SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K
      FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

  (Mark One)
      [X]   Annual Report Pursuant to Section 13 or 15(d) of the Securities
            Exchange Act of 1934

                 For the fiscal year ended December 31, 1999.

                                      or

      [ ]   Transition Report Pursuant to Section 13 or 15(d) of the
            Securities Exchange Act of 1934 [No Fee required]

            For the transition period from ________________ to__________________

                           Commission File No. 0-28148

                               STAFF LEASING, INC.
             (exact name of registrant as specified in its charter)

                Florida                                         65-0735612
     (State or other jurisdiction of                          (I.R.S. Employer
     incorporation or organization)                         Identification No.)

      600 301 Blvd West, Suite 202
            Bradenton, FL                                          34205
(Address of principal executive offices)                         (Zip Code)

(Registrant's Telephone Number, Including Area Code):  (941) 748-4540

Securities Registered Pursuant to Section 12(b) of the Act:  NONE

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, par value $0.01 per share
           (Title of class)

      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]

      The aggregate market value of the voting stock of Staff Leasing, Inc. held
by non-affiliates (based upon the March 20, 2000 $5.250 closing sale price for
the Common Stock on the Nasdaq National Market) was approximately $75.3 million.
      Number of shares outstanding of the issuer's common stock, as of March 20,
2000: 21,709,542 shares of common stock, $.01 par value.

                       DOCUMENTS INCORPORATED BY REFERENCE

      PART III - Portions of Registrant's Proxy Statement relating to the annual
meeting of shareholders to be held May 22, 2000, are incorporated by reference
in Part III.

                                       1
<PAGE>
                              TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I.
<S>                                                                                   <C>
      ITEM 1.   Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3

      ITEM 2.   Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

      ITEM 3.   Legal Proceedings  . . . . . . . . . . . . . . . . . . . . . . . . . 14

      ITEM 4.   Submission of Matters to a Vote of Security-Holders  . . . . . . . . 15

PART II.

      ITEM 5.   Market for the Registrant's Common Equity and
                 Related Stockholder Matters  . . . . . . . . . . . . . . . . . . .  15

      ITEM 6.   Selected Financial Data  . . . . . . . . . . . . . . . . . . . . . . 16

      ITEM 7.   Management's Discussion and Analysis of Financial Condition
                 and Results of Operations  . . . . . . . . . . . . . . . . . . . .  17

      ITEM 7 A. Quantitative and Qualitative Disclosures about Market Risk. . . . .  22

      ITEM 8.   Financial Statements and Supplementary Data  . . . . . . . . . . . . 22

      ITEM 9.   Changes in and Disagreements with Accountants on Accounting
                 and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . .22

PART III.

      ITEM 10.  Directors and Executive Officers of the Registrant . . . . . . . . . 22

      ITEM 11.  Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . 22

      ITEM 12.  Security Ownership of Certain Beneficial Owners and Management . . . 22

      ITEM 13.  Certain Relationships and Related Transactions . . . . . . . . . . . 23

PART IV.

      ITEM 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K  . . 23
</TABLE>

                                       2
<PAGE>

PART I

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

      In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), Staff Leasing, Inc. (the
"Company") is hereby providing cautionary statements identifying important
factors that could cause the Company's actual results to differ materially from
those projected in forward-looking statements (as such term is defined in the
Reform Act) made by or on behalf of the Company herein or orally, whether in
presentations, in response to questions or otherwise. Any statements that
express, or involve discussions as to, expectations, beliefs, plans, objectives,
assumptions or future events or performance (often, but not always, through the
use of words or phrases such as "will result," "are expected to," "anticipated,"
"plans," "intends," "will continue," "estimated," and "projection") are not
historical facts and may be forward-looking and, accordingly, such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results or performance of the Company to
be materially different from any future results or performance expressed or
implied by such forward-looking statements. Such known and unknown risks,
uncertainties and other factors include, but are not limited to, the following:
(i)increased cost of workers' compensation coverage (ii) increased volatility of
profit generated from workers' compensation component of the Company's service
offering under the Company's loss sensitive workers' compensation program for
2000 (iii) the potential for additional subsidies for health benefit plans; (iv)
possible adverse application of certain Federal and state laws and the possible
enactment of unfavorable laws or regulation; (v) impact of competition from
existing and new professional employer organizations; (vi) risks associated with
expansion into additional states where the Company does not have a presence or
significant market penetration; (vii) risks associated with the Company's
dependence on key vendors; (viii) the possibility for client attrition; (ix)
risks associated with geographic market concentration and concentration of
clients in the construction industry; (x) the financial condition of clients;
(xi) the failure to properly manage growth and successfully integrate acquired
companies and operations; and (xii) other factors which are described in further
detail in the Company's filings with the Securities and Exchange Commission.

      The Company cautions that the factors described above could cause actual
results or outcomes to differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company. Any
forward-looking statement speaks only as of the date on which such statement is
made, and the Company undertakes no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for
management to predict all of such factors. Further, management cannot assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.

ITEM 1.    BUSINESS

GENERAL

      Staff Leasing is the largest professional employer organization ("PEO") in
the United States. As of December 31, 1999, the Company served over 10,700
clients with approximately 133,000 worksite employees, primarily in Florida,
Texas, Georgia, Arizona, Minnesota, North Carolina, Tennessee and Alabama.
Through its operating subsidiaries, Staff Leasing provides its clients with a
broad range of services, including payroll administration, risk management,
benefits administration, unemployment services, and human resources consulting
services. The Company's clients are typically small to medium-sized businesses
with between two and 100 employees.

      The Company's services are designed to improve the productivity and
profitability of its clients' businesses by:

      o  Allowing managers of these businesses to focus on revenue-producing
         activities by relieving them of the time-consuming burdens associated
         with employee administration;

      o  Helping these businesses to better manage certain employment-related
         risks, including those associated with workers' compensation and state
         unemployment taxes;

      o  Improving the cash management of these businesses with respect to
         payroll-related expenses; and

      o  Enabling these businesses to attract and retain employees by providing
         health and retirement benefits to worksite employees on a
         cost-effective and convenient basis.

                                       3
<PAGE>

      In providing these services, the Company becomes a co-employer of the
worksite employees. Employment-related liabilities are contractually allocated
between the Company and the client. The Company assumes responsibility for and
manages the risks associated with: (i) worksite employee payroll; (ii) workers'
compensation insurance coverage; and (iii) compliance with certain
employment-related governmental regulations that can be effectively managed away
from the client's business. The client retains the worksite employees' services
in its business and remains responsible for compliance with other
employment-related governmental regulations that are more closely related to
worksite employee supervision. The Company charges its clients a service fee to
cover the cost of certain employment-related taxes, workers' compensation
insurance coverage and administrative and field services. This service fee is
invoiced together with the salaries and wages of the worksite employees and the
client's portion of health and retirement benefit plan costs.

      References in this report to the "Company" or "Staff Leasing" include
Staff Leasing, Inc. and its consolidated subsidiaries. The Company was
originally organized in 1993. From November 5, 1993 to July 1, 1997, the Company
was a limited partnership (the "Partnership"), which was formed to acquire the
assets of a PEO business that had operated since 1984. Staff Leasing, Inc. was
formed in 1997 to acquire all of the limited partnership interests in the
Partnership held by various investors, including certain executive officers,
directors, and employees of the Company, pursuant to the reorganization (the
"Reorganization"). In the Reorganization, which was concluded in July 1997
simultaneously with the Company's initial public offering, Staff Leasing, Inc.
acquired all of the limited partnership interests in the Partnership, becoming
the sole limited partner and in effect incorporating the business of the
Company. As part of the Reorganization, Charles S. Craig, Chairman and Chief
Executive Officer of the Company and owner of all of the issued and outstanding
capital stock of Staff Acquisition, Inc., the general partner of the
Partnership, granted the Company an option to exchange the stock of Staff
Acquisition, Inc. for 417,900 shares of the Company's common stock. On September
30, 1997, the Company exercised this option and completed the exchange.

RECENT EVENTS

      In August 1999, the Company's Board of Directors announced its decision to
explore various strategic alternatives available to the Company in order to
maximize shareholder value. Such alternatives could include a sale of the
Company or a recapitalization. The Board of Directors' Special Committee is
continuing to evaluate these alternatives. There can be no assurance that any
actions taken by the Company will result in a transaction or, if any such
transaction were to occur, as to the value to be obtained by the Company or its
shareholders.

      In August 1999, the Company announced the completion of a new workers'
compensation program with CNA and the Texas Workers' Compensation Insurance Fund
("Texas Fund") which commenced on January 1, 2000. The Texas Fund will be the
provider of workers' compensation insurance for clients based in Texas. The
Texas Fund program is a guaranteed cost insurance arrangement with a term of one
year. The cost of the premium will be determined based on the industries
serviced by the Company in Texas. For the remainder of the country, the
Company's workers' compensation carrier will be CNA. This program is an insured
loss sensitive program for a term of one year. The Company anticipates that its
workers' compensation costs will increase beginning in 2000 as a result of these
workers' compensation arrangements. An accrual for the workers' compensation
costs for the first quarter of 2000 will be made based on prior loss experience,
the Company's business mix, including the percentage of business in Texas, and
actual claims for the first quarter. Accruals for subsequent periods will be
affected by further changes in the Company's business mix and actual claims
experience. The final costs of coverage will be determined by the actual claims
experience over time as claims close and by the administrative costs of the
program. The increased accruals for the cost of coverage in 2000 and future
years will have no impact on 1999 and prior year earnings.

PEO INDUSTRY

      The PEO industry began to evolve in the early 1980s, largely in response
to the difficulties faced by small to medium-sized businesses in procuring
workers' compensation insurance coverage on a cost-effective basis and in
operating in an increasingly complex legal and regulatory environment. While
various service providers, such as payroll processing firms, benefits and safety
consultants and temporary staffing firms, were available to assist these
businesses with specific tasks, PEOs began to emerge as providers of a more
comprehensive outsourcing solution to these burdens.

      Growth in the PEO industry has been significant. Staffing Industry
Analysts, Inc., an employment industry research firm, estimates that gross
revenues in the PEO industry grew from $5.0 billion in 1991 to $31.7 billion in
1999.


                                       4
<PAGE>

The Company believes that the key factors driving demand for PEO services
include:

    o   The increasing complexity of employment-related governmental regulations
        and the related costs of compliance;

    o   The size and growth of the small to medium-sized business community in
        the United States;

    o   The increasing acceptance in the small to medium-sized business
        community of outsourcing of non-core functions;

    o   The need to manage cash expenditures associated with payroll and
        payroll-related expenses, including workers' compensation insurance; and

    o   The need to provide health and retirement benefits on a cost-effective
        and convenient basis.

      Another contributor to the recent growth of the PEO industry has been the
increasing recognition and acceptance by regulatory authorities of PEOs and the
co-employer relationship created by PEOs, with the development of licensing or
registration requirements at the state level. The Company and other industry
leaders, in concert with NAPEO, have worked with the relevant government
entities for the establishment of a regulatory framework that would clarify the
roles and obligations of the PEO and the client in the "co-employer"
relationship. This framework imposes financial responsibility on the PEO and its
controlling persons in order to promote the increased acceptance and further
development of the industry. See "Industry Regulation -- State Regulation."

      While many states do not explicitly regulate PEOs, 21 states (including
four states where the Company has offices: Florida, Texas, Tennessee and
Minnesota) have enacted legislation containing licensing or registration
requirements and, currently, several states are considering such regulation.
Such laws vary from state to state but generally provide for monitoring the
fiscal responsibility of PEOs.

CLIENT SERVICES

      The Company provides a broad range of services to its clients, including
payroll administration, risk management, benefits administration, unemployment
services and human resources consulting services. These services are offered by
the Company to its clients on a bundled basis, except for health and retirement
benefits, which are optional for worksite employees. The Company provides these
services to its clients through the following core activities:

      PAYROLL ADMINISTRATION. As a co-employer, the Company is responsible for
payroll administration, which includes recordkeeping, making payroll tax
deposits, reporting payroll taxes and related matters. The Company's call center
in Bradenton, Florida is staffed by approximately 200 client service
representatives and supervisors that are organized into teams. Each team is
assigned to serve clients in specific sales branch offices in defined geographic
areas. These representatives receive payroll and employee-related information by
telephone, facsimile transmission and via the Internet from clients, and input
this data for processing. The call center generally handles approximately 40,000
inbound and outbound phone calls per week. The Company processed approximately
5.4 million payroll checks in 1999 and sent out approximately 303,000 W-2s at
the end of January 2000.

      RISK MANAGEMENT. As part of its risk management services, the Company
conducts on-site safety inspections for its clients with high-risk profiles to
identify potential safety hazards. The Company's safety consultants meet with
clients to review their loss history, determine loss exposure, evaluate current
controls and recommend additional control options to reduce exposure to loss or
worker injury. These safety consultants continue to monitor worksite safety
concerns, as needed. The safety consultants are also trained to ensure the
proper workers' compensation classification of worksite employees. These risk
management services are designed to reduce workers' compensation claims and to
reduce other costs arising from workplace injury, such as costs of employee
turnover, employee retraining and recruiting and reduced employee morale. As of
December 31, 1999, the Company employed 41 safety consultants.

      BENEFITS ADMINISTRATION. The Company offers its clients and worksite
employees optional health and dental insurance, life insurance, accidental death
and dismemberment insurance and long-term disability insurance. In addition, the
clients and worksite employees are offered a cafeteria plan which includes a
flexible spending account allowing for payment of certain health and dependent
care costs with pre-tax payroll dollars.

      The Company also offers retirement benefits under a multiple employer
401(k) retirement plan, and through traditional and Roth payroll deducted IRAs
for worksite employees, including owners of clients. In addition to the 401(k)
retirement plan, the


                                       5
<PAGE>

Company also provides numerous benefits-related human resources services to its
clients. These services for both health and retirement benefit plans include
client support for issues related to pre- and post-tax payroll deductions, plan
eligibility, Internal Revenue Code Section 125 and Employee Retirement Income
Security Act ("ERISA") requirements, Consolidated Omnibus Budget Reconciliation
Act of 1987 ("COBRA") administration for health benefit plans and investment
fund information for retirement benefit plans.

      UNEMPLOYMENT SERVICES. The Company's unemployment services department is
responsible for processing all unemployment claims related to worksite
employees. Claims determined by the Company to be unwarranted are protested by
the Company under the appropriate regulatory procedures. The Company also offers
limited employment placement services to unemployed worksite employees and
attempts to place employees who request such services either with other clients
or other businesses.

      HUMAN RESOURCES CONSULTING SERVICES. The Company provides certain
consulting services to assist its clients in the recruitment, selection,
development and retention of human capital in compliance with regulatory
requirements. The Company also provides human resources related forms, policies
and administrative functions, such as employment applications, employee
guidebooks and Family and Medical Leave Act of 1993 ("FMLA") administration.
Additionally, the Company conducts seminars for its clients and worksite
employees, including interviewing techniques, diversity awareness, sexual
harassment prevention and performance management training. Most of these
services can be customized to suit client needs. They are provided by a
dedicated team of human resources professionals and are utilized by client
companies of all sizes spanning a wide range of industries.


CLIENTS

      OVERVIEW. As of December 31, 1999, the Company's customer base consisted
of over 10,700 client companies with an average of 12.4 employees. The Company
had clients classified in over 500 Standard Industrial Classification ("SIC")
codes. The Company's client distribution by major SIC code industry grouping for
1999 is:

<TABLE>
<CAPTION>
                                                              PERCENT OF
                                                                TOTAL
CATEGORY                                                       REVENUES
---------                                                  --------------
<S>                                                           <C>
Construction.............................................          33.0%
Services(1)..............................................          22.4
Manufacturing............................................          11.5
Retail Trade.............................................           8.2
Restaurants..............................................           7.7
Agriculture(2)...........................................           4.9
Finance/Insurance/Real Estate............................           4.1
Wholesale Trade..........................................           3.9
Transportation...........................................           3.7
Other....................................................            .6
                                                             ----------
Total..........................................                   100.0%
                                                             ==========
</TABLE>


(1)  Services consist principally of clients in the following: business
     services, automotive repair, health services, personal services (e.g.,
     laundry and dry cleaning, beauty and barber shops), hotel and lodging
     services, engineering, accounting and management services, recreational
     services, social services and miscellaneous repair services.

(2) Agriculture consists primarily of landscaping and nursery services.

      CLIENT SELECTION AND RETENTION STRATEGY. As part of its client selection
strategy, the Company offers its services to certain businesses within specified
SIC codes. All prospective clients are also evaluated individually on the basis
of total predicted profitability. This analysis takes into account workers'
compensation risk and claims history, unemployment history, payroll adequacy,
and credit status. With respect to potential clients operating in certain
industries believed by the Company to present a level of risk exceeding industry
norms, more rigorous approval requirements must be met before the Company enters
into a Client Services Agreement. This process may include an on-site inspection
and review of workers' compensation and unemployment claims experience for the
last three years. In addition, under the terms of the Company's agreement with
Liberty Mutual in 1999 and with CNA and the Texas Fund in 2000, potential
clients in certain industries or with historically high workers' compensation
insurance claims experience must also be approved by the insurance carrier
before a Client Services Agreement is executed.


                                       6
<PAGE>

      Historically, the Company's sales force has sold to all businesses within
its established workers' compensation risk parameters. As a result, the
Company's client base has contained significant segments of businesses with
fewer than five employees, start-up businesses and small construction businesses
that tend to be volatile and less likely to succeed than larger businesses with
long operating histories in less cyclical industries. The Company modified its
selection criteria for new clients during the first quarter of 2000 to restrict
the solicitation of businesses with fewer than five employees and those paying
wages substantially below average for their trade or business. At this time, the
Company modified its pricing model to take into account factors such as the size
of the client based on employee count, payroll volume and adequacy, and the
length of time the client has been in business when determining a service fee.
The Company determines a client's method of payment based on the client's credit
history.

      The Company performs a detailed profitability and risk analysis of all its
clients. Based on the results of this analysis, the Company terminates certain
clients or increases prices to clients which the Company believes would
otherwise be detrimental to its long-term profitability.

      The Company believes that the retention rate of its client base is
directly affected by the natural instability in the small to medium-sized
business market that it serves. The NAPEO standard for measuring client
retention is computed by dividing the number of clients at the end of the period
by the sum of the number of clients at the beginning of the period plus the
number of clients added during the period. The Company's client retention rate
decreased to 72% in 1999, down from 78% in 1998. Approximately 29% of the
clients that ceased to use the Company's services in 1999 were terminated at the
Company's option for reasons that include unacceptable risk, administrative
non-compliance and low profitability for the Company. An additional 43% ceased
to use the Company's services for reasons relating to their individual financial
condition, such as their business being closed or sold. The remaining 31% of
those clients stopped using the Company's services for other reasons, including
the cost of service and dissatisfaction with service.

      In order to improve client retention with respect to those clients who
voluntarily stopped using the Company's services, the Company intends to
introduce several client care initiatives and to focus on improved client
service.

      With regard to those clients who stopped using the Company's services as a
result of their individual financial condition, the Company's change in client
selection criteria is intended to improve client retention. The attrition rate
of clients with under five employees is significantly greater as a result of
their financial condition than for those clients with more than five employees.


      CLIENT SERVICES AGREEMENT. All clients enter into Staff Leasing's Client
Services Agreement. The Client Services Agreement provides for an initial
one-year term, subject to termination by the Company or the client at any time
upon 30 days' prior written notice. After the initial term the contract may be
renewed, terminated or continued on a month-to-month basis. In most cases, such
contracts are continued on a month-to-month basis. The Company requires the
owners of substantially all of its clients to personally guarantee the clients'
obligations under the Client Services Agreement.

      The service fee charged by the Company is invoiced along with each
periodic payroll delivered to the client. The service fee covers the cost of
certain employment-related taxes, workers' compensation insurance coverage and
administrative and field services provided by the Company to the client,
including payroll administration, recordkeeping and safety, human resources and
regulatory compliance consultation. The client's portion of health and
retirement benefit plan costs is charged separately and is not included in the
service fee. The component of the service fee related to administration varies
according to the size of the client, the amount and frequency of payroll
payments and the method of delivery of such payments. The component of the
service fee related to workers' compensation and unemployment insurance is
based, in part, on the client's historical claims experience.

      Clients are required to pay amounts owed to the Company upon delivery of
the payroll checks to the client. The Company retains the ability to terminate
immediately the Client Services Agreement as well as its employment relationship
with the worksite employees upon non-payment by a client. The Company manages
its exposure for payment through this right to terminate, the periodic nature of
payroll, client credit checks, owner guarantees and the Company's client
selection process.

      Employment-related liabilities are allocated between the Company and the
client pursuant to the Client Services Agreement, with the Company assuming
responsibility for worksite employee payroll and for compliance with certain
employment-related governmental regulations that can be effectively managed away
from the client's premises. The client remains responsible for compliance with
other employment-related governmental regulations that are more closely related
to the daily supervision of


                                       7
<PAGE>

worksite employees. Certain responsibilities and liabilities are shared by Staff
Leasing and the client where joint responsibility is appropriate. The following
table summarizes the division of responsibilities for regulatory compliance
under the Client Services Agreement:

<TABLE>
<CAPTION>
              STAFF LEASING                                 CLIENT
              -------------                                 ------
<S>                                        <C>
o All rules and regulations governing the         o Occupational Safety and Health Act
  reporting, collection and payment of              ("OSHA") and related or similar Federal
  and state payroll taxes on                        Federal, state or local regulations
  wages, including:

  (i) Federal income tax withholding              o Government contracting requirements as
  provisions of the Code; (ii) state                regulated by, including, but not
  and/or local income tax withholding               limited to: (i) Executive Order 11246;
  provisions; (iii) FICA; (iv) FUTA; and            (ii) Vocational Rehabilitation Act of
  (v) applicable state unemployment tax             1973; (iii) Vietnam Era Veterans'
  provisions, including managing claims             Readjustment Assistance Act of 1974;
                                                    (iv) Walsh-Healy Public Contracts Act;
o Applicable workers' compensation laws             (v) Davis-Bacon Act; (vi) the Service
  including, but not limited to: (i)                Contract Act of 1965; and (vii) any and
  procuring workers' compensation                   all similar, related, or like Federal,
  insurance; and (ii) completing and                state or local laws, regulations,
  filing all required reports                       ordinances and statutes

                                                  o Professional licensing and liability
o Fair Labor Standards Act ("FLSA")*
                                                  o Fidelity bonding requirements

o COBRA continuation coverage for                 o Code Sections 414(m), (n) & (o)
  employees covered under health plans              relating to client maintained benefit
  sponsored by Staff Leasing                        plans

o Section 1324a(b)(3) of the Immigration          o Laws affecting the assignment and
  Reform and Control Act ("IRCA") (main-            ownership of intellectual property
  tenance of employment eligibility                 rights including, but not limited to,
  forms sent to Staff Leasing at request            inventions, whether patentable or not and
  of clients)                                       patents resulting therefrom,
                                                    copyrights and trade secrets
o Laws governing the garnishment of wages,
  including the Consumer Credit Protection
  Act, Title III                                  o Worker Adjustment and Retraining
                                                    Notification Act
o Family and Medical Leave Act of 1993
  ("FMLA")*,                                      o Laws affecting the maintenance, storage
                                                    and disposal of hazardous materials
o All rules and regulations governing
  administration, procurement and payment         o FLSA*, Title VII (Civil Rights Act
  of of all employee benefit plans elected          1964), FMLA,* IRCA, the Americans
  with by the client or worksite employee           Disabilities Act, the Age Discrimination
                                                    in Employment Act (including provisions
                                                    thereunder relating to client's premises)

                                                  o All other Federal, state, county, or
                                                    local laws, regulations, ordinances and
                                                     statutes which regulate employees' wage
                                                     and hour matters, prohibit discrimination
                                                     in the workplace or govern the
                                                     employer/employee relationship
</TABLE>
----------------
* Shared responsibility

SALES AND MARKETING

      The Company markets its services through a direct sales force, which as of
December 31, 1999, consisted of approximately 250 sales persons and 440 other
sales and field service personnel. The Company uses a direct sales force rather
than selling through agents, because this allows the Company more control over
the client selection process. The Company's sales force is located throughout
its 45 branch offices, with five to twenty five sales persons in each branch
office. The Company plans to continue adding sales offices in the Western Middle
Atlantic and Midwest regions during the next few years. The Company's sales
persons are compensated by a combination of salary and commissions which has,
for top producers, exceeded $125,000 in annual compensation.

                                       8
<PAGE>

      The Company seeks to hire sales persons who have five years or more work
experience and two years or more sales experience in other business-to-business
sales positions. The Company provides at least one month of training for each
new sales person in the field, followed by a one week formal training program to
familiarize new sales persons with the Company's services, policies and
procedures. The Company requires sales persons to undergo training when new
services are offered by the Company.

      The Company generates sales leads from various referral sources which
accounted for approximately 57.3% of the Company's new clients during 1999, as
well as from direct sales efforts and inquiries. Each sales person is required
to visit his or her clients periodically in order to maintain an ongoing
relationship and to benefit from referrals. The Company has focused its sales
efforts on client referrals and uses a client incentive program to encourage
increased referral activity from its clients. The Company also generates sales
leads through contacts produced by its telesales group, which makes calls to
potential clients identified from industry data, its internet site, purchased
lists and other sources.

eCOMMERCE STRATEGY

      The Company is implementing a comprehensive eCommerce strategy which
includes continued development of StaffWEB, the Company's Internet-based service
platform, with a focus on providing on-line, personalized PEO services to the
Company's clients and worksite employees. At the end of 1999, over 19% of
worksite employees were having their payroll hours submitted over StaffWEB.

      The Company's second major eCommerce initiative involves establishing a
business eCommerce portal. This will allow the Company to provide a wide range
of product and service offerings to it's clients and worksite employees. In
addition, the Company believes that the ability to provide added services to
clients will improve client retention. In connection with this initiative, the
Company has formed strategic alliances with DigitalWorks.com and
ServiceMagic.com and plans to operate co-branded websites in connection with
these companies.

      The final initiative in the eCommerce strategy involves selling PEO
services over the Internet. Through the Company's website, businesses will be
identified as potential clients and marketed and sold PEO services.

VENDOR RELATIONSHIPS

      The Company provides benefits to its worksite employees under arrangements
with a number of vendors. The Company's most significant vendor relationships
are as follows:

      WORKERS' COMPENSATION. In 1999, the Company's workers' compensation
coverage was provided by Liberty Mutual. This program was initiated in March
1994, and renegotiated effective January 1, 1997, to, among other things, reduce
rates charged to the Company. This contract, which expired on December 31, 1999,
provided coverage on a guaranteed cost basis. Amounts due under this arrangement
were a fixed percentage of the Company's workers' compensation payroll and were
paid on a monthly basis. The Company had no liability in excess of such amounts
paid.

      The Company has a new workers' compensation program with CNA and the Texas
Fund which commenced on January 1, 2000. The Texas Fund will be the provider of
workers' compensation insurance for clients based in Texas. The Texas Fund
program is a guaranteed cost insurance arrangement with a term of one year. The
cost of the premium will be determined based on the industries serviced by the
Company in Texas. For the remainder of the country, the Company's workers'
compensation insurance carrier will be CNA. This program is an insured loss
sensitive program, for a term of one year. The Company anticipates that its
workers' compensation costs will increase beginning in 2000 as a result of these
workers' compensation arrangements.

      HEALTH INSURANCE. In 1999, the Company's group health benefit plans were
provided by Blue Cross and Blue Shield of Florida, Blue Cross and Blue Shield of
Texas, Blue Cross and Blue Shield of Georgia, United Healthcare of Arizona,
HealthPartners (Minnesota), Blue Cross and Blue Shield of North Carolina, and
Blue Cross and Blue Shield of Tennessee, under separate contracts in Florida,
Texas, Georgia, Arizona, Minnesota, North Carolina, and Tennessee, respectively.
Premiums paid by worksite employees, and the portion of premiums, if any, paid
by the client, vary depending on the coverage options selected and the place of
residence of the worksite employee.

      The Company's policy with Blue Cross and Blue Shield of Florida is a
minimum premium arrangement initiated in January of 1997 and renewed as of
January 1, 2000 for an additional three years through December 31, 2002. The
administrative costs per covered employee associated with this policy were
negotiated for 2000, 2001, and 2002 and stop loss coverage per covered employee
is provided at the level of 115% of projected claims. Plans offered in Arizona,
Georgia, Minnesota, North Carolina,


                                       9
<PAGE>

Tennessee and Texas provide the Company with guaranteed cost contracts, with the
Company's liability capped annually at fixed amounts.

INFORMATION TECHNOLOGY

      The Company has invested and is continuing to invest significant capital
and resources in the development and enhancement of its information systems.
From 1996 through 1999, the Company invested approximately $30.4 million in its
technology infrastructure, including computer hardware and software and
telephony. This investment was made to better serve its increasing client base,
to maintain a high level of customer service at increasing volumes and to
increase operating leverage in its processing operations.

      These systems provide the Company with the capability to promptly and
accurately deliver payroll and related services and generate in-depth management
reports. The Company's information systems manage all data relating to worksite
employee enrollment, payroll processing, benefits administration, management
information and other requirements of the Company's operations. The current
systems have high volume payroll processing capabilities which allow the Company
to produce and deliver weekly payrolls to its clients, each customized to the
needs of such clients. Currently, the Company processes approximately 100,000
payroll checks per week.

      In 1998, the Company converted payroll for approximately 75,000 worksite
employees to Oracle's human resource and payroll application. In May 1999, the
payroll processing for the remainder of the company's worksite employees was
converted to the Oracle application. The Oracle system enables the Company to
effectively manage its existing operations and maintain appropriate controls
during its continued growth.

      The Company intends to further automate its call center through the
deployment of Oracle Customer Relationship Management "CRM" System. A pilot of
the Oracle CRM product was rolled-out in 1999 to standardize and script customer
service functions and interactions.

      The Company has introduced additional technology to its field staff
through the roll-out of a sales automation software system. This software will
allow for a more efficient processing of new business leads and sales proposals.

      In 1999, the Company continued its aggressive development of StaffWEB, an
Internet interface with the Oracle payroll processing application. StaffWEB
allows clients to conveniently input their payroll data directly into the
Company's payroll applications via the Internet. Clients can regularly add or
delete employees, view reports, and change payroll information. StaffWEB allows
the Company to service its clients 24 hours a day with increased accuracy and
efficiency. StaffWEB is updated regularly to increase its functionality. At the
end of 1999, approximately 19% of worksite employees were having their payroll
hours submitted over the Internet. Usage of this new technology is expected to
continue to increase in 2000.

      The Company's information technology staff consisted of 57 persons at
December 31, 1999. The Company believes that its information systems are
integral in achieving its growth objectives and intends to continue to invest in
its technology infrastructure.


YEAR 2000

      The Company's primary internal computer applications were purchased from
Microsoft and Oracle. In 1999, the Company upgraded or migrated to certain
versions of their software that had been affirmed as Year 2000 compliant. The
Company completed an inventory of its computer hardware, supporting software,
and non-IT systems; assessed non-compliance issues; and upgraded or replaced as
necessary to ensure Year 2000 compliance. The approximate cost of Year 2000
remediation in 1999 was $.5 million and was expensed as incurred. The Company
did not experience any adverse effects on its financial condition or results of
operations related to any Year 2000 issues and does not expect that it will
experience any adverse effects in 2000.


COMPETITION

      The PEO industry is highly fragmented. NAPEO estimates that there are
approximately 2,000 companies providing certain levels of PEO services. Most of
these companies have limited operations and fewer than 1,000 worksite employees.
However, there are several larger industry participants, and the Company
believes three other competitors have annualized PEO revenues in excess of $1
billion. The Company considers its primary competition to be PEOs, insurance
agents and fee-for-service providers, such as payroll processors and human
resources consultants. The market for PEO services is expected to become
increasingly competitive as larger companies, some of which have greater
financial resources than the Company and which have not traditionally operated
in this industry, enter the market.

                                       10
<PAGE>

      The key competitive factors in the PEO industry are breadth and quality of
services, price, reputation, financial stability, as well as choice, quality and
cost of benefits. The Company believes that it competes favorably in these
areas.


INTERNAL COMPANY EMPLOYEES

      As of December 31, 1999, the Company had 1,358 internal employees with 671
employees located at the Company's Bradenton, Florida headquarters. The
remaining employees were located in the Company's branch offices. None of the
Company's internal employees are a party to a collective bargaining agreement.


INDUSTRY REGULATION

      The Company's operations are affected by numerous Federal and state laws
and regulations relating to employment matters, benefit plans and taxes. By
entering into a co-employer relationship with its clients, the Company assumes
certain obligations and responsibilities as an employer under these laws.
Because many of these Federal and state laws were enacted before the development
of non-traditional employment relationships, such as PEOs, temporary employment
and other employment-related outsourcing arrangements, many of these laws do not
specifically address the obligations and responsibilities of non-traditional
employers. In addition, the definition of "employer" under these laws is not
uniform.

      Some governmental agencies that regulate employment have developed rules
that specifically address issues raised by the relationship among PEOs, clients
and worksite employees. Existing regulations are relatively new and, therefore,
their interpretation and application by administrative agencies and Federal and
state courts is limited or non-existent. The development of additional
regulations and interpretation of existing regulations can be expected to evolve
over time. In addition, from time to time, states have considered, and may in
the future consider, imposing certain taxes on gross revenues or service fees of
the Company and its competitors. The Company cannot predict with certainty the
nature or direction of the development of Federal, state and local regulations
or whether any states will impose such taxes.

      The Company believes that its operations are currently in compliance in
all material respects with all applicable Federal and state statutes and
regulations.


Employee Benefit Plans

      Effective April 1, 1997, the Company began to offer a new 401(k)
retirement plan, designed to be a "multiple employer" plan under Internal
Revenue Code Section 413(c). This plan enables owners of clients and highly
compensated worksite employees, as well as highly compensated internal employees
of the Company, to participate. These persons were excluded from the prior
401(k) retirement plan to avoid issues of discrimination in favor of highly
compensated employees. Generally, employee benefit plans are subject to
provisions of both the Internal Revenue Code of 1986, as amended ("the Code")
and ERISA. Effective January 1, 1999, the Company has expanded its retirement
plan offerings to include payroll-deducted traditional and Roth IRAs in addition
to implementing an enhanced array of over 20 investment options.

      EMPLOYER STATUS. In order to qualify for favorable tax treatment under the
Code, the plans must be established and maintained by an employer for the
exclusive benefit of its employees. Generally, an entity is an "employer" of
certain workers for Federal employment tax purposes if an employment
relationship exists between the entity and the workers under the common law test
of employment. In addition, the officers of a corporation are deemed to be
employees of that corporation for Federal employment tax purposes. The common
law test of employment, as applied by the Internal Revenue Service ("IRS"),
involves an examination of many factors to ascertain whether an employment
relationship exists between a worker and a purported employer. That test is
generally applied to determine whether an individual is an independent
contractor or an employee for Federal employment tax purposes and not to
determine whether each of two or more companies is a "co-employer." Substantial
weight is typically given to the question of whether the purported employer has
the right to direct and control the details of an individual's work.

      The IRS established the Market Segment Study for the purpose of
identifying specific compliance issues prevalent in certain segments of the PEO
industry. The Company was not one of the PEOs selected for the study. One issue
that has arisen from this study is whether a PEO can be a co-employer of
worksite employees, including officers and owners of client companies, for
various purposes under the Code, including participation in the PEO's 401(k)
retirement plan.

      The Company is not able to predict either the timing or the nature of any
final decision that may be reached by the IRS with respect to the Market Segment
Study and the ultimate outcome of such decisions. Further, the Company is unable
to predict whether the Treasury Department will issue a policy statement with
respect to its position on these issues or, if issued, whether such a statement
would be favorable to


                                       11
<PAGE>

the Company. The Company believes that the establishment of its multiple
employer plan under Code Section 413(c) eliminates the exposure as to
contributions to that plan resulting from an IRS determination that no employer
relationship exists between the sponsor of the plan and the plan participants.
Since this plan is co-sponsored by each participating client, the Company
believes that even if the IRS were to determine that the worksite employees were
not employees of the Company, it could not reach the same conclusion as to the
client co-sponsor. However, if an adverse conclusion by the IRS were applied
retroactively to disqualify the Company's former 401(k) retirement plan,
employees' vested account balances under the former 401(k) retirement plan would
become taxable, the Company's tax deductions would be allowed only as matching
contributions become vested, the former 401(k) retirement plan's trust would
become a taxable trust, and the Company would be subject to liability with
respect to its failure to withhold and pay taxes applicable to salary deferral
contributions by employees, including worksite employees. In such event, the
Company would also face the risk of client dissatisfaction and potential
litigation. A retroactive application by the IRS of an adverse conclusion would
have a material adverse effect on the Company's financial position and results
of operations. While the Company believes that a retroactive disqualification is
unlikely, there can be no assurance as to the ultimate resolution of these
issues by the IRS.

      ERISA REQUIREMENTS. Employee pension and welfare benefit plans are also
governed by ERISA. ERISA defines "employer" as "any person acting directly as an
employer, or indirectly in the interest of an employer, in relation to an
employee benefit plan." ERISA defines the term "employee" as "any individual
employed by an employer." The United States Supreme Court has held that the
common law test of employment must be applied to determine whether an individual
is an employee or an independent contractor under ERISA. A definitive judicial
interpretation of "employer" in the context of a PEO or employee leasing
arrangement has not been established.

      If the Company were found not to be an employer for ERISA purposes, its
former 401(k) retirement plan would not comply with ERISA and could be subject
to retroactive disqualification by the IRS. Further, the Company would be
subject to liabilities, including penalties, with respect to its cafeteria plan
for the failure to withhold and pay taxes applicable to salary deferral
contributions by its worksite employees. In addition, as a result of such
finding the Company and its plans would not enjoy, with respect to worksite
employees, the preemption of state laws provided by ERISA and could be subject
to varying state laws and regulation, as well as to claims based upon state
common laws.

Federal Employment Taxes

      As an employer, the Company assumes responsibility and liability for the
payment of Federal and state employment taxes with respect to wages and salaries
paid to worksite employees. There are essentially three types of Federal
employment tax obligations: (i) withholding of income tax requirements governed
by Code section 3401, et seq.; (ii) obligations under the Federal Income
Contributions Act ("FICA"), governed by Code section 3101, et seq.; and (iii)
obligations under the Federal Unemployment Tax Act ("FUTA"), governed by Code
section 3101, et seq. Under these Code sections, employers have the obligation
to withhold and remit the employer portion and, where applicable, the employee
portion of these taxes.

      The Market Segment Study discussed above examines, among other issues,
whether PEOs, such as the Company, are employers of worksite employees under the
Code provisions applicable to Federal employment taxes and, consequently,
responsible for payment of employment taxes on wages and salaries paid to such
worksite employees. Section 3401(d)(1) of the Code, which applies to Federal
income tax withholding requirements, contains an exception to the general common
law test applied to determine whether an entity is an "employer" for purposes of
Federal income tax withholding. Section 3401(d)(1) states that if the person for
whom services are rendered does not have control of the payment of wages, the
"employer" for this purpose is the person having control of the payment of
wages. The Treasury Regulations issued under section 3401(d)(1) state that a
third party can be deemed to be the employer of workers under this Section for
income tax withholding purposes where the person for whom services are rendered
does not have legal control of the payment of wages. While section 3401(d)(1)
has been examined by several courts, its ultimate scope has not been delineated.
Moreover, the IRS has to date relied extensively on the common law test of
employment in determining liability for failure to comply with Federal income
tax withholding requirements.

      Accordingly, while the Company believes that it can assume the withholding
obligations for worksite employees, if the Company fails to meet these
obligations the client may be held jointly and severally liable. While this
interpretive issue has not, to the Company's knowledge, discouraged clients from
utilizing the Company's services, there can be no assurance that a definitive
adverse resolution of this issue would not do so in the future.

State Regulation

      FLORIDA. In Florida, the Company's PEO operations are licensed under the
Florida Employee Leasing Licensing Act of 1991 (the "Florida Licensing Act").
The Florida Licensing Act requires PEOs and their controlling persons to be
licensed, mandates


                                       12
<PAGE>

reporting requirements and allocates several employer responsibilities. The
Florida Licensing Act also requires licensed PEOs to submit annual audited
financial statements and maintain a tangible accounting net worth and positive
working capital. The Florida Licensing Act also requires PEOs to, among other
things: (i) reserve a right of direction and control over the leased employees;
(ii) enter into a written agreement with the client; (iii) pay wages to the
leased employees; (iv) pay and collect payroll taxes; (v) retain authority to
hire, terminate, discipline and reassign employees; (vi) reserve a right to
direct and control the management of safety, risk and hazard control at the
worksite, including responsibility to promulgate and administer employment and
safety policies and to manage workers' compensation claims.

      TEXAS. The Texas Staff Leasing Act regulates and establishes a legal
framework for PEOs in Texas and has requirements similar to those of Florida for
a PEO's relationship with its clients. The Texas Staff Leasing Act, which became
effective on September 1, 1993, established mandatory licensing for PEOs and
expressly recognizes a licensed PEO as the employer of the worksite employee for
purposes of the Texas Unemployment Compensation Act. The Texas Staff Leasing Act
also provides, to the extent governed by Texas law, that a licensed PEO may
sponsor and maintain employee benefit plans for the benefit of worksite
employees. In addition, the Texas Staff Leasing Act not only provides that a PEO
may elect to obtain workers' compensation insurance coverage for its worksite
employees but also provides that, for workers' compensation insurance purposes,
a licensed PEO and its client are treated as co-employers. In order to obtain a
license, applicants must undergo a background check, demonstrate a history of
good standing with tax authorities and meet certain capitalization requirements
that increase with the number of worksite employees employed. The Texas Staff
Leasing Act specifies that the Texas Department of Licensing and Regulation is
responsible for enforcement of the Texas Staff Leasing Act and TDLR has adopted
regulations under the Texas Staff Leasing Act.

         OTHER STATES. While many states do not explicitly regulate PEOs, 21
states including four states where the Company has offices (Florida, Texas,
Tennessee and Minnesota) have passed laws that have licensing, registration or
other compliance requirements for PEOs and several states are considering such
regulation. Such laws vary from state to state but generally provide for
monitoring the fiscal responsibility of PEOs. The Company holds licenses in
Florida, Texas, Tennessee and Minnesota, the Company holds licenses or is
registered or is otherwise compliant in 13 other states. Whether or not a state
has licensing, registration or other compliance requirements, the Company faces
a number of other state and local regulations that could impact its operations.
The Company's objective is to establish strong working relationships with state
regulatory authorities in states where it operates and the Company believes that
to date it has been able to do so.


EXECUTIVE OFFICERS OF THE REGISTRANT

      Pursuant to General Instruction G(3), the information regarding executive
officers of the Company called for by Item 401(b) of Regulation S-K is hereby
included in Part I of this Form 10-K.

      The following table sets forth certain information with respect to each
person who is or was an executive officer of the Company in 1999, as indicated
below.

<TABLE>
<CAPTION>
NAME                                 AGE                      POSITION
----                                 ---                      --------
<S>                                    <C>    <C>
Charles S. Craig .. . . . . .........  49     Chairman of the Board and Chief Executive Officer
                                              (resigned CEO position December 1999)
Richard A. Goldman . ................  43     Office of Chief Executive, President and Director
John E. Panning. ....................  49     Office of Chief Executive, Chief Financial Officer
                                              and Director
John Bilchak, Jr.....................  52     Senior Vice President, Benefits and Risk
                                              Management (resigned January 2000)
Todd Davis      .....................  40     Senior Vice President, Service Center
                                              Operations (resigned February 2000)
Lisa Harris     .....................  39     Senior Vice President, Chief Information Officer
Joyce Lillis McGill..................  53     Senior Vice President, Sales (resigned May 1999)
</TABLE>

      CHARLES S. CRAIG has served as Chairman of the Board of Directors since
November 1993. He assumed the additional position of Chief Executive Officer in
July 1995. He announced his resignation as Chief Executive Officer in December
1999. Mr. Craig has been a Managing Director of Craig Capital Corporation
("Craig Capital") since 1988. An investor group organized by Craig Capital
acquired Staff Leasing in 1993. He has served on the boards of CP Industries,
Inc., Curtis Industries, Inc., Sinclair & Valentine, LP (Chairman), Schuylkill
Metals Corporation, TCOM, LP, and NASCO, Inc.


                                       13
<PAGE>

      RICHARD A. GOLDMAN has served as President and been a member of the
three-person Office of the Chairman since January 1997. The Office of the
Chairman was disbanded in December 1999 and since then Mr. Goldman has been a
member of the Office of the Chief Executive. Mr. Goldman served as Senior Vice
President of Risk Management and General Counsel of Staff Leasing from July 1995
to January 1997. In May 1997, Mr. Goldman was appointed by the late Governor
Lawton Chiles to Florida's Board of Employee Leasing and in February 1998 was
appointed chairman of that board. Before joining Staff Leasing, Mr. Goldman was
a partner in the New York law firm of Dechert Price & Rhoads from April 1993 to
July 1995.

      JOHN E. PANNING has served as Chief Financial Officer and as a member of
the three-person Office of the Chairman since January 1997. The Office of the
Chairman was disbanded in December 1999 and since then Mr. Panning has been a
member of the Office of the Chief Executive. From August 1996 to December 1996,
he served as Senior Vice President of Finance of Staff Leasing. Mr. Panning
served as Senior Vice President of Sales of Staff Leasing from January 1995 to
July 1996.

      JOHN BILCHAK, JR. served as Senior Vice President of Benefits and Risk
Management from January 1997 until his resignation in January 2000. Mr. Bilchak
served as Vice President of Benefits from January 1996 to December 1996. Before
joining Staff Leasing, Mr. Bilchak served as a principal with Towers Perrin from
June 1992 to January 1996.

      TODD DAVIS served as Senior Vice President of Service Center Operations
from January 1999 until his resignation in February 2000. He was Vice President
of Service Center Operations from July 1998 until January 1999. Before joining
Staff Leasing he was Vice President, Call Center Operations for the Home
Shopping Network from August 1997 to June 1998; Practice Leader, Global Call
Center Business Consulting for Lucent Technologies Business Communications
Systems from July 1996 to August 1997; and Regional Manager, Call Center
Applications for AT&T Business Communications Systems from October 1994 to June
1996.

      LISA HARRIS has served as Senior Vice President and Chief Information
Officer since January 1999. Before joining the Company, she was Vice President,
Information Services of Precision Response Corporation from March 1996 to
December 1998; a director and senior director of Certified Vacations, Inc. from
December 1992 to February 1996.

      JOYCE LILLIS MCGILL served as Senior Vice President of Sales from March
1997 until her resignation in May 1999. She previously served in various
positions for Compaq Computer Corporation, and was employed by that company as
Vice President-Eastern Region from April 1996 until becoming employed by the
Company. From February 1993 until April 1996, she was Regional Director of
Sales, Service & Operations, Northeast Region for Compaq.


ITEM 2.  PROPERTIES

      The Company's operations are conducted from its 102,957 square foot
corporate headquarters located in Bradenton, Florida. The Company leases this
facility under a lease which expires in November 2005, but which can be renewed,
at the option of the Company, for two additional five-year periods.

      The Company also leases space for its 45 offices located in Florida,
Georgia, Texas, Arizona, Minnesota, North Carolina, Tennessee, and Alabama. The
Company believes that its branch office leases, which generally have terms of
three to five years, can either be renewed on acceptable terms or that other,
comparable space can be located upon the expiration of any branch office lease
without significant additional cost to the Company. The Company considers its
facilities to be adequate for its current and prospective operations.


ITEM 3.    LEGAL PROCEEDINGS

      Lawrence E. Egle v. Staff Leasing, Inc., et al. On April 30, 1999, the
plaintiff, a shareholder of the Company, brought a class action in the Twelfth
Judicial Division, Manatee County, Florida against the Company and certain of
its directors alleging that the directors and senior officers of the Company
breached their fiduciary duty to shareholders by failing to pursue a proposal
from Paribas Principal Partners to acquire the Company in order to entrench
themselves in the management of the Company. Plaintiff seeks injunctive relief
and unspecified damages including attorneys' and experts' fees. The Company has
moved to dismiss the action. To date, the parties have engaged in limited
discovery, and expect to continue discovery over the next several months. The
Company believes the lawsuit is without merit.

      The Company is a party to certain pending claims which have arisen in the
normal course of business, none of which, in the opinion of management, is
expected to have a material adverse effect on the consolidated financial
position or results of operations if adversely resolved.


                                       14
<PAGE>

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

      None



Part II.


ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      MARKET INFORMATION. The Common Stock is traded on the Nasdaq National
Market under the symbol "STFF." The following table sets forth, for the quarters
indicated, the high and low sale prices of the Common Stock as reported on the
Nasdaq National Market.

                                                 HIGH          LOW
                                                 ----          ---
   FISCAL YEAR ENDED DECEMBER 31, 1998:
   -----------------------------------
   First Quarter                               $28.750      $18.625
   Second Quarter                              $33.500      $26.000
   Third Quarter                               $30.125       $9.750
   Fourth Quarter                              $17.313       $8.500


   FISCAL YEAR ENDED DECEMBER 31, 1999:
   -----------------------------------
   First Quarter                               $16.563       $9.875
   Second Quarter                              $15.375      $10.375
   Third Quarter                               $13.250       $9.000
   Fourth Quarter                              $10.375       $7.625

      HOLDERS. As of March 20, 2000, there were approximately 174 shareholders
of record of the Common Stock. This number does not include beneficial owners of
the Common Stock whose shares are held in the names of various dealers, clearing
agencies, banks, brokers and other fiduciaries.

      DIVIDENDS. The Company has not paid and does not anticipate paying any
cash dividends on its Common Stock in the foreseeable future. The Company
expects that it will retain all available earnings generated by the Company's
operations for the development and growth of its business. Any future
determination as to the payment of dividends will be made at the discretion of
the Board of Directors of the Company and will depend upon the Company's
operating results, financial condition, capital requirements, general business
conditions and such other factors as the Board of Directors deems relevant.


                                       15
<PAGE>

ITEM 6.    SELECTED FINANCIAL DATA

      The following table sets forth certain selected historical financial and
operating data of the Company as of the dates and for the periods indicated. The
Company operated as a limited partnership for all periods before the
Reorganization on July 1, 1997, and as a C-corporation under the Code since the
Reorganization. The Reorganization was accounted for as a combination among
entities under common control and accordingly, for financial statement
presentation purposes, the Reorganization was treated as a pooling of interests
of the Company and Staff Capital, L.P. as of and for the periods presented. The
following selected financial data are qualified by reference to, and should be
read in conjunction with, the consolidated financial statements, related notes
and other financial information included as Part II, Item 8. of this Form 10-K,
as well as "Management's Discussion and Analysis of Financial Condition and
Results of Operations" which is included as Part II, Item 7.

<TABLE>
<CAPTION>
                                                           FOR THE YEARS ENDED DECEMBER 31,
                                         ----------------------------------------------------------------------
                                             1995          1996            1997          1998           1999
                                         -----------    -----------    -----------    -----------   -----------
                                                       (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                      <C>            <C>            <C>            <C>           <C>
STATEMENT OF OPERATIONS DATA:
  Revenues ...........................   $ 1,091,588    $ 1,432,131    $ 1,851,248    $ 2,375,522   $ 2,701,886

  Gross profit .......................   $    32,037    $    59,505    $    93,988    $   112,915   $   127,623

  Operating income (loss) ............   $   (20,276)   $      (441)   $    26,446    $    34,342   $    32,975

  Net income (loss) (1)(2) ...........   $   (24,942)   $    (3,865)   $    30,783    $    23,395   $    21,650

  Net income (loss) attributable
    to common shareholders (1)(3) ....   $   (24,942)   $    (5,637)   $    28,392    $    23,395   $    21,650

  Net income (loss) per share
    attributable to common
    shareholders(4)
          - Basic ....................   $     (1.27)   $      (.29)   $      1.32    $      1.01   $       .99
          - Diluted ..................   $     (1.27)   $      (.29)   $      1.26    $       .97   $       .97

  Weighted average
    common shares (in
    thousands)(4)
          - Basic ....................        19,614         19,614         21,588         23,207        21,779
          - Diluted ..................        19,614         19,614         22,459         24,092        22,210

STATISTICAL AND OPERATING DATA:
  Worksite employees at period
    end ..............................        73,116         86,000        107,885        127,470       133,197
  Clients at period end ..............         6,490          7,511          9,233         10,751        10,740
  Average number of worksite
    employees per client at
    period end .......................         11.27          11.45          11.68          11.86         12.40
  Capital expenditures ...............   $     1,619    $     5,923    $     7,100    $    10,937   $    10,911


BALANCE SHEET DATA:
  Total assets .......................   $    56,932    $    65,982    $   125,119    $   139,778   $   163,570

  Long-term capital leases, including
  current portion ....................   $     5,069    $     3,746    $        --    $        --   $        --

  Long-term borrowings, including
    current portion ..................   $    26,450    $    17,700    $        --    $        --   $        --

  Redeemable preferred interests .....   $     2,000    $    17,674    $        --    $        --   $        --

  Total shareholders' equity (deficit)   $   (33,949)   $   (35,680)   $    58,148    $    62,789   $    80,756
</TABLE>

-----------------
(1)   Before the Reorganization, the Company operated as a Partnership.
      Accordingly, the tax effect of the Partnership's activities accrued to the
      individual partners and no provision for income taxes was recognized.

(2)   Included in income tax benefit for the year ended December 31, 1997 was
      $10,172 of deferred tax benefit related to the reversal of the valuation
      allowance for deferred tax assets. The deferred tax assets recognized
      consist principally of assets with tax basis in excess of book basis,
      reserves not currently deductible and tax loss carryforwards. The tax
      benefit recorded is non-cash in nature (See Note 17 to the consolidated
      financial statements).

(3)   Fixed return on preferred interest represents the return paid on the Class
      A and Class B Interests through July 1, 1997, the date of Reorganization.
      The fixed return on preferred interest was $0, $1,772, $2,391, $0, and $0
      for the years ended December 31, 1995, 1996, 1997, 1998 and 1999,
      respectively.

(4)   In the fourth quarter of 1997, the Company adopted the provisions of
      Statement of Financial Accounting Standards No. 128,"Earnings Per Share"
      (SFAS 128), as required. The previously reported earnings (loss) per share
      have been restated as required by SFAS 128.


                                       16
<PAGE>

 ITEM 7.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

      The following discussion contains forward-looking statements. The
Company's actual results could differ materially from those discussed in such
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below and elsewhere in this Form 10-K. See
Part 1, "Cautionary Note Regarding Forward-Looking Statements." The following
discussion should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto included elsewhere in this filing.
Historical results are not necessarily indicative of trends in operating results
for any future period.

OVERVIEW

      The Company is the largest professional employer organization ("PEO") in
the United States. At December 31, 1999, the Company served over 10,700 clients
with approximately 133,000 worksite employees. With 45 branches located in
Florida, Texas, Georgia, Arizona, Minnesota, North Carolina, Tennessee, and
Alabama, the Company provides a broad range of services, including payroll
administration, risk management, benefits administration, unemployment services
and other human resources consulting services.

      REVENUES. Revenues consist of charges by the Company for the salaries and
wages of the worksite employees (including the employee-paid portion of health
and other benefits), the service fee and the clients' portion of health and
retirement benefits provided to the worksite employees. These charges are
invoiced to the client at the time of each periodic payroll. The service fee
covers the cost of certain employment-related taxes, workers' compensation
insurance coverage and administrative and field services provided by the Company
to the client, including payroll administration and safety, human resources and
regulatory compliance consultation. Salaries and wages of worksite employees are
affected by inflation, including the effect of increases in the Federal minimum
wage, and by competition in the labor markets in which the Company operates.
Fluctuations in salaries and wages resulting from these factors have a
proportionate impact on the Company's service fee, which is invoiced as a
percentage of salaries and wages.

      COST OF SERVICES. Cost of services includes salaries and wages of worksite
employees, payroll taxes, employee benefit costs, workers' compensation
insurance and state unemployment taxes.

      Salaries, wages and payroll taxes consist of salaries and wages of
worksite employees, the employer's portion of amounts due with respect to FICA,
which includes Social Security and Medicare related taxes, and Federal
unemployment taxes. FICA and FUTA rates are fixed by the appropriate Federal
regulations. The amounts payable under FICA and FUTA are dependent on an
employee's wage levels, but are not affected by an employer's claims experience
or other employer-related criteria. These amounts are thus not subject to the
Company's control.

      Employee benefit costs are comprised primarily of medical benefit costs,
but also include costs of other employee benefits such as dental, disability and
group life insurance. Worksite employee participation in the Company's health
benefit plans is optional, as is the client's contribution to the cost of such
plans. As of December 31, 1999, the Company's group health benefit plans were
under seven separate contracts in force in the states of Florida, Texas,
Georgia, North Carolina, and Tennessee, with the Blue Cross entities in each
state, with United Healthcare of Arizona, Inc. and Health Partners in Minnesota.
Plans offered in Texas, Georgia, Arizona, Minnesota and North Carolina are
provided to the Company under guaranteed cost arrangements, with the Company's
liability capped at fixed amounts. The Company's policy with Blue Cross and Blue
Shield of Florida is a three year minimum premium arrangement for 2000, 2001 and
2002, pursuant to which the Company is obligated to reimburse Blue Cross and
Blue Shield of Florida for the cost of the claims incurred by participants under
the plan, plus the cost of plan administration. The administrative costs
associated with this policy are fixed for stop loss coverage at the level of
115% of projected claims. The Company's policy with Blue Cross and Blue Shield
of Tennessee is also a minimum premium arrangement.

      Workers' compensation costs are the amounts paid by the Company under its
guaranteed cost arrangement with Liberty Mutual, which expired on December 31,
1999. Effective January 1, 2000, new workers' compensation programs with CNA and
the Texas Fund commenced. Workers' compensation costs are anticipated to
increase beginning in 2000 as a result of these workers' compensation
arrangements.


                                       17
<PAGE>

         State unemployment tax rates vary from state to state and are based
upon the employer's claims history. The Company aggressively manages its state
unemployment tax exposure by contesting unwarranted claims and offering
re-employment services to unemployed workers.

         OPERATING EXPENSES. Operating expenses consist primarily of salaries,
wages and commissions associated with the Company's internal employees, and
general and administrative expenses. Over the past several years, the Company
has experienced an increase in its operating expenses as the Company has
expanded its senior management, sales and marketing staff, payroll processing
operations, and client and worksite employee service functions. The Company
expects that future revenue growth will result in increased operating leverage,
as the Company's fixed operating expenses are leveraged over a larger revenue
base.

      INCOME TAXES. The Company records income tax expense using the asset and
liability method of accounting for deferred income taxes. Before the
Reorganization, the Company operated through limited partnerships. Accordingly,
all earnings or losses were passed directly to the partners and no provision for
income taxes was required. In 1997, a non-recurring tax benefit with respect to
the Company's deferred tax asset was recognized in accordance with the
provisions of Statement of Financial Accounting Standards 109, "Accounting for
Income Taxes." This asset related primarily to assets with tax basis in excess
of book basis and certain reserves which will be deductible in future periods.
The Company's effective tax rate for 1999 was 37.2%. The Company's 1999
effective tax rate for financial reporting purposes differs from the statutory
Federal rate of 35% primarily because of state taxes and Federal tax credits.

      PROFITABILITY. Profitability is largely dependent upon the Company's
success in managing revenues and costs that are within its control. These
controllable revenues and costs primarily relate to workers' compensation,
health benefits and state unemployment taxes. The Company manages these
controllable costs through its use of: (i) its workers' compensation
arrangements with well respected carriers, internal risk assessment and risk
management programs; (ii) appropriately designed health benefit plans that
encourage worksite employee participation, high managed care utilization and
efficient risk pooling; and (iii) aggressive management of its state
unemployment tax exposure.

      HEALTH BENEFIT PLAN SUBSIDIES. In 1997, the Company implemented a plan
aimed at reducing its health benefit plan subsidies, which had been significant
in previous years.

      The Company changed from a single national health care company to a series
of regional health care companies. These companies have extensive provider
networks and strong reputations in the markets in which the Company operates.
The Company believes health care is a regional business in the United States,
and as such, must align itself with regional health care companies.

      These health care companies include Blue Cross and Blue Shield of Florida,
Blue Cross and Blue Shield of Texas, Blue Cross and Blue Shield of Georgia,
United Healthcare of Arizona, HealthPartners (Minnesota), Blue Cross and Blue
Shield of North Carolina, and Blue Cross and Blue Shield of Tennessee, under
separate contracts in Florida, Texas, Georgia, Arizona, Minnesota, North
Carolina, and Tennessee, respectively.

    The Company's health care providers are able to offer health maintenance
organization ("HMO") coverage in addition to preferred provider organization
("PPO") coverage. The Company believes that the managed care services provided
by an HMO are more cost effective than those provided by a PPO. At the end of
1999, in excess of 70% of the Company's health plan participants received their
coverage through an HMO.

    The Company's health care policy with Blue Cross and Blue Shield of Florida
is a minimum premium arrangement. The arrangement was initiated in 1997 and was
renewed as of January 1,2000 for an additional three years through December 31,
2002. The administrative costs per covered employee associated with this policy
were negotiated for 2000, 2001 and 2002 and stop loss coverage per covered
employee is provided at the level of 115% of projected claims.

    Health care plans offered in Arizona, Georgia, Minnesota, North Carolina,
Tennessee and Texas provide the Company with guaranteed cost contracts and the
Company's liability is capped annually at fixed amounts.

      In 1997, the Company experienced a surplus of $1.0 million in health plan
operations. This surplus would have been a subsidy of $2.5 million in 1997 had
the Company not reduced its estimates for 1996 health reserves due to favorable
experience in the maturation or run-out of 1996 health claims.

      The Company had $1.1 million of net subsidy cost in its health plan
operations for 1998. The 1998 subsidy was $2.5 million, which was offset by an
adjustment to 1997 health reserves due to favorable experience in the maturation
or run-out of 1997 health claims.

                                       18
<PAGE>

      In 1999, the Company experienced a surplus of $0.6 million in health plan
operations. This surplus would have been a subsidy of $1.6 million in 1999 had
the Company not reduced its estimates for 1998 health reserves due to favorable
experience in the maturation or run-out of 1998 health claims.

RESULTS OF OPERATIONS

   The following table presents the Company's results of operations for the
years ended December 31, 1997, 1998 and 1999, expressed as a percentage of
revenues:

<TABLE>
<CAPTION>
                                               FOR THE YEARS ENDED
                                                   DECEMBER 31,
                                             -----------------------
                                              1997     1998     1999
                                              ----     ----     ----
<S>                                          <C>      <C>      <C>
Revenues...................................  100.0%   100.0%   100.0%
Cost of services:
  Salaries, wages and payroll taxes........   90.5     90.8     91.0
  Benefits, workers' compensation, state
     unemployment taxes and other costs....    4.4      4.4      4.3
                                             -----    -----    -----
          Total cost of services...........   94.9     95.2     95.3
                                             -----    -----    -----
Gross profit...............................    5.1      4.8      4.7
                                             -----    -----    -----
Operating expenses:
  Salaries, wages and commissions..........    2.3      2.1      2.2
  Other general and administrative.........    1.1      0.9      1.0
  Depreciation and amortization............    0.3      0.3      0.3
                                             -----    -----    -----
          Total operating costs............    3.7      3.3      3.5
                                             -----    -----    -----
Operating income...........................    1.4      1.5      1.2
Interest income ...........................    0.1      0.1      0.1
Interest expense...........................    0.1      0.0      0.0
                                             -----    -----    -----
Income before income taxes.................    1.4      1.6      1.3
Income tax (provision) benefit...........      0.3     (0.6)    ( .5)
                                             -----    -----    -----
Net income     ............................    1.7%     1.0%      .8%
                                             =====    =====    =====
</TABLE>

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

      For the year ended December 31, 1999, revenues increased 13.7% over 1998,
totaling $2.7 billion, compared to $2.38 billion for 1998. This increase was due
primarily to an increased number of worksite employees. From 1998 to 1999, the
number of worksite employees increased 4.5%, from 127,470 to 133,197. Revenue
growth exceeded headcount growth by 9.2%, primarily due to wage inflation and
expansion in higher wage markets. The increase in the number of worksite
employees was the result of continuing sales and marketing efforts in existing
markets as well as the development of new markets. The Company opened a total of
five new sales offices in Tennessee, Alabama, and Georgia in 1999, compared to
eight new sales offices in 1998.

      In January 1997 and January 1998, the Company reduced the service fees
charged on average to its Florida clients, in response to a reduction in
workers' compensation rates in Florida. While the Company believes this
reduction in service fees has not adversely affected the Company's profitability
to date because the Company has been able to offset the effect of this action by
controlling expenses, it is possible that future service fee reductions could
adversely affect the Company's operations.

      Cost of services was $2.57 billion for 1999, compared to $2.26 billion for
1998, representing an increase of $311.7 million, or 13.8%. This increase was
due primarily to an increased number of worksite employees. Cost of services was
95.3% of revenues for 1999, compared to 95.2% for 1998.

      Salaries, wages and payroll taxes of worksite employees were $2.46 billion
for 1999, compared to $2.16 billion for 1998, representing an increase of $300
million, or 13.9%. Salaries, wages and payroll taxes were 91.0% of revenues for
1999, compared to 90.8% for 1998.

      Benefits, workers' compensation, state unemployment taxes and other costs
were $116.8 million for 1999, compared to $105.2 million for 1998, representing
an increase of $11.6 million, or 11.1%. Benefits, workers' compensation, state
unemployment taxes and other costs were 4.3% of revenues for 1999, compared to
4.4% in 1998. The health benefit plan subsidy was $1.65 million in 1999,
compared to $2.5 million in 1998. However, favorable experience on the
maturation or run-out of prior year health claims


                                       19
<PAGE>

reduced this subsidy by $2.2 million in 1999 versus a reduction of $1.4 million
in 1998.

      Gross profit was $127.6 million for 1999, compared to $112.9 million for
1998, representing an increase of $14.7 million, or 13%. Gross profit was 4.7%
of revenues for 1999, compared to 4.8% for 1998. Gross profit margin decreased
as a percentage of revenues due to continued expansion outside of Florida,
penetration of higher wage markets and downward pressure on workers'
compensation margins due to a competitive workers' compensation market.

      Operating expenses were $94.6 million for 1999, compared to $78.6 million
for 1998, representing an increase of $16.1 million, or 20.5%. Operating
expenses were 3.5% of revenues for 1999, compared to 3.3% for 1998.

      Salaries, wages and commissions were $59.5 million for 1999, compared to
$50.9 million for 1998, representing an increase of $8.6 million, or 16.9%. This
increase was due to an increase in corporate personnel hired to support the
Company's expanded operations and information technology conversions, and
additional sales and sales support personnel located at its branch offices.
Salaries, wages and commissions were 2.2% of revenues for 1999 compared to 2.1%
for 1998.

      Other general and administrative expenses were $27.4 million for 1999,
compared to $21.7 million in 1998, representing an increase of $5.7 million, or
26.2%. This increase was primarily a result of administrative expenses to
support the opening of five new branch offices in 1999 and spending for
technology consulting for data conversion and testing of systems for year 2000
compliance. Other general and administrative expenses were 1.0% of revenues for
1999, compared to .9% for 1998.

      Depreciation and amortization expenses increased by $1.8 million for 1999
compared to 1998, representing an increase of 29.6%. This increase was primarily
the result of the Company's investment in management information systems.

      Interest income was $3.3 million for 1999, compared to $3.2 million for
1998, representing an increase of $.1 million.

      Interest expense was $.1 million for 1999 and 1998. The Company had no
long-term debt obligations outstanding in 1999. Interest expense results from
letter of credit fees.

      Other expense in 1999 was substantially due to an acquisition proposal
received from Paribas Principal Partners and expenses related to strategic
alternatives being explored by the Company.

      Income before income taxes was $34.5 million for 1999, compared to income
before income taxes of $37.4 million for 1998, representing a decrease of $2.9
million, or 7.9%.

      Income taxes of $12.8 million for 1999 represented a provision at an
effective tax rate of 37.2%.

      Net income was $21.7 million for 1999, compared to $23.4 million for 1998,
representing a decease of $1.7 million, or 7.3%.


YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

      Revenues were $2.38 billion for 1998, compared to $1.85 billion for 1997.
This increase was due primarily to an increased number of clients and worksite
employees. From 1997 to 1998, the number of clients increased 16.4% from 9,233
to 10,751. The number of worksite employees increased 18.2%, from 107,885 to
127,470. Revenue growth exceeded headcount growth by 10.1%, primarily due to
wage inflation and expansion in higher wage markets. The increase in the number
of worksite employees was the result of continuing sales and marketing efforts
in existing markets as well as the development of new markets. The Company
opened eight new sales offices in Florida, Texas, North Carolina and Tennessee
in 1998, compared to six new sales offices in 1997.

      Cost of services was $2.26 billion for 1998, compared to $1.76 billion for
1997, representing an increase of $505.3 million, or 28.8%. This increase was
due primarily to an increased number of clients and worksite employees. Cost of
services was 95.2% of revenues for 1998, compared to 94.9% for 1997.

   Salaries, wages and payroll taxes of worksite employees were $2.16 billion
for 1998, compared to $1.68 billion for 1997, representing an increase of $482
million, or 28.8%. Salaries, wages and payroll taxes were 90.8% of revenues for
1998, compared to 90.5% for 1997.

      Benefits, workers' compensation, state unemployment taxes and other costs
were $105.2 million for 1998, compared to $81.9 million for 1997, representing
an increase of $23.3 million, or 28.5%. Benefits, workers' compensation, state
unemployment taxes and other costs were 4.4% of revenues for 1997 and 1998. The
health benefit plan


                                       20
<PAGE>

subsidy was $2.5 million in both 1997 and 1998. However, favorable experience on
the maturation or run-out of prior year health claims reduced this subsidy by
$1.4 million in 1998 versus a reduction of $3.5 million in 1997.

      Gross profit was $112.9 million for 1998, compared to $94.0 million for
1997, representing an increase of $18.9 million, or 20.1%. Gross profit was 4.8%
of revenues for 1998, compared to 5.1% for 1997. Gross profit margin decreased
as a percentage of revenues due to continued expansion outside of Florida,
penetration of higher wage markets and downward pressure on workers'
compensation margins due to a competitive workers' compensation market.

      Operating expenses were $78.6 million for 1998, compared to $67.5 million
for 1997, representing an increase of $11.0 million, or 16.3%. Operating
expenses were 3.3% of revenues for 1998, compared to 3.7% for 1997.

      Salaries, wages and commissions were $50.9 million for 1998, compared to
$42.1 million for 1997, representing an increase of $8.8 million, or 20.8%. This
increase was due primarily to a 26.9% increase in corporate personnel hired to
support the Company's expanded operations and additional sales and sales support
personnel located at its branch offices. This was partially offset by savings in
health benefits and employee bonus programs. Salaries, wages and commissions
were 2.1% of revenues for 1998, compared to 2.3% for 1997.

      Other general and administrative expenses were $21.7 million for 1998,
compared to $20.9 million in 1997, representing an increase of $.9 million, or
4.2%. This increase was primarily a result of administrative expenses to support
the opening of eight new branch offices in 1998, versus six offices in 1997, and
expanded sales and marketing programs for 1998. Other general and administrative
expenses were .9% of revenues for 1998, compared to 1.1% for 1997.

      Depreciation and amortization expenses increased by $1.4 million for 1998
compared to 1997, representing an increase of 30.6%. This increase was primarily
the result of the Company's investment in management information systems.
Amortization of capitalized software costs associated with the Company's
implementation of new payroll processing and management information systems
began July 1997, when the systems became operational. These software costs are
being amortized over a seven-year period.

      Interest expense was $.1 million for 1998, compared to $2.1 million for
1997, representing a decrease of $2.0 million. The decrease was due primarily to
the repayment of the Company's long-term borrowings in the third quarter of
1997, partially offset by the write-off of unamortized debt issuance costs
associated with this debt. The Company had no long-term debt obligations
outstanding in 1998.

      Interest income was $3.2 million for 1998, compared to $1.3 million for
1997, representing an increase of $1.9 million. The net change represents
interest income earned on the net proceeds of the Company's initial public
offering in July 1997 and net cash from operations.

      Income before income taxes was $37.4 million for 1998, compared to income
before income taxes of $25.6 million for 1997, representing an increase of $11.8
million, or 46.4%.

      Income taxes of $14.0 million for 1998 represented a provision at an
effective tax rate of 37.5%. Income taxes of $9.9 million for 1997 was reduced
by the recognition of deferred tax benefits, the tax benefit of allocation of
income to Staff Acquisition, and other items totaling $15.1 million, resulting
in a $5.2 million tax benefit for that year.


LIQUIDITY AND CAPITAL RESOURCES

   The Company had $65.8 million in cash and cash equivalents, restricted
certificates of deposit and marketable securities at December 31, 1999. The
Company periodically evaluates its liquidity requirements, capital needs and
availability of capital resources in view of its plans for expansion, including
potential acquisitions, anticipated levels of health benefit plan subsidies and
other operating cash needs. The Company has in the past sought, and may in the
future seek, to raise additional capital or take other measures to increase its
liquidity and capital resources. The Company believes that its current balances
and cash flow from operations will be sufficient to meet its requirements
through 2000. The Company may rely on these same sources, as well as public or
private debt and/or equity financing to meet its long-term capital needs.

      The Company repaid all of its long-term obligations during the third
quarter of 1997 utilizing the proceeds from its initial public offering and had
no long-term debt as of December 31, 1999. In July 1999, the Company entered
into an agreement with NationsBank for a $10 million revolving line of credit to
provide for intraday working capital needs. Borrowings under the credit facility
bear interest at variable rates based on the lenders' base rate or LIBOR. No
borrowings have been made against the credit line. At December 31, 1999, the
Company had working capital of $37.4 million.

                                       21
<PAGE>

      The Company's primary short-term capital requirements relate to the
payment of accrued payroll and payroll taxes of its internal and worksite
employees, accounts payable for capital expenditures and the payment of accrued
workers' compensation expense and health benefit plan premiums. As of December
31, 1999, the Company had $7.8 million of restricted certificates of deposit,
with original maturities of less than one year, as collateral for certain
standby letters of credit issued in connection with the Company's health benefit
plans.

      Net cash provided from operations was $25.7 million for 1999. In 1999, the
Company invested $10.9 million in its facilities and technology infrastructure.
For 2000, the Company anticipates total capital expenditures of $8.5 million.

      The Company's Board of Directors approved a program in August 1998 to
repurchase up to two million shares of the Company's common stock. Purchases may
be made from time to time depending upon the Company's stock price, and will be
made primarily in the open market, but may also be made through privately
negotiated transactions. In January 1999, the Company's Board of Directors
increased this share repurchase plan to three million shares. In 1998, the
Company repurchased 1.6 million shares of its common stock for a total cost of
$21.0 million. In 1999, the Company repurchased 411,725 shares at a cost of $4.3
million.


INFLATION

      The Company believes that inflation in salaries and wages of worksite
employees has a positive impact on its results of operations as its service fee
is proportional to such changes in salaries and wages.


ITEM 7 A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The Company is subject to market risk from exposure to changes in interest
rates based on its investing and cash management activities. The Company
utilizes U.S. government agency and other corporate debt with fixed rates and
maturities of less than one year to manage its exposures to interest rates. (See
Note 4 to the Consolidated Financial Statements appearing elsewhere in this Form
10-K). The Company does not expect changes in interest rates to have a material
effect on income or cash flows in fiscal 2000, although there can be no
assurances that interest rates will not change.


ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The information required by this Item 8 is contained in a separate section
of this Annual Report. See "Index to Consolidated Financial Statements and
Financial Statement Schedule" on page F-1.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

   None.


PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICES OF THE REGISTRANT

   The information regarding the Company's executive officers is included in
Item 1 of Part I under "Executive Officers of the Registrant." Other information
required by this Item 10 will be contained in the Company's Proxy Statement,
relating to the 2000 Annual Meeting of Shareholders to be held on May 22, 2000
(the "Proxy Statement") and is incorporated herein by reference.


ITEM 11. EXECUTIVE COMPENSATION

   The information required by this Item 11 will be contained in the Proxy
Statement and is incorporated herein by reference, provided that the
Compensation Committee Report and Performance Graph contained in the Proxy
Statement shall not be deemed to be incorporated herein by reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The information required by this Item 12 will be contained in the Proxy
Statement and is incorporated herein by reference.


                                       22
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   The information required by this Item 13 will be contained in the Proxy
Statement and is incorporated herein by reference.


PART IV.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  1.  Financial Statements - The financial statements and independent
         auditors' report are listed in the "Index to Financial Statements and
         Financial Statement Schedule" on page F-1 and included on pages F-2
         through F-21.

     2.  Financial Statement Schedules - The financial statement schedule
         required by Item 14(a) (2) is included on page S-1.

     3.  Exhibits including those incorporated by reference:


EXHIBIT
  NO.                      DESCRIPTION
-------                    -----------

2.1      Agreement and Plan of Merger by and among SLI Transitory, L.P., Staff
         Capital, L.P. and Staff Leasing, Inc. (filed as Exhibit 4.3 to the
         Company`s registration statement no. 333-22933 and incorporated herein)

3.1      Articles of Incorporation of Staff Leasing, Inc. (filed as Exhibit 3.1
         to the Company's registration statement no. 333-22933 and incorporated
         herein)

3.2      Bylaws of Staff Leasing, Inc. (filed as Exhibit 3.2 to the Company's
         registration statement no. 333-22933 and incorporated herein)

4.1      Specimen Common Stock Certificate (filed as Exhibit 4.1 to the
         Company's registration statement no. 333-22933 and incorporated herein)

4.2      See Exhibits 3.1 and 3.2 for the provisions of Staff Leasing Inc.'s
         Articles of Incorporation and Bylaws governing the rights of holders of
         securities of Staff Leasing, Inc.

10.1     1997 Stock Incentive Plan of Staff Leasing, Inc. as amended through
         November 19, 1998, incorporated by reference and filed as Exhibit 4.1
         on Registration Statement Form S-8 filed with the Commission on
         December 15, 1998. (Reg. No. 333-68929).*

10.2     Form of Indemnification Agreement dated March 3, 1997, between Staff
         Leasing, Inc. and each of its directors and executive officers. (filed
         as Exhibit 10.2 to the Company's registration statement no. 333-22933
         and incorporated herein)*

10.3     Form of Executive Agreement between Staff Leasing, Inc. and its
         executive officers. (filed as Exhibit 10.3 to the Company's
         registration statement no. 333-22933 and incorporated herein)*

10.4     Voting Trust Agreement by and between Charles S. Craig and Staff
         Leasing, Inc., together with related Voting Trust Certificate. (filed
         as Exhibit 10.4 to the Company's registration statement no. 333-22933
         and incorporated herein)*

10.5     Option to Purchase Agreement by and between Charles S. Craig and Staff
         Leasing, Inc., relating to outstanding capital stock of Staff
         Acquisition, Inc. (filed as Exhibit 10.5 to the Company's registration
         statement no. 333-22933 and incorporated herein)*

10.6     Amended and Restated Credit Agreement among Staff Acquisition, Inc.,
         Staff Capital, L.P., various banks and Banque Paribas, as Agent, dated
         as of November 5, 1993 and Amended and Restated as of December 8, 1994,
         together with First Amendment thereto dated as of June 29, 1995, Second
         Amendment thereto dated as of April 26, 1996, Third Amendment thereto
         dated as of August 31, 1996, Fourth Amendment thereto dated November
         30, 1996, Fifth Amendment thereto dated as of March 5, 1997, and the
         Sixth Amendment thereto dated as of May 29, 1997. (filed as Exhibit
         10.6 to the Company's registration statement no. 333-22933 and
         incorporated herein)

                                       23
<PAGE>

EXHIBIT
  NO.                      DESCRIPTION
-------                    -----------

10.7     Agreement of Lease dated March 27, 1995 between Quixotic Investment
         Holdings, Inc. (Landlord) and the Company for premises located at 600
         301 Boulevard West, Suite 202, Bradenton, Florida 34205 (filed as
         Exhibit 10.7 to the Company's registration statement no. 333-22933 and
         incorporated herein)

10.8     Workers' Compensation and Employers' Liability Policy issued by Liberty
         Mutual Insurance Company to Staff Leasing, effective January 1, 1997.
         (filed as Exhibit 10.8 to the Company's registration statement no.
         333-22933 and incorporated herein)

10.9     1993 Restricted Equity Plan, as Amended and Restated. (filed as Exhibit
         10.9 to the Company's registration statement no. 333-22933 and
         incorporated herein)

10.10    Credit Agreement dated as of December 11, 1997, among Staff Leasing,
         Inc., its subsidiaries, the lenders named therein, and NationsBank,
         N.A., as Agent (1) (filed as Exhibit 10.11 to the Company's annual
         report on Form 10-K and incorporated herein).

10.11    Lease Agreement dated December 5, 1997, between Aldina, L.C. and Staff
         Capital, L.P. (filed as Exhibit 10.12 to the Company's annual report on
         Form 10-K and incorporated herein).

10.12    Credit Agreement dated July 26, 1999, among Staff Leasing, Inc. its
         subsidiaries, the lenders named herein, and Nationsbank, N.A. as Agent.

10.13    Workers' Compensation and Employers' Liabliity Policy issued by Texas
         Workers' Compensation Insurance Fund to Staff Leasing of Texas, L.P.,
         effective January 1, 2000.

10.14    Finance Agreement for Paid Loss Workers' Compensation deductible dated
         as of January 1, 2000, between Staff Leasing, Inc. and Continental
         Casualty Company.

10.15    Workers' Compensation and Employers Liability Policy issued by
         Continental Casualty Co. to Staff Leasing, Inc., effective January 1,
         2000. (2)

21.1     List of Subsidiaries of the Registrant.

23.1     Independent Auditors' Consent to Form S-8 (filed as registration
         statement no. 333-68929 and incorporated herein).

27.1     Financial Data Schedule (for SEC use only).

-------------
(1)      Schedules to the Credit Agreement containing disclosure called for by
         the agreement or various forms for loan activities under the agreement
         are omitted and will be provided to the Commission upon request.
(2)      Exhibits referenced in policy are omitted and will be provided to the
         Commission upon request.
  *      Management contract or compensatory plan or arrangement.

(b)      Reports on Form 8-K:

         None.


                                       24
<PAGE>
                                 SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Staff Leasing, Inc. has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.

<TABLE>
<CAPTION>
<S>                                             <C>
                                                STAFF LEASING, INC.

Dated:  March 30, 2000                           /s/ Richard A. Goldman
--------------------------------------------------------------------------------------
                                                Richard A. Goldman
                                                Office of the Chief Executive,
                                                President and a Director
                                                (Principal Executive Officer)

      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.

Dated:  March 30, 2000                           /s/ Charles S. Craig
---------------------------------------------------------------------------------------
                                                Charles S. Craig
                                                Chairman of the Board

Dated:  March 30, 2000                           /s/ John E. Panning
---------------------------------------------------------------------------------------
                                                John E. Panning
                                                Office of the Chief Executive,
                                                Chief Financial Officer and a Director

Dated:  March 30, 2000                           /s/ George B. Beitzel
---------------------------------------------------------------------------------------
                                                George B. Beitzel
                                                Director

Dated:  March 30, 2000                           /s/ Melvin R. Laird
---------------------------------------------------------------------------------------
                                                Melvin R. Laird
                                                Director

Dated:  March 30, 2000                           /s/ Elliot B. Ross
---------------------------------------------------------------------------------------
                                                Elliot B. Ross
                                                Director

Dated:  March 30, 2000                           /s/ Jonathan H. Kagan
---------------------------------------------------------------------------------------
                                                Jonathan H. Kagan
                                                Director

Dated:  March 30, 2000                           /s/ Richard A. Goldman
---------------------------------------------------------------------------------------
                                                 Richard A. Goldman
                                                 Director
</TABLE>

                                       25
<PAGE>

                      STAFF LEASING, INC. AND SUBSIDIARIES

   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

<TABLE>
<CAPTION>
                                                                     PAGE
                                                                     ----
<S>                                                                   <C>
  Independent Auditors' Report........................................F-2

  Consolidated Balance Sheets as of December 31, 1998 and
     1999.............................................................F-3

  Consolidated Statements of Income for the Years Ended
     December 31, 1997, 1998, and 1999................................F-4

  Consolidated Statements of Changes in Shareholders'
     Equity for the Years Ended December 31,
     1997, 1998, and 1999 ............................................F-5

  Consolidated Statements of Cash Flows for the Years Ended
     December 31, 1997, 1998, and 1999................................F-6

  Notes to Consolidated Financial Statements .........................F-7

  Financial Statement Schedule II - Valuation and Qualifying Accounts S-1
</TABLE>
                                       F-1

                                       26
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
Staff Leasing, Inc.
Bradenton, Florida

We have audited the accompanying consolidated financial statements and financial
statement schedule of Staff Leasing, Inc. (a Florida corporation) and
subsidiaries listed in the Index to Consolidated Financial Statements and
Financial Statement Schedule on page F-1 of the Annual Report on Form 10-K of
Staff Leasing, Inc. for the year ended December 31, 1999. These consolidated
financial statements and financial statement schedule are the responsibility of
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Staff Leasing, Inc. and
subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects, the information set forth therein.

Deloitte & Touche LLP
Certified Public Accountants



Tampa, Florida
February 25, 2000

                                       F-2

                                       27
<PAGE>

                      STAFF LEASING, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                      December 31,             December 31,
                                                          1998                     1999
                                                  ----------------------   ----------------------
                                                   (in $000's, except share and per share data)
<S>                                                <C>                      <C>
                            ASSETS
Current assets:
  Cash and cash equivalents                        $      15,412            $      23,081
  Certificates of deposit - restricted                     8,379                    7,777
  Marketable securities                                   32,022                   34,914
  Accounts receivable, net                                38,637                   41,631
  Other current assets                                     6,182                   11,494
                                                  ----------------------   ----------------------
         Total current assets                            100,632                  118,897

Property and equipment, net                               25,071                   28,833
Goodwill, net of accumulated amortization
  of $3,779 and $4,513, respectively                      10,892                   10,159
Deferred tax asset                                         2,898                    1,950
Other assets                                                 285                    3,731
                                                  ----------------------   ----------------------
                                                   $     139,778            $     163,570
                                                  ======================   ======================
             LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accrued insurance premiums and health
     reserves                                      $      22,757            $      22,724
  Accrued payroll and payroll taxes                       38,748                   35,574
  Deferred tax liability                                   5,729                    8,770
  Accounts payable and other accrued liabilities           5,515                   10,888
  Customer deposits and prepayments                        2,741                    3,523
                                                  ----------------------   ----------------------
         Total current liabilities                        75,490                   81,479

Other long-term liabilities                                1,499                    1,335
Commitments and contingencies (See notes)

Shareholders' equity:
  Common stock, $.01 par value                               221                      217
         Shares authorized:          100,000,000
         Shares issued and outstanding:
                          1998 -      22,121,267
                          1999 -      21,709,542
  Additional paid in capital                              46,804                   42,987
  Retained earnings                                       16,051                   37,701
  Other                                                     (287)                    (149)
                                                  ----------------------   ----------------------
         Total shareholders' equity                       62,789                   80,756
                                                  ----------------------   ----------------------
                                                   $     139,778            $     163,570
                                                  ======================   ======================
</TABLE>

                 See notes to consolidated financial statements.

                                       F-3


                                       28
<PAGE>
                      STAFF LEASING, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                -------------------------------------------------------
                                                      1997               1998               1999
                                                -----------------   ----------------  -----------------
                                                          (in $000's, except per share data)
                                                -------------------------------------------------------
<S>                                                  <C>                 <C>               <C>
Revenues                                             $1,851,248          $2,375,522        $2,701,886
                                                -----------------   ----------------  -----------------
Cost of services:

   Salaries, wages and payroll taxes                  1,675,369           2,157,406         2,457,420

   Benefits, workers' compensation, state
       unemployment taxes and other costs                81,891             105,201           116,843
                                                -----------------   ----------------  -----------------
             Total cost of services                   1,757,260           2,262,607         2,574,263
                                                -----------------   ----------------  -----------------
Gross profit                                             93,988             112,915           127,623
                                                -----------------   ----------------  -----------------
Operating expenses:

   Salaries, wages and commissions                       42,147              50,905            59,529

   Other general and administrative                      20,853              21,738            27,435

   Depreciation and amortization                          4,542               5,930             7,684
                                                -----------------   ----------------  -----------------
             Total operating expenses                    67,542              78,573            94,648
                                                -----------------   ----------------  -----------------
Operating income                                         26,446              34,342            32,975

Interest income                                           1,345               3,154             3,269
Interest expense                                         (2,138)                (68)              (61)
Other income (expense)                                      (92)                  4            (1,694)
                                                -----------------   ----------------  -----------------
Income before income taxes                               25,561              37,432            34,489
Income tax provision (benefit)                           (5,222)             14,037             12,839
                                                -----------------   ----------------   ----------------
Net income                                               30,783              23,395            21,650

Return on preferred interests                            (2,391)                 --                --
                                                -----------------   ----------------  -----------------
Net income attributable to common shareholders       $  28,392            $  23,395         $  21,650
                                                =================   ================  =================
Net income  per share attributable to common
shareholders
  - Basic                                            $    1.32            $    1.01          $    .99
                                                =================   ================  =================
  - Diluted                                          $    1.26            $     .97          $    .97
                                                =================   ================  =================
Weighted average common shares outstanding
   - Basic                                              21,588               23,207            21,799
                                                =================   ================  =================
   - Diluted                                            22,459               24,092            22,210
                                                =================   ================  =================
</TABLE>

                 See notes to consolidated financial statements.

                                       F-4


                                       29
<PAGE>
                      STAFF LEASING, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                   YEARS ENDED DECEMBER 31, 1997, 1998, 1999
<TABLE>
<CAPTION>
                                                                                         Accumulated
                                                                                            Other        Retained
                                      Common                  Additional                 Comprehensive   Earnings/
                                      Stock        Common      Paid In                      Income      (Accumulated
                                     (shares)       Stock      Capital        Other         (loss)        Deficit)        Total
                                  --------------- ---------- ------------- ------------- ------------- ---------------- -----------
                                                           In $000's except for share data
<S>                                  <C>          <C>            <C>         <C>                            <C>         <C>
Balance, January 1, 1997             19,196,472   $    192     $  3,506     $ (1,251)                   $ (38,127)     $ (35,680)
Return on preferred interests                                    (1,744)                                                  (1,744)
Repurchase of shareholder
  interests                             (53,992)                   (612)          53                                        (559)
Issuance of common stock through
  IPO, net                            3,944,978         39       60,999                                                   61,038
Issuance of common stock upon
  exercise of Company option for
  all capital stock of Staff
  Acquisition, Inc.                     417,900          4          137                                                      141
Tax benefit of restricted stock
  plan vesting                                                    3,208                                                    3,208
Capital contributions                                               324         (324)                                          -
Other                                                                59          902                                         961
Net income                                                                                                 30,783         30,783
                                  --------------- -------- ------------- -------------  -------------- -------------- -----------
Balance, January 1, 1998             23,505,358        235       65,877         (620)                      (7,344)        58,148

Repurchase and retirement of
  common stock                       (1,571,800)       (16)     (20,976)                                                 (20,992)
Issuance of common stock                 10,000        -            257                                                      257
Issuance of common stock through
  exercise of warrants, net             177,709          2          835                                                      837
Tax benefit of restricted stock
  plan vesting                                                      814                                                      814
Other                                                                (3)         277                                         274
Comprehensive income:
Unrealized gain on marketable
  securities                                                                            $        56
Net income                                                                                                 23,395
Total comprehensive income                                                                                                23,451
                                  --------------- -------- ------------- -------------  -------------- -------------- -----------
Balance, January 1, 1999             22,121,267        221       46,804         (343)            56        16,051         62,789

Repurchase and retirement  of
  common stock                         (411,725)        (4)      (4,287)                                                  (4,291)
Tax benefit of restricted stock
  plan vesting                                                      470                                                      470
Other                                                                            234                                         234
Comprehensive income:
Unrealized loss on marketable
  securities                                                                                    (96)
Net income                                                                                                 21,650
Total comprehensive income                                                                                                21,554
                                  --------------- -------- ------------- -------------  -------------- ------------- -----------
Balance, December 31, 1999           21,709,542    $   217 $     42,987     $   (109)   $       (40)     $ 37,701     $   80,756
                                  =============== ======== ============= =============  ============== ============= ===========
</TABLE>
                 See notes to consolidated financial statements.

                                       F-5


                                       30
<PAGE>

                      STAFF LEASING, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                                     ---------------------------------------------
                                                                         1997            1998            1999
                                                                     --------------  -------------   -------------
                                                                                     (in $000's)
<S>                                                                    <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                          $  30,783       $  23,395       $  21,650
   Adjustments to reconcile net income
      to net cash provided by operating activities:
         Depreciation and amortization                                     4,542           5,930           7,684
         Deferred taxes, net                                              (5,222)         12,042           4,435
         Amortization and write-off of debt issuance costs                   957               -               -
         Provision for bad debts                                             820             720             306
         Other                                                             1,145             368             314
         Changes in operating working capital:
            Decrease(increase) in certificates of deposit -
               restricted                                                 (8,406)             27             602
            Increase in accounts receivable                               (1,678)         (4,543)         (3,300)
            (Increase)decrease in other current assets                        67          (4,819)         (5,312)
            (Decrease)increase in accounts payable and other
                accrued liabilities                                       (3,578)         (1,020)          5,373
            Increase (decrease) in accrued payroll and payroll
                taxes                                                      1,557           1,911          (3,174)
            Increase(decrease) in accrued insurance premiums and
                health reserves                                            6,263           2,797             (33)
            Increase in customer deposits and prepayments                    725             620             782
            Increase in other long-term assets                               (89)           (115)         (3,446)
            Decrease in other long-term liabilities                         (538)            (19)           (164)
                                                                     --------------  -------------   -------------
      Net cash provided by operating activities                           27,348          37,294          25,717
                                                                     --------------  -------------   -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Marketable securities classified as available for sale:
       Purchases                                                         (19,701)        (59,364)        (71,691)
       Sales                                                                   -          19,992           5,995
       Maturities                                                              -          27,140          62,703
   Capital expenditures                                                   (7,100)        (10,937)        (10,911)
                                                                     --------------  -------------   -------------
      Net cash used in investing activities                              (26,801)        (23,169)        (13,904)
                                                                     --------------  -------------   -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from sale of common shares, net                               61,038           1,094               -
   Capital contributions, net of shareholder notes receivable and
      issuance costs                                                         370               -               -
   Repayment of Capital Leases                                            (3,746)              -               -
   Repayment of shareholders' notes receivable                               877             134               7
   Repurchase of common shareholders' interests                             (559)        (20,992)         (4,151)
   Repurchase of shareholders' interests, including fixed return         (19,788)              -               -
   Repayments of long-term debt                                          (17,700)              -               -
                                                                     --------------  -------------   -------------
      Net cash provided by (used in) financing activities                 20,492         (19,764)         (4,144)
                                                                     --------------  -------------   -------------
   Net increase (decrease) in cash and cash equivalents                   21,039          (5,639)          7,669
Cash and cash equivalents - beginning of year                                 12          21,051          15,412
                                                                     --------------  -------------   -------------
Cash and cash equivalents - end of year                                $  21,051       $  15,412       $  23,081
                                                                     ==============  =============   =============
Supplemental disclosure of cash flow information:
   Income taxes paid                                                    $      -        $  3,787        $  7,314
                                                                     ==============  =============   =============
   Interest paid                                                        $  1,020        $     77        $     21
                                                                     ==============  =============   =============
</TABLE>

                 See notes to consolidated financial statements.

                                       F-6


                                       31
<PAGE>

                      STAFF LEASING, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       (in $000's, except per share data)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      DESCRIPTION OF BUSINESS - Staff Leasing Inc. and subsidiaries ("the
Company") is headquartered in Bradenton, Florida and operates as one business
segment which provides professional employer services to small to medium-sized
businesses primarily in the states of Florida, Texas, Georgia, Arizona,
Minnesota, North Carolina, Tennessee and Alabama. The Company, through its
subsidiaries, provides a broad range of services, including payroll
administration, risk management, benefits administration, unemployment services
and other human resources consulting services to their clients. The Company is
paid a service fee to cover the cost of certain employment related taxes,
workers' compensation insurance coverage and administration and field services,
plus a markup to cover overhead and to provide a profit.

      PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial
statements include the accounts of Staff Leasing, Inc. and all of its
subsidiaries: Staff Acquisition, Inc.; Staff Insurance, Inc.; Staff Capital,
L.P.; and the operating limited partnerships ("OLPs") of Staff Capital, L.P.;
Staff Leasing, L.P.; Staff Leasing II, L.P.; Staff Leasing III, L.P.; Staff
Leasing IV, L.P.; Staff Leasing V, L.P.; Staff Leasing of Georgia, L.P.; Staff
Leasing of Georgia II, L.P.; Staff Leasing of Georgia III, L.P.; Staff Leasing
of Texas, L.P.; and Staff Leasing of Texas II, L.P. (collectively, the
"Company"). All intercompany balances and transactions have been eliminated. As
of December 31, 1998, Staff Capital, L.P. was dissolved, and its assets were
transferred to Staff Leasing, Inc. and its related entities.

      BASIS OF PRESENTATION - Effective July 1, 1997, the Company completed a
reorganization (See Note 2) which was accounted for as a pooling of interests
among entities under common control. As a result, common stock, which replaced
previous preferred and common partnership interests, has been reflected in these
financial statements as being issued as of the earliest date presented. Before
the reorganization, the Company operated as Staff Capital, L.P.

      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. The Company's most significant estimates relate to
the reserve for health benefit claims. Actual results could differ from those
estimates.

      MARKETABLE SECURITIES - The Company accounts for marketable securities in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." The Company
determines the appropriate classification of all marketable securities as
held-to-maturity, available-for-sale or trading at the time of purchase and
re-evaluates such classification as of each balance sheet date. At December 31,
1999, all of the company's investments in marketable securities are classified
as available-for-sale, and as a result, are reported at market value. Unrealized
gains and losses, net of tax, are reported as a separate component of
shareholders' equity and comprehensive income. The amortized cost of debt
securities is adjusted for amortization of premiums and accretion of discounts
from the date of purchase to maturity. Such amortization is included in interest
income as an addition to or deduction from the coupon interest earned on the
investments. The cost of investments sold is based on the average cost method,
and realized gains and losses are included in other income (expense).

      PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the lesser of the
remaining estimated useful lives of the related assets or lease terms, as
follows:

<TABLE>
<CAPTION>
                                                              YEARS
                                                             ------
<S>                                                         <C>
Automobiles.................................................   5
Computer hardware and software.............................. 3 to 7
Furniture and equipment..................................... 5 to 7
Leasehold improvements.....................................  Life of lease
</TABLE>

      GOODWILL - Goodwill is being amortized using the straight-line method over
a period of 20 years.

                                       F-7

                                       32
<PAGE>

                      STAFF LEASING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                       (in $000's, except per share data)


      FAIR VALUE OF FINANCIAL INSTRUMENTS- The carrying values of cash and cash
equivalents, marketable securities, accounts receivable, and accounts payable
and other accrued liabilities approximate fair value.

      VALUATION OF LONG-LIVED ASSETS - The Company periodically evaluates the
carrying value of long-lived assets, including goodwill and other intangible
assets, when events and circumstances warrant such a review. The carrying value
of a long-lived asset is considered impaired when indicators of impairment are
present and undiscounted cash flows estimated to be generated by the asset are
less than the asset's carrying amount. In that event, a loss is recognized based
on the amount by which the carrying value exceeds the fair market value of the
long-lived asset. Fair market value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with the risk involved.

      STATEMENT OF CASH FLOWS - The change in deferred taxes for 1997, 1998, and
1999 includes $3,208, $814, and $470, respectively, which relates to the vesting
of restricted stock. This amount was recorded to Additional Paid in Capital.

      CASH EQUIVALENTS - Cash equivalents are defined as short-term investments
with original maturities of three months or less.

      REVENUE RECOGNITION - Service revenues are recognized in the period in
which the worksite employee works. The accrual for payroll and payroll taxes
represents the portion of payroll paid subsequent to year end for which the
worksite employee worked prior to year end.

      SALES AND MARKETING COMMISSIONS AND CLIENT REFERRAL FEES - Sales and
marketing commissions and client referral fees are expensed as incurred. Such
expenses are classified as salaries, wages and commissions in the consolidated
statement of operations.

      WORKERS' COMPENSATION - Workers' compensation claims incurred by worksite
employees are fully insured through a guaranteed cost arrangement with Liberty
Mutual Insurance Company. This plan expired on December 31, 1999. New workers'
compensation contracts commenced January 1, 2000 with CNA and The Texas Fund.
The Texas Fund is a guaranteed cost plan based on a percentage of manual
premium. The CNA contract is an insured loss sensitive program that is based on
a percentage of manual premium. (See note 13)

      HEALTH BENEFITS - Health benefit claims incurred by worksite employees
under the health benefit plans are expensed as incurred according to the terms
of each contract (See Note 9).

      STOCK-BASED COMPENSATION - The Company has adopted only the pro forma
disclosure provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"). SFAS No. 123
encourages, but does not require companies to record at fair value compensation
cost for stock-based employee compensation plans. The Company accounts for
equity-based compensation arrangements in accordance with the intrinsic value
method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. Intrinsic value is the
amount by which the market price of the underlying stock exceeds the exercise
price of the stock option or award on the measurement date, generally the date
of grant.

      INCOME TAXES - The Company records income tax expense using the asset and
liability method of accounting for deferred income taxes. Under such method,
deferred tax assets and liabilities are recognized for the expected future tax
consequences of temporary differences between the financial statements and the
income tax basis of the Company's assets and liabilities.

      EARNINGS PER SHARE - The Company computes and discloses earnings per share
in accordance with the provisions of Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" ("SFAS No. 128").

      RECLASSIFICATIONS - Certain reclassifications of prior years amounts have
been made in order to conform with current year presentations.

                                       F-8


                                       33
<PAGE>

                      STAFF LEASING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                       (in $000's, except per share data)


      COMPREHENSIVE INCOME - Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income" was adopted by the Company in
the first quarter of 1998. SFAS 130 establishes standards for reporting and
display of comprehensive income and its components. It requires that all items
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement or financial statement
footnote. Comprehensive income is defined as "the change in equity of a business
during a period from transactions and other events and circumstances from
non-owner sources." The only source of other comprehensive income (loss) was an
unrealized gain of $56, net of tax effect of $33, at December 31, 1998, and an
unrealized loss of $40, net of tax effect of $24 at December 31, 1999, resulting
from change in market value of marketable securities, which is reflected in the
Consolidated Statements of Changes in Shareholders' Equity/(Deficit).

      NEW ACCOUNTING PRONOUNCEMENTS - In June 1998, the FASB issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities. Such
standard requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure these instruments at fair value.
The accounting for changes in the fair value of a derivative (that is, gains and
losses) depends upon the intended use of the derivative and resulting
designation if used as a hedge. SFAS No. 133, as amended, is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. The Company has
not evaluated whether this standard will have a material effect on its financial
position or results of operations.

2. REORGANIZATION AND INITIAL PUBLIC OFFERING:

      Effective July 1, 1997, a reorganization (the "Reorganization") was
consummated whereby the Company became the sole limited partner of Staff
Capital, L.P. Staff Acquisition, Inc. ("Staff Acquisition") is the sole general
partner of Staff Capital, L.P. and each of the OLPs.

      Pursuant to the Reorganization, all of the holders of the common limited
partnership interests in Staff Capital, L.P. exchanged their partnership
interests for 17,122,205 shares of common stock in the Company. Certain of the
preferred limited partnership interests were exchanged for 2,074,267 shares of
common stock in the Company and warrants to purchase an aggregate of 1,352,253
shares of common stock in the Company with an exercise price of $7.24 per share.

      In addition, Charles S. Craig, the Chairman and CEO of the Company and
owner of all the issued and outstanding capital stock of Staff Acquisition, the
general partner of Staff Capital, granted to the Company an option to exchange
the stock of Staff Acquisition for 417,900 shares of the Company's common stock.
The number of shares of common stock issuable to Mr. Craig in connection with
the exercise of such option was determined on the same basis used to determine
the number of shares of common stock issued in exchange for the partnership
interests of Staff Capital, L.P. On September 30, 1997, the Company exercised
this option.

      The Reorganization was accounted for as a combination among entities under
common control and accordingly, for financial statement presentation purposes,
the Reorganization was treated as a pooling of interests of the Company and
Staff Capital, L.P. as of and for the periods presented.

      In conjunction with the Reorganization, on July 1, 1997, the Company
completed an initial public offering (the "IPO") of 3,500,000 shares of its
common stock. The Company subsequently issued an additional 444,978 shares
resulting from the exercise of certain overallotment provisions for a total
issuance of 3,944,978 shares. In conjunction with this offering, 655,022 shares
were sold on behalf of certain selling shareholders, for an aggregate offering
price of $11 million. The IPO expenses incurred by the Company totaled
approximately $6.0 million, including $4.7 million of underwriting discounts and
commissions, and approximately $1.3 million of other expenses.

      Net proceeds raised from the IPO, including over allotment, amounted to
approximately $61,038. The net proceeds from the IPO were used to redeem
preferred partnership interests of $16,294, including accrued fixed return of
$2,552, and to repay outstanding long-term debt of $15,200. The remainder has
been allocated for general corporate purposes. Reorganization related expenses
as of July 1, 1997, included: (i) the write-off of $714 in unamortized deferred
financing costs associated with the repayment of the Company's long-term debt;
(ii) the write-off of $163 in unamortized organization costs associated with the
reorganization of the structure of the limited partnerships; and (iii) $962 of
accelerated accretion associated with the early redemption of the preferred
partnership interests.

                                    F-9


                                       34
<PAGE>

                      STAFF LEASING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                       (in $000's, except per share data)

3. CERTIFICATES OF DEPOSIT - RESTRICTED:

      As of December 31, 1999, the Company had certificates of deposit, with
original maturities of less than one year, that serve as collateral for certain
standby letters of credit issued in connection with the Company's health benefit
plans. Due to the short maturity of these instruments, the carrying amount
approximates fair value. These interest-bearing certificates of deposit have
been classified as restricted in the accompanying consolidated balance sheets.
The interest earned on these certificates is recognized as interest income on
the Company's consolidated statement of operations.

4. MARKETABLE SECURITIES:

      As of December 31, 1999, the Company had marketable securities with
contractual maturities of less than one year from the date of purchase. All of
the Company's investments in marketable securities are classified as
available-for-sale and are summarized as follows:

<TABLE>
<CAPTION>
                                                             Gross             Gross
                                         Amortized        Unrealized         Unrealized         Estimated
As of December 31, 1998:                    Cost             Gains             Losses          Fair Value
                                         (in 000's)        (in 000's)        (in 000's)        (in 000's)
                                           -------           -----              ------          -------
<S>                                        <C>                   <C>                <C>             <C>
Obligations of U.S. Government
Agencies                                   $31,933           $  92              $  (3)          $32,022
                                           -------           -----              ------          -------
As of December 31, 1999:
-------------------------------------
Obligations of U.S. Government
Agencies                                   $28,478           $   4              $ (68)         $ 28,414

Certificate of Deposits                      5,000               -                   -            5,000

Other                                        1,500               -                   -            1,500
                                           -------           -----              ------          -------
                                           $34,978           $   4              $ (68)          $34,914
                                           =======           =====              ======          =======
</TABLE>

      The unrealized gains and losses shown for 1999, net of tax effect of $24,
are reflected as comprehensive income in the Consolidated Statements of Changes
in Shareholders' Equity. For the years ended December 31, 1998 and 1999, gross
realized gains on sales of available-for-sale securities were $8 and $0,
respectively. For the years ended December 31, 1998 and 1999, gross realized
losses on sales of available-for-sale securities were $4 and $5, respectively.

      At December 31, 1998 and 1999, the Company's marketable securities
included unamortized premiums of $101 and $4, respectively. At December 31, 1998
and 1999, the Company's marketable securities included unamortized discounts of
$81 and $60, respectively. During the year ended December 31, 1998, premium
amortization of $210 and discount accretion of $718 were included in interest
income. During the year ended December 31, 1999, premium amortization of $24 and
discount accretion of $566 were included in interest income.

5. ACCOUNTS RECEIVABLE

      At December 31, 1998 and 1999, accounts receivable consisted of the
following:

<TABLE>
<CAPTION>
                                                            1998        1999
                                                          -------     -------
<S>                                                       <C>       <C>
Billed to clients ...................................... $ 15,391     $ 11,391
Unbilled revenues ......................................   24,048       30,980
                                                         --------     --------
                                                           39,439       42,371
Less:   Allowance for doubtful accounts..................    (802)        (740)
                                                         --------     --------
                                                          $38,637      $41,631
                                                         ========     ========
</TABLE>

                                      F-10


                                       35
<PAGE>

                      STAFF LEASING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                       (in $000's, except per share data)

6. PROPERTY AND EQUIPMENT

      At December 31, 1998 and 1999, property and equipment consisted of the
following:

<TABLE>                                                          1998      1999
                                                              -------   -------
<S>                                                           <C>       <C>
Leasehold improvements......................................  $ 1,484   $ 1,832
Furniture and fixtures......................................    2,508     2,944
Vehicles....................................................      103       103
Equipment...................................................    1,799     2,803
Computer hardware and software..............................   29,490    38,066
                                                              -------   -------
Total property and equipment................................   35,384    45,748
Less accumulated depreciation...............................  (10,313)  (16,915)
                                                              -------   -------
                                                              $25,071   $28,833
                                                              =======   =======
</TABLE>
      For the years ended December 31, 1997, 1998, and 1999 depreciation expense
was $3,505, $5,125, and $6,946 respectively.

7. OTHER ASSETS AND AMORTIZATION

      Included in other current assets as of December 31, 1998 and 1999 were
prepaid income taxes of $1,903 and $881, and prepaid workers compensation
insurance of $0 and $6,504, respectively. Also included in other current assets
were prepaid expenses, short-term deposits and other miscellaneous receivables.

      For the years ended December 31, 1997, 1998 and 1999, total amortization
expense, including annual amortization of goodwill of $733 per year, was $1,038,
$805, and $738, respectively.

8. LONG-TERM DEBT

         On July 26, 1999, the Company entered into a $10,000 credit agreement
with NationsBank, NA. No amounts have been borrowed under this facility since
its inception.

      As of December 31, 1999, the Company had $7,777 in standby collateralized
letters of credit issued in conjunction with the Company's health benefit plans.
These letters of credit were unused as of December 31, 1999.

9. HEALTH BENEFITS

      The Company currently provides health benefits to those worksite employees
electing coverage. For health benefit plans in Florida, the Company's ultimate
liability for its health benefit claims is capped at a factor based on premiums
as set forth in the Company's minimum premium agreement with its health
insurance carriers. The stop loss coverage per covered employee under the
Florida plan was capped at 115% of projected claims for the 1997, 1998, and 1999
plan years. For health benefit plans in Arizona, Colorado, Georgia, Minnesota,
North Carolina, Tennessee and Texas, the Company's health benefit liabilities
are equal to its premiums paid. Worksite employees who elect coverage are fully
insured subject to the terms of coverage under the health benefit plans.

      In 1997 and 1998, the health benefit plan subsidy was $2,500 per year and
in 1999 it was $1,642. Favorable experience on the maturation or run-out of
health claims enabled the Company to reduce its reserve for health benefit
claims by $3,500 for 1996, $1,400 for 1997, and $2,192 for 1998 which were
recognized in 1997, 1998 and 1999, respectively.

      Year-end liabilities for health benefit loss reserves were based upon
actuarial estimates of claims incurred but not reported under the health plans
at December 31, 1998 and 1999. The actual ultimate liability may differ from
these actuarial estimates. The accrual for these reserves at December 31, 1998
and 1999 totaled $8,413 and $8,275, respectively, of which $1,000 was classified
as long-term for both years.

                                      F-11


                                       36
<PAGE>

                      STAFF LEASING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                        (in $000's, except per share data

10. COMMITMENTS AND CONTINGENCIES

      Operating Leases -- The Company occupies office facilities and lease
office equipment under operating leases which expire in various years through
2005. Lease expense was $3,352, $3,729 and $4,309 for the years ended December
31, 1997, 1998, and 1999, respectively. Future minimum payments under
noncancelable operating leases as of December 31, 1999 are as follows:

   YEAR ENDING
   DECEMBER 31,                                              AMOUNT
   ------------                                              -------
   2000....................................................  $ 3,794
   2001...................................................     3,040
   2002...................................................     2,387
   2003...................................................     2,185
   2004...................................................     1,943
   Thereafter ............................................     1,620
                                                             -------
                                                             $14,969
                                                             =======

      On April 30, 1999, a shareholder of the Company brought a class action in
the Twelfth Judicial Division, Manatee County, Florida against the Company and
certain of its directors alleging that the directors and senior officers of the
Company breached their fiduciary duty to shareholders by failing to pursue a
proposal from Paribae Principal Partners to acquire the Company in order to
entrench themselves in the management of the Company. Plaintiff seeks injunctive
relief and unspecified damages including attorneys' and experts' fees. The
Company has moved to dismiss the action. To date, the parties have engaged in
limited discovery, and expect to continue discovery over the next several
months. The Company believes the lawsuit is without merit.

      The Company is a party to certain pending claims which have arisen in the
normal course of business, none of which, in the opinion of management, is
expected to have a material adverse effect on the consolidated financial
position or results of operations if adversely resolved.

      The Company's employer and health care operations are subject to numerous
Federal, state and local laws related to employment, taxes and benefit plan
matters. Generally, these regulations affect all companies in the U.S. However,
the regulatory environment for professional employer organizations ("PEOs") is
an evolving area due to uncertainties resulting from the non-traditional
employment relationships. Many Federal and state laws relating to tax and
employment matters were enacted before the development of PEOs and do not
specifically address the obligations and responsibilities of these PEO
relationships. If the IRS concludes that PEOs are not "employers" of certain
worksite employees for purposes of the Internal Revenue Code of 1986, as amended
(the "Code"), the tax qualified status of the Company's 401(k) retirement plan
as in effect before April 1, 1997 could be revoked, its cafeteria plan may lose
its favorable tax status and the Company may no longer be able to assume the
client's Federal employment tax withholding obligations. Any adverse
developments in the above noted areas could have a material effect on the
Company's financial condition and future results of operations.

11. RELATED PARTIES

      During 1997 and 1998, approximately $270 and $21, respectively, of lease
expense related to certain automobile leases was paid to an entity owned by a
shareholder. This arrangement terminated in 1998. The Company had also entered
into a five-year employment contract with a shareholder, which required annual
payments of $362. This agreement expired in November 1998. See "Shareholder
Notes Receivable" in Note 15.

                                      F-12


                                       37
<PAGE>

                      STAFF LEASING, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                       (in $000's, except per share data)

12. RETIREMENT PLAN

      The Company currently offers a defined contribution 401(k) retirement plan
to its internal employees as well as its external worksite employees. The
Company does not match any portion of such employees' elective contributions.
Effective April 1, 1997, the Company offered a new 401(k) plan to its employees
which is designed to be a "multiple employer" plan under the Internal Revenue
Code Section 413(c). This new plan enables employee-owners, as well as highly
compensated internal and external employees of the Company to participate. Such
persons were excluded from the former 401(k) plan to avoid issues of
discrimination in favor of highly compensated employees. Effective January 1,
1999, the Company expanded and enhanced its retirement plan offerings to include
payroll deducted traditional and Roth IRAs.

13. GEOGRAPHIC MARKET CONCENTRATION AND DEPENDENCE ON KEY VENDORS

      Geographic Market Concentration - As of December 31, 1999, the Company had
offices in seven states and worksite employees in 46 states. The Company's
Florida client revenues accounted for 79%, 75% and 75% of the Company's total
revenues in 1997, 1998 and 1999, respectively. As a result of the size of the
Company's base of worksite employees in Florida and continued growth from its
Florida operations, the Company's profitability over the next several years is
expected to be largely dependent on economic and regulatory conditions in
Florida. Any adverse change in either of these conditions could have a material
adverse effect on the Company's profitability and growth prospects.

      Dependence on Key Vendors - The maintenance of health insurance plans that
cover worksite employees is a significant part of the Company's business. The
current health contracts are provided by vendors, with some of which the Company
has recently established relationships, on terms that the Company believes to be
favorable. While the Company believes that replacement contracts could be
obtained on competitive terms with other carriers, such replacement could cause
a significant disruption to the Company's business resulting in a decrease in
client retention and general dissatisfaction with the Company's service
offering. This, in turn, could have a material adverse effect on the Company's
future results of operations or financial condition.

      In 1999, the Company's workers' compensation coverage was provided by
Liberty Mutual. This program was initiated in March 1994, and renegotiated
effective January 1, 1997, to, among other things, reduce rates charged to the
Company. This contract, which expired on December 31, 1999, provided coverage on
a guaranteed cost basis. Amounts due under this arrangement are a fixed
percentage of the Company's workers' compensation payroll and were paid on a
monthly basis. The Company had no liability in excess of such amounts paid.

      The Company has a new workers' compensation program with CNA and the Texas
Fund which commenced on January 1, 2000. The Texas Fund will be the provider of
workers' compensation insurance for clients based in Texas. The Texas Fund
program is a guaranteed cost insurance arrangement with a term of one year. The
cost of the premium will be determined based on the industries serviced by the
Company in Texas. For the remainder of the country, the Company's workers'
compensation carrier will be CNA. This program is an insured loss sensitive
program for a term of one year. The Company anticipates that its workers'
compensation costs will increase beginning in 2000 as a result of these workers'
compensation arrangements. An accrual for the workers' compensation costs for
the first quarter of 2000 will be made based on prior loss experience, the
Company's business mix, including the percentage of business in Texas, and
actual claims for the first quarter. Accruals for subsequent periods will be
affected by further changes in the Company's business mix and actual claims
experience. The final costs of coverage will be determined by the actual claims
experience over time as claims close and by the administrative costs of the
program. The increased accruals for the cost of coverage in 2000 and future
years will have no impact on 1999 and prior year earnings.

                                      F-13


                                       38
<PAGE>

                      STAFF LEASING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                       (in $000's, except per share data)

14. EQUITY

STOCK REPURCHASE PROGRAM

      In August 1998, the Company's Board of Directors approved a program to
repurchase up to two million shares of the Company's common stock. In January
1999, the Company's Board of Directors increased this share repurchase plan to
three million shares. Purchases may be made from time to time depending upon the
Company's stock price, and will be made primarily in the open market, but may
also be made through privately negotiated transactions. In 1999, the Company
repurchased, for retirement, 412,000 shares of its common stock for a total cost
of approximately $4 million.

RESTRICTED STOCK PLAN

      Certain members of the Company's management have purchased common shares
at prices based upon a formula derived from the original acquisition price of
the entities acquired by Staff Capital, L.P. in November, 1993. Before July
1995, such common shares could be sold only to the Company and were not freely
transferable. The sales price that the Company would pay was based upon the same
formula used to derive the original purchase price. In July 1995 the Company
enacted a vesting schedule whereby the above-noted restrictions generally would
lapse over a four-year vesting period commencing with the first anniversary
subsequent to the date of purchase. Accordingly, the Company obtained appraisals
in order to derive estimated fair values of the purchased common shares then
owned as of July 1995 and subsequently purchased and recorded deferred
compensation expense to the extent that the estimated fair values exceeded the
purchase prices. Deferred compensation is being amortized on a straight-line
basis over the vesting period. Compensation expense recorded for the years
ending December 31, 1997, 1998, and 1999 was $138, $145 and $90, respectively.
Deferred compensation was $282 at December 31, 1998 and $53 at December 31,
1999. Following the Reorganization, the Company ceased further grants under this
plan.

WARRANTS

      Pursuant to the Reorganization (See Note 2), warrants to purchase
1,352,253 shares of common stock at the exercise price of $7.24 per share were
issued to redeem certain preferred limited partnership interests in July 1997.
These warrants were exercisable beginning June 25, 1997. In April 1998, 177,709
of these warrants were exercised as part of the Company's secondary offering.
Proceeds from this exercise, net of expenses of $450, totaled $837. As of
December 31, 1998, and 1999, 1,174,544 of these warrants remain outstanding. An
equivalent number of shares of stock are being held in reserve as of December
31, 1999 to meet this contractual commitment. The warrants expire on March 31,
2001.

EMPLOYEE STOCK OPTION PLAN

      In 1997, the Company adopted the 1997 Stock Incentive Plan (the "Plan").
The Plan provides for options to be granted to key employees, officers, and
directors of Staff Leasing, for the purchase of up to 2,500,000 shares of common
stock. Options granted under the Plan generally have a vesting period of 4 or 5
years, and may not be exercised more than 10 years from the date of the grant,
except as noted below.

      Due to the decline in the market price of the Company's common stock in
the third and fourth quarters of 1998, the Company took steps to ensure that the
options previously granted under the Plan would continue to provide a meaningful
incentive to its grantees. On August 19, 1998, the Company cancelled 59,000
options which had been granted to certain employees during the previous twelve
months, and reissued them at an exercise price equal to $18.0625, with all other
option terms and conditions remaining the same as those originally granted.

      On December 14, 1998, the Company approved an option reissuance grant for
all non-executive employees currently participating in the Plan. The Company's
Directors and senior management, holding 158,500 options, were excluded from
this reissuance grant. Under the terms of the reissuance grant, employees were
offered the right to receive, in exchange for the surrender of their existing
options, nonqualified stock options with an exercise price equal to that day's
closing market price per common share of $11.625. The ratio for the exchange of
options was 110 new shares for each 100 existing shares surrendered. This ratio
was determined using the Black-Scholes option pricing model. The expiration date
for all new options issued under this reissuance grant is December 14, 2003. In
addition, previous vesting restrictions based on stock price performance were
removed. A total of 430,946 options were subject to this reissuance grant.

                                      F-14


                                       39
<PAGE>

                      STAFF LEASING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                       (in $000's, except per share data)

      The following table summarizes the activity in the Plan for the years
ended December 31, 1998 and 1999:

                                              Number of      Weighted-Average
       1998:                                    Shares              Price
       ------------------------------------------------------------------------
       Granted                                   955,238          $12.56
       Exercised                                       0            $  0
       Cancelled                                 604,026          $18.33
       Options outstanding at end of year      1,002,438          $12.55
       Options exercisable at end of year         35,956          $14.87

       1999:
       ------------------------------------------------------------------------
       Granted                                   494,856          $ 9.18
       Exercised                                       0            $  0
       Cancelled                                 179,207          $12.27
       Options outstanding at end of year      1,318,087          $11.33
       Options exercisable at end of year        253,766          $13.00

      Components of stock options under this Plan as of December 31, 1999 are as
follows:

<TABLE>
<CAPTION>
                         Options Outstanding                                  Options Exercisable
    ---------------------------------------------------------------   -------------------------------------
                         Weighted-Average
       Number of            Remaining           Weighted-Average         Number of      Weighted-Average
         Shares          Contractual Life        Exercise Price           Shares         Exercise Price
    ----------------- ----------------------- ---------------------   -------------------------------------
<S>          <C>            <C>                     <C>                       <C>           <C>
             388,276        9.2 Years               $    8.44                 0             $       0
             722,111        5.7 Years               $   11.57           195,695             $   11.63
              67,000        9.1 Years               $   12.59                 0             $       0
              75,700        6.1 Years               $   16.95            24,321             $   17.00
              65,000        6.8 Years               $   18.06            33,750             $   18.06

    ----------------- ----------------------- ---------------------   ---------------- --------------------
           1,318,087        7.0 Years               $   11.33           253,766             $   13.00
    ================= ======================= =====================   =====================================
</TABLE>

      In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-Based Compensation," the fair value of option
grants is estimated on the date of grant using the Black-Scholes option-pricing
model for proforma footnote purposes with the following weighted-average
assumptions:

                                                   Year Ended December 31,
                                                    1998             1999
                                              ---------------   ----------------
           Risk-free interest rate                  5.30%            6.65%
           Expected dividend yield                  0.00%            0.00%
           Expected volatility                      81.3%            73.4%
           Expected option life (in years)           4.5              5.3

      Using the Black-Scholes option-pricing model, the weighted-average fair
value was calculated to be $8.47 as of December 31, 1998 and $7.54 as of
December 31, 1999 for all options granted during each year.

                                      F-15


                                       40
<PAGE>

                      STAFF LEASING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                       (in $000's, except per share data)


      As permitted by SFAS No. 123, the Company has elected to continue to
account for its Plan in accordance with the intrinsic value method prescribed by
APB Opinion 25 and related Interpretations in accounting. Accordingly, no
compensation cost has been recognized for the Plan. Had compensation cost for
the Company's stock option plan been determined based on the fair value at the
grant date consistent with the method prescribed by SFAS No. 123, the Company's
net income and earnings per share would have been reduced to the pro forma
amounts indicated below:

                                                        1998             1999
                                                      --------         --------
  Net income attributable to
    common shareholders         As reported           $ 23,395         $21,650
                                Pro forma             $ 22,570         $20,087

  Basic earnings per share      As reported              $1.01           $ .99
                                Pro forma                $ .97           $ .92

  Diluted earnings per share    As reported              $ .97           $ .97
                                Pro forma                $ .94           $ .90

EMPLOYEE STOCK PURCHASE PLAN

      Effective January 1, 1998, the Company adopted an employee stock purchase
plan. All full-time employees are eligible to participate after 90 days of
employment. Under the terms of this plan, employees can choose each year to have
up to 100% of their annual base earnings withheld to purchase the Company's
common stock on the open market. The Company absorbs all transaction costs and
administrative fees associated with stock purchases through this plan.

SHAREHOLDER NOTES RECEIVABLE

      Shareholder notes receivable consisted of six notes in an aggregate amount
of $61 at December 31, 1998 and five notes in an aggregate amount of $57 at
December 31, 1999 from common shareholders. Principal under these notes is due
on March 31, 2001. Interest is payable at rates currently ranging from 6.36% to
7.50% per annum.

                                      F-16

                                       41
<PAGE>

                      STAFF LEASING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                       (in $000's, except per share data)


16. EARNINGS PER SHARE

      The number of common stock equivalents included in weighted average shares
outstanding, for the twelve months ended December 31, 1997, 1998 and 1999,
related to the warrants issued in connection with the Reorganization was
842,804, 774,961 and 415,672, respectively, for the diluted earnings per share
calculation. The number of common stock equivalents included in weighted average
shares outstanding, for the twelve months ended December 31, 1997, 1998 and
1999, related to the options granted in connection with the Company's stock
option plan, was 28,264, 110,280 and 14,948, respectively, for diluted earnings
per share.

      The reconciliation of net income attributable to common stock and shares
outstanding for the purposes of calculating basic and diluted earnings per share
for the three years ended December 31, 1997, 1998 and 1999 is as follows:

<TABLE>
<CAPTION>
                                                       Income             Shares         Per Share
                                                    (Numerator)       (Denominator)        Amount
                                                  -----------------  -----------------  -------------
                                                    (in $000's)         (in 000's)
<S>                                                <C>                     <C>           <C>
For the Year Ended 1997:
------------------------
Net income                                         $    30,783
Less:  Return on preferred interests                    (2,391)
                                                  -----------------
BASIC EPS
Net income attributable to
  Common shareholders                              $    28,392             21,588        $  1.32
                                                                                        =============
Effect of dilutive securities:
Warrants                                                                      843
Options                                                                        28
                                                  -----------------  -----------------
DILUTED EPS
Net income attributable to common
  shareholders and assumed conversions             $    28,392             22,459        $  1.26
                                                  =================  =================  =============
For the Year Ended 1998:
------------------------
Basic EPS
Net income                                         $    23,395             23,207        $  1.01
                                                                                        =============
Effect of dilutive securities:
Warrants                                                                      775
Options                                                                       110
                                                  -----------------  -----------------
DILUTED EPS
Net income attributable to common
  shareholders and assumed conversions             $    23,395             24,092        $   .97
                                                  =================  =================  =============

For the Year Ended 1999:
------------------------
Basic EPS
Net income                                         $    21,650             21,779        $   .99
                                                                                        =============
Effect of dilutive securities:
Warrants                                                                      416
Options                                                                        15
                                                  -----------------  -----------------
DILUTED EPS
Net income attributable to common
  shareholders                                     $    21,650             22,210        $   .97
                                                  =================  =================  =============
</TABLE>

                                      F-17


                                       42
<PAGE>

                      STAFF LEASING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                       (in $000's, except per share data)

      Options to purchase 37,500 shares of common stock at prices ranging from
$19.75 to $24.75 per share were outstanding during a portion of 1997, but were
not included in the computation of diluted EPS because the options' exercise
price was greater than the average market price for 1997 of $19.21 per common
share. These options were outstanding at the end of 1997.

      As discussed in Note 15, all but 158,500 options outstanding in 1998 were
subject to re-pricing and as such, the antidilutive impact of various option
grants changed during the year. The following table represents the number and
exercise prices of the options which were not included in the computation of
diluted EPS by quarter for 1998 because the options' exercise price was greater
than the average market price:

<TABLE>
<CAPTION>
                         Antidilutive Options
                          Outstanding at End         Range of           Weighted-Average
                            of Period Shown      Exercise Prices           Stock Price
                         --------------------   --------------------  -------------------
<S>                               <C>                           <C>         <C>
      1st Quarter, 1998          -0-                           -0-          $   24.89
      2nd Quarter, 1998        11,000              $28.88 - $29.50              28.57
      3rd Quarter, 1998        59,500              $28.94 - $28.94              19.65
      4th Quarter, 1998       158,500              $17.00 - $18.06              12.41
                                                                      -------------------
                                                                            $   22.38
                                                                      ===================
</TABLE>

      The following table represents the weighted average number and exercise
prices of the options which were not included in the computation of diluted EPS
by quarter for 1999 because the options' exercise price was greater than the
average market price:

<TABLE>
<CAPTION>
                         Antidilutive Options
                          Outstanding at End         Range of       Weighted-Average
                            of Period Shown       Exercise Prices      Stock Price
                         --------------------    ------------------  ----------------
<S>                           <C>                  <C>                 <C>
      1st Quarter, 1999       213,200              $12.38 - $18.06     $   12.11
      2nd Quarter, 1999       152,700              $13.13 - $18.06         12.49
      3rd Quarter, 1999       913,877              $11.31 - $18.06         11.29
      4th Quarter, 1999       922,811              $10.19 - $18.06          9.00
                                                                     ----------------
                                                                       $   11.21
                                                                     ================
</TABLE>

17. INCOME TAXES:

      The Company records income tax expense using the asset and liability
method of accounting for deferred income taxes. Under such method, deferred tax
assets and liabilities are recognized for the expected future tax consequences
of temporary differences between the financial statement and the income tax
bases of the Company's assets and liabilities. An allowance is recorded when it
is more likely than not that any or all of a deferred tax asset will not be
realized. The provision for income taxes includes taxes currently payable plus
the net change during the year in deferred tax assets and liabilities recorded
by the Company.

      For the six months ended June 30, 1997, the Company operated through
limited partnerships. Accordingly, all earnings or losses were passed directly
to the partners and no provision for income taxes was required.

      Before December 31, 1997, a valuation allowance had been recorded with
respect to the Company's deferred tax assets. As of December 31, 1997, such
valuation allowance was adjusted and the benefit of the deferred tax assets was
recognized in the income statement.

                                      F -18


                                       43
<PAGE>

                      STAFF LEASING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                       (in $000's, except per share data)


             The provision (benefit) for income taxes for the year ended
December 31, 1997 is as follows:

                                     Current         Deferred         Total
U.S. Federal tax                     $ 1,528          $(6,402)      $(4,874)
State and local tax                      109             (457)         (348)
                                     -------         ---------      --------

Total provision (benefit)            $ 1,637          $(6,859)      $(5,222)
                                     =======          ========       =======

      The provision for income taxes for the year ended December 31, 1998 is as
follows:

                                     Current         Deferred         Total
U.S. Federal tax                     $ 2,364          $ 9,660      $ 12,024
State and local tax                      445            1,568         2,013
                                     -------         --------       -------

Total provision                      $ 2,809         $ 11,228      $ 14,037
                                     =======         ========        ======

      The provision for income taxes for the year ended December 31, 1999 is as
follows:

                                     Current         Deferred         Total
U.S. Federal tax                     $ 7,570         $  3,440       $11,010
State and local tax                    1,279              550         1,829
                                      ------          -------        ------

Total provision                      $ 8,849         $  3,990       $12,839
                                     =======         ========        ======


      The reconciliation of the statutory U.S. Federal rate to the effective tax
rate for the years ended December 31, 1997, 1998 and 1999 is as follows:

<TABLE>
<CAPTION>
                                                   1997            1998         1999
                                                   ----            ----         ----
<S>                                              <C>           <C>           <C>
     Statutory U.S. Federal tax at 35%           $  8,946      $  13,101     $ 12,071
      Increase (reduction) from:
     State income taxes, less Federal benefit         928          1,309        1,188
     Recognition of deferred tax benefit          (10,172)             -            -
     Tax Benefit of income allocated
        to Staff Acquisition, Inc.                 (4,551)             -            -
     Tax credits                                     (502)          (504)        (487)
     Other, net                                       129            131           67
                                                 --------      ---------     ---------

     Income tax provision (benefit)              $ (5,222)     $  14,037     $ 12,839
                                                 ========      =========     ========

     Effective tax rate                            (20.4%)         37.5%         37.2%
                                                 ========      =========     ========
</TABLE>

      The components of deferred tax assets and liabilities included on the
balance sheet at December 31, 1998 and 1999 are as follows:

                                                       1998    1999
                                                       ----    ----
Deferred Tax Assets:
-------------------
Tax basis in excess of book basis
  of intangible assets                               $ 6,189  $ 5,452
Reserves not currently deductible                      2,943    2,498
                                                      ------   ------

Total deferred tax assets                              9,132    7,950
                                                      ------   ------

Deferred Tax Liabilities:
------------------------
Unearned revenue                                       9,292   11,927
Depreciation                                           2,671    2,843
                                                      ------   ------
Total deferred tax liabilities                        11,963   14,770
                                                      ------   ------

Net deferred tax liability                           ($2,831) ($6,820)
                                                      ======= =======

                                      F-19


                                       44
<PAGE>

                      STAFF LEASING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                       (in $000's, except per share data)


Balance Sheet Classification:
----------------------------
Current assets:
  Deferred taxes                                     $   -    $   -
Current liabilities:
  Deferred taxes                                      (5,729) ( 8,770)
                                                     -------  -------
      Net current deferred tax liability              (5,729) ( 8,770)
                                                     -------  -------

Non-current assets:
  Deferred taxes                                       2,898    1,950
Non-current liabilities:
  Deferred taxes                                         -         -
                                                     -------  -------

      Net non-current deferred tax asset               2,898    1,950
                                                     -------  -------

Net deferred tax liability                           ($2,831) ($6,820)
                                                     =======  =======

      The Company paid $7,314 of income taxes in 1999, and $3,787 of income
taxes in 1998. During 1998, the Company used $2,996 of net operating loss
carryforwards and $357 of tax credit carryforwards.



18. QUARTERLY FINANCIAL DATA (UNAUDITED):

      The following table presents certain unaudited results of operations data
for the interim quarterly periods during the years ended December 31, 1998 and
1999. The Company believes that all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the results of operations in
accordance with generally accepted accounting principles, have been made. The
results of operations for any interim period are not necessarily indicative of
the operating results for a full year or any future period.

<TABLE>
<CAPTION>
                                                             QUARTER ENDED
                    ------------------------------------------------------------------------------------------------
                                        1998                                               1999
                    --------------------------------------------      ----------------------------------------------
                     MAR. 31     JUNE 30    SEPT. 30     DEC. 31       MAR. 31     JUNE 30     SEPT. 30      DEC. 31
                    ---------   ---------   ---------   ---------     ---------   ---------   ---------    ---------
                                              (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                 <C>         <C>         <C>         <C>            <C>        <C>         <C>          <C>
Revenues........... $ 539,616   $ 582,211   $ 607,342   $ 646,353      $  647,341 $  664,264  $  680,502   $ 709,778
Gross profit....... $  26,233   $  28,196   $  28,776   $  29,710      $   30,633 $   30,700  $   33,433   $  32,857
Gross profit
  margin...........       4.9%        4.8%        4.7%        4.6%            4.7%       4.6%        4.9%        4.6%
Operating income....$   7,887   $   9,037   $   8,986   $   8,432      $    8,492 $    8,055  $    9,349   $   7,079
Net income       .. $   5,351   $   6,154   $   6,174   $   5,716      $    5,614 $    4,989  $    6,410   $   4,638
Earnings per share
     - Basic        $     .23   $     .26   $     .26   $     .26      $      .26 $      .23  $      .30   $     .20
     - Diluted      $     .22   $     .25   $     .26   $     .25      $      .25 $      .22  $      .29   $     .21
</TABLE>

                                      F-20


                                       45
<PAGE>

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                           ALLOWANCE FOR DOUBTFUL ACCOUNTS
------------------------------------------------------------------------------------
                                    (IN THOUSANDS)

BALANCE            PROVISION        DETERMINED       ACCOUNT       BALANCE
JANUARY 1, 1999    FOR BAD DEBTS    UNCOLLECTIBLE    RECOVERIES    DECEMBER 31, 1999
---------------    -------------    -------------    ----------    -----------------
<S>                <C>              <C>              <C>          <C>
$           802    $         306    $         737    $      369   $              740
===============    =============    =============    ==========    =================

BALANCE            PROVISION        DETERMINED       ACCOUNT       BALANCE
JANUARY 1, 1998    FOR BAD DEBTS    UNCOLLECTIBLE    RECOVERIES    DECEMBER 31, 1998
---------------    -------------    -------------    ----------    -----------------
$           835    $         720    $         931    $      178    $             802
===============    =============    =============    ==========    =================

BALANCE            PROVISION        DETERMINED       ACCOUNT       BALANCE
JANUARY 1, 1997    FOR BAD DEBTS    UNCOLLECTIBLE    RECOVERIES    DECEMBER 31, 1997
---------------    -------------    -------------    ----------    -----------------
$           440    $         820    $         604    $      179    $             835
===============    =============    =============    ==========    =================
</TABLE>

                                       S-1


                                       46