-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JDhdjqbDrE665SVsKXbrn4hsfQtPjCna0pzqrsEKpazX0/KfBuy486Nj2bDsYA61 Mm+EcQkK9Pr7pT016D6DWw== 0001047469-98-009798.txt : 19980317 0001047469-98-009798.hdr.sgml : 19980317 ACCESSION NUMBER: 0001047469-98-009798 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980313 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HALF ROBERT INTERNATIONAL INC /DE/ CENTRAL INDEX KEY: 0000315213 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 941648752 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-10427 FILM NUMBER: 98565272 BUSINESS ADDRESS: STREET 1: 2884 SAND HILL RD STREET 2: STE 200 CITY: MENLO PARK STATE: CA ZIP: 94025 BUSINESS PHONE: 4158549700 MAIL ADDRESS: STREET 1: 2884 SAND HILL ROAD STREET 2: STE 200 CITY: MENLO PARK STATE: CA ZIP: 94025 FORMER COMPANY: FORMER CONFORMED NAME: BOOTHE FINANCIAL CORP /DE/ DATE OF NAME CHANGE: 19870721 FORMER COMPANY: FORMER CONFORMED NAME: BOOTHE INTERIM CORP DATE OF NAME CHANGE: 19600201 10-K405 1 FORM 10-K405 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ COMMISSION FILE NUMBER 1-10427 ROBERT HALF INTERNATIONAL INC. (Exact name of registrant as specified in its charter) DELAWARE 94-1648752 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2884 SAND HILL ROAD, SUITE 200, MENLO PARK, CALIFORNIA 94025 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (650) 234-6000 ------------------------ Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED Common Stock, Par Value $.001 per Share New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None ------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ As of February 28, 1998, the aggregate market value of the Common Stock held by non-affiliates of the registrant was approximately $3,780,000,000 based on the closing sale price on that date. This amount excludes the market value of 8,110,689 shares of Common Stock held by registrant's directors and officers and their affiliates. As of February 28, 1998, there were outstanding 91,645,927 shares of the registrant's Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Proxy Statement to be mailed to stockholders in connection with the registrant's annual meeting of stockholders, scheduled to be held in May 1998, are incorporated by reference in Part III of this report. Except as expressly incorporated by reference, the registrant's Proxy Statement shall not be deemed to be part of this report. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS Robert Half International Inc. is the world's largest specialized provider of temporary and regular personnel in the fields of accounting and finance. Its divisions include ACCOUNTEMPS-Registered Trademark- and ROBERT HALF-Registered Trademark-, providers of temporary and regular personnel, respectively, in the fields of accounting and finance. The Company, utilizing its experience as a specialized provider of temporary and permanent personnel, has expanded into additional specialty fields. In 1991, the Company formed OFFICETEAM-Registered Trademark- to provide skilled temporary administrative and office personnel. In 1994, the Company established RHI CONSULTING-Registered Trademark- to concentrate on providing temporary and contract information technology professionals in positions ranging from PC support technician to chief information officer. In 1992, the Company acquired THE AFFILIATES-Registered Trademark-, which focuses on placing temporary and regular employees in paralegal, legal administrative and other legal support positions. In 1997, the Company established RHI MANAGEMENT RESOURCES-REGISTERED TRADEMARK- to provide senior level project professionals specializing in the accounting and finance fields. The Company's business was originally founded in 1948. Prior to 1986, the Company was primarily a franchisor of ACCOUNTEMPS and ROBERT HALF offices. Beginning in 1986, the Company and its current management embarked on a strategy of acquiring franchised locations and other local or regional independent providers of specialized temporary service personnel. The Company has acquired all but three of the ACCOUNTEMPS and ROBERT HALF franchises in 47 separate transactions, and has acquired 18 other local or regional providers of specialized temporary service personnel. Since 1986, the Company has significantly expanded operations at many of the acquired locations and has opened many new locations. The Company believes that direct ownership of offices allows it to better monitor and protect the image of the ACCOUNTEMPS and ROBERT HALF names, promotes a more consistent and higher level of quality and service throughout its network of offices and improves profitability by centralizing many of its administrative functions. The Company currently has more than 200 offices in 39 states and five foreign countries and placed approximately 160,000 employees on temporary assignment with clients in 1997. ACCOUNTEMPS The ACCOUNTEMPS temporary services division offers customers a reliable and economical means of dealing with uneven or peak work loads for accounting, tax and finance personnel caused by such predictable events as vacations, taking inventories, tax work, month-end activities and special projects and such unpredictable events as illness and emergencies. Businesses increasingly view the use of temporary employees as a means of controlling personnel costs and converting such costs from fixed to variable. The cost and inconvenience to clients of hiring and firing permanent employees are eliminated by the use of ACCOUNTEMPS temporaries. The temporary workers are employees of ACCOUNTEMPS and are paid by ACCOUNTEMPS only when working on customer assignments. The customer pays a fixed rate only for hours worked. ACCOUNTEMPS clients may fill their permanent employment needs by using an ACCOUNTEMPS employee on a trial basis and, if so desired, "converting" the temporary position to a permanent position. The client typically pays a one-time fee for such conversions. OFFICETEAM The Company's OFFICETEAM division, which commenced operations in 1991, places temporary and permanent office and administrative personnel, ranging from word processors to office managers, from approximately 190 locations in the United States, Canada and Europe. OFFICETEAM operates in much the same fashion as the ACCOUNTEMPS and ROBERT HALF divisions. 1 ROBERT HALF The Company offers permanent placement services through its office network under the name ROBERT HALF. The Company's ROBERT HALF division specializes in placing accounting, financial, tax and banking personnel. Fees for successful permanent placements are paid only by the employer and are generally a percentage of the new employee's annual compensation. No fee for permanent placement services is charged to employment candidates. RHI CONSULTING The Company's RHI CONSULTING division, which commenced operations in 1994, specializes in providing information technology contract consultants and placing regular employees in areas ranging from multiple platform systems integration to end-user support, including specialists in programming, networking, systems integration, database design and help desk support. RHI CONSULTING conducts its activities from approximately 80 locations in the United States, Canada and Europe. THE AFFILIATES In 1992, the Company acquired THE AFFILIATES, a small operation involving only a limited number of offices, which places temporary and permanent employees in paralegal, legal administrative and legal secretarial positions. The legal profession's requirements (the need for confidentiality, accuracy and reliability, a strong drive toward cost-effectiveness, and frequent peak workload periods) are similar to the demands of the clients of the ACCOUNTEMPS division. RHI MANAGEMENT RESOURCES The Company's RHI MANAGEMENT RESOURCES division, which commenced operations in 1997, specializes in providing senior level project professionals in the accounting and finance fields, including chief financial officers, controllers, and senior financial analysts, for such tasks as financial systems conversions, expansion into new markets, business process reengineering and post-merger financial consolidation. MARKETING AND RECRUITING The Company markets its services to clients as well as employment candidates. Local marketing and recruiting are generally conducted by each office or related group of offices. Advertising directed to clients and employment candidates consists primarily of yellow pages advertisements, classified advertisements and radio. Direct marketing through mail and telephone solicitation also constitutes a significant portion of the Company's total advertising. National advertising conducted by the Company consists primarily of print advertisements in national newspapers, magazines and certain trade journals. Joint marketing arrangements have been entered into with Microsoft, Lotus Development Corporation, Corel Corporation (publisher of WordPerfect), Peachtree Software, Inc., Intuit and Computer Associates International, Inc. and typically provide for cooperative advertising, joint mailings and similar promotional activities. The Company also actively seeks endorsements and affiliations with professional organizations in the business management, office administration and professional secretarial fields. The Company also conducts public relations activities designed to enhance public recognition of the Company and its services. Local employees are encouraged to be active in civic organizations and industry trade groups. The Company owns many trademarks, service marks and tradenames, including the ROBERT HALF-Registered Trademark-, ACCOUNTEMPS-Registered Trademark-, OFFICETEAM-Registered Trademark-, THE AFFILIATES-Registered Trademark-, RHI CONSULTING-Registered Trademark- and RHI MANAGEMENT RESOURCES-REGISTERED TRADEMARK- marks, which are registered in the United States and in a number of foreign countries. ORGANIZATION Management of the Company's operations is coordinated from its headquarters in Menlo Park, California. The Company's headquarters provides support and centralized services to its offices in the 2 administrative, marketing, accounting, training and legal areas, particularly as it relates to the standardization of the operating procedures of its offices. The Company has more than 200 offices in 39 states and five foreign countries. Office managers are responsible for most activities of their offices, including sales, local advertising and marketing and recruitment. COMPETITION The Company faces competition in its efforts to attract clients as well as high-quality specialized employment candidates. The temporary and permanent placement businesses are highly competitive, with a number of firms offering services similar to those provided by the Company on a national, regional or local basis. In many areas the local companies are the strongest competitors. The most significant competitive factors in the temporary and permanent placement businesses are price and the reliability of service, both of which are often a function of the availability and quality of personnel. The Company believes it derives a competitive advantage from its long experience with and commitment to the specialized employment market, its national presence, and its various marketing activities. EMPLOYEES The Company has approximately 4,300 full-time staff employees. The Company's offices placed approximately 160,000 employees on temporary assignments with clients during 1997. Temporary employees placed by the Company are the Company's employees for all purposes while they are working on assignments. The Company pays the related costs of employment, such as workers' compensation insurance, state and federal unemployment taxes, social security and certain fringe benefits. The Company provides voluntary health insurance coverage to interested temporary employees. OTHER INFORMATION The Company's current business constitutes a single business segment. (See Item 8. Financial Statements and Supplementary Data for financial information about the Company.) The Company is not dependent upon a single customer or a limited number of customers. The Company's operations are generally more active in the first and fourth quarters of a calendar year. Order backlog is not a material aspect of the Company's business and no material portion of the Company's business is subject to government contracts. The Company does not have any material expenditures for research and development. Compliance with federal, state or local environmental protection laws has no material effect on the capital expenditures, earnings or competitive position of the Company. Information about foreign operations is contained in Note M of Notes to Consolidated Financial Statements in Item 8. The Company does not have export sales. ITEM 2. PROPERTIES The Company's headquarters is located in Menlo Park, California. Placement activities are conducted through more than 200 offices located in the United States, Canada, the United Kingdom, Belgium, France and the Netherlands. All of the offices are leased. ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any material pending legal proceedings other than routine litigation incidental to its business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of the Company's security holders during the fourth quarter of the fiscal year covered by this report. 3 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is listed for trading on the New York Stock Exchange under the symbol "RHI". On December 31, 1997, there were approximately 2,300 holders of record of the Common Stock. Following is a list by fiscal quarters of the sales prices of the stock as quoted on the New York Stock Exchange, adjusted, as appropriate, to reflect the two-for-one stock split effected in the form of a stock dividend in June 1996 and the three-for-two stock split effected in the form of a stock dividend in September 1997:
SALES PRICES -------------------- 1997 HIGH LOW -------------------------------- -------- --------- 4th Quarter..................... $43.06 $33.00 3rd Quarter..................... $42.67 $31.33 2nd Quarter..................... $31.50 $23.00 1st Quarter..................... $29.83 $22.25 SALES PRICES -------------------- 1996 HIGH LOW -------------------------------- -------- --------- 4th Quarter..................... $27.67 $21.75 3rd Quarter..................... $26.83 $16.08 2nd Quarter..................... $20.29 $16.25 1st Quarter..................... $16.58 $13.00
No cash dividends were paid in 1997 or 1996. The Company, as it deems appropriate, may continue to retain all earnings for use in its business or may consider paying a dividend in the future. 4 ITEM 6. SELECTED FINANCIAL DATA Following is a table of selected financial data of the Company for the last five years:
YEARS ENDED DECEMBER 31, ------------------------------------------------------------ 1997 1996 1995 1994 1993 ------------ ---------- ---------- ---------- ---------- (IN THOUSANDS) INCOME STATEMENT DATA: Net service revenues............................... $ 1,302,876 $ 898,635 $ 628,526 $ 446,328 $ 306,166 Direct costs of services, consisting of payroll, payroll taxes and insurance costs for temporary employees......................................... 785,546 545,343 384,449 273,327 188,292 ------------ ---------- ---------- ---------- ---------- Gross margin....................................... 517,330 353,292 244,077 173,001 117,874 Selling, general and administrative expenses....... 357,766 246,485 170,684 121,640 88,074 Amortization of intangible assets.................. 4,926 5,405 4,767 4,584 4,251 Interest (income) expense.......................... (4,190) (2,243) (463) 1,570 3,992 ------------ ---------- ---------- ---------- ---------- Income before income taxes......................... 158,828 103,645 69,089 45,207 21,557 Provision for income taxes......................... 65,131 42,543 28,791 19,090 9,834 ------------ ---------- ---------- ---------- ---------- Net income......................................... $ 93,697 $ 61,102 $ 40,298 $ 26,117 $ 11,723 ------------ ---------- ---------- ---------- ---------- ------------ ---------- ---------- ---------- ----------
YEARS ENDED DECEMBER 31, ---------------------------------------------------------- 1997 1996 1995 1994 1993 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) NET INCOME PER SHARE: BASIC.............................................. $ 1.03 $ .69 $ .47 $ .32 $ .16 DILUTED............................................ $ 1.00 $ .67 $ .46 $ .31 $ .16 SHARES: BASIC.............................................. 90,668 88,267 85,479 82,095 72,927 DILUTED............................................ 93,999 91,522 88,488 85,051 75,313
DECEMBER 31, ---------------------------------------------------------- 1997 1996 1995 1994 1993 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS) BALANCE SHEET DATA: Intangible assets, net............................... $ 177,425 $ 174,663 $ 155,441 $ 152,824 $ 152,156 Total assets......................................... $ 561,367 $ 416,012 $ 301,140 $ 227,761 $ 204,598 Debt financing....................................... $ 8,157 $ 6,611 $ 5,725 $ 4,214 $ 32,740 Stockholders' equity................................. $ 418,800 $ 308,445 $ 227,930 $ 176,995 $ 133,602
All shares and per share amounts have been restated to retroactively reflect the three-for-two stock split effected in the form of a stock dividend in September 1997 and the two-for-one stock splits effected in the form of a stock dividend in both June 1996 and August 1994. 5 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1997 Temporary services revenues were $1.2 billion, $829 million and $577 million for the years ended December 31, 1997, 1996 and 1995, respectively, increasing by 45% during 1997 and 44% during 1996. The increase in revenues during these periods reflected in part revenues generated from the Company's OFFICETEAM, RHI CONSULTING, and RHI MANAGEMENT RESOURCES divisions, which were started in 1991, 1994 and 1997, respectively. Permanent placement revenues were $100 million, $70 million and $52 million for the years ended December 31, 1997, 1996 and 1995, respectively, increasing by 43% during 1997 and 35% during 1996. Overall revenue increases reflect continued improvement in demand for the Company's services, which the Company believes is a result of increased acceptance in the use of professional staffing services. Revenues from companies acquired during 1997, 1996 and 1995 were not material. The Company currently has more than 200 offices in 39 states and five foreign countries. Domestic operations represented 90% of revenues for the years ended December 31, 1997, 1996 and 1995. Foreign operations represented 10% of revenues for the years ended December 31, 1997, 1996 and 1995. Gross margin dollars from the Company's temporary services represent revenues less direct costs of services, which consist of payroll, payroll taxes and insurance costs for temporary employees. Gross margin dollars from permanent placement services are equal to revenues, as there are no direct costs associated with such revenues. Gross margin dollars for the Company's temporary services were $417 million, $283 million and $192 million for the years ended December 31, 1997, 1996 and 1995, respectively, increasing by 47% in both 1997 and 1996. Gross margin amounts equaled 35% of revenues for temporary services for the year ended December 31, 1997, and 34% for the year ended December 31, 1996, and 33% for the year ended December 31, 1995, which the Company believes reflects its ability to adjust billing rates and wage rates to underlying market conditions. Gross margin dollars for the Company's permanent placement division were $100 million, $70 million and $52 million for each of the years ended December 31, 1997, 1996 and 1995, respectively, increasing by 43% and 35% in 1997 and 1996, respectively. Selling, general and administrative expenses were $358 million during 1997, compared to $246 million in 1996 and $171 million in 1995. Selling, general and administrative expenses as a percentage of revenues were 28% for the year ended December 31, 1997, and 27% in both of the years ended December 31, 1996 and 1995. Selling, general and administrative expenses consist primarily of staff compensation, advertising, and occupancy costs, most of which generally follow changes in revenues. The Company allocates the excess of cost over the fair market value of the net tangible assets first to identifiable intangible assets, if any, and then to goodwill. Although management believes that goodwill has an unlimited life, the Company amortizes these costs over 40 years. Management believes that its strategy of making acquisitions of established companies in established markets and maintaining its presence in these markets preserves the goodwill for an indeterminate period. The carrying value of intangible assets is periodically reviewed by the Company and impairments are recognized when the expected future operating cash flows derived from such intangible assets is less than their carrying value. Based upon its most recent analysis, the Company believes that no material impairment of intangible assets existed at December 31, 1997. Intangible assets represented 32% of total assets and 42% of total stockholders' equity at December 31, 1997. Interest income for the years ended December 31, 1997, 1996 and 1995 was $5,139,000, $2,948,000 and $1,237,000, respectively. Interest expense for the years ended December 31, 1997, 1996 and 1995 was $949,000, $705,000 and $774,000, respectively. These changes primarily reflect an increase in cash and cash equivalents. The provision for income taxes was 41% for both the years ended December 31, 1997 and 1996, and 42% for the year ended December 31, 1995. 6 LIQUIDITY AND CAPITAL RESOURCES The change in the Company's liquidity during the past three years is the net effect of funds generated by operations and the funds used for the staffing services acquisitions, capital expenditures and principal payments on outstanding notes payable. In October 1997, the Company authorized the repurchase, from time to time, of up to four million shares of the Company's common stock on the open market or in privately negotiated transactions, depending on market conditions. The Company has repurchased approximately 100,000 shares on the open market pursuant to this program. For additional information regarding the Company's stock repurchase program, see Note F of the Notes to Consolidated Financial Statements. Repurchases of the securities have been funded with cash generated from operations. For the year ended December 31, 1997, the Company generated $82 million from operations, used $35.3 million in investing activities and provided $4.5 million by financing activities. The Company's working capital at December 31, 1997, included $131 million in cash and cash equivalents. In addition at December 31, 1997, the Company had available $71.4 million of its $80 million bank revolving line of credit. The Company's working capital requirements consist primarily of the financing of accounts receivable. While there can be no assurances in this regard, the Company expects that internally generated cash plus the bank revolving line of credit will be sufficient to support the working capital needs of the Company, the Company's fixed payments, and other obligations on both a short and long term basis. As of December 31, 1997, the Company had no material capital commitments. In 1997, the Company initiated a number of major system projects to replace core systems. Management expects these new systems to be in place before Year 2000 and to resolve any major existing Year 2000 issues. The Company expects to spend in excess of $40 million on these projects. ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's market risk sensitive instruments do not subject the Company to material market risk exposures. 7 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
DECEMBER 31, ---------------------- 1997 1996 ---------- ---------- ASSETS: Cash and cash equivalents................................................................. $ 131,349 $ 80,181 Accounts receivable, less allowances of $7,164 and $4,016................................. 186,899 125,383 Other current assets...................................................................... 15,757 9,066 ---------- ---------- Total current assets.................................................................... 334,005 214,630 Intangible assets, less accumulated amortization of $46,001 and $39,461................... 177,425 174,663 Property and equipment, less accumulated depreciation of $29,962 and $18,252.............. 49,937 26,719 ---------- ---------- Total assets............................................................................ $ 561,367 $ 416,012 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY: Accounts payable and accrued expenses..................................................... $ 20,285 $ 15,049 Accrued payroll costs..................................................................... 95,925 66,087 Income taxes payable...................................................................... 2,258 3,883 Current portion of notes payable and other indebtedness................................... 3,627 1,542 ---------- ---------- Total current liabilities............................................................... 122,095 86,561 Notes payable and other indebtedness, less current portion................................ 4,530 5,069 Deferred income taxes..................................................................... 15,942 15,937 ---------- ---------- Total liabilities....................................................................... 142,567 107,567 ---------- ---------- Commitments and Contingencies STOCKHOLDERS' EQUITY: Common Stock, $.001 par value authorized 160,000,000 shares; issued and outstanding 91,208,029 and 89,621,932 shares........................................................ 91 90 Capital surplus........................................................................... 196,888 140,443 Deferred compensation..................................................................... (44,276) (26,802) Accumulated translation adjustments....................................................... (1,347) 23 Retained earnings......................................................................... 267,444 194,691 ---------- ---------- Total stockholders' equity.............................................................. 418,800 308,445 ---------- ---------- Total liabilities and stockholders' equity.............................................. $ 561,367 $ 416,012 ---------- ---------- ---------- ----------
All shares and amounts have been restated to retroactively reflect the three-for-two stock split effected in the form of a stock dividend in September 1997 and the two-for-one stock split effected in the form of a stock dividend in June 1996. The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 8 ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, ------------------------------------ 1997 1996 1995 ------------ ---------- ---------- Net service revenues....................................................... $ 1,302,876 $ 898,635 $ 628,526 Direct costs of services, consisting of payroll, payroll taxes and insurance costs for temporary employees.................................. 785,546 545,343 384,449 ------------ ---------- ---------- Gross margin............................................................... 517,330 353,292 244,077 Selling, general and administrative expenses............................... 357,766 246,485 170,684 Amortization of intangible assets.......................................... 4,926 5,405 4,767 Interest income............................................................ (4,190) (2,243) (463) ------------ ---------- ---------- Income before income taxes................................................. 158,828 103,645 69,089 Provision for income taxes................................................. 65,131 42,543 28,791 ------------ ---------- ---------- Net income................................................................. $ 93,697 $ 61,102 $ 40,298 ------------ ---------- ---------- ------------ ---------- ---------- Basic net income per share................................................. $ 1.03 $ .69 $ .47 Diluted net income per share............................................... $ 1.00 $ .67 $ .46
All per share amounts have been restated to retroactively reflect the three-for-two stock split effected in the form of a stock dividend in September 1997 and the two-for-one stock split effected in the form of a stock dividend in June 1996. The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 9 ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
YEARS ENDED DECEMBER 31, ------------------------------- 1997 1996 1995 --------- --------- --------- COMMON STOCK--SHARES: Balance at beginning of period................................................ 89,622 86,677 84,456 Issuances of restricted stock................................................. 802 989 702 Repurchases of common stock................................................... (676) (296) (342) Exercises of stock options.................................................... 1,446 1,709 1,861 Issuance of common stock for acquisitions..................................... 14 543 -- --------- --------- --------- Balance at end of period.................................................... 91,208 89,622 86,677 --------- --------- --------- --------- --------- --------- COMMON STOCK--PAR VALUE: Balance at beginning of period................................................ $ 90 $ 87 $ 84 Issuances of restricted stock................................................. 1 1 1 Repurchases of common stock................................................... (1) -- -- Exercises of stock options.................................................... 1 2 2 --------- --------- --------- Balance at end of period.................................................... $ 91 $ 90 $ 87 --------- --------- --------- --------- --------- --------- CAPITAL SURPLUS: Balance at beginning of period................................................ $ 140,443 $ 99,739 $ 82,598 Issuances of restricted stock--excess over par value.......................... 29,189 24,019 6,886 Exercises of stock options--excess over par value............................. 5,755 4,119 3,817 Issuance of common stock for acquisition...................................... 400 -- -- Tax benefits from exercises of stock options and restricted stock vesting..... 21,101 12,566 6,438 --------- --------- --------- Balance at end of period.................................................... $ 196,888 $ 140,443 $ 99,739 --------- --------- --------- --------- --------- --------- DEFERRED COMPENSATION: Balance at beginning of period................................................ $ (26,802) $ (9,642) $ (5,533) Issuances of restricted stock................................................. (29,190) (24,020) (6,887) Amortization of deferred compensation......................................... 11,716 6,860 2,778 --------- --------- --------- Balance at end of period.................................................... $ (44,276) $ (26,802) $ (9,642) --------- --------- --------- --------- --------- --------- ACCUMULATED TRANSLATION ADJUSTMENTS: Balance at beginning of period................................................ $ 23 $ 51 $ (541) Translation adjustments....................................................... (1,370) (28) 592 --------- --------- --------- Balance at end of period.................................................... $ (1,347) $ 23 $ 51 --------- --------- --------- --------- --------- --------- RETAINED EARNINGS: Balance at beginning of period................................................ $ 194,691 $ 137,695 $ 100,386 Repurchases of common stock--excess over par value............................ (20,944) (5,391) (2,989) Issuance of common stock for acquisition...................................... -- 1,285 -- Net income.................................................................... 93,697 61,102 40,298 --------- --------- --------- Balance at end of period.................................................... $ 267,444 $ 194,691 $ 137,695 --------- --------- --------- --------- --------- ---------
All shares and amounts have been restated to retroactively reflect the three-for-two stock split effected in the form of a stock dividend in September 1997 and the two-for-one stock split effected in the form of a stock dividend in June 1996. The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 10 ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEARS ENDED DECEMBER 31, ---------------------------------- 1997 1996 1995 ---------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income................................................................. $ 93,697 $ 61,102 $ 40,298 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of intangible assets...................................... 4,926 5,405 4,767 Depreciation expense................................................... 12,726 6,457 3,564 Provision for deferred income taxes.................................... (5,135) (1,702) (683) Changes in assets and liabilities, net of effects of acquisitions: Increase in accounts receivable........................................ (61,027) (38,565) (24,289) Increase in accounts payable, accrued expenses and accrued payroll costs................................................................ 27,878 17,893 15,106 Increase (decrease) in income taxes payable............................ (1,625) (1,274) 2,976 Change in other assets, net of change in other liabilities............. 10,517 5,109 432 ---------- ---------- ---------- Total adjustments........................................................ (11,740) (6,677) 1,873 ---------- ---------- ---------- Net cash and cash equivalents provided by operating activities............. 81,957 54,425 42,171 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions, net of cash acquired......................................... (3,338) (4,620) (1,024) Capital expenditures....................................................... (31,958) (18,027) (8,417) ---------- ---------- ---------- Net cash and cash equivalents used in investing activities................. (35,296) (22,647) (9,441) CASH FLOWS FROM FINANCING ACTIVITIES: Repurchases of common stock and common stock equivalents................... (20,945) (5,391) (2,989) Principal payments on notes payable and other indebtedness................. (1,405) (4,239) (1,289) Proceeds and tax benefits from exercises of stock options and restricted stock vesting............................................................ 26,857 16,687 10,256 ---------- ---------- ---------- Net cash and cash equivalents provided by financing activities............. 4,507 7,057 5,978 ---------- ---------- ---------- Net increase in cash and cash equivalents.................................. 51,168 38,835 38,708 Cash and cash equivalents at beginning of period........................... 80,181 41,346 2,638 ---------- ---------- ---------- Cash and cash equivalents at end of period................................. $ 131,349 $ 80,181 $ 41,346 ---------- ---------- ---------- ---------- ---------- ---------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest................................................................. $ 476 $ 521 $ 405 Income taxes............................................................. $ 50,340 $ 32,163 $ 21,853 Acquisitions: Assets acquired-- Intangible assets...................................................... $ 4,079 $ 9,932 $ 4,697 Other.................................................................. 499 2,180 753 Liabilities incurred-- Notes payable and contracts............................................ (536) (5,125) (2,800) Other.................................................................. (304) (1,082) (1,626) Common stock issued...................................................... (400) (1,285) -- ---------- ---------- ---------- Cash paid, net of cash acquired.......................................... $ 3,338 $ 4,620 $ 1,024 ---------- ---------- ---------- ---------- ---------- ----------
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS. Robert Half International Inc. (the "Company") provides specialized staffing services through such divisions as ACCOUNTEMPS, ROBERT HALF, OFFICETEAM, RHI CONSULTING and RHI MANAGEMENT RESOURCES. The Company, through its ACCOUNTEMPS, ROBERT HALF and RHI MANAGEMENT RESOURCES divisions, is the world's largest specialized provider of temporary, full-time, and project professionals in the fields of accounting and finance. OFFICETEAM specializes in skilled temporary administrative personnel. RHI CONSULTING provides contract information technology professionals. RHI MANAGEMENT RESOURCES places senior-level accounting and financial professionals on longer term, more complex projects lasting for several months to a year or longer. Revenues are predominantly from temporary services. The Company operates in the United States, Canada and Europe. The Company is a Delaware corporation. PRINCIPLES OF CONSOLIDATION. The Consolidated Financial Statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany balances have been eliminated. Certain reclassifications have been made to the 1996 and 1995 financial statements to conform to the 1997 presentation. REVENUE RECOGNITION. Temporary services revenues are recognized when the services are rendered by the Company's temporary employees. Permanent placement revenues are recognized when employment candidates accept offers of permanent employment. Allowances are established to estimate losses due to placed candidates not remaining employed for the Company's guarantee period, typically 90 days. CASH AND CASH EQUIVALENTS. The Company considers all highly liquid investments with a maturity of three months or less as cash equivalents. INTANGIBLE ASSETS. Intangible assets primarily consist of the cost of acquired companies in excess of the fair market value of their net tangible assets at acquisition date, which are being amortized on a straight-line basis over a period of 40 years. The carrying value of intangible assets is periodically reviewed by the Company and impairments are recognized when the expected future operating cash flows derived from such intangible assets are less than their carrying value. Based upon its most recent analysis, the Company believes that no material impairment of intangible assets existed at December 31, 1997. INCOME TAXES. Deferred taxes are computed based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rates. FOREIGN CURRENCY TRANSLATION. The results of operations of the Company's foreign subsidiaries are translated at the monthly average exchange rates prevailing during the period. The financial position of the Company's foreign subsidiaries is translated at the current exchange rates at the end of the period, and the related translation adjustments are recorded as part of Stockholders' Equity. Gains and losses resulting from foreign currency transactions are included in the Consolidated Statements of Income. USE OF ESTIMATES. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the life of the related asset or the life of the lease. 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE B--ACQUISITIONS In July 1986, the Company acquired all of the outstanding stock of Robert Half Incorporated, the franchisor of the ACCOUNTEMPS and ROBERT HALF operations. Subsequently, in 65 separate transactions the Company acquired all of the outstanding stock of certain corporations operating ACCOUNTEMPS and ROBERT HALF franchised offices in the United States, the United Kingdom and Canada as well as other staffing services businesses. The Company has paid approximately $210 million in cash, stock, notes and other indebtedness in these acquisitions, excluding transaction costs and cash acquired. These acquisitions were primarily accounted for as purchases, and the excess of cost of the acquired companies in excess of the fair market value of the net tangible assets acquired is being amortized over 40 years using the straight-line method. Results of operations of the acquired companies are included in the Consolidated Statements of Income from the dates of acquisition. The acquisitions made during 1997, 1996 and 1995 had no material pro forma impact on the results of operations. NOTE C--NOTES PAYABLE AND OTHER INDEBTEDNESS The Company issued promissory notes as well as other forms of indebtedness in connection with certain acquisitions and other payment obligations. These are due in varying installments, carry varying interest rates and in aggregate amounted to $8,157,000 at December 31, 1997 and $6,611,000 at December 31, 1996. At December 31, 1997, $4,825,000 of the notes was secured by a standby letter of credit (see Note D). The following table shows the schedule of maturities for notes payable and other indebtedness at December 31, 1997 (in thousands): 1998................................................................ $ 3,627 1999................................................................ 1,032 2000................................................................ 901 2001................................................................ 56 2002................................................................ 61 Thereafter.......................................................... 2,480 --------- $ 8,157 --------- ---------
At December 31, 1997, generally the notes carried fixed rates and the weighted average interest rate for the above was approximately 7.0%, 6.9% and 7.3% for the years ended December 31, 1997, 1996 and 1995, respectively. NOTE D--BANK LOAN (REVOLVING CREDIT) The bank loan is an unsecured credit facility which provides a line of credit of up to $80,000,000, which is available to fund the Company's general business and working capital needs, including acquisitions and the purchase of the Company's common stock, and to cover the issuance of debt support standby letters of credit up to $15,000,000. As of December 31, 1997 and 1996, the Company had no borrowings on the line of credit outstanding and had used $8,583,000 and $8,683,000 in debt support standby letters of credit, respectively. There is a commitment fee on the unused portion of the entire credit facility of .09%. The loan is subject to certain financial covenants which also affect the interest rates charged. The final maturity date for the credit facility is August 31, 2002. 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE E--ACCRUED PAYROLL COSTS Accrued payroll costs consisted of the following (in thousands):
YEARS ENDED DECEMBER 31, -------------------- 1997 1996 --------- --------- Payroll and bonuses..................................................... $ 36,493 $ 28,374 Employee benefits and workers' compensation............................. 42,042 30,126 Payroll taxes........................................................... 17,390 7,587 --------- --------- $ 95,925 $ 66,087 --------- --------- --------- ---------
NOTE F--STOCKHOLDERS' EQUITY STOCK SPLITS--In August 1997, the Company effected a three-for-two stock split in the form of a stock dividend. In June 1996, the Company effected a two-for-one stock split in the form of a stock dividend. All shares and per share amounts have been retroactively restated in the financial statements to reflect these stock splits. STOCK REPURCHASE PROGRAM--In October 1997, the Company's Board of Directors authorized the repurchase, from time to time, of up to four million shares of the Company's common stock on the open market or in privately negotiated transactions, depending on market conditions. During 1997, the Company repurchased approximately 100,000 shares of common stock for a total cost of $3.4 million. NOTE G--INCOME TAXES The provision for income taxes for the years ended December 31, 1997, 1996 and 1995 consisted of the following (in thousands):
YEARS ENDED DECEMBER 31, ------------------------------- 1997 1996 1995 --------- --------- --------- Current: Federal.................................................... $ 53,973 $ 34,392 $ 22,061 State...................................................... 12,261 7,457 4,728 Foreign.................................................... 4,032 2,396 2,685 Deferred--principally domestic............................... (5,135) (1,702) (683) --------- --------- --------- $ 65,131 $ 42,543 $ 28,791 --------- --------- --------- --------- --------- ---------
The income taxes shown above varied from the statutory federal income tax rates for these periods as follows:
YEARS ENDED DECEMBER 31, ---------------------------- 1997 1996 1995 ---- ---- ---- Federal U.S. income tax rate................................ 35.0% 35.0% 35.0% State income taxes, net of federal tax benefit.............. 4.6 4.5 4.5 Amortization of intangible assets........................... .8 1.0 1.5 Other, net.................................................. .6 .5 .7 ---- ---- ---- Effective tax rate.......................................... 41.0% 41.0% 41.7% ---- ---- ---- ---- ---- ----
14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE G--INCOME TAXES (CONTINUED) The deferred portion of the tax provisions consisted of the following (in thousands):
YEARS ENDED DECEMBER 31, ------------------------------- 1997 1996 1995 --------- --------- --------- Amortization of franchise rights............................... $ 66 $ 691 $ 1,650 Accrued expenses, deducted for tax when paid................... (5,511) (2,468) (2,068) Other, net..................................................... 310 75 (265) --------- --------- --------- $ (5,135) $ (1,702) $ (683) --------- --------- --------- --------- --------- ---------
The net deferred income tax liability shown on the balance sheet is comprised of the following (in thousands):
DECEMBER 31, -------------------- 1997 1996 --------- --------- Deferred income tax assets.............................................. $ (4,836) $ (2,536) Deferred income tax liabilities......................................... 20,778 18,473 --------- --------- $ 15,942 $ 15,937 --------- --------- --------- ---------
No valuation allowances against deferred tax assets were required for the years ended December 31, 1997 and 1996. The components of the net deferred income tax liability at December 31, 1997 and 1996, were as follows (in thousands):
DECEMBER 31, -------------------- 1997 1996 --------- --------- Amortization of intangible assets....................................... $ 17,026 $ 16,954 Foreign taxes........................................................... 0 151 Other, net.............................................................. (1,084) (1,168) --------- --------- $ 15,942 $ 15,937 --------- --------- --------- ---------
NOTE H--COMMITMENTS Rental expense, primarily for office premises, amounted to $19,594,000, $13,315,000 and $11,027,000 for the years ended December 31, 1997, 1996 and 1995, respectively. The approximate minimum rental commitments for 1998 and thereafter under non-cancelable leases in effect at December 31, 1997, were as follows (in thousands): 1998............................................................... $ 22,184 1999............................................................... 21,986 2000............................................................... 19,460 2001............................................................... 17,375 2002............................................................... 12,303 Thereafter......................................................... 26,229
15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE I--STOCK PLANS Under various stock plans, officers, employees and outside directors may receive grants of restricted stock or options to purchase common stock. Grants are made at the discretion of the Compensation Committee of the Board of Directors. Grants vest between four and seven years. Options granted under the plans have exercise prices ranging from 85% to 100% of the fair market value of the Company's common stock at the date of grant, consist of both incentive stock options and nonstatutory stock options under the Internal Revenue Code, and generally have a term of ten years. Recipients of restricted stock do not pay any cash consideration to the Company for the shares, have the right to vote all shares subject to such grant, and receive all dividends with respect to such shares, whether or not the shares have vested. Compensation expense is recognized on a straight-line basis over the vesting period. Vesting is accelerated upon the death or disability of the recipients. The Company accounts for these plans under APB Opinion 25. Therefore, no compensation cost has been recognized for its stock option plans. Had compensation cost for the stock options granted subsequent to January 1, 1995, been based on the estimated fair value at the award dates, as prescribed by Statement of Financial Accounting Standards No. 123, the Company's pro forma net income and net income per share would have been as follows:
YEARS ENDED DECEMBER 31, --------------------------------------------- 1997 1996 1995 ------------- ------------- ------------- Net Income As Reported................................................. $ 93,697 $ 61,102 $ 40,298 Pro forma................................................... $ 90,212 $ 59,666 $ 40,174 Net Income Per Share Basic As Reported............................................... $ 1.03 $ .69 $ .47 Pro forma................................................. $ .99 $ .68 $ .47 Diluted As Reported............................................... $ 1.00 $ .67 $ .46 Pro forma................................................. $ .97 $ .66 $ .46
The pro forma amounts do not include amounts for stock options granted before January 1, 1995. Therefore, the pro forma amounts may not be representative of the disclosed effects on pro forma net income and net income per share for future years. The fair value of each option is estimated, as of the grant date, using the Black-Scholes option pricing model with the following assumptions used for grants in 1997, 1996 and 1995, respectively: no dividend yield for any year; expected volatility of 32% to 34%; risk-free interest rates of 5.7% to 6.9%, 5.3% to 6.7% and 5.4% to 7.9%; and expected lives of 5.5 to 7.3 years for all three years. 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE I--STOCK PLANS (CONTINUED) The following table reflects activity under all stock plans from January 1, 1995 through December 31, 1997, and the weighted average exercise prices:
STOCK OPTION PLANS ---------------------- WEIGHTED AVERAGE RESTRICTED NUMBER OF PRICE STOCK PLANS SHARES PER SHARE ------------- ---------- ---------- Outstanding, January 1, 1995.................................. 1,757,474 9,399,183 $ 3.70 Granted..................................................... 745,176 2,071,893 $ 12.67 Exercised................................................... -- (1,861,221) $ 2.05 Restrictions lapsed......................................... (563,313) -- -- Forfeited................................................... (42,846) (542,007) $ 4.79 ------------- ---------- ---------- Outstanding, December 31, 1995................................ 1,896,491 9,067,848 $ 6.04 Granted..................................................... 998,492 1,689,644 $ 20.94 Exercised................................................... -- (1,708,532) $ 2.41 Restrictions lapsed......................................... (412,329) -- -- Forfeited................................................... (9,099) (387,429) $ 9.33 ------------- ---------- ---------- Outstanding, December 31, 1996................................ 2,473,555 8,661,531 $ 9.53 Granted..................................................... 847,469 1,944,656 $ 29.68 Exercised................................................... -- (1,446,404) $ 3.98 Restrictions lapsed......................................... (859,399) -- -- Forfeited................................................... (45,578) (515,537) $ 15.29 ------------- ---------- ---------- Outstanding, December 31, 1997................................ 2,416,047 8,644,246 $ 14.52 ------------- ---------- ---------- ------------- ---------- ----------
The following table summarizes information about options outstanding as of December 31, 1997:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ---------------------------------------------------- ------------------------------ NUMBER NUMBER OUTSTANDING AS WEIGHTED WEIGHTED EXERCISABLE AS WEIGHTED OF AVERAGE AVERAGE OF AVERAGE DECEMBER 31, REMAINING EXERCISE DECEMBER 31, EXERCISE RANGE OF EXERCISE PRICES 1997 CONTRACTUAL LIFE PRICE 1997 PRICE - ----------------------------------------- ---------------- ------------------- ------------- --------------- ------------- $1.44 to $4.21........................... 1,848,332 4.81 $ 2.90 1,848,332 $ 2.90 $5.00 to $8.00........................... 1,862,215 6.80 $ 6.95 1,172,598 $ 7.08 $8.58 to $19.46.......................... 2,456,571 8.01 $ 15.24 641,417 $ 14.26 $20.21 to $37.50......................... 1,916,216 9.09 $ 24.74 229,866 $ 22.43 $38.58 to $41.44......................... 560,912 9.81 $ 39.98 -- -- ---------------- --- ------ --------------- ------ 8,644,246 7.42 $ 14.52 3,892,213 $ 7.18 ---------------- --- ------ --------------- ------ ---------------- --- ------ --------------- ------
At December 31, 1997, the total number of available shares to grant under the plans (consisting of either restricted stock or options) was 1,137,850. NOTE J--PREFERRED SHARE PURCHASE RIGHTS Pursuant to the Company's stockholder rights agreement, each share of common stock carries one right to purchase .0067 shares of preferred stock. The rights become exercisable in certain limited circumstances involving a potential business combination transaction or an acquisition of shares of the Company and are exercisable at a price of $66.67 per right, subject to adjustment. Following certain other events after the rights become exercisable, each right entitles its holder to purchase for $66.67 an amount 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE J--PREFERRED SHARE PURCHASE RIGHTS (CONTINUED) of common stock of the Company, or, in certain circumstances, securities of the acquiror, having a then-current market value of twice the exercise price of the right. The rights are redeemable and may be amended at the Company's option before they become exercisable. Until a right is exercised, the holder of a right has no rights as a stockholder of the Company. The rights expire on July 23, 2000. NOTE K--NET INCOME PER SHARE In 1997, the Company adopted Statement of Financial Accounting Standard No. 128 (SFAS No. 128), "Earnings Per Share". Under SFAS No. 128, basic net income per share is computed as net income divided by weighted average shares, excluding the dilutive effects of stock options and other potentially dilutive securities. The calculation of net income per share in compliance with SFAS No. 128 for the three years ended December 31, 1997 is reflected in the following table:
YEARS ENDED DECEMBER 31, ------------------------------- 1997 1996 1995 --------- --------- --------- Net Income................................................... $ 93,697 $ 61,102 $ 40,298 Basic: Weighted average shares.................................... 90,668 88,267 85,479 --------- --------- --------- --------- --------- --------- Diluted: Weighted average shares.................................... 90,668 88,267 85,479 Common stock equivalents--stock options.................... 3,331 3,255 3,009 --------- --------- --------- Diluted shares............................................. 93,999 91,522 88,488 --------- --------- --------- --------- --------- --------- Net Income Per Share: Basic...................................................... $ 1.03 $ .69 $ .47 Diluted.................................................... $ 1.00 $ .67 $ .46
As a result of adopting SFAS No. 128 in 1997, the Company's reported net income per share for 1996 and 1995 have been restated. The effect of this accounting change on previously reported net income per share data is as follows:
1996 1995 --------- --------- Primary net income per share as reported........................................ $ .67 $ .45 Effect of SFAS No. 128.......................................................... .02 .02 --- --- Basic net income per share as restated.......................................... $ .69 $ .47 --- --- --- --- Fully diluted net income per share as reported.................................. $ .67 $ .45 Effect of SFAS No. 128.......................................................... -- .01 --- --- Diluted net income per share as restated........................................ $ .67 $ .46 --- --- --- ---
In 1997, the Financial Accounting Standards Board adopted SFAS No. 130 "Reporting Comprehensive Income", which requires disclosure of comprehensive income. This statement becomes effective in 1998. The Company does not expect the impact of adopting this statement to be significant. 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE L--QUARTERLY FINANCIAL DATA (UNAUDITED) The following tabulation shows certain quarterly financial data for 1997 and 1996 (in thousands, except per share amounts):
QUARTER ---------------------------------------------- YEAR ENDED 1997 1 2 3 4 DECEMBER 31, - -------------------------------------------------- ---------- ---------- ---------- ---------- ------------ Net service revenues.............................. $ 283,023 $ 311,622 $ 339,754 $ 368,477 $1,302,876 Gross margin...................................... $ 111,894 $ 124,140 $ 135,200 $ 146,096 $ 517,330 Income before income taxes........................ $ 33,777 $ 37,613 $ 41,710 $ 45,728 $ 158,828 Net income........................................ $ 19,920 $ 22,210 $ 24,631 $ 26,936 $ 93,697 Basic net income per share........................ $ .22 $ .24 $ .27 $ .30 $ 1.03 Diluted net income per share...................... $ .21 $ .24 $ .26 $ .29 $ 1.00 QUARTER ---------------------------------------------- YEAR ENDED 1996 1 2 3 4 DECEMBER 31, - -------------------------------------------------- ---------- ---------- ---------- ---------- ------------ Net service revenues.............................. $ 196,239 $ 210,649 $ 232,950 $ 258,797 $ 898,635 Gross margin...................................... $ 76,642 $ 83,921 $ 91,788 $ 100,941 $ 353,292 Income before income taxes........................ $ 22,478 $ 24,234 $ 27,058 $ 29,875 $ 103,645 Net income........................................ $ 13,239 $ 14,224 $ 15,946 $ 17,693 $ 61,102 Basic net income per share........................ $ .15 $ .16 $ .18 $ .20 $ .69 Diluted net income per share...................... $ .15 $ .16 $ .17 $ .19 $ .67
NOTE M--SEGMENT REPORTING Information about the Company's operations in different geographic locations for each of the three years in the period ended December 31, 1997, is shown below. The Company's areas of operations outside of the United States include Canada, the United Kingdom, Belgium, France and the Netherlands. Revenues represent total revenues from the respective geographic areas. Operating income is revenues less operating costs and expenses pertaining to specific geographic areas. Foreign operating income reflects charges for U.S. management fees and amortization of intangible assets of $1,538,000, $1,533,000 and $992,000 for the years ended December 31, 1997, 1996 and 1995, respectively. Domestic operating income reflects charges for amortization of intangibles of $4,466,000, $4,935,000 and $4,307,000 for the years ended December 31, 1997, 1996 and 1995, respectively. Identifiable assets are those assets used in the geographic areas and are after elimination of intercompany balances.
YEARS ENDED DECEMBER 31, ------------------------------------ 1997 1996 1995 ------------ ---------- ---------- (IN THOUSANDS) Revenues Domestic............................................. $ 1,176,888 $ 812,751 $ 564,564 Foreign.............................................. 125,988 85,884 63,962 ------------ ---------- ---------- $ 1,302,876 $ 898,635 $ 628,526 ------------ ---------- ---------- ------------ ---------- ---------- Operating Income Domestic............................................. $ 144,393 $ 94,260 $ 63,861 Foreign.............................................. 10,245 7,142 4,765 ------------ ---------- ---------- $ 154,638 $ 101,402 $ 68,626 ------------ ---------- ---------- ------------ ---------- ---------- Assets Domestic............................................. $ 505,702 $ 375,576 $ 267,487 Foreign.............................................. 55,665 40,436 33,653 ------------ ---------- ---------- $ 561,367 $ 416,012 $ 301,140 ------------ ---------- ---------- ------------ ---------- ----------
19 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and the Board of Directors of Robert Half International Inc.: We have audited the accompanying consolidated statements of financial position of Robert Half International Inc. (a Delaware corporation) and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Robert Half International Inc. and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP San Francisco, California January 22, 1998 20 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III The information required by Items 10 through 13 of Part III is incorporated by reference from the registrant's Proxy Statement, under the captions "NOMINATION AND ELECTION OF DIRECTORS," "BENEFICIAL STOCK OWNERSHIP," "COMPENSATION OF DIRECTORS," "COMPENSATION OF EXECUTIVE OFFICERS" AND "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION AND CERTAIN TRANSACTIONS," which Proxy Statement will be mailed to stockholders in connection with the registrant's annual meeting of stockholders which is scheduled to be held in May 1998. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. FINANCIAL STATEMENTS The following consolidated financial statements of the Company and its subsidiaries are included in Item 8 of this report: Consolidated statements of financial position at December 31, 1997 and 1996. Consolidated statements of income for the years ended December 31, 1997, 1996 and 1995. Consolidated statements of stockholders' equity for the years ended December 31, 1997, 1996 and 1995. Consolidated statements of cash flows for the years ended December 31, 1997, 1996 and 1995. Notes to consolidated financial statements. Report of independent public accountants. Selected quarterly financial data for the years ended December 31, 1997 and 1996 are set forth in Note L--Quarterly Financial Data (Unaudited) included in Item 8 of this report. 2. FINANCIAL STATEMENT SCHEDULES Schedules I through V have been omitted as they are not applicable. 3. EXHIBITS
EXHIBIT NO. EXHIBIT - ------- --------------------------------------------------------------------------- 3.1 Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997. 3.2 By-Laws, incorporated by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. 4.1 Indenture dated as of October 1, 1972, as amended, between IDS Realty Trust and First National Bank of Minneapolis, incorporated by reference to Exhibits 6(t) and 6(v) to the Form S-14 Registration Statement of the Registrant (formerly known as Boothe Interim Corporation) filed with the Securities and Exchange Commission on December 31, 1979. 4.2 Restated Certificate of Incorporation of Registrant (filed as Exhibit 3.1). 4.3 Rights Agreement, dated as of July 23, 1990, between the Registrant and The Chase Manhattan Bank (formerly Manufacturers Hanover Trust Company of California), as amended and restated effective April 30, 1997, incorporated by reference to Exhibit 1 to Registrant's Form 8-A/A Amendment No. 4 filed on May 1, 1997.
21
EXHIBIT NO. EXHIBIT - ------- --------------------------------------------------------------------------- 10.1 Credit Agreement dated as of November 1, 1993, among the Registrant, NationsBank of North Carolina, N.A. and Bank of America National Trust and Savings Association, as amended, incorporated by reference to (i) Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1993, (ii) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1995, (iii) Exhibit 10.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, and (iv) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997. *10.2 Employment Agreement dated as of October 2, 1985, between the Registrant and Harold M. Messmer, Jr. The Twelfth Amendment to the Employment Agreement is filed with this Annual Report on Form 10-K for the fiscal year ended December 31, 1997. The original Employment Agreement and the first eleven amendments thereto are incorporated by reference to (i) Exhibit 10.(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1985, (ii) Exhibit 10.2(b) to Registrant's Registration Statement on Form S-1 (No. 33-15171), (iii) Exhibit 10.2(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, (iv) Exhibit 10.2(d) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, (v) Exhibit 28.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1990, (vi) Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, (vii) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1993, (viii) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, (ix) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1995, (x) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and (xi) Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.3 Key Executive Retirement Plan--Level II, as amended, incorporated by reference to Exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.4 Restated Retirement Agreement between the Registrant and Harold M. Messmer, Jr., incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.5 1985 Stock Option Plan, as amended, incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997. *10.6 Excise Tax Restoration Agreement dated November 5, 1996, incorporated by reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.7 Outside Directors' Option Plan, as amended. *10.8 1989 Restricted Stock Plan, as amended, incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997. *10.9 StockPlus Plan, as amended. *10.10 1993 Incentive Plan, as amended. *10.11 Deferred Compensation Plan, incorporated by reference to Exhibit 10.24 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. *10.12 Annual Performance Bonus Plan, incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996. *10.13 Form of Severance Agreement, incorporated by reference to (i) Exhibit 10.26 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989 and (ii) Exhibit 19.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1990.
22
EXHIBIT NO. EXHIBIT - ------- --------------------------------------------------------------------------- *10.14 Form of Indemnification Agreement for Directors of the Registrant, incorporated by reference to (i) Exhibit 10.27 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989 and (ii) Exhibit 10.19 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. *10.15 Form of Indemnification Agreement for Executive Officers of Registrant, incorporated by reference to Exhibit 10.28 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. *10.16 Senior Executive Retirement Plan, as amended, incorporated by reference to Exhibit 10.16 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.17 Collateral Assignment of Split Dollar Insurance Agreement, incorporated by reference to Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. 21 Subsidiaries of the Registrant. 23 Accountants' Consent 27 Financial Data Schedule.
- ------------------------ * Management contract or compensatory plan required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K. (b) Reports on Form 8-K The Registrant filed no reports on Form 8-K during the fiscal quarter ending December 31, 1997. 23 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ROBERT HALF INTERNATIONAL INC. (Registrant) Date: March 13, 1998 By: /S/ M. KEITH WADDELL ------------------------------------ M. Keith Waddell Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) 24 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: March 13, 1998 By: /S/ HAROLD M. MESSMER, JR. ------------------------------------------ Harold M. Messmer, Jr. Chairman of the Board, President, Chief Executive Officer, and a Director (Principal Executive Officer) Date: March 13, 1998 By: /S/ ANDREW S. BERWICK, JR. ------------------------------------------ Andrew S. Berwick, Jr., Director Date: March 13, 1998 By: /S/ FREDERICK P. FURTH ------------------------------------------ Frederick P. Furth, Director Date: March 13, 1998 By: /S/ EDWARD W. GIBBONS ------------------------------------------ Edward W. Gibbons, Director Date: March 13, 1998 By: /S/ FREDERICK A. RICHMAN ------------------------------------------ Frederick A. Richman, Director Date: March 13, 1998 By: /S/ THOMAS J. RYAN ------------------------------------------ Thomas J. Ryan, Director Date: March 13, 1998 By: /S/ J. STEPHEN SCHAUB ------------------------------------------ J. Stephen Schaub, Director Date: March 13, 1998 By: /S/ M. KEITH WADDELL ------------------------------------------ M. Keith Waddell Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) Date: March 13, 1998 By: /S/ BARBARA J. FORSBERG ------------------------------------------ Barbara J. Forsberg Vice President and Controller (Principal Accounting Officer)
25 EXHIBIT INDEX
EXHIBIT NO. EXHIBIT - ------- --------------------------------------------------------------------------- 3.1 Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997. 3.2 By-Laws, incorporated by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. 4.1 Indenture dated as of October 1, 1972, as amended, between IDS Realty Trust and First National Bank of Minneapolis, incorporated by reference to Exhibits 6(t) and 6(v) to the Form S-14 Registration Statement of the Registrant (formerly known as Boothe Interim Corporation) filed with the Securities and Exchange Commission on December 31, 1979. 4.2 Restated Certificate of Incorporation of Registrant (filed as Exhibit 3.1). 4.3 Rights Agreement, dated as of July 23, 1990, between the Registrant and The Chase Manhattan Bank (formerly Manufacturers Hanover Trust Company of California), as amended and restated effective April 30, 1997, incorporated by reference to Exhibit 1 to Registrant's Form 8-A/A Amendment No. 4 filed on May 1, 1997. 10.1 Credit Agreement dated as of November 1, 1993, among the Registrant, NationsBank of North Carolina, N.A. and Bank of America National Trust and Savings Association, as amended, incorporated by reference to (i) Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1993, (ii) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1995, (iii) Exhibit 10.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, and (iv) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997. *10.2 Employment Agreement dated as of October 2, 1985, between the Registrant and Harold M. Messmer, Jr. The Twelfth Amendment to the Employment Agreement is filed with this Annual Report on Form 10-K for the fiscal year ended December 31, 1997. The original Employment Agreement and the first eleven amendments thereto are incorporated by reference to (i) Exhibit 10.(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1985, (ii) Exhibit 10.2(b) to Registrant's Registration Statement on Form S-1 (No. 33-15171), (iii) Exhibit 10.2(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, (iv) Exhibit 10.2(d) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, (v) Exhibit 28.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1990, (vi) Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, (vii) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1993, (viii) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, (ix) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1995, (x) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and (xi) Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.3 Key Executive Retirement Plan--Level II, as amended, incorporated by reference to Exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.4 Restated Retirement Agreement between the Registrant and Harold M. Messmer, Jr., incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.5 1985 Stock Option Plan, as amended, incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997. *10.6 Excise Tax Restoration Agreement dated November 5, 1996, incorporated by reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.7 Outside Directors' Option Plan, as amended. *10.8 1989 Restricted Stock Plan, as amended, incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997.
EXHIBIT NO. EXHIBIT - ------- --------------------------------------------------------------------------- *10.9 StockPlus Plan, as amended. *10.10 1993 Incentive Plan, as amended. *10.11 Deferred Compensation Plan, incorporated by reference to Exhibit 10.24 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. *10.12 Annual Performance Bonus Plan, incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996. *10.13 Form of Severance Agreement, incorporated by reference to (i) Exhibit 10.26 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989 and (ii) Exhibit 19.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1990. *10.14 Form of Indemnification Agreement for Directors of the Registrant, incorporated by reference to (i) Exhibit 10.27 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989 and (ii) Exhibit 10.19 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. *10.15 Form of Indemnification Agreement for Executive Officers of Registrant, incorporated by reference to Exhibit 10.28 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. *10.16 Senior Executive Retirement Plan, as amended, incorporated by reference to Exhibit 10.16 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.17 Collateral Assignment of Split Dollar Insurance Agreement, incorporated by reference to Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. 21 Subsidiaries of the Registrant. 23 Accountants' Consent 27 Financial Data Schedule.
- ------------------------ * Management contract or compensatory plan required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K. EX-10.2 2 EXHIBIT 10.2 Exhibit 10.2 TWELFTH AMENDMENT TO EMPLOYMENT AGREEMENT This Twelfth Amendment to Employment Agreement is made and entered into as of January 1, 1998, by and between Robert Half International Inc. (formerly Boothe Financial Corporation), a Delaware corporation, ("Corporation") and Harold M. Messmer, Jr. ("Officer"). 1. The last sentence of Section 3.1 of the Employment Agreement dated as of October 2, 1985, as amended, between Corporation and Officer (the "Employment Agreement") is hereby amended to read in its entirety as follows: "Effective as of January 1, 1998, the Base Salary shall in no event be less than $525,000 per annum." 2. In all other respects, the Employment Agreement is hereby ratified and confirmed. IN WITNESS WHEREOF, the parties hereto have executed this agreement effective as of the day and year first written above. ROBERT HALF INTERNATIONAL INC. By /s/ M. Keith Waddell ---------------------------------- M. Keith Waddell Senior Vice President /s/ Harold M. Messmer, Jr. ---------------------------------- Harold M. Messmer, Jr. EX-10.7 3 EXHIBIT 10.7 EXHIBIT 10.7 OUTSIDE DIRECTORS' OPTION PLAN OF ROBERT HALF INTERNATIONAL INC. (AS AMENDED AND RESTATED EFFECTIVE DECEMBER 11, 1997) 1. DEFINITIONS. As used in this Plan, the following terms have the following meanings: 1.1. ADMINISTRATOR means the Board or a committee appointed by the Board. 1.2. AFFILIATE means a "parent" or "subsidiary" corporation, as defined in Sections 425(e)and 425(f), respectively, of the Code. 1.3. ANNUAL ORGANIZATIONAL MEETING means the first meeting of the Board after the annual meeting of the Company's stockholders. 1.4. BOARD means the Board of Directors of the Company. 1.5. CHANGE IN CONTROL. A Change in Control means any of the following events: 1.5.1. Any person or group (as such terms are defined in Section 13(d)(3) of the Exchange Act), other than an employee benefit plan sponsored by the Company or a subsidiary thereof or a corporation owned (directly or indirectly), by the stockholders of the Company in substantially the same proportions of the ownership of stock of the Company, shall become the beneficial owner of securities of the Company representing 20% or more, or commences a tender or exchange offer following the successful consummation of which the offerer and its affiliates would beneficially own securities representing 20% or more, of the combined voting power of then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise; PROVIDED, HOWEVER, that a Change in Control shall not be deemed to include the acquisition by any such person or group of securities representing 20% or more of the Company if such party has acquired such securities not with the purpose nor with the effect of changing or influencing the control of the Company, nor in connection with or as a participant in any transaction having such purposes or effect, including, without limitation, not in connection with such party (i) making any public announcement with respect to the voting of such shares at any meeting to consider a merger, consolidation, sale of substantial assets or other business combination or extraordinary transaction involving the Company, (ii) making, or in any way participating in, any "solicitation" of "proxies" (as such terms are defined or used in Regulation 14A under the Exchange Act) to vote any voting securities of the Company (including, without limitation, any such solicitation subject to Rule 14a-11 under the Exchange Act) or seeking to advise or influence any party with respect to the voting of any voting securities of the Company, directly or indirectly, relating to a merger or other business combination involving the Company or the sale or transfer of substantial assets of the Company, (iii) forming, joining or in any way participating in any "group" within the meaning of Section 13(d)(3) of the Exchange Act with respect to any voting securities of the Company, directly or indirectly, relating to a merger or other business combination involving the Company or the sale or transfer of any substantial assets of the Company, or (iv) otherwise acting, alone or in concert with others, to seek control of the Company or to seek to control or influence the management or policies of the Company. 1.5.2. The stockholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company. 1.5.3. A change in the composition of the Board of Directors of the Company occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (i) are directors of the Company as of the date hereof, or (ii) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company). As a result of or in connection with any cash tender offer, merger, or other business combination, sale of assets or contested election, or combination of the foregoing, the persons who were directors of the Company just prior to such event shall cease within one year to constitute a majority of the Board. 1.5.4. The Company's stockholders approve a definitive agreement providing for a transaction in which the Company will cease to be an independent publicly owned corporation. 1.5.5. The stockholders of the Company approve a definitive agreement (i) to merge or consolidate the Company with or into another corporation in which the holders of the Stock immediately before such merger or reorganization will not, immediately following such merger or reorganization, hold as a group on a fully-diluted basis both the ability to elect at least a majority of the directors of the surviving corporation and at least a majority in value of the surviving corporation's outstanding equity securities, or (ii) to sell or otherwise dispose of all or substantially all of the assets of the Company. 1.6. CODE means the Internal Revenue Code of 1986, as amended. 1.7. COMPANY means Robert Half International Inc. 1.8. DIRECTOR means a member of the Board. 1 1.9. ELIGIBLE DIRECTOR means a Director who is not also an employee of the Company or an Affiliate. 1.10. EXCHANGE ACT means the Securities Exchange Act of 1934, as amended. 1.11. GRANT DATE means the date on which an Option is granted. 1.12. OFFER means a tender offer or an exchange offer for shares of the Company's Stock. 1.13. OPTION means an option to purchase Stock as described in Section 5.1 hereof. An Option granted under this Plan is a nonstatutory option to purchase Stock which does not meet the requirements set forth in Section 422A of the Code. 1.14. OPTION AGREEMENT means a written agreement evidencing an Option, in form satisfactory to the Company, duly executed on behalf of the Company and delivered to and executed by an Optionee. 1.15. OPTIONEE means an Eligible Director who has been granted an Option. 1.16. PLAN means the Outside Directors' Option Plan. 1.17. SECURITIES ACT means the Securities Act of 1933, as amended. 1.18. STOCK means the Common Stock, $.001 par value, of the Company. 1.19. STOCK PURCHASE AGREEMENT means a written agreement, in form satisfactory to the Company, duly executed by the Company and an Optionee who has exercised an Option to purchase Stock. 1.20. TERMINATION DATE means the date on which an Optionee ceases to be either a Director of or a consultant to the Company. 1.21. VESTING DATE means, with respect to each calendar year, the last day of the month in which the Annual Organization Meeting is held; provided, however, that the "Vesting Date" with respect to a particular Option shall not include the last day of the month in which such Option is granted. 1.22. VOTING SHARES means the outstanding shares of the Company entitled to vote for the election of directors. 2. PURPOSES OF THE PLAN. The purposes of the Plan are to attract and retain the best available candidates for the Board, to provide additional equity incentives to Eligible Directors through their participation in the growth value of the Stock, and to promote the success of the Company's business. To accomplish the foregoing objectives, this Plan provides a means whereby Eligible Directors will receive Options to purchase Stock. 3. STOCK SUBJECT TO THE PLAN. The number of authorized but previously unissued shares of the Company's Stock available for issuance hereunder shall equal the number of shares of Stock with respect to which Options are granted pursuant to Section 5 hereof. 4. ADMINISTRATION. The Administrator shall have the authority to grant Options upon the terms and conditions of this Plan, and to determine all other matters relating to this Plan. The Administrator may delegate ministerial duties to such employees of the Company as it deems proper. All questions of interpretation, implementation and application of this Plan shall be determined by the Administrator, and such determinations shall be final and binding on all persons. 2 5. TERMS AND CONDITIONS OF OPTIONS. 5.1. GRANT OF OPTION. Options shall be granted pursuant to this Plan as follows: 5.1.1. GRANT ON EFFECTIVE DATE. Upon the effective date of this Plan, an Option for 30,000 shares of Stock shall be granted to each Eligible Director who shall not previously have been granted an option by the Company for the purchase of shares of Stock. 5.1.2. SUBSEQUENT GRANTS. On the date of each Annual Organizational Meeting subsequent to the effective date of this Plan, an Option shall be granted to each Eligible Director. With respect to any Eligible Director who, prior to such date, shall not have been granted an option by the Company, whether pursuant to this Plan or any other plan or arrangement with the Company, the Option shall be for 15,000 shares of Stock. Otherwise, the Option shall be for 12,000 shares of Stock. 5.2. EXERCISE PRICE. The exercise price of an Option shall be 100% of the value of the Stock on the Grant Date, determined in accordance with Section 6 hereof. 5.3. OPTION TERM. Each Option granted under this Plan shall expire ten (10) years from the Grant Date. 5.4. OPTION EXERCISE. 5.4.1. INITIAL EXERCISE. No Option may be exercised in whole or in part until the later to occur of (i) the first Vesting Date following the Grant Date of such Option and (ii) six months after the Grant Date of such Option. 5.4.2. STOCKHOLDER APPROVAL. If stockholder approval of this Plan is required (a) under the rules and regulations promulgated under Section 16 of the Exchange Act in order to exempt any transaction contemplated by this Plan from Section 16(b) of the Exchange Act, or (b) by the rules of the New York Stock Exchange, if the Company's securities are listed thereon, or (c) by the rules of the National Association of Securities Dealers automated quotation system ("NASDAQ"), National Market System, if the Company's securities are quoted thereon, then no Option may be exercised in whole or in part until the stockholders of the Company have approved this Plan. 5.4.3. COMPLIANCE WITH SECURITIES LAWS. Stock shall not be issued pursuant to the exercise of an Option unless the exercise of the Option and the issuance and delivery of Stock pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act, the Exchange Act, applicable state securities laws, the rules and regulations promulgated under each of the foregoing, the requirements of the New York Stock Exchange (if the Company's securities are listed thereon) and the requirements of NASDAQ pertaining to the National Market System (if the Company's securities are quoted thereon), and shall be further subject to the approval of counsel for the Company with respect to such compliance. 5.5. REGISTRATION AND RESALE. If the Stock subject to this Plan is not registered under the Securities Act and under applicable state securities laws, the Administrator may require that the Participant deliver to the Company such documents as counsel for the Company may determine are necessary or advisable in order to substantiate compliance with applicable securities laws and the rules and regulations promulgated thereunder. 5.6. VESTING SCHEDULE. An Optionee's right to exercise an Option shall vest, as to twenty-five percent (25%) of the Stock (as adjusted, pursuant to Section 5.8.1 hereof, if applicable) initially subject to the Option, on each of the first through fourth Vesting Dates following the Grant Date. 3 5.7. PAYMENT UPON EXERCISE. At the time written notice of exercise of an Option is given to the Company, the Optionee shall make payment in full, in cash or check or by one of the methods specified in Section 5.7.1 or Section 5.7.2 below, for all Stock purchased pursuant to the exercise of such Option. Proceeds of any such payment shall constitute general funds of the Company. 5.7.1. PROMISSORY NOTE. An Option may be exercised by delivery of the Optionee's full recourse promissory note for any portion or all of the aggregate exercise price of the Stock as to which the Option is being exercised. Such note shall (a) bear interest at the lowest rate which will not result in interest being imputed pursuant to the Internal Revenue Code, (b) mature four years after the date of exercise and (c) be on such other terms as determined by the Administrator. Such promissory note shall be secured by a security interest in the Stock purchased pursuant to the Option and in such other manner, if any, as the Administrator shall approve. 5.7.2. DELIVERY OF STOCK. An Option may be exercised by delivery by the Optionee of Stock already owned by the Optionee for all or part of the aggregate exercise price of the Stock as to which the Option is being exercised, so long as (i) the value of such Stock (determined as provided in Section 6) is equal on the date of exercise to the aggregate exercise price of the shares of Stock as to which the Option is being exercised, or such portion thereof as the Optionee is authorized to pay by delivery of Stock and (ii) such previously owned shares have been held by the Optionee for at least six months. 5.8. ADJUSTMENTS. 5.8.1. CHANGES IN CAPITAL STRUCTURE. If the Stock is changed by reason of a stock split, reverse stock split, stock dividend, or recapitalization, or is converted into or exchanged for other securities other than as a result of a Change of Control, the Administrator shall make such appropriate adjustments in (i) the number of shares of Stock to be covered by options granted under Section 5.1.2 hereof, (ii) each Option outstanding under this Plan, and (iii) the exercise price of each outstanding Option; provided, however, that the Company shall not be required to issue fractional shares as a result of any such adjustment. Each such adjustment shall be determined by the Administrator in its sole discretion, which determination shall be final and binding on all persons. Any new or additional Stock to which an Optionee may be entitled under this Section 5.8.1 shall be subject to all of the terms and conditions set forth in Section 5 of this Plan. 5.8.2. CHANGE OF CONTROL. In the event of a Change of Control, all Options shall vest immediately. 5.9. NO ASSIGNMENT. No right or benefit under, or interest in, the Plan shall be subject to assignment or transfer (other than by will or the laws of descent and distribution), and no such right, benefit or interest shall be subject to attachment or legal process for or against Participant or his or her beneficiaries, as the case may be. During the life of the Optionee, an Option shall be exercisable only by the Optionee or, in the event of disability of the Optionee, by the Optionee's guardian or legal representative. 5.10. TERMINATION; EXPIRATION OF UNVESTED OPTIONS. Options granted to an Optionee under this Plan, to the extent such rights have not expired or been exercised, shall terminate on such Optionee's Termination Date; provided, however, that an Option may be exercised, to the extent vested and exercisable on the Termination Date, for a period of thirty (30) days after such Optionee's Termination Date; and, provided further, that if exercise of an Option during such thirty (30) day period would subject such Optionee to liability under Section 16(b) of the Exchange Act, such thirty (30) day period shall not begin to run until six (6) months from the date of the last Stock transaction made, indirectly or directly, by such Optionee prior to such Optionee's Termination Date. 4 6. DETERMINATION OF VALUE. For purposes of this Plan, the value of the Stock shall be the closing sales price on the New York Stock Exchange or the NASDAQ National Market System, as the case may be, on the date the value is to be determined as reported in THE WALL STREET JOURNAL (Western Edition). If there are no trades on such date, the closing sale price on the last preceding business day upon which trades occurred shall be the fair market value. If the Stock is not listed on the New York Stock Exchange or quoted on the NASDAQ National Market System, the fair market value shall be determined in good faith by the Administrator. 7. MANNER OF EXERCISE. An Optionee wishing to exercise an Option shall give written notice to the Company at its principal executive office, to the attention of the Secretary of the Company, accompanied by an executed Stock Purchase Agreement and by payment of the Option exercise price in accordance with Section 5.7. The date the Company receives written notice of an exercise hereunder accompanied by payment of the Option exercise price will be considered the date such Option was exercised. Promptly after receipt of such written notice and payment, the Company shall deliver to the Optionee or such other person permitted to exercise such Option under Section 5.9, a certificate or certificates for the requisite number of shares of Stock. The Company shall pay any stock issue or transfer tax incurred with respect to such exercise and issuance. 8. RIGHTS. 8.1. RIGHTS AS OPTIONEE. No Eligible Director shall acquire any rights as an Optionee unless and until an Option Agreement has been duly executed on behalf of the Company, delivered to the Optionee and executed by the Optionee. 8.2. RIGHTS AS STOCKHOLDER. No person shall have any rights as a stockholder of the Company with respect to any Stock subject to an Option until the date that a stock certificate has been issued and delivered to the Optionee. 8.3. NO RIGHT TO REELECTION. Nothing contained in the Plan or any Option Agreement shall be deemed to create any obligation on the part of the Board to nominate any Director for reelection by the Company's stockholders, or confer upon any Director the right to remain a member of the Board for any period of time, or at any particular rate of compensation. 9. REGISTRATION AND RESALE. The Board may, but shall not be required to, cause the Plan, the Options, and Stock subject to the Plan to be registered under the Securities Act and under the securities laws of any state. No Option may be exercised, and the Company shall not be obliged to grant Stock upon exercise of an Option, unless, in the opinion of counsel for the Company, such exercise and grant is in compliance with all applicable federal and state securities laws and the rules and regulations promulgated thereunder. As a condition to the grant of an Option for the issuance of Stock upon the exercise of an Option, the Administrator may require that the Optionee agree to comply with such provisions and federal and state securities laws as may be applicable to such grant or the issuance of Stock, and that the Optionee delivers to the Company such documents as counsel for the Company may determine are necessary or advisable in order to substantiate compliance with applicable securities laws and the rules and regulations promulgated thereunder. 10. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN. The Board or the Administrator may at any time amend, alter, suspend, or discontinue this Plan, except to the extent that stockholder approval is required for any amendment or alteration (a) by Rule 16b-3 or applicable law in order to exempt from Section 16(b) of the Exchange Act any transaction contemplated by this Plan, or (b) by the rules of the New York Stock Exchange, if the Company's securities are listed thereon, or (c) by the rules of NASDAQ pertaining to the National Market System, if the Company's securities are quoted thereon; provided, however, no amendment, alteration, suspension or discontinuation shall be made that would impair the rights of any Optionee under an Option without such Optionee's consent; and provided further, any provision in this Plan relating to the eligibility of Directors to participate in this Plan, the timing of Option grants made under this Plan or the amount of Options granted to a Director under this Plan shall not be amended, to the extent so provided by Rule 16b-3, more than once every six months, other 5 than to comport with the changes in the Code or the rules thereunder. Subject to the foregoing, the Administrator shall have the power to make such changes in the regulations and administrative provisions hereunder, or in any Option (with the Optionee's consent), as in the opinion of the Administrator may be appropriate from time to time. 11. INDEMNIFICATION OF ADMINISTRATOR. Members of the group constituting the Administrator shall be indemnified for actions with respect to the Plan to the fullest extent permitted by the Certificate of Incorporation, as amended, and the By-laws of the Company and by the terms of any indemnification agreement that has been or shall be entered into from time to time between the Company and any such person. 12. HEADINGS. The headings used in this Plan are for convenience only, and shall not be used to construe the terms and conditions of the Plan. 13. EFFECTIVE DATE. This Plan shall become effective upon adoption by the Board. If stockholder approval is required (a) under the General Rules and Regulations promulgated under Section 16 of the Exchange Act in order to exempt any transaction contemplated by this Plan from Section 16(b) of the Exchange Act or (b) by the rules of the New York Stock Exchange, if the Company's securities are listed thereon, or (c) by the rules of NASDAQ pertaining to the National Market System, if the Company's securities are quoted thereon, then this Plan shall be submitted to the stockholders of the Company for consideration at the next annual meeting of stockholders. The Administrator may make Options conditioned on such approval, and any Option so made shall be effective as of the date of grant, subject only to such approval. 6 EX-10.9 4 EXHIBIT 10.9 EXHIBIT 10.9 ROBERT HALF INTERNATIONAL INC. STOCKPLUS PLAN (AS AMENDED AND RESTATED EFFECTIVE NOVEMBER 12, 1997) 1. PURPOSES. The principal purposes of the Robert Half International Inc. StockPlus Plan (the "Plan") are: (a) to improve individual employee performance by providing long-term incentives and rewards to employees of the Company, (b) to assist the Company in attracting, retaining and motivating employees with experience and ability, and (c) to associate the interests of such employees with those of RHII's shareholders. 2. DEFINITIONS. Unless the context clearly indicates otherwise, the following terms, when used in this Plan, shall have the meanings set forth below: (a) "COMMON STOCK" or "STOCK" means RHII Common Stock, par value $.001 per share. (b) "ADMINISTRATOR" means the Board of Directors of RHII or a committee of the Board, the composition and the size of which shall cause such committee to satisfy the requirements of Rule 16b-3 of the Exchange Act with respect to officers and directors. (c) "COMPANY" means Robert Half International Inc., its divisions and direct and indirect subsidiaries. (d) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (e) "FAIR MARKET VALUE" means the closing sales price on the New York Stock Exchange or the NASDAQ National Market System, as the case may be, on the date the value is to be determined as reported in The Wall Street Journal (Western Edition). If there are no trades on such date, the closing price on the latest preceding business day upon which trades occurred shall be the Fair Market Value. If the Stock is not listed in the New York Stock Exchange or quoted on the NASDAQ National Market System, the Fair Market Value shall be determined in good faith by the Administrator. (f) "GRANT DATE" means the date an Option is granted under the Plan. (g) "OPTION" or "STOCK OPTION" means a right granted under the Plan to an Optionee to purchase shares of RHII Common Stock at a fixed price for a specified period of time. (h) "OPTION PRICE" means the price at which a share of Common Stock covered by an Option granted hereunder may be purchased. (i) "OPTIONEE" means an eligible employee of the Company who has received a Stock Option granted under the Plan. (j) "RHII" means Robert Half International Inc., a Delaware corporation. 3. ADMINISTRATION. The Plan shall be administered by the Administrator, which shall have full power and authority to administer and interpret the Plan and to adopt such rules, regulations, agreements, guidelines and instruments for the administration of the Plan as the Administrator deems necessary or advisable. The Administrator's powers include, but are not limited to (subject to the specific limitations described herein), authority to determine the employees to be granted Options 1 under the Plan, determine the size and applicable terms and conditions of grants to be made to such employees, determine the time when Options will be granted and authorize grants to eligible employees. Any guidelines that may be adopted from time to time by the Administrator shall be advisory only and shall not be binding upon the Administrator. The Administrator's interpretations of the Plan, and all actions taken and determinations made by the Administrator concerning any matter arising under or with respect to the Plan or any Options granted hereunder, shall be final, binding and conclusive on all interested parties. The Administrator may delegate ministerial functions hereunder, such delegation to be subject to such terms and conditions as the Administrator in its discretion shall determine. The Administrator may as to all questions of accounting rely conclusively upon any determinations made by the independent public accountants of the Company. 4. STOCK AVAILABLE FOR OPTIONS. The shares that may be delivered or purchased under the Plan shall not exceed an aggregate of 5,785,000 shares of Common Stock, subject to any adjustments which may be made pursuant to Section 11 hereof. Shares of Stock used for purposes of the Plan may be either shares of authorized but unissued Common Stock or treasury shares or both. Stock covered by Options which have terminated or expired prior to exercise or have been surrendered or cancelled shall be available for further option hereunder. 5. ELIGIBILITY. All those employees of the Company as shall be determined from time to time by the Administrator shall be eligible to participate in the Plan, provided, however, that no employee may be granted Options in the aggregate which would result in that employee receiving more than 10% of the maximum number of shares available for issuance under the Plan. However, no individual who is subject to Section 16 of the Exchange Act with respect to transactions in the Company's securities may be granted an option subsequent to November 1, 1995. 6. TERMS AND CONDITIONS OF OPTIONS. Each Option granted hereunder shall be in writing and shall contain such terms and conditions as the Administrator may determine, subject to the following: (a) PRICE. The Option Price shall be not less than 85% of the Fair Market Value of Common Stock on the Grant Date. (b) TERM AND EXERCISE DATES. Options granted hereunder shall have a term of no longer than ten years from the Grant Date. No Option may be granted after the tenth anniversary of the date of adoption of this Plan. A grant of Options may become exercisable in installments; provided, however, that no Option shall become exercisable until six months following the Grant Date of such Option. However, Stock Options must be exercised for full shares of Common Stock. To the extent that Stock Options are not exercised when they become initially exercisable, they shall be carried forward and be exercisable until the expiration of the term of such Stock Options, subject to the provisions of Section 6(e) hereof. An option granted after November 1, 1995, to an eligible employee pursuant to this Plan shall automatically expire if, within six months after its grant, the recipient of such option becomes subject to Section 16 of the Exchange Act with respect to transactions in the Company's securities. (c) EXERCISE OF OPTION. To exercise an Option, the holder thereof shall give notice of his or her exercise to the Company, specifying the number of shares of Common Stock to be purchased and identifying the specific Options that are being exercised. From time to time the Administrator may establish procedures relating to effecting such exercises. No fractional shares shall be issued as a result of exercising an Option. An Option is exercisable during an Optionee's lifetime only by the Optionee or Optionee's guardian or legal representative. (d) PAYMENT OF OPTION PRICE. The purchase price for Options being exercised must be paid in full at time of exercise. Payment shall be, at the option of the holder at the time of exercise, by any combination of cash, check or delivery of shares of Common Stock that have been owned by Optionee for at least six months. If all or a portion of the purchase price is paid by delivery of shares, the shares shall be valued at the Fair Market Value of such shares on the date of exercise. 2 In addition, in order to enable the Company to meet any applicable foreign, federal (including FICA), state and local withholding tax requirements, an Optionee shall also be required to pay the amount of tax to be withheld. No share of stock will be delivered to any Optionee until all such amounts have been paid. In the event that withholding taxes are not paid within the specified time period, to the extent permitted by law the Company shall have the right, but not the obligation, to cause such withholding taxes to be satisfied by reducing the number of shares of stock deliverable or by offsetting such withholding taxes against amounts otherwise due from the Company to the Optionee. If withholding taxes are paid by reduction of the number of shares deliverable to Optionee, such shares shall be valued at the Fair Market Value as of the date of exercise. (e) EFFECT OF TERMINATION OF EMPLOYMENT. All Options then held by the Optionee which are exercisable at the date of termination shall continue to be exercisable by the Optionee, or, if applicable, Optionee's estate, until the earlier of 30 days after such date or the expiration of such Options in accordance with their terms. All Options which are not exercisable at such date shall automatically terminate and lapse, unless the Administrator shall determine otherwise. Notwithstanding the foregoing, if exercise of an Option during the 30-day period described in the previous sentence would subject the Optionee to liability under Section 16 of the Exchange Act, such Option shall be exercisable until the earliest of (a) its normal termination date and (b) seven months after the last transaction in Common Stock by the Optionee prior to termination. (f) MISCONDUCT. In the event that the Administrator determines in good faith that an Optionee has (i) used for profit, or materially harmed the Company by disclosing to unauthorized persons, confidential information or trade secrets of the Company, (ii) materially breached any contract with, or materially violated any fiduciary obligation to, the Company, or (iii) engaged in unlawful trading in the securities of RHII or of another company based on nonpublic information gained as a result of that Optionee's employment with the Company, then, effective as of the date notice of such misconduct is given by the Administrator to the Optionee, that Optionee shall forfeit all rights to any unexercised Options granted under the Plan and all of that Optionee's outstanding Options shall automatically terminate and lapse, unless the Administrator shall determine otherwise. (g) NONTRANSFERABILITY OF OPTIONS. During an Optionee's lifetime, his or her Options shall not be transferrable and shall only be exercisable by the Optionee and any purported transfer shall be null and void. Options are not transferable except by will or by the laws of descent and distribution. 7. AMENDMENT. The Administrator may, at any time, amend, suspend or terminate the Plan, in whole or in part, provided that no such action shall adversely affect any rights or obligations with respect to any grants theretofore made hereunder. The Administrator may amend the terms and conditions of outstanding Options, provided, however, that (i) no such amendment shall be adverse to the holders of the Options, (ii) no such amendment shall extend the term of an Option, and (iii) the amended terms of the Option would be permitted under this Plan. 8. FOREIGN EMPLOYEES. Without amending the Plan, the Administrator may grant Options to eligible employees who are foreign nationals on such terms and conditions different from those specified in this Plan as may in the judgment of the Administrator be necessary or desirable to foster and promote achievement of the purposes of the Plan, and, in furtherance of such purposes the Administrator may make such modifications, amendments, procedures, subplans and the like as may be necessary or advisable to comply with provisions of laws in other countries in which the Company operates or has employees. 9. REGISTRATION, LISTING AND QUALIFICATION OF SHARES. Each Option shall be subject to the requirement that if at any time the Administrator shall determine that the registration, listing or qualification of the shares covered thereby upon any securities exchange or under any foreign, federal, state or local law, or the consent or approval of any governmental regulatory body, is necessary or 3 desirable as a condition of, or in connection with, the granting of such Option or the purchase of shares thereunder, no such Option may be exercised unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any condition not acceptable to the Administrator. Any person exercising an Option shall make such representations and agreements and furnish such information as the Administrator may request to assure compliance with the foregoing or any other applicable legal requirements. RHII shall use its reasonable best efforts to cause shares issued hereunder to be registered under the Securities Act of 1933, as amended. 10. BUY OUT OF OPTION GAINS. The Administrator shall have the right to elect, in its sole discretion and without the consent of the holder thereof (subject to the last sentence of this paragraph), to cancel the exercisable portion of any Option and pay to the Optionee the excess of the Fair Market Value of the shares of Common Stock covered by such cancelled portion of the Option over the Option Price of such cancelled portion of the Option at the date the Administrator provides written notice (the "Buy Out Notice") of its intention to exercise such right. Buy outs pursuant to this provision shall be effected by RHII as promptly as possible after the date of the Buy Out Notice. Payments of buy out amounts may be made in cash, in shares of Common Stock, or partly in cash and partly in Common Stock, as the Administrator deems advisable. To the extent payment is made in shares of Common Stock, the number of shares shall be determined by dividing the amount of the payment to be made by the Fair Market Value of a share of Common Stock at the date of the Buy Out Notice. In no event shall RHII be required to deliver a fractional share of Common Stock in satisfaction of this buy out provision. Payments of such buy out amounts shall be made net of any applicable foreign, federal (including FICA), state and local withholding taxes. Notwithstanding the foregoing, no buy out may be effected (a) until at least six months after the Grant Date of the subject option, and (b) without the consent of the Optionee if the Optionee is generally required to file reports pursuant to Section 16(a) of the Exchange Act with respect to his transactions in the Common Stock. 11. ADJUSTMENT FOR CHANGE IN STOCK SUBJECT TO PLAN. In the event of any change in the outstanding shares of Common Stock by reason of any stock split, stock dividend, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change, such equitable adjustments may be made in the Plan and the Options granted hereunder as the Administrator determines are necessary or appropriate, including, if necessary, an adjustment in the number of shares and prices per share applicable to Options then outstanding and in the number of shares which are reserved for issuance under the Plan. Any such adjustment shall be conclusive and binding for all purposes of the Plan. 12. NO RIGHTS TO OPTIONS OR EMPLOYMENT. No employee or other person shall have any claim or right to be granted an Option under the Plan. Receipt of an Option under the Plan shall not give an employee any rights to receive any other grant under the Plan. An Optionee shall have no rights to or interest in any Option except as set forth herein. Neither the Plan nor any action taken hereunder shall be construed as giving any employee any right to be retained in the employ of the Company. 13. RIGHTS AS SHAREHOLDER. An Optionee under the Plan shall have no rights as a holder of Common Stock with respect to Options granted hereunder, unless and until certificates for shares of Common Stock are issued to such Optionee. 14. OTHER ACTIONS. This Plan shall not restrict the authority of the Administrator or of RHII, for proper corporate purposes, to grant or assume stock options, other than under the Plan, to or with respect to any employee or other person. 15. COSTS AND EXPENSES. Except as provided in Section 6(d) hereof with respect to taxes, the costs and expenses of administering the Plan shall be borne by RHII and shall not be charged to any grant nor to any employee receiving a grant. 4 16. PLAN UNFUNDED. The Plan shall be unfunded. Except for reserving a sufficient number of authorized shares to the extent required by law to meet the requirements of the Plan, RHII shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any grant under the Plan. 17. GOVERNING LAW. This Plan shall be governed by and construed in accordance with the laws of the State of Delaware. 18. INDEMNIFICATION OF ADMINISTRATOR. Members of the group constituting the Administrator shall be indemnified for actions with respect to the Plan to the fullest extent permitted by the Certificate of Incorporation, as amended, and the By-laws of the Company and by the terms of any indemnification agreement that has been or shall be entered into from time to time between the Company and any such persons. 19. EFFECTIVE DATE. This Plan shall become effective upon adoption by the Board of Directors of RHII. If stockholder approval is required (a) under the General Rules and Regulations promulgated under Section 16 of the Exchange Act in order to exempt any transaction contemplated by this Plan from Section 16(b) of the Exchange Act, (b) by the rules of the New York Stock Exchange, if RHII Common Stock is listed thereon, or (c) by the rules of NASDAQ pertaining to the National Market System, if RHII Common Stock is quoted thereon, then this Plan shall be submitted to the stockholders of RHII for consideration at the next annual meeting of stockholders. The Administrator may make Options conditioned on such approval, and any Option so made shall be effective as of the date of grant. 5 EX-10.10 5 EXHIBIT 10.10 EXHIBIT 10.10 ROBERT HALF INTERNATIONAL INC. 1993 INCENTIVE PLAN (AS AMENDED AND RESTATED EFFECTIVE DECEMBER 11, 1997) 1. PURPOSES. The principal purposes of the Robert Half International Inc. 1993 Incentive Plan (the "Plan") are: (a) to improve individual employee performance by providing long-term incentives and rewards to key employees of the Company, (b) to assist the Company in attracting, retaining and motivating key employees with experience and ability, and (c) to align the interests of such employees with those of the Company's stockholders. 2. DEFINITIONS. Unless the context clearly indicates otherwise, the following terms, when used in this Plan, shall have the meanings set forth below: (a) "ADMINISTRATOR" means either the Board of Directors or a committee of the Board of Directors of the Company, the composition and the size of which shall cause such committee to satisfy the requirements of Rule 16b-3 of the Exchange Act with respect to officers and directors. (b) "BOARD" means the Board of Directors of the Company. (c) "CHANGE IN CONTROL" means the occurrence of any of the following: (i) Any person or group (as such terms are defined in Section 13(d)(3) of the Exchange Act), other than an employee benefit plan sponsored by the Company or a subsidiary thereof or a corporation owned (directly or indirectly), by the stockholders of the Company in substantially the same proportions of the ownership of stock of the Company, shall become the beneficial owner of securities of the Company representing 20% or more, or commences a tender or exchange offer following the successful consummation of which the offerer and its affiliates would beneficially own securities representing 20% or more, of the combined voting power of then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise; PROVIDED, HOWEVER, that a Change in Control shall not be deemed to include the acquisition by any such person or group of securities representing 20% or more of the Company if such party has acquired such securities not with the purpose nor with the effect of changing or influencing the control of the Company, nor in connection with or as a participant in any transaction having such purposes or effect, including, without limitation, not in connection with such party (A) making any public announcement with respect to the voting of such shares at any meeting to consider a merger, consolidation, sale of substantial assets or other business combination or extraordinary transaction involving the Company, (B) making, or in any way participating in, any "solicitation" of "proxies" (as such terms are defined or used in Regulation 14A under the Exchange Act) to vote any voting securities of the Company (including, without limitation, any such solicitation subject to Rule 14a-11 under the Exchange Act) or seeking to advise or influence any party with respect to the voting of any voting securities of the Company, directly or indirectly, relating to a merger or other business combination involving the Company or the sale or transfer of substantial assets of the Company, (C) forming, joining or in any way participating in any "group" within the meaning of Section 13(d)(3) of the Exchange Act with respect to any voting securities of the Company, directly or indirectly, relating to a merger or other business combination involving the Company or the sale or transfer of any substantial assets of the Company, or (D) otherwise acting, alone or in concert with others, to seek control of the Company or to seek to control or influence the management or policies of the Company. (ii) The stockholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company. (iii) A change in the composition of the Board of Directors of the Company occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company). As a result of or in connection with any cash tender offer, merger, or other business combination, sale of assets or contested election, or combination of the foregoing, the persons who were directors of the Company just prior to such event shall cease within one year to constitute a majority of the Board. (iv) The Company's stockholders approve a definitive agreement providing for a transaction in which the Company will cease to be an independent publicly owned corporation. (v) The stockholders of the Company approve a definitive agreement (A) to merge or consolidate the Company with or into another corporation in which the holders of the Stock immediately before such merger or reorganization will not, immediately following such merger or reorganization, hold as a group on a fully-diluted basis both the ability to elect at least a majority of the directors of the surviving corporation and at least a majority in value of the surviving corporation's outstanding equity securities, or (B) to sell or otherwise dispose of all or substantially all of the assets of the Company. (d) "COMMON STOCK" or "STOCK" means Robert Half International Inc. Common Stock, par value $.001 per share. 1 (e) "COMPANY" means Robert Half International Inc., its divisions and direct and indirect subsidiaries. (f) "CONTINUOUS EMPLOYMENT" means employment with the Company or any Subsidiary, or serving as a director or consultant to the Company or any Subsidiary, without any termination or leave of absence, except for a leave of absence approved by the Company or any Subsidiary which is less than six consecutive months in duration. (g) "DISABILITY" or "DISABLED" shall mean (i) a physical or mental condition which, in the judgment of the Administrator based on competent medical evidence satisfactory to the Administrator (including, if required by the Administrator, medical evidence obtained by an examination conducted by a physician selected by the Administrator), renders Holder unable to engage in any substantial gainful activity for the Company and which condition is likely to result in death or to be of long, continued and indefinite duration, or (ii) a judicial declaration of incompetence. (h) "ELIGIBLE EMPLOYEE" means an employee of the Company or any Subsidiary (including an employee who is a director and/or officer) who, as determined by the Administrator in its sole discretion, has and exercises management functions and responsibilities. (i) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (j) "FAIR MARKET VALUE" means the closing sales price on the New York Stock Exchange or the NASDAQ National Market System, as the case may be, on the date the value is to be determined as reported in THE WALL STREET JOURNAL (Western Edition). If there are no trades on such date, the closing price on the latest preceding business day upon which trades occurred shall be the Fair Market Value. If the Stock is not listed in the New York Stock Exchange or quoted on the NASDAQ National Market System, the Fair Market Value shall be determined in good faith by the Administrator. (k) "GRANT" shall mean an Option or a Restricted Stock Award. (l) "GRANT DATE" means the date a Grant is made under the Plan. (m) "HOLDER" means the recipient of a Grant pursuant to this Plan. (n) "ISSUE DATE" means the date on which shares of Stock subject to a Restricted Stock Award are issued or transferred by the Company to the account of an Eligible Employee who has received such grant. (o) "MINIMUM WITHHOLDING TAXES" means any applicable federal, state and local income and other employment taxes which the Company is required to withhold in connection with (i) the lapse of restrictions on Stock subject to a Restricted Stock Award, (ii) the exercise of an Option, or (iii) the making of an election under Section 83(b) of the Internal Revenue Code with respect to a Restricted Stock Award. (p) "OFFER" means a tender offer or an exchange offer for the Company's Stock. (q) "OPTION" or "STOCK OPTION" means a right granted under the Plan to a Holder to purchase shares of Common Stock at a fixed price for a specified period of time. (r) "OPTION PRICE" means the price at which a share of Common Stock covered by an Option granted hereunder may be purchased. (s) "OPTIONEE" means an Eligible Employee who has received a Stock Option granted under the Plan. (t) "RESTRICTED STOCK AWARD" means a grant described in Section 6 of the Plan. (u) "SECURITIES ACT" means the Securities Act of 1933, as amended. (v) "SUBSIDIARY" means a "SUBSIDIARY" corporation as defined in Section 424(f) of the Internal Revenue Code of 1986, as amended. 2 (w) "VESTED" means that portion of a Grant with respect to which the Vesting Date has arrived or passed. (x) "VESTING DATE" means the date specified in Section 5 or 6 hereof, as the case may be, or such other date as shall be established by the Administrator or otherwise on the Grant Date or thereafter. (y) "VOTING SHARES" means the outstanding shares of the Company entitled to vote for the election of Directors. 3. STOCK AVAILABLE. The number of shares of Stock for which Grants may be made during any calendar year shall be that number which is equal to 1.5% of the number of issued and outstanding shares of Common Stock of the Company (excluding treasury shares) as of January 1 of such year (January 1, 1993, in the case of the first year). Any shares of Common Stock covered by Options which have terminated or expired prior to exercise or have been cancelled without value shall not be counted against the annual limit and shall be available for further grants hereunder and shares constituting the portion of a Restricted Stock Award that is forfeited before any dividends are paid upon such forfeited shares shall not be counted against the annual limit and shall be available for further grants hereunder. The foregoing number of shares available for Grants shall be subject to any adjustments which may be made pursuant to Section 12 hereof. Shares of Stock used for Options may be either shares of authorized but unissued Common Stock or treasury shares or both. Shares of Stock used for Restricted Stock Awards shall be treasury shares to the extent that treasury shares are available, and, if no treasury shares are available, Restricted Stock Awards shall be authorized but unissued Common Stock. 4. PARTICIPANTS. From time to time the Administrator shall, in its sole discretion, but subject to all of the provisions of the Plan, determine which Eligible Employees will be given Grants under the Plan, the number of Options or shares of Restricted Stock to be granted to each such Eligible Employee and the terms, conditions and restrictions of each such Grant. In making such determinations, the Administrator shall take into account the nature of services rendered and to be rendered by the respective recipients, their present and potential contribution to the Company's success and such other factors as the Administrator in its discretion deems relevant to the accomplishment of the purposes of the Plan. In any year, the Administrator may approve Options to Eligible Employees subject to differing terms and conditions and Restricted Stock Awards to Eligible Employees subject to differing terms and conditions. During any calendar year, the number of shares of Stock with respect to which Options or Restricted Stock are granted to any one individual may not exceed 75% of the number of shares of Stock available for Grants during 1994, subject to adjustment pursuant to Section 12 hereof. 5. OPTIONS. Each Option granted hereunder shall be in writing and shall contain such terms and conditions as the Administrator may determine, subject to the following: (a) PRICE. The Option Price shall be not less than 85% of the Fair Market Value of Common Stock on the Grant Date. (b) TERM AND EXERCISE. Options granted hereunder shall have a term of no longer than ten years from the Grant Date. An Option may be exercised only as to those portions of the Option that have Vested. Stock Options must be exercised for full shares of Common Stock. (c) INCENTIVE STOCK OPTIONS. No Option granted hereunder shall be deemed an Incentive Stock Option (as such term is defined in the Internal Revenue Code) unless (a) such Option is designated as an Incentive Stock Option at the time of grant by the Administrator and (b) such Option otherwise meets the requirements for Incentive Stock Options specified in the Internal Revenue Code. However, no Option designated as an Incentive Stock Option shall contain any restrictions upon the ability of the Holder to dispose of Stock acquired upon the exercise thereof other than as provided elsewhere in this Plan. During the life of the Plan, the total number of 3 shares for which Incentive Stock Options may be granted may not exceed ten times the number of shares available for Grants under the Plan during the first calendar year in which the Plan is in effect. (d) VESTING. Unless otherwise determined by the Administrator on the Grant Date, each Option shall Vest as to twenty-five percent (25%) of the Stock covered by such Option on each of the first through fourth anniversaries of the Grant Date. Notwithstanding the foregoing, the Administrator may accelerate Vesting, in whole or in part, under such terms and conditions as the Administrator deems appropriate. (e) EXERCISE OF OPTION. To exercise an Option, the Holder shall give written notice of exercise to the Company, specifying the number of shares of Common Stock to be purchased and identifying the specific Options that are being exercised. From time to time the Administrator may establish procedures relating to such exercises. An Option is exercisable during a Holder's lifetime only by the Holder or, with respect to options that are not designated as Incentive Stock Options, under such other circumstances as may be permitted by Rule 16b-3, or any successor rule, under the Exchange Act and all interpretations of the staff of the Securities and Exchange Commission thereunder. (f) PAYMENT OF OPTION PRICE. The purchase price for Options being exercised must be paid in full at time of exercise. Payment shall be, at the option of the holder at the time of exercise, by any combination of cash, check or delivery of shares of Common Stock that have been owned by Holder for at least six months. If all or a portion of the purchase price is paid by delivery of shares, the shares shall be valued at the Fair Market Value of such shares on the date of exercise. In addition, unless the Administrator determines otherwise at the time of grant, payment of the Option Price and of Minimum Withholding Taxes may be made by (i) full recourse promissory note (secured or unsecured), payable on such terms and bearing such interest as the Administrator may determine or (ii) delivery (on a form acceptable to the Administrator) of an irrevocable direction to a securities broker to sell shares of Common Stock and to deliver part of the sales proceeds to the Company in payment of the full exercise price and Minimum Withholding Taxes and receipt of written confirmation from the securities broker of receipt of such irrevocable direction, the number of shares sold, the price at which sold and the date of sale. (g) NONTRANSFERABILITY OF OPTIONS. Options are not transferable except by will, by the laws of descent and distribution, or, with respect to options that are not designated as Incentive Stock Options, pursuant to a domestic relations order or under such other circumstances as the Administrator may determine. 6. RESTRICTED STOCK AWARDS. Each Restricted Stock Award made under the Plan shall contain the following terms, conditions and restrictions and such additional terms, conditions and restrictions as may be determined by the Administrator at the time of grant. (a) RIGHTS WITH RESPECT TO SHARES OF STOCK. Upon written acceptance by the Eligible Employee of restrictions and other terms and conditions described in the Plan and in the instrument evidencing such Restricted Stock Award, the Eligible Employee shall be a Holder, and the Company shall cause to be issued or transferred to the name of the Holder a certificate or certificates for the number of shares of Stock granted. From and after the Issue Date, the Holder shall have absolute ownership of such shares of Stock, including the right to vote and to receive dividends thereon, subject to the terms, conditions and restrictions described in the Plan and in the instrument evidencing the grant of such Restricted Stock Award. 4 (b) RESTRICTIONS ON TRANSFER. Shares covered by a Restricted Stock Award may not be sold, assigned, pledged, transferred or otherwise conveyed in any manner until the Vesting Date for such shares. (c) VESTING. Unless otherwise determined by the Administrator on the Grant Date, each Restricted Stock Award shall Vest as to twenty-five percent (25%) of the Stock covered by such grant on each of the first through fourth Vesting Dates which occur following the related Grant Date of such Restricted Stock Award. Notwithstanding the foregoing, the Administrator may accelerate the lapsing of restrictions on a Restricted Stock Award, in whole or in part under such terms and conditions as the Administrator deems appropriate. (d) AUTOMATIC VESTING IN SPECIAL CIRCUMSTANCES. Any provisions herein to the contrary notwithstanding, a Restricted Stock Award shall automatically become Vested upon (a) the Death or Disability of the Holder or (b) the occurrence of a Change in Control. (e) AGREEMENT BY HOLDER REGARDING WITHHOLDING TAXES. Each Holder granted a Restricted Stock Award shall represent in writing that such Holder acknowledges that, with respect to each Restricted Stock Award held by such Holder, (i) Minimum Withholding Taxes shall be due with respect to shares of Stock covered by such award, (ii) payment of Minimum Withholding Taxes to the Company is the responsibility of Holder and (iii) payment of such Minimum Withholding Taxes may require a significant cash outlay by Holder. (f) ELECTION TO RECOGNIZE GROSS INCOME IN THE YEAR OF GRANT. If any Holder properly elects within thirty (30) days of the Grant Date to include in gross income for federal income tax purposes an amount equal to the fair market value of the shares of Stock on the Grant Date, such Holder shall pay in cash to the Company in the calendar month of such Grant Date, or make arrangements satisfactory to the Administrator to pay to the Company, any Minimum Withholding Taxes required to be withheld with respect to such shares. (g) CONSIDERATION. Recipients of Restricted Stock Awards made in treasury shares shall not be required to pay any consideration to the Company. Recipients of Restricted Stock Awards made in the form of previously unissued shares shall be required to pay such minimum consideration, if any, as may be required by applicable law. The Administrator shall determine the form of consideration at the time of the award, which may include services rendered prior to the award. (h) PERFORMANCE CONDITIONS. If so determined by the Administrator, any grant of Restricted Shares shall be made subject to a Performance Condition in addition to any vesting requirements imposed upon such grant. Such Performance Condition shall operate as specified in this paragraph (h). (1) As used in this paragraph (h), the following terms shall have the indicated meanings: CERTIFICATION DATE means the date that the Administrator makes its written certification of a Final Restricted Stock Award. EPS means fully diluted earnings per share, determined in accordance with generally accepted accounting principles. For purposes of the foregoing sentence, earnings shall mean income before extraordinary items, discontinued operations and cumulative effect of changes in accounting principles and after full accrual for the bonuses paid under this Plan. EPS RATIO means the result obtained by dividing Preliminary EPS by Target EPS. FINAL RESTRICTED STOCK AWARD means the product of the Multiplier and the Original Restricted Stock Award. 5 MEASUREMENT YEAR means (a) in the case of a grant made in the first fiscal quarter of a fiscal year, that fiscal year or (b) in the case of a grant made in the second, third or fourth quarters of a fiscal year, the subsequent fiscal year. MULTIPLIER means (a) the sum of 0.1 and the EPS Ratio, if the EPS Ratio is greater than or equal to 0 and less than 0.9, (b) 1, if the EPS Ratio is greater than or equal to 0.9, or (c) 0, if the EPS Ratio is less than 0. NINE-MONTH PERIOD means the first three fiscal quarters of the Measurement Year. ORIGINAL RESTRICTED STOCK AWARD means the number of shares initially granted pursuant to a Restricted Stock Award made subject to a Performance Condition. PRELIMINARY EPS means 1.334 multiplied by EPS for a Nine-Month Period. TARGET EPS means the EPS goal set with respect to a Restricted Stock Award made subject to a Performance Condition. (2) A Restricted Stock Award shall be subject to a Performance Condition only if the Administrator makes such a determination on the Grant Date or if the Holder consents thereto. (3) If a Restricted Stock Award is made subject to a Performance Condition, the Administrator shall, not later than the end of the second calendar month of the Measurement Year, determine the Target EPS for such award. (4) After the public release by the Company of its unaudited results for the third fiscal quarter of the Measurement Year, the Chief Financial Officer shall, with respect to each Restricted Stock Award made subject to a Performance Condition, (a) calculate the Preliminary EPS, (b) determine the Multiplier, (c) calculate the Final Restricted Stock Award, and (d) deliver such calculation to the Administrator. (5) The Administrator shall, prior to the end of the Measurement Year, review the information submitted by the Chief Financial Officer and certify, in writing, each Final Restricted Stock Award. (6) To the extent that a Final Restricted Stock Award is less than the Original Restricted Stock Award, the number of shares of the Original Restricted Stock Award representing the difference shall be forfeited by the Holder. The Final Restricted Stock Award shall bear the same vesting schedule as the Original Restricted Stock Award, and on each Vesting Date the percentage of the Final Restricted Stock Award that vests shall be the same as the percentage of the Original Restricted Stock Award that would have vested had no shares been forfeited as a result of the performance condition. (7) If all or a portion of a Restricted Stock Award made subject to a Performance Condition shall vest prior to the Certification Date by reason of death, Disability or a Change in Control, then the Performance Condition shall be cancelled and none of such shares shall be subject to reduction or forfeiture as provided by the Performance Condition. Such shares shall be released to Holder in accordance with the terms of this plan relating to vested shares. (8) If all or a portion of a Restricted Stock Award made subject to a Performance Condition shall vest prior to the Certification Date for any reason other than death, Disability or a Change in Control, no shares shall be released to the Holder until after the Certification Date. No such vesting prior to the Certification Date shall in any way be deemed a 6 satisfaction, waiver or cancellation of the Performance Condition, and such Restricted Stock Award shall remain subject to reduction and forfeiture as provided by the Performance Condition. (i) ALTERNATIVE PERFORMANCE CONDITIONS. If so determined by the Administrator, any grant of Restricted Shares shall be made subject to an Alternative Performance Condition in addition to any vesting requirements imposed upon such grant. Such Alternative Performance Condition shall operate as specified in this paragraph (i). (1) As used in this paragraph (i), the following terms shall have the indicated meanings: CERTIFICATION DATE means the date that the Administrator makes its written certification of a Final Restricted Stock Award. ACTUAL EPS means fully diluted earnings per share for the Performance Period, determined in accordance with generally accepted accounting principles. For purposes of the foregoing sentence, earnings shall mean income before extraordinary items, discontinued operations and cumulative effect of changes in accounting principles and after full accrual for the bonuses paid under this Plan. EPS RATIO means the result obtained by dividing Actual EPS by Target EPS. FINAL RESTRICTED STOCK AWARD means the product of the Multiplier and the Original Restricted Stock Award. MULTIPLIER means (a) the sum of 0.1 and the EPS Ratio, if the EPS Ratio is greater than or equal to 0 and less than 0.9, (b) 1, if the EPS Ratio is greater than or equal to 0.9, or (c) 0, if the EPS Ratio is less than 0. ORIGINAL RESTRICTED STOCK AWARD means the number of shares initially granted pursuant to a Restricted Stock Award made subject to an Alternative Performance Condition. PERFORMANCE PERIOD means the period of service to which the Alternative Performance Condition relates. TARGET EPS means the EPS goal set with respect to a Restricted Stock Award made subject to an Alternative Performance Condition. (2) A Restricted Stock Award shall be subject to an Alternative Performance Condition only if the Administrator makes such a determination on the Grant Date or if the Holder consents thereto. (3) If a Restricted Stock Award is made subject to an Alternative Performance Condition, the Administrator shall establish the Performance Period and Target EPS for such award no later than the time permitted by section 162(m) of the Internal Revenue Code. (4) After the public release by the Company of its unaudited results for the last fiscal quarter of the Performance Period, the Chief Financial Officer shall, with respect to each Restricted Stock Award made subject to an Alternative Performance Condition, (a) calculate the Actual EPS, (b) determine the Multiplier, (c) calculate the Final Restricted Stock Award, and (d) deliver such calculation to the Administrator. (5) The Administrator shall review the information submitted by the Chief Financial Officer and certify, in writing, each Final Restricted Stock Award. (6) To the extent that a Final Restricted Stock Award is less than the Original Restricted Stock Award, the number of shares of the Original Restricted Stock Award representing the difference shall be forfeited by the Holder. The Final Restricted Stock Award shall bear the same vesting schedule as the Original Restricted Stock Award, and on each 7 Vesting Date the percentage of the Final Restricted Stock Award that vests shall be the same as the percentage of the Original Restricted Stock Award that would have vested had no shares been forfeited as a result of the Alternative Performance Condition. (7) If all or a portion of a Restricted Stock Award made subject to an Alternative Performance Condition shall vest prior to the Certification Date by reason of death, Disability or a Change in Control, then the Alternative Performance Condition shall be cancelled and none of such shares shall be subject to reduction or forfeiture as provided by the Alternative Performance Condition. Such shares shall be released to Holder in accordance with the terms of this plan relating to vested shares. (8) If all or a portion of a Restricted Stock Award made subject to an Alternative Performance Condition shall vest prior to the Certification Date for any reason other than death, Disability or a Change in Control, no shares shall be released to the Holder until after the Certification Date. No such vesting prior to the Certification Date shall in any way be deemed a satisfaction, waiver or cancellation of the Alternative Performance Condition, and such Restricted Stock Award shall remain subject to reduction and forfeiture as provided by the Alternative Performance Condition. 7. WITHHOLDING TAXES. In order to enable the Company to meet any applicable foreign, federal (including FICA), state and local withholding tax requirements, a Holder shall be required to pay the Minimum Withholding Taxes. No share of stock will be delivered to any Holder until Minimum Withholding Taxes have been paid. At the option of the Holder, withholding taxes may be paid by any combination of (a) cash, (b) reduction in the number of shares deliverable to Holder (in the case of an Option) or by surrendering a portion of the Restricted Stock Award to the Company (in either case "Share Reduction"), (c) delivery to the Company of other shares of Common Stock owned by Holder ("Share Delivery") or (d) any other means approved or ratified by the Administrator. If withholding taxes are paid by Share Reduction or Share Delivery, such shares shall be valued at the Fair Market Value as of the date of exercise or vesting. A Holder may elect to have additional shares withheld or surrendered pursuant to Share Reduction or Share Delivery above the amount required to satisfy Minimum Withholding Taxes. However, total combined Share Reduction and Share Delivery may not exceed the total taxes that Holder will have to pay (assuming Federal and state taxes are imposed at his marginal rate) by reason of the exercise or vesting. In addition, any use of Share Delivery in excess of Minimum Withholding Taxes must be effected with shares that have been held at least six months. In the event that Minimum Withholding Taxes are not paid by Holder, to the extent permitted by law the Company shall have the right, but not the obligation, to cause such withholding taxes to be satisfied by Share Reduction or by offsetting such withholding taxes against amounts otherwise due from the Company to the Holder. 8. RESTRICTIVE LEGENDS; TRANSFER RESTRICTIONS; CUSTODY. So long as any restrictions or obligations imposed pursuant hereto shall apply to a share of Stock (including, but not limited to, the restrictions or obligations imposed pursuant to Sections 5(f), 5(h), 6(b), 6(e), 6(f) and 7 hereof), each certificate evidencing such share shall bear an appropriate legend referring to the terms, conditions and restrictions. In addition, the Company may instruct its transfer agent that shares of Stock evidenced by such certificates may not be transferred without the written consent of the Company. Any attempt to dispose of such shares of Stock in contravention of such terms, conditions and restrictions shall be invalid. Certificates representing shares that have not Vested or with respect to which Minimum Withholding Taxes have not been paid will be held in custody by the Company or such bank or other institution designated by the Administrator. 9. TERMINATION OF CONTINUOUS EMPLOYMENT. If the Holder's Continuous Employment with the Company or any Subsidiary shall terminate for any reason, then, with respect to any portion of a Grant that has not Vested prior to or concurrently with such termination (a) in the case of an Option, all rights to such portion that has not Vested shall terminate and (b) in the case of a Restricted Stock Award, all rights to the shares covered by any portion thereof that has not Vested shall be forfeited; provided, however, that the Administrator, in its sole discretion within ninety (90) days of such termination of Continuous Employment, may notify the Holder in writing that the Holder's rights in such portion that has not Vested will not terminate or be forfeited and that the Holder shall continue to be the owner thereof, subject to such continuing restrictions as the Administrator may prescribe in 8 such notice. Options then held by the Holder which are Vested at the date of termination shall continue to be exercisable by the Holder, or, if applicable, Holder's estate, until the earlier of 90 days after such date or the expiration of such Options in accordance with their terms. Notwithstanding the foregoing, (i) the Administrator may in its sole discretion extend the period during which an Option may be exercised following termination of employment at any time, provided that any such extension does not exceed the Option's normal termination date, and (ii) if exercise of an Option during the 90-day period described in the previous sentence would subject the Holder to liability under Section 16 of the Exchange Act, such Option shall be exercisable until the earliest of (a) its normal termination date and (b) seven months after the last transaction in Common Stock by the Holder prior to termination. 10. ADMINISTRATION. The Plan shall be administered by the Administrator, which shall have full power and authority to administer and interpret the Plan and to adopt such rules, regulations, agreements, guidelines and instruments for the administration of the Plan as the Administrator deems necessary or advisable. The Administrator's powers include, but are not limited to (subject to the specific limitations described herein), authority to determine the employees who shall receive Grants under the Plan, determine the size and applicable terms and conditions of Grants to be made to such employees, determine the time when Grants will be made and authorize Grants to Eligible Employees. The Administrator's interpretations of the Plan, and all actions taken and determinations made by the Administrator concerning any matter arising under or with respect to the Plan or any Grants hereunder, shall be final, binding and conclusive on all interested parties. The Administrator may delegate ministerial functions hereunder, such delegation to be subject to such terms and conditions as the Administrator in its discretion shall determine. The Administrator may as to all questions of accounting rely conclusively upon any determinations made by the independent public accountants of the Company. 11. COMPLIANCE WITH SECURITIES LAWS. No Option may be exercised and no Stock may be issued pursuant to an Option or transferred pursuant to a Restricted Stock Award unless the Administrator shall determine that such exercise, issuance or transfer complies with all relevant provisions of law, including, without limitation, the Securities Act, the Exchange Act, applicable state securities laws, and rules and regulations promulgated under each of the foregoing, and the requirements of any stock exchange upon which the Stock may then be listed or quotation system upon which the Stock may be quoted, and shall be further subject to the approval of counsel for the Company with respect to such compliance. If the Stock subject to this Plan is not registered under the Securities Act and under applicable state securities laws, the Administrator may require that the Holder deliver to the Company such documents as counsel for the Company may determine are necessary or advisable in order to substantiate compliance with applicable securities laws and the rules and regulations promulgated thereunder. 12. ADJUSTMENT FOR CHANGE IN STOCK SUBJECT TO PLAN. In the event of any change in the outstanding shares of Common Stock by reason of any stock split, stock dividend, recapitalization, merger, consolidation, combination, spin-off or exchange of shares or other similar corporate change, appropriate adjustments shall be made by the Administrator in the number of shares of Stock subject to this Plan, the number of shares of Stock covered by each Grant and, in the case of Options, the Option Price of such Option. Any such adjustment shall be determined by the Administrator in its sole discretion, which determination shall be conclusive and binding for all purposes of the Plan. Any new or additional Stock to which a Holder of a Restricted Stock Award may be entitled shall be subject to all the terms and conditions set forth in Section 6 of this Plan. If fractional shares become due to any Holder as a result of any adjustment, the Company may, at its option, pay cash in lieu thereof. 13. NO RIGHTS TO GRANTS OR EMPLOYMENT. No employee or other person shall have any claim or right to a Grant under the Plan. Receipt of a Grant under the Plan shall not give an employee any 9 rights to receive any other Grant under the Plan. Neither the Plan nor any action taken hereunder shall be construed as giving any employee any right to be retained in the employ of the Company or any Subsidiary. 14. RIGHTS AS SHAREHOLDER. A Holder under the Plan shall have no rights as a holder of Common Stock with respect to Options granted hereunder, unless and until certificates for shares of Common Stock are issued to such Holder. 15. PLAN UNFUNDED. The Plan shall be unfunded. Except for reserving a sufficient number of authorized shares to the extent required by law to meet the requirements of the Plan, the Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any grant under the Plan. 16. NO ASSIGNMENT. Except as specifically provided by law (including the laws of descent and distribution) and elsewhere herein, no right or benefit under, or interest in, the Plan shall be subject to assignment, and no such right, benefit or interest shall be subject to attachment or legal process for or against Holder or his or her beneficiaries, as the case may be. 17. GOVERNING LAW. This Plan shall be governed by and construed in accordance with the laws of the State of Delaware. 18. INDEMNIFICATION OF ADMINISTRATOR. Members of the group constituting the Administrator shall be indemnified for actions with respect to the Plan to the fullest extent permitted by the Certificate of Incorporation, as amended, and the By-laws of the Company and by the terms of any indemnification agreement that has been or shall be entered into from time to time between the Company and any such persons. 19. HEADINGS. The headings used in this Plan are for convenience only, and shall not be used to construe the terms and conditions of the Plan. 20. AMENDMENT. The Administrator may, at any time, amend, suspend or terminate the Plan, in whole or in part, provided that no such action shall adversely affect any rights or obligations with respect to any Grants theretofore made hereunder. The Administrator may amend or cancel the terms and conditions of any outstanding Grant, determine whether cash will be paid or Grants will be made in replacement of, or as alternatives to, outstanding Grants or grants under any other incentive compensation plan; provided, however, that no such change shall be adverse to the Holder thereof without such Holder's consent. 21. EFFECTIVE DATE, TERMINATION. This Plan shall become effective upon approval by the stockholders of the Company, and shall remain in effect until terminated by the Board of Directors or Administrator. 10 EX-21 6 EXHIBIT 21 EXHIBIT 21 LIST OF SUBSIDIARIES
JURISDICTION OF NAME OF SUBSIDIARY INCORPORATION - ------------------------------------------------------------------------ -------------------- RH Holding Company, Inc. California LegalTeam, Inc. California Benchmark Staffing, Inc. California Benchmark Resources, Inc. California Robert Half Licensing, Inc. California Robert Half of California, Inc. California Cooperative Resources, Inc. California Robert Half of Texas G.P. Ltd. Delaware XYZ-II, Inc. Delaware Atlantic Temporaries, Inc. Delaware Texas Temp Gen, Inc. Delaware Texas Temp Lim, Inc. Delaware Robert Half Incorporated Florida R-H International Advertising Fund, Inc. Florida OfficeTeam Inc. Louisiana Robert Half Corporation Nevada Robert Half Nevada Staff, Inc. Nevada Tripoli Associates Corporation New York Robert Half of Pennsylvania, Inc. Pennsylvania Texas Temp Limited Partnership Texas RHT, L.P. (a limited partnership) Texas Fontaine Archer Van de Voorde S.A./N.V. Belgium S.A. Robert Half N.V. Belgium Robert Half International N.V. Belgium Robert Half Canada Inc. Canada Robert Half France S.A. (96% owned) France Accountemps S.A.R.L. France Robert Half S.A. France Robert Half Limited United Kingdom Robert Half Personnel (Midlands) Limited United Kingdom Envaward Limited United Kingdom Hatlon Limited United Kingdom Smiths Recruitment Limited United Kingdom
EX-23 7 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants we hereby consent to the incorporation by reference of our report dated January 22, 1998 into the Company's Registration Statements on Form S-8 (nos. 33-14706, 33-32622, 33-32623, 33-39187, 33-39204, 33-40795, 33-52617, 33-56639, 33-56641, 33-57763, 33-62138, 33-62140, 33-65401, 33-65403, 333-05743, 333-05745, 333-18283, 333-18339, 333-42471, 333-42573, 333-42343, and 333-42269). /s/ ARTHUR ANDERSEN LLP San Francisco, California January 22, 1998 EX-27 8 EXHIBIT 27 (FDS)
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR YEAR DEC-31-1997 DEC-31-1996 JAN-01-1997 JAN-01-1996 DEC-31-1997 DEC-31-1996 131,349 80,181 0 0 194,063 129,399 7,164 4,016 0 0 334,005 214,630 79,899 44,971 29,962 18,252 561,367 416,012 122,095 86,561 4,530 5,069 0 0 0 0 91 90 418,709 308,355 561,367 416,012 0 0 1,302,876 898,635 0 0 785,546 545,343 4,926 5,405 0 0 (4,190) (2,243) 158,828 103,645 65,131 42,543 93,697 61,102 0 0 0 0 0 0 93,697 61,102 1.03 0.69 1.00 0.67
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