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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________.
COMMISSION FILE NUMBER 000-23711
ACSYS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 58-2299173
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
75 14TH STREET, SUITE 2200, ATLANTA, GEORGIA 30309
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
404-817-9440
(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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Title of Each Class Name of Each Exchange on Which Registered
Common Stock, No Par Value per Share American Stock Exchange
Series A Junior Participating Preferred Stock Purchase Rights American Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, No Par Value Per Share
Series A Junior Participating Preferred Stock Purchase Rights
(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. [ ]
The aggregate market value of the voting common equity held by
non-affiliates of the registrant, based upon the closing sale price of common
stock on March 10, 2000, as reported by the American Stock Exchange(R), was
approximately $22,934,577*
As of March 10, 2000, the number of shares outstanding of the registrant's
common stock was 14,502,736.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for the Annual
Meeting of Shareholders to be held on June 20, 2000 to be filed within 120 days
after the end of the registrant's fiscal year, are incorporated by reference
into Part III, Items 10 - 13 of this Form 10-K.
*Solely for purposes of this calculation, all executive officers and directors
of the registrant and all shareholders reporting beneficial ownership of more
than 5% of the registrant's common stock are considered to be affiliates.
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INDEX OF FORM 10-K
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PART I PAGE
Item 1. Business .................................................................................. 3
Item 2. Properties.................................................................................. 12
Item 3. Legal Proceedings........................................................................... 12
Item 4. Submission of Matters to a Vote of Security Holders......................................... 12
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters....................... 13
Item 6. Selected Financial Data..................................................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....... 16
Item 7A Quantitative and Qualitative Disclosures About Market Risk.................................. 20
Item 8. Financial Statements and Supplementary Data................................................. 21
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........ 21
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.............................................. 22
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................ 23
Signatures.............................................................................................. 29
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This Form 10-K contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements relate to future
economic performance, plans and objectives of management for future operations
and projections of revenue and other financial items that are based on the
beliefs of our management, as well as assumptions made by, and information
currently available to, our management. The words "expect," "estimate,"
"anticipate," "believe," "intend," and similar expressions are intended to
identify forward-looking statements. Such statements involve assumptions,
uncertainties and risks. If one or more of these risks or uncertainties
materialize or underlying assumptions prove incorrect, actual outcomes may vary
materially from those anticipated, estimated or expected. Among the key factors
that may have a direct bearing on our expected operating results, performance or
financial condition are economic conditions facing the staffing industry
generally, uncertainties related to the job market and our ability to attract
qualified candidates, uncertainties associated with our brief operating history;
our ability to manage our debt level and interest expense; our ability to
achieve and manage growth; our ability to successfully identify suitable
acquisition candidates, complete acquisitions or integrate the acquired business
into our operations; our ability to attract and retain qualified personnel; our
ability to develop new services; our ability to cross-sell our services to
existing clients; our ability to enhance and expand existing offices; our
ability to open new offices; general economic conditions; and other factors
discussed from time to time in our filings with the Securities and Exchange
Commission. These factors are not intended to represent a complete list of all
risks and uncertainties inherent in our business, and should be read in
conjunction with the more detailed cautionary statements included in this Form
10-K under the caption "Business--Risk Factors."
PART I
ITEM 1. BUSINESS.
OVERVIEW
Acsys, Inc. is one of the leading providers of specialty professional staffing
services in the United States with 40 offices serving more than 20 major
metropolitan markets across the country. Our vision is to be recognized by our
clients, employees and competitors as the preeminent and most innovative
provider of financial and information technology ("IT") human capital. Our
clients come from many industries, including telecommunications, consumer
products, energy, financial services, healthcare, industrial, media,
professional services, retail and technology.
Our clients are experiencing a rapidly changing environment as employers. These
pervasive changes require our clients to have the flexibility to vary the number
of employees to meet their changing business needs. Additionally, our clients
are now outsourcing entire portions of their finance and information processing
departments where historically such services were performed by permanent
employees. These changes are resulting in the growing demand for temporary
staffing services. In 1999, over 80% of our business was comprised of finance
and IT temporary staffing services. We are expanding these segments of our
business by adding complementary services and by cross-selling our existing
services into new markets. We believe we are strategically positioned to help
our clients profitably address the changes which are rapidly affecting their
business.
Our success comes from excelling in the finance and information technology
niches which have shared some of the highest growth within the staffing
industry. We excel in these niches by recruiting and retaining talented
professionals with our training and education programs and with our attractive
compensation and benefits programs. It is those professionals that drive our
success by consistently meeting or exceeding our clients' expectations. We
ensure that we achieve this high level of performance by recruiting highly
qualified professionals, and by implementing technology advances and
improvements to make our professionals more effective.
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We were formed as a Georgia corporation in March 1997 and since then have
acquired 11 accounting and finance and IT specialty professional staffing
businesses. In February 1998, we completed our IPO of 2,842,500 shares of common
stock at $8.50 per share, raising approximately $20.1 million after deducting
underwriting discounts and offering expenses.
THE STAFFING INDUSTRY
The staffing industry generally consists of companies that provide four basic
services to clients: temporary staffing, placement and search, professional
employer organization services and outplacement. Based on information from the
Staffing Industry Report, a leading staffing industry publication, staffing
industry revenues increased from approximately $42.6 billion in 1993 to
approximately $117.6 billion in 1999, representing a compound annual growth rate
of 18%.
We are focused on the accounting and finance portion of the specialty
professional segment, which according to the Staffing Industry Report, had 1999
revenues of $9.4 billion, representing approximately 13% of the $69.9 billion
temporary staffing sector. In 1999 the Staffing Industry Report forecasted that
the specialty professional segment would increase by 22% from the prior year. In
addition to accounting and finance, the specialty professional segment, as
defined by the Staffing Industry Report, includes legal, laboratory and other
professional staffing services (excluding IT and technical services). The
temporary specialty professional staffing segment is one of the fastest growing
segments of the temporary staffing sector, with profit margins greater than
those of the traditional clerical and light industrial temporary staffing
business. We are also focused on the technical/IT segment that includes IT
services such as consulting systems, network integration and support, and IT
supplemental staffing. According to the Staffing Industry Report, the
technical/IT segment had 1999 revenues of $21.7 billion, representing
approximately 31% of the temporary staffing segment.
Temporary staffing has become widely accepted as a valuable tool for managing
personnel costs and for meeting specialized or fluctuating employment
requirements. Businesses are experiencing a rapidly changing environment and
must be flexible to vary the number of employees to meet their needs. Temporary
staffing companies offer a means of dealing with these changes. In addition,
employees increasingly look to temporary assignments as a way to build
experience, make contacts, and receive training and valuable exposure to a
variety of work settings, as well as a means to gain full-time employment.
According to the Staffing Industry Report, 1999 revenues for the placement and
search sector of the staffing industry was $15.0 billion, representing 13% of
the total staffing industry and was expected to grow by 15% in 2000. Personnel
placed by companies in this sector cover a wide range of industries and a
variety of position levels. Placement and search firms fulfill their clients'
needs by identifying, evaluating and recommending qualified candidates for
positions. Placement and search firms are generally characterized as either
retained search or contingency placement, depending upon how their fees are
determined. Retained search firms receive a retainer at the outset of an
assignment, while contingency firms, such as Acsys, receive compensation upon
successful completion of a search and placement of a recommended candidate.
Contingency firms typically fill mid-level positions for a fee equal to a
percentage of the candidates' first year annual salary.
We believe that companies have become increasingly reliant on placement and
search firms for a number of reasons. The continued strength and growth of the
economy has reduced the pool of available specialty professionals and increased
the difficulty of finding talented candidates. Many companies are outsourcing
ancillary activities, such as recruiting, to reduce costs and increase
efficiencies. A permanent placement firm may also serve in a consultative role
to the client by providing objective feedback on candidates and advice regarding
the appropriate qualifications and compensation for a particular position.
Internet recruiting has become an integral segment of the staffing industry.
Staffing companies are increasing their use of national and niche internet
recruiting sites for candidate searches as well as developing their own web
sites to attract candidates. We expect the growth of internet recruiting to
result in professionals changing jobs more frequently as information about
available jobs becomes easier to access. We believe that companies will continue
using staffing companies for the full scope of services including resume
verification, interviewing
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and assessment of candidates and that internet recruiting will be complimentary
to traditional staffing companies.
In summary, we believe that a number of factors may increase demand for
specialty professional temporary staffing and permanent placement services.
These factors include:
- Use of temporary employees to fill higher-skilled positions.
- Employers' difficulty in locating qualified employees.
- Desire of employers to utilize candidates with the latest
training and current skill sets demanded in the increasingly
technology-reliant business environment.
- Trend to outsource non-core functions to reduce costs and
increase efficiencies.
- Employment candidates' attraction to industry-focused
specialty service providers.
- Employment candidates seeking more flexibility and
opportunities to gain experience in a variety of work
settings.
OPERATING STRATEGY
During the fourth quarter of 1999, we restructured our operations into two
business units, professional services and information technology. This
reorganization streamlined and re-aligned management along business units that
we believe will improve our operating efficiency and support our national
branding strategies. We also expect this reorganization to promote a greater
focus within each unit, enabling us to better serve clients and candidates
nationwide.
The key elements of Acsys' operating strategy are as follows:
Focus on Specialty Professional Markets. We focus primarily on temporary
staffing positions that require specialized skills such as accounting and
finance and Enterprise Resource Planning ("ERP") and Customer Relationship
Management ("CRM") software implementation. We believe that our years of
experience, reputation for client service and the industry expertise of our
staffing professionals give us a competitive advantage. For example, many of our
staffing professionals in the accounting and finance sector are certified public
accountants. We believe that these specialized characteristics also provide an
opportunity for Acsys to generate higher margins than those of traditional
clerical and light industrial staffing companies.
Emphasize Client Relationships. We believe that client relationships and the
staffing professionals who develop and maintain those relationships are our most
important assets. We are seeing increasing changes in our clients' businesses
and with these changes their temporary staffing needs, and we are meeting those
needs by providing trained professionals who understand the businesses they
serve. Moreover, we believe that the central function of management, including
our senior executive team, is to support the professionals who directly interact
with the client. We have built common infrastructure and information systems to
help our professionals meet those needs.
Leverage National Brand. Our operating offices all operate under the Acsys brand
name. We are supporting this name change with national advertising and support
programs. We believe that we can develop brand equity through our leadership as
a specialty professional staffing firm, thus enabling us to increase market
share and achieve marketing efficiencies and greater operating leverage.
GROWTH STRATEGY
Our goal is to build a national specialty professional staffing business with
offices in major United States metropolitan markets. The key elements of our
growth strategy in order of relative importance are as follows:
Cross-Sell Services. We intend to build our temporary staffing business by
responding to the demands of our clients. Our strategy in meeting these needs is
to add complementary services such as permanent placement, and cross-selling our
existing services into new markets. Because of our integration efforts in 1999,
we will increase our cross-selling efforts between markets and on a national
level. With a common infrastructure and improved information systems, we expect
a greater level of synergy that will enable us to continue to grow our staffing
business internally.
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Enhance and Expand Existing Offices. We plan to expand our current offices by
building on existing client relationships through cross-selling of services,
pursuing new clients and by replicating successful marketing sales and business
techniques on an national level. We rely on our operating office managers to
drive this internal growth and to determine which sales, marketing and business
techniques are most appropriate for their respective local markets.
Introduce New Services. We plan to develop new specialty professional staffing
services internally by leveraging our existing expertise and reputation in
specialty professional staffing services, particularly in markets where our
clients have solicited us for those new services.
Open New Offices. We plan to continue to grow our business by opening new
offices. We will open two types of new offices, spin-offs from existing offices
and "de novo" offices. A spin-off office is opened in an existing geographic
market by breaking a branch office in two. Such an office provides greater
geographic coverage and increased market penetration at a low marginal cost. De
novo offices represent an initial presence in new geographic markets.
Pursue Strategic Acquisitions. Although in the short-term we plan to focus on
internal growth, our long term growth strategy includes acquiring accounting and
finance, IT staffing and permanent placement staffing businesses. When we return
to pursuing strategic acquisitions, we will seek acquisition candidates with
characteristics such as attractive geographic market locations, strong market
shares and new or expanded specialties that we can add to our existing services.
We will also focus on acquisition targets that have strong management teams and
complementary cultures. To fund these acquisitions, we plan to use equity, debt,
available cash and combinations of all three as consideration.
SERVICES
Acsys currently offers the following services:
Accounting and Finance Temporary Staffing. We provide temporary staffing
services to clients in a variety of industries, such as telecommunications,
health care, banking, manufacturing and government. Our temporary staffing
clients are Fortune 1000 companies, middle-market companies, governmental
agencies and nonprofit organizations. Some of our temporary employees may decide
to accept an offer of permanent employment from the client and thereby "convert"
the temporary position to a permanent position, the result of which is the
payment of a placement fee to us by the client. Accounting and finance staffing,
including other staffing services, represented 49.2%, 47.1% and 52.4% of total
revenues for the years ended December 31, 1999, 1998, and 1997, respectively.
Information Technology. We offer a full range of consultant and placement
services through a network of highly qualified IT professionals. We believe that
to achieve growth in the IT sector we should focus on specific niches. A major
portion of our IT business is our ERP implementation consulting services. For
example, we are a SAP(TM) National Implementation Partner and provide staff
augmentation for the implementation of PeopleSoftTM, J.D. Edwards(R) and Siebel
Systems software. Information technology staffing services represented 32.5%,
32.3% and 24.5% of total revenues for the years ended December 31, 1999, 1998
and 1997, respectively.
Permanent Placement. We are in the permanent placement business primarily
because it complements our temporary staffing services, and is an important
driver in the growth of our temporary staffing business. Our permanent placement
business primarily specializes in placing mid-level accounting, financial, tax,
banking and IT personnel in permanent positions with a diverse mix of companies
ranging from small businesses and nonprofit organizations to Fortune 1000
companies. Substantially all of our permanent placement business is on a
contingency basis, meaning that we are not compensated for a permanent placement
assignment unless the candidate we recommend is hired by a client. Fees for
successful permanent placements are paid by the employer and are generally equal
to a percentage of the candidate's first-year annual compensation. Typically, if
a candidate placed by Acsys is terminated or resigns during a specified guaranty
period (typically 90-180 days), we either fill the position without further
charge or provide a prorated refund. Permanent placements represented 18.3%,
20.6% and 23.2% of total revenues for the years ended December 31, 1999, 1998
and 1997, respectively.
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INDUSTRY SEGMENTS
We have three reportable segments: Permanent Placement, Temporary Services, and
IT Contract Services. While there is cross-selling of services among these
segments, these segments are managed separately as each business generally
offers different services, has distinct candidate and client pools, and requires
different marketing strategies.
The Permanent Placement segment provides contingency-based placement services by
identifying, evaluating and recommending qualified candidates for permanent
employment by clients. The Permanent Placement segment generates revenue equal
to a percentage of a candidate's first-year annual salary. The Temporary
Services segment provides professional and clerical temporary employees to
clients, generally billing clients on an hourly basis. The IT Contract Services
segment provides qualified information technology professionals to clients on a
contracted or hourly basis to assist in enterprise resource planning software
implementation, systems integration services and information technology
services. Please see Note 12 of our attached consolidated financial statements
for additional information regarding the segments of our business.
EMPLOYEES
We have 574 full-time internal staff employees as of December 31, 1999. In
addition to our internal staff employees, temporary professionals placed by us
are our employees while they are working on assignments. Neither our internal
staff nor our temporary employees are represented by a collective bargaining
agreement. Hourly wages for our temporary employees are determined according to
market conditions. We pay mandated costs of employment, including the employer's
share of Social Security and Medicare taxes (FICA), federal and state
unemployment taxes, unemployment compensation insurance and workers'
compensation insurance. We offer access to various insurance programs and
benefits to our temporary employees. We believe our employee relations are
satisfactory.
COMPETITION
The staffing industry is highly competitive, with limited barriers to entry. We
believe that availability and quality of employment candidates, reliability of
service and price of services are the most significant competitive factors in
the specialty professional staffing sector. We believe that we derive a
competitive advantage from our extensive experience with and commitment to the
specialty professional staffing market, our strong local market presence and
reputation, and our various marketing activities. A number of firms offer
services similar to ours on a national, regional and local basis. We compete for
our clients, candidates and acquisitions with many local and regional companies
and also face competition from a number of international and national specialty
professional staffing companies including Robert Half International, Inc., Romac
International, Inc., Accountants, Inc. and Accountants on Call, as well as
professional staffing divisions of larger general staffing firms, such as
Interim Services, Inc., Olsten Corporation and Manpower. These firms currently
have materially greater financial and operating resources than Acsys.
TRADENAMES
All of our offices currently operate under the Acsys tradename.
RISK FACTORS
Our business is subject to certain risks, including the following:
WE HAVE A SHORT COMBINED OPERATING HISTORY.
Acsys, Inc. was incorporated in March 1997. From May 1997 to August 1998, we
acquired eleven specialty professional staffing businesses. As a result, our
senior management has managed Acsys as a combined business for only a short
time. We can offer no assurance that our management will be able to manage these
operations effectively or implement our operating or expansion strategies
successfully. Failure to implement
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our operating and growth strategies successfully could have a material adverse
effect on our business, results of operations, or financial condition.
WE FACE SIGNIFICANT CHALLENGES IN ACHIEVING AND MANAGING GROWTH.
We intend to grow through internal growth, the opening of new offices and
acquisitions. Our ability to expand market presence in current locations and
successfully enter other markets depends upon our ability to:
- - maintain sufficient profit margins despite pricing pressures;
- - manage costs in a changing regulatory environment;
- - adapt our infrastructure and systems to accommodate growth;
- - recruit and train additional qualified personnel; and
- - obtain capital to fund acquisitions.
Our ability to grow also depends upon our competition and the demand for
temporary and permanent employees in our markets. These factors may require
significant costs and affect our profitability.
WE HAVE LIMITED EXPERIENCE IN OPENING NEW OFFICES.
We intend to open new offices which may produce significant operating losses and
place demands on our operational, administrative and financial resources. In
addition, our future performance and profitability will depend in part on our
ability to attract and retain qualified personnel to manage these new offices.
To date, we have limited experience in opening new offices and, therefore,
cannot assure their success.
WE MAY NOT BE ABLE TO DEVELOP AND OFFER NEW SERVICES THAT GAIN MARKETPLACE
ACCEPTANCE.
We intend to offer different services than the ones we presently provide.
Successful development of new services will depend in part upon our ability to
identify and integrate such services into our existing operating structure. The
identification and offering of new services in which we have little or no
experience or expertise could divert our management's attention and place
significant demands on our operational, administrative and financial resources.
We may not be able to offer new services without adversely affecting our
business, results of operations or financial condition.
OUR BUSINESS DEPENDS ON THE AVAILABILITY OF QUALIFIED PERSONNEL.
We depend on our ability to attract and retain personnel who possess the skills
and experience necessary to meet the staffing requirements of our clients.
Competition for individuals with proven skills in finance and accounting and ERP
software implementation is intense. Qualified personnel may not continue to be
available to us in sufficient numbers and on acceptable economic terms. The
inability to attract and retain qualified personnel could have a material
adverse effect on our business, results of operations or financial condition.
WE RELY HEAVILY ON OUR SIGNIFICANT RELATIONSHIP WITH SAP.
A significant part of our IT staffing business involves providing consultants to
implement ERP software systems for our clients. ERP software systems help
companies better manage their business by redesigning their business processes
in such areas as product development, service delivery, manufacturing, human
resources, finance and accounting. A German company, SAP AG, has developed a
widely used ERP software system. SAP authorizes our consultants to implement
SAP's technology under agreements with SAP. SAP, however, is not obligated to
refer business to us. If our relationship with SAP were to deteriorate or to be
discontinued, or if SAP's ERP software system were to become noncompetitive or
obsolete, either event could have a material adverse effect on our business,
results of operations or financial condition.
WE HAVE HISTORICALLY EXPERIENCED LOSSES AND MAY CONTINUE TO EXPERIENCE LOSSES IN
THE FUTURE.
As a result of our activities to grow through acquisition and to integrate the
acquired companies, we have incurred significant charges, including combination
expenses and severance and office closing costs of $1.4 million in 1997, $2.3
million 1998 and $5.5 million in 1999. These types of charges in the past and
possibly in the future can cause us to incur losses in the periods in which
these charges occur.
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OUR BUSINESS WILL SUFFER DURING ECONOMIC DOWNTURNS.
The general level of economic activity and unemployment in the United States
significantly affects demand for our staffing services. When economic activity
decreases, many companies reduce their utilization of permanent placement firms
and temporary employees. In addition, we may experience more competitive pricing
pressure during periods of economic downturn. Therefore, any significant
economic downturn could have a material adverse effect on our business, results
of operations or financial condition.
WE FACE INTENSE COMPETITION IN THE STAFFING INDUSTRY.
We operate in a highly competitive industry, with limited barriers to entry. We
and other full service and specialized staffing companies compete for employees,
clients and acquisitions in national, regional and local markets. A significant
number of competitors have greater marketing, financial and other resources than
Acsys. Our competitors and customers contribute to the increase of price
competition in the staffing industry. A high level of future competition could
limit our ability to maintain or increase our market share or to maintain
adequate gross profits, both of which could have a material adverse effect on
our business, results of operations or financial condition.
OUR CREDIT FACILITY CONTAINS RESTRICTIVE COVENANTS.
Our credit facility contains restrictions on Acsys and our subsidiaries that
affect, and in some cases prohibit or significantly limit, our ability and the
ability of our subsidiaries to:
- - incur additional indebtedness;
- - create liens;
- - make investments including making any additional acquisitions;
- - declare and pay cash dividends;
- - issue some types of convertible and redeemable stock; and
- - sell assets.
Our credit facility also requires us to maintain specified financial ratios and
satisfy financial condition tests. Additionally, the pricing under our credit
facility will increase to the extent we are unable to reduce the amounts
borrowed thereunder at certain intervals. Our ability to meet those financial
ratios and tests can be affected by events beyond our control. We can offer no
assurance that we will meet those tests. In addition, these restrictive
covenants may adversely affect our ability to finance our future operations or
capital needs, or to engage in other business activities that may be in our
interest. A breach of any of these covenants could result in a default under the
credit facility. Upon the occurrence of an event of default under the credit
facility, our lenders could elect to declare all amounts outstanding under the
credit facility, together with any accrued interest, to be immediately due and
payable. If we were unable to repay those amounts, our lenders could proceed
against the collateral granted to them to secure that indebtedness.
Substantially all of our assets are pledged as collateral under the credit
facility. If the credit facility were to be accelerated, we can offer no
assurance that our assets would be sufficient to repay in full that
indebtedness. An event of default or acceleration of the credit facility could
have a material adverse effect on our business, financial condition and results
of operations.
OUR BUSINESS MAY SUFFER AS A RESULT OF POSSIBLE INCREASES IN COSTS FROM
GOVERNMENT REGULATION.
Significant increases in federal, state and local payroll related costs, which
include unemployment taxes, workers compensation and insurance, FICA and
Medicare, would have a material adverse effect upon Acsys. Our costs could also
increase as a result of federal and state health care reforms, such as those
which extend health insurance benefits to currently uncovered personnel, or the
imposition of additional requirements and restrictions for the placement of
personnel. There can be no assurance that we will promptly and adequately
increase our client fees to cover the increased costs. Further, we cannot offer
assurance that we will adapt to future regulatory changes made by the Internal
Revenue Service, the Department of Labor or other state and federal regulatory
agencies.
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THERE ARE DISTINCT RISKS ASSOCIATED WITH THE STAFFING INDUSTRY.
As a provider of temporary staffing services, we place our employees in the
workplace of other businesses. Like all employers, our employees can commit acts
which would subject us to negative publicity, injunctive orders or the
imposition of fines or damages. These acts include discrimination, harassment,
employment of illegal aliens, violations of wage and hour requirements, errors
and omissions, misuse of client proprietary information, misappropriation of
funds and other criminal activity or torts. In some instances, we indemnify
clients against our employees' actions, but in certain circumstances, our
clients might hold us responsible for the actions of those employees not under
our direct control. In the past, we have not had any significant problems in
this area and maintain insurance coverage that we believe is adequate as to both
risks and amounts. However, if an employee fails to follow these policies or if
our insurance is inadequate, such actions could have a material adverse effect
on our business, results of operations, or financial condition. Any interruption
in our clients' business such as inclement weather or work stoppage will further
affect temporary staffing service providers.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE.
Quarterly results of operations may fluctuate if we are unable or unwilling to
lower our expenses to meet lower than expected future revenues. Accordingly, we
believe that period to period comparisons of results of operations are not
necessarily meaningful and that an investor should not rely upon such
comparisons as an indication of future results of operations. Because of the
foregoing, it is likely that in some future quarter our operating results will
be below the expectations of public market analysts and investors. Such an event
could have a material effect on the price of our common stock.
WE HAVE A SIGNIFICANT AMOUNT OF INTANGIBLE ASSETS, WHICH IS SUBJECT TO POSSIBLE
CHANGES IN ACCOUNTING TREATMENT AND POSSIBLE IMPAIRMENT.
As of December 31, 1999, approximately $53.4 million, or 61.0% of Acsys' total
assets were intangible assets. These intangible assets, which primarily
represent amounts attributable to goodwill, arose through acquisitions accounted
for as purchases. We will likely incur additional goodwill in the future if we
acquire other staffing companies. Additionally, we currently amortize goodwill
over a useful life that management believes is reasonable and is allowable under
generally accepted accounting principles, or GAAP. GAAP can change in the future
and affect the amortization period and therefore the future results of our
company. Additionally, any impairment in the value of such assets could have a
material adverse effect on our business, results of operations or financial
condition.
OUR STOCK PRICE WILL FLUCTUATE AND COULD FLUCTUATE SIGNIFICANTLY.
Since our common stock has been publicly traded, the market price of our common
stock has fluctuated over a wide range and may continue to do so in the future.
Significant fluctuations in the market price of our common stock may occur in
response to various factors and events, including, among other things:
- - the depth and liquidity of the trading market for our common stock;
- - quarterly variations in actual or anticipated operating results;
- - growth rates;
- - changes in estimates by analysts;
- - market conditions in the staffing industry, including demand for
temporary services;
- - announcements by competitors;
- - regulatory actions; and
- - general economic conditions.
In addition, the stock market has from time to time experienced significant
price and volume fluctuations, which have affected the market prices of the
stocks of staffing companies and which may be unrelated to the operating
performance of particular companies. Furthermore, our operating results and
prospects from time to time may be below the expectations of public market
analysts and investors. The occurrence of any of these events could result in a
material decline in the price of our common stock.
-10-
<PAGE> 11
WE MAY ENCOUNTER DIFFICULTIES IN ACQUIRING BUSINESSES.
We intend to pursue acquisitions of other businesses as part of our long-term
growth strategy. With regard to these acquisitions, we cannot offer assurance
that we will:
- - successfully identify suitable acquisition candidates;
- - complete acquisitions; or
- - integrate acquired businesses into our operations.
Acquired companies may not achieve levels of revenues, profitability or
productivity comparable to those of our existing locations, or otherwise perform
as expected. Acquisitions involve special risks, which could have a material
adverse effect on our business, results of operations or financial condition,
including, among others:
- - diversion of our management's attention;
- - possible adverse effects on our earnings because of increased goodwill
amortization, increased interest costs and the issuance of additional
securities;
- - difficulties related to the integration of the acquired business; and
- - possible dilution of the value of the common stock held by our
shareholders.
THE ABILITY OF OUR SHAREHOLDERS TO EFFECT CHANGES IN CONTROL OF ACSYS IS
LIMITED.
Provisions in our articles of incorporation and bylaws, the business
corporations code of the State of Georgia, certain employment agreements with
Acsys' executive officers and our adoption of a shareholders protection rights
agreement, or poison pill, in June 1999 may make it difficult to pursue a tender
offer, change in control or takeover attempt which we oppose. As a result,
shareholders who might desire to participate in such a transaction may not have
an opportunity to do so. In addition, these provisions may reduce the trading
price of our stock. These provisions include: the issuance of preferred stock
without shareholder approval; certain provisions relating to the meeting of
shareholders; "fair price" and "business combinations" statutes under the
general corporation law of Georgia; and provisions in employment agreements
which allow certain employees to terminate their employment and receive a
severance pay in the event of a change of control.
WE DO NOT ANTICIPATE THAT WE WILL PAY CASH DIVIDENDS.
Since our initial public offering in February 1998, we have never declared or
paid any cash dividends on our capital stock and do not anticipate paying cash
dividends in the foreseeable future. In addition, our credit facility contains
restrictions on our ability to declare and pay cash dividends.
WE MAY EXPERIENCE DIFFICULTIES DUE TO RECENT CHANGES IN SENIOR MANAGEMENT.
In March 1999, Edward S. Baumstein resigned as the President of Acsys. In
December 1999, Timothy Mann resigned as our CEO, and Mary Beth Chase resigned as
our Executive Vice President and Chief Development Officer. In addition, several
members of management of Acsys, IT, our IT division, resigned in December 1999.
Accompanying these resignations was a reorganization of our operations and the
appointment of new members of senior management. This turnover in senior
management creates risks for Acsys, including possible delays or problems in
implementing a new organizational structure and potential uncertainty by
employees and existing and prospective clients about the direction and prospects
of our company.
-11-
<PAGE> 12
ITEM 2. PROPERTIES.
We do not own any real property and lease all of our offices. We believe these
facilities are adequate for our current needs and do not anticipate any material
difficulties in replacing such facilities or securing facilities for new
offices.
ITEM 3. LEGAL PROCEEDINGS.
From time to time we are, or may be in the future, involved in litigation
incidental to our business, including employment practice claims assessed by
individuals or governmental agencies. There is currently no litigation pending
which management believes is material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of 1999.
-12-
<PAGE> 13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION AND HOLDERS OF RECORD
On September 7, 1999, we moved the listing of our common stock from the Nasdaq
National Market(R) to the American Stock Exchange(R) and began trading under the
symbol "AYS". Between February 6, 1998 and September 7, 1999, our common stock
traded on the Nasdaq National Market(R) under the symbol "ACSY". Before February
6, 1998, there was no established public trading market for our common stock. On
March 10, 2000, there were 60 holders of record of our common stock.
PRICE RANGE OF COMMON STOCK
The following table sets forth, for the period indicated, the high and low sales
prices of the common stock.
<TABLE>
<CAPTION>
PERIOD HIGH LOW
------ ---- ---
<S> <C> <C>
First Quarter, 1998 (from February 6, 1998)...... $ 16.500 $11.063
Second Quarter, 1998............................. 20.500 13.000
Third Quarter, 1998.............................. 13.750 6.250
Fourth Quarter, 1998............................. 9.750 2.969
</TABLE>
<TABLE>
<CAPTION>
PERIOD HIGH LOW
------ ---- ---
<S> <C> <C>
First Quarter, 1999.............................. $ 5.000 $ 2.438
Second Quarter, 1999............................. 4.500 3.000
Third Quarter, 1999.............................. 5.000 2.500
Fourth Quarter, 1999............................. 2.625 1.313
</TABLE>
DIVIDENDS
We do not anticipate paying any cash dividends on our common stock in the
foreseeable future because we intend to retain our earnings to finance the
expansion of our business and for general corporate purposes. Any payment of
future dividends will be at the discretion of our board of directors and will
depend upon, among other things, our earnings, financial condition, capital
requirements, level of indebtedness, contractual restrictions with respect to
the payment of dividends and other factors that our board of directors deems
relevant. Our credit facility currently prohibits the payment of dividends
without the lender's consent.
We were an S-corporation from our inception through February 5, 1998, the date
of our IPO, except for ICON Search and Consulting, Inc. which was a
C-corporation. As explained in Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Capital Resources,"
in 1998 we distributed to our shareholders the approximate amount that they
needed to fund the payment of federal and state income taxes payable on our
taxable income during that period.
RECENT SALES OF UNREGISTERED SECURITIES
Acsys did not sell any securities which were not registered under the Securities
Act of 1933, as amended, during 1999.
-13-
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA.
All of the financial data set forth below have been restated to give effect to
the acquisitions of Infinity Enterprises, Inc.; David C. Cooper & Associates,
Inc.; DCAA Professional Temporaries, Inc.; EKT, Inc., Cama of Tampa, Inc.; Rylan
Forbes Consulting Group, Inc.; Acsys Resources, Inc.; and Icon Search and
Consulting, Inc. ("ICON"), which have been accounted for under the pooling of
interests method of accounting (the "Pooling Acquisitions"). Additionally, the
financial data set forth above includes results of operations of Infinity
Enterprises, Inc., ICON and Cama of Tampa, Inc. from January 1, 1995, and
January 1, 1995, respectively, the dates of their formation. The acquisitions of
C.P.A. Staffing, Inc.; C.P.A. Search, Inc.; Career Placement Associates
(together "CPA Staffing") in August 1997; TGS in March 1998; KPD in July 1998;
and Staffing Edge in August 1998 have been accounted for under the purchase
method of accounting and are included in the historical statements of operations
from their respective dates of acquisition (the "Purchase Acquisitions"). The
entities acquired in the Pooling Acquisitions and the Purchase Acquisitions are
collectively referred to as the "Acquired Companies." Prior to becoming a
publicly traded company in February, 1998, we were an S-corporation, except for
ICON which was a C-corporation; accordingly, certain financial data may not be
comparable to or indicative of our post-IPO results. The following table
contains certain financial and operating data and is qualified by the more
detailed Consolidated Financial Statements and Notes thereto included elsewhere
in this Form 10-K. The balance sheet data as of December 31, 1999, 1998, 1997,
1996 and 1995 and the Statements of Operations Data for the years ended December
31, 1999, 1998, 1997, 1996 and 1995 were derived from the Consolidated Financial
Statements and Notes thereto that have been audited by Arthur Andersen LLP,
independent public accountants. The financial data shown below should be read in
conjunction with the Consolidated Financial Statements and the related Notes
thereto and Item 7. "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Service revenues:
Temporary staffing .......................................... $ 135,851 $ 103,067 $60,057 $44,556 $28,215
Permanent placement ......................................... 30,475 26,831 18,071 12,186 8,269
--------- --------- ------- ------- -------
Total service revenues .................................... 166,326 129,898 78,128 56,742 36,484
Direct cost of services ......................................... 92,771 72,170 42,583 30,616 18,284
--------- --------- ------- ------- -------
Gross profit .............................................. 73,555 57,728 35,545 26,126 18,200
Selling, general and administrative expenses .................... 61,392 48,260 29,979 20,769 13,893
Combination expenses ............................................ -- 1,730 1,797 -- --
Amortization and depreciation ................................... 3,288 1,658 715 693 682
Severance and franchise termination costs ....................... 5,479 650 682 567 166
--------- --------- ------- ------- -------
Operating income .......................................... 3,396 5,430 2,372 4,097 3,459
Other expense, net .............................................. 3,334 1,129 788 811 865
--------- --------- ------- ------- -------
Income before income taxes and extraordinary item ............... 62 4,301 1,584 3,286 2,594
Income taxes (1) ................................................ 604 5,527 438 419 133
--------- --------- ------- ------- -------
Income (loss) before extraordinary item ......................... (542) (1,226) 1,146 2,867 2,461
Extraordinary item (less income tax benefit of $243) ............ (398) -- -- -- --
--------- --------- ------- ------- -------
Net income (loss) ............................................... $ (940) $ (1,226) $ 1,146 $ 2,867 $ 2,461
Basic and diluted net income (loss) per share ................... $ (0.06) $ (0.09) $ 0.02 $ 0.27 $ 0.24
Shares used in computing basic net income (loss) per share ...... 14,484 14,016 10,440 9,972 10,094
Shares used in computing diluted net income (loss) per share .... 14,484 14,016 10,544 9,972 10,094
</TABLE>
-14-
<PAGE> 15
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital .................................. $12,303 $15,366 $ 4,921 $ 4,309 $ 2,216
Total assets ..................................... 87,524 86,363 33,352 18,167 14,503
Long-term debt, including current maturities ..... 38,717 38,320 11,754 8,847 8,905
Redeemable common stock .......................... -- -- 1,220 288 --
Shareholders' equity ............................. 32,853 33,703 10,801 4,175 2,670
</TABLE>
(1) Prior to the IPO, we operated as an S-corporation for income tax purposes,
except for ICON which was a C-corporation. Accordingly, income tax expense
prior to the IPO resulted from the operating earnings of ICON. In connection
with the IPO, we terminated our S-corporation status and recorded a charge
to income tax expense of approximately $3,000,000 in 1998 representing the
tax effect of differences in the bases of assets and liabilities for
financial reporting and income tax purposes. See Note 3 of Notes to
Consolidated Financial Statements for information concerning the computation
of the income taxes. Also, see Item 7 "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
-15-
<PAGE> 16
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
INTRODUCTION
We are a specialty professional staffing firm that operates approximately 40
offices serving more than 20 major metropolitan markets across the United States
with a more significant presence in the Eastern and Midwestern United States. We
have acquired several companies that provide temporary and permanent placement
staffing services primarily in the areas of accounting, finance and information
technology. The results of operations of TGS, KPD Systems, Inc. ("KPD") and
Staffing Edge, Inc. ("Staffing Edge") are included in the Company's consolidated
results of operations beginning March 31, 1998, July 1, 1998 and August 4, 1998,
respectively (the "1998 Purchase Acquisitions"). Also the results of operation
for C.P.A Staffing are included from August 12, 1999. As a result, consolidated
results may not be comparable to or indicative of future performance. Our
revenues and expenses may be significantly affected by the number and timing of
the acquisition of additional businesses, the opening of additional offices or
the introduction of new services. The timing of such expansion activities may
also affect period-to-period comparisons.
RESULTS OF OPERATIONS
The following table sets forth the consolidated statements of operations for the
indicated periods.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1999 1998 1997
--------- --------- -------
<S> <C> <C> <C>
Service revenues: .......................................... (IN THOUSANDS)
Temporary staffing .................................... $ 135,851 $ 103,067 $60,057
Permanent placement ................................... 30,475 26,831 18,071
--------- --------- -------
Total service revenues ........................... 166,326 129,898 78,128
Direct cost of services .................................... 92,771 72,170 42,583
--------- --------- -------
Gross profit ..................................... 73,555 57,728 35,545
Selling, general and administrative expenses ............... 61,392 48,260 29,979
Combination expenses ....................................... -- 1,730 1,797
Amortization and depreciation .............................. 3,288 1,658 715
Severance and franchise termination costs .................. 5,479 650 682
--------- --------- -------
Operating income ................................. 3,396 5,430 2,372
Other expense, net ......................................... 3,334 1,129 788
--------- --------- -------
Income before income taxes and extraordinary item .......... 62 4,301 1,584
Income taxes ............................................... 604 5,527 438
--------- --------- -------
Income (loss) before extraordinary item .................... (542) (1,226) 1,146
Extraordinary item (less applicable income tax of $243) .... (398) -- --
--------- --------- -------
Net income (loss) .......................................... $ (940) $ (1,226) $ 1,146
========= ========= =======
</TABLE>
-16-
<PAGE> 17
RESULTS FOR 1999 COMPARED TO RESULTS FOR 1998
Service Revenues. Total service revenues in 1999 increased $36.4 million, or
28.0%, to $166.3 million from $129.9 million in 1998. Temporary staffing service
revenues, excluding IT contract service revenues, in 1999 increased $20.6
million, or 33.7%, to $81.8 million as compared to $61.2 million in 1998
primarily due the increase in revenue from the 1998 Purchase Acquisitions. IT
contract service revenue increased $12.1 million, or 28.9% to $54.0 million in
1999 as compared to $41.9 million in 1998 primarily due to the increase in the
local IT contract service revenue partially offset by the decrease in the
enterprise resource planning, or ERP, service revenue. Permanent placement
service revenues in 1999 increased $3.7 million, or 13.8%, to $30.5 million from
$26.8 million in 1998 primarily due to the increase in revenue from the 1998
Purchase Acquisitions.
Gross Profit. Gross profit increased $15.9 million, or 27.6%, to $73.6 million
in 1999 from $57.7 million for 1998. Gross profit as a percentage of service
revenues in 1999 was 44.2% of revenues compared to 44.4% of revenues in 1998 and
was comparable between the two periods.
Selling, General and Administrative Expenses. Selling, general and
administrative, or SG&A, expenses increased $13.1 million, or 27.1%, to $61.4
million in 1999 from $48.3 million in 1998. As a percentage of revenues, SG&A
expenses were 36.9% in 1999 compared with 37.2% in 1998 and were comparable
between the two periods.
Amortization and Depreciation. Amortization and depreciation for 1999 increased
$1.6 million from 1998 due to a full year's worth of amortization and
depreciation resulting from the 1998 Purchase Acquisitions. Depreciation expense
also increased as a result of capital expenditures in 1999.
Combination Expenses. Combination expenses in 1998 were $1.7 million reflecting
transaction costs for the Pooling Acquisitions.
Severance and Franchise Termination Costs. During 1999, we announced plans to
reduce future selling, general and administrative costs. These plans included
the closure of an under-performing office and the termination of certain former
employees, principally related to integration efforts. We expensed $5.5 million
of which approximately $5.0 million related to severance costs and $550,000
related to office closing costs. We recorded a charge of $650,000 in 1998
consisting principally of severance obligations resulting from consolidating our
corporate offices in Atlanta. This substantial increase in severance and
franchise termination costs in 1999 compared to 1998 was principally the result
of severance payments made with respect to management and organizational changes
announced in the first and fourth quarters of 1999.
Other Income (Expense). Interest expense in 1999, consisting principally of
interest on borrowings under our revolving credit facility and interest on
non-compete and severance arrangements, increased $2.5 million from 1998. The
majority of the increase in interest expense resulted from the higher debt
levels related to the 1998 Purchase Acquisitions. See "Liquidity and Capital
Resources." Additionally, during the second quarter of 1999, we realized other
income of $270,000 from the sale of miscellaneous assets.
Income Tax Provision. We recorded $604,000 in income tax expense during 1999 on
a pre-tax income of $62,000. This high level of income tax expense relative to
pre-tax income reflects the impact of non-deductible goodwill. Prior to February
5, 1998, we were an S-corporation and not subject to income taxes, except for
ICON which was a C-corporation. In connection with the IPO and the termination
of our S-corporation status, we recorded a deferred tax liability of
approximately $3.0 million in 1998 to recognize income tax expense created by
our change to a C-corporation, which primarily relates to a change from the cash
to accrual method of accounting for income tax purposes. We are paying the
deferred tax liability, which was created by this charge, over a four-year
period.
Extraordinary Item. During the fourth quarter of 1999, we recognized $398,000 in
extraordinary expense, net of tax, related to the extinguishment of long-term
debt. See "Liquidity and Capital Resources."
Net Loss. We recognized a net loss and a net loss per share of $940,000 and
$0.06 and $1.2 million and $0.09 for 1999 and 1998, respectively.
-17-
<PAGE> 18
RESULTS FOR 1998 COMPARED TO RESULTS FOR 1997
Service Revenues. Total service revenues in 1998 increased $51.8 million, or
66.3%, to $129.9 million from $78.1 million in 1997. Temporary staffing service
revenues, excluding IT contract service revenues, in 1998 increased $20.3
million, or 49.7%, to $61.2 million in 1998 as compared to $40.9 million in
1997. The increase in temporary staffing service revenues is primarily
attributable to the increase in billing rates and the impact of the 1998
Purchase Acquisitions. IT contract service revenue increased $22.7 million, or
118.3% to $41.9 million in 1998 as compared to $19.2 million in 1997 due to the
growth of our ERP service revenue. Permanent placement service revenues in 1998
increased $8.7 million, or 48.5%, to $26.8 million from $18.1 million in 1997.
Permanent placement service revenues increased primarily due to increases in the
number of permanent placements, the increase in placement fees and the 1998
Purchase Acquisitions.
Gross Profit. Gross profit increased $22.2 million, or 62.4%, to $57.7 million
in 1998 from $35.5 million for 1997. Gross profit as a percentage of service
revenues in 1998 decreased to 44.4% of revenues compared to 45.5% of revenues in
1997. The gross profit percentage decline resulted from the decrease in 1998 of
the higher margin permanent placement revenues as a percentage of the total
revenues and as a result of the growth in 1998 of the IT business which has
higher billing rates but lower margins than the rest of our business.
Selling, General and Administrative Expenses. SG&A expenses increased $18.3
million, or 61.0%, to $48.3 million in 1998 from $30.0 million in 1997. As a
percentage of revenues, SG&A expenses were 37.2% in 1998 compared with 38.4% in
1997. This decrease as a percentage of revenues is primarily attributable to the
spreading of overhead costs over a substantially larger revenue base.
Amortization and Depreciation. Amortization and depreciation for 1998 increased
$943,000 from 1997 primarily due to the 1998 Purchase Acquisitions. Depreciation
expense also increased as a result of capital expenditures in 1997 and 1998.
Combination Expenses. Combination expenses in 1998 and 1997 were $1.7 million
and $1.8 million, respectively, reflecting transaction costs for the Pooling
Acquisitions.
Severance and Franchise Termination Costs. We recorded a charge of $650,000 in
1998 consisting principally of severance obligations resulting from
consolidating our corporate offices in Atlanta. In 1997, we recognized $512,000
of severance expense as a result of the termination of the employment of our
former President. Additionally in 1997, we recognized $170,000 related to the
termination of a franchise agreement by Cama of Tampa, Inc.
Other Income (Expense). Other expense, net consists principally of interest
expense. In 1998, we recorded interest expense of $1.3 million, consisting of
interest on borrowings under our revolving credit facility and interest on
non-compete and severance arrangements partially offset by interest income on
short-term investments of $123,000. For 1997, we recorded other expense, net of
$788,000 consisting principally of interest expense on our credit facility and
other long-term debt. See "Liquidity and Capital Resources."
Income Tax Provision. Prior to February 5, 1998, we were an S-corporation and
not subject to income taxes, except for ICON which was a C-corporation. In
connection with the IPO and the termination of our S-corporation status, we
recorded a deferred tax liability of approximately $3.0 million in 1998 to
recognize income tax expense created by our change to a C-corporation, which
primarily relates to a change from the cash to accrual method of accounting for
income tax purposes. We are paying the deferred tax liability, which was created
by this charge, over a four-year period. For 1997, the income tax provision
relates exclusively to ICON, which as a C-corporation was subject to corporate
income taxes.
Net Income (Loss). We recognized a net loss and a net loss per share of $1.2
million and $0.09, respectively, in 1998 compared to net income and net income
per share of $1.1 million and $0.02, respectively, for 1997. The calculation of
the net income per share for 1997 reflects a reduction of $932,000 to net income
available to common shareholders for the accretion on redeemable common shares.
-18-
<PAGE> 19
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $3.4 million in 1999 compared to
cash used in operating activities of $7.1 million in 1998.
Net cash used in investing activities was $4.4 million in 1999 and related to
capital expenditures. Net cash used in investing activities was $37.4 million in
1998. Included in cash used for investing activities was $34.3 million (net of
cash acquired) paid in connection with the 1998 Purchase Acquisitions and $3.1
million used for capital expenditures.
Net cash used in financing activities was $768,000 in 1999. The use of cash was
primarily due to deferred financing costs of $1.2 million related to our credit
facility partially offset by $352,000 from borrowings to fund operations. Net
cash provided in financing activities was $45.9 million in 1998. Upon completion
of our IPO, we raised $20.1 million, net of expenses paid. We used approximately
$11.1 million to immediately repay our then current borrowings under our credit
facility. We subsequently borrowed approximately $31.5 million in connection
with our acquisition of Staffing Edge in August 1998 and made other borrowings
to fund operations. Additionally, in 1998, we paid $834,000 in connection with
our obligation to pay certain pre-IPO S-corporation tax liabilities of persons
who were shareholders during the period we were an S-corporation.
Our primary credit facility is provided by a syndicate of lenders pursuant to
that certain Amended and Restated Credit Agreement dated as of April 13, 1999
among Acsys, Bank of America, N.A. (formerly NationsBank, N.A.), as
administrative agent and the lenders party thereto from time to time. Proceeds
of our credit facility may be used to finance working capital and general
corporate purposes, capital expenditures and permitted acquisitions.
On December 31, 1999 we amended the credit facility to, among other things,
modify the pricing, modify certain of our covenants and reduce our borrowing
capacity under the credit facility from $80.0 million to $55.0 million. The
amendment also changed the maturity date of the loans under the credit facility
from April 12, 2002 to October 31, 2001. We believe that the reduction of our
borrowing capacity will have a minimal impact on our ability to grow our
business internally. In addition, as set forth below, the interest rates charged
under the credit facility will increase unless we are able to reduce the amount
of outstanding borrowings by certain specified dates.
As a result of the amendment, we recorded an extraordinary item, net of tax, of
$398,000 related to the write-off of deferred loan costs. As of December 31,
1999, we had borrowed approximately $38.1 million under the credit facility.
Interest under the credit facility accrues at a variable rate indexed, at our
option, at the administrative agent's prime rate or the London Interbank Offered
Rate, or LIBOR, plus an applicable margin that varies based on certain financial
covenant requirements such as our Consolidated Leverage Ratio and Consolidated
Fixed Charge Ratio (as these terms are defined in the credit facility) and the
amount of borrowings outstanding under the credit facility. Accordingly,
interest rates may vary with respect to prime rate loans from the prime rate to
the prime rate plus 2.75% or with respect to LIBOR Loans from LIBOR plus 1.5% to
LIBOR plus 4.25%, provided, however, that until September 30, 2000, the
applicable margin for prime rate loans is fixed at 2% and the applicable margin
for LIBOR loans is fixed at 3.5%.
Our obligations under the credit facility are secured by a lien on substantially
all of the our and our subsidiaries' assets, including accounts receivable,
inventory, equipment, general intangibles and other property. Additionally, the
credit facility is secured by a first priority pledge of the capital stock of
our subsidiaries.
The credit facility contains customary affirmative covenants and certain
operating and financial covenants. The financial covenants include requirements
to not exceed a specified consolidated leverage ratio, to maintain a certain
consolidated fixed charge coverage ratio and to maintain a minimum consolidated
net worth, and to not exceed certain consolidated capital expenditures and
rental payment levels. Please see "Recent Trends and Developments" for a
discussion of a recent waiver of a financial covenant that we obtained from our
lenders.
On September 7, 1999, we moved the listing of our common stock to the American
Stock Exchange(R) to accommodate the Nasdaq National Market's minimum bid
requirement.
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<PAGE> 20
RECENT TRENDS AND DEVELOPMENTS
In 1999, we generated approximately 14.1% of our revenues and 7.5% of our gross
profit from the placement of contract professionals in positions related to the
implementation of ERP software licensed by SAP AG. SAP announced that it
experienced a slowdown in orders for its software. SAP believed that this
slowdown related to its clients allocating resources away from ERP
implementation in order to address year 2000 and other resource allocation
issues. We experienced a decrease in our SAP implementation staffing business
and expect this trend to continue into the beginning of 2000. We experienced a
decrease in our permanent placement staffing business, which we believe was
principally related to hiring delays related to Year 2000 issues, and we expect
this trend to continue into the beginning of 2000. We believe decreases are due
to clients allocating their resources away from SAP implementation to address
year 2000 issues and thus, that the decrease will be temporary. Our belief that
this trend is temporary is a forward-looking statement that is subject to
numerous risks and uncertainties. Actual results may differ materially from our
estimate due to a variety of factors, including continued decreased demand for
SAP software and the attendant implementation services.
Under the terms of the December 31, 1999 amendment to our credit facility, we
are required on specified dates to reduce the amount of outstanding borrowings
in order to avoid an increase in the interest rate margin due to our lenders.
There can be no assurance that we will be able to manage our borrowing levels
and, as a result, interest expense could increase.
We expect that at March 31, 2000 we will not be in compliance with the
consolidated leverage ratio covenant under our credit facility. Accordingly, we
have obtained, in advance, from our lenders a waiver of this covenant default.
We have not obtained waivers with respect to any other possible future defaults.
The Year 2000 issue referred to problems that could have resulted from computer
software programs and operating systems that use only two digits rather than
four to define the applicable year in a date field. These programs were designed
and developed without considering the impact of the upcoming change in the
century. If not corrected, many computer applications could have failed or
created erroneous results by or at the Year 2000. In 1999 we spent $4.4 million
in capital expenditures that principally related to company integration. Due to
these integration efforts our systems were Year 2000 compliant and accordingly
our systems were not impacted by the date change.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We do not engage in investing in or trading market risk sensitive instruments.
We also do not purchase, for investment, hedging, or for purposes "other than
trading," instruments that are likely to expose Acsys to market risk, whether
interest rate, foreign currency exchange, commodity price or equity price risk,
except as discussed in the following paragraph. We have not entered into any
forward or futures contracts, purchased any options or entered into any interest
rate swaps. We currently do not have any foreign operations and thus we do not
believe that we have any exposure to foreign currency exchange rate risk.
We have interest rate risk under our credit facility. As of December 31, 1999,
we had total debt outstanding of $38.1 million under the credit facility which
provides for interest rates that are tied to our lender's prime rate, the
federal funds rate or the London Inter-Bank Offering Rate (LIBOR). Therefore, we
are subject to exposure to interest rate risk for these borrowings based on the
fluctuations in these published rates. The weighted average interest rate on
borrowings under the credit facility was 7.86% for 1999. Based on the
outstanding indebtedness under the credit facility, an increase in the weighted
average interest rate of 0.5% would cause a corresponding increase in our annual
interest expense of approximately $190,000. See also Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources."
-20-
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our financial statements, including our consolidated balance sheets, as of
December 31, 1999 and 1998, consolidated statements of income for the years
ended December 31, 1999, 1998 and 1997, consolidated statements of cash flows
for the years ended December 31, 1999, 1998 and 1997 and consolidated statements
of redeemable common stock and shareholders' equity for the years ended December
31, 1999, 1998 and 1997, together with the report thereon of Arthur Andersen LLP
dated February 2, 2000 and the schedule containing certain supplemental
information are attached hereto as pages F-1 through F-22.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
There have been no disagreements with or change in the registrant's independent
public accountants since our inception in March 1997.
-21-
<PAGE> 22
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Reference is made to the information that is responsive to this Item appearing
in our definitive Proxy Statement for the Annual Meeting of Shareholders
currently scheduled for June 20, 2000 (the "Proxy Statement") to be filed with
the Securities and Exchange Commission within 120 days after the end of our
fiscal year, which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Reference is made to the information that is responsive to this Item appearing
in the Proxy Statement to be filed with the Securities and Exchange Commission
within 120 days after the end of our fiscal year, which information in
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Reference is made to the information that is responsive to this Item appearing
in the Proxy Statement to be filed with the Securities and Exchange Commission
within 120 days after the end of our fiscal year, which information in
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the information that is responsive to this Item appearing
in the Proxy Statement to be filed with the Securities and Exchange Commission
within 120 days after the end of our fiscal year, which information in
incorporated herein by reference.
-22-
<PAGE> 23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements.
The following consolidated financial statements of Acsys and its
subsidiaries and report of independent auditors are included in Item 8
hereof:
Report of Independent Public Accountants on Financial Statements
Consolidated Balance Sheets as of December 31, 1999 and 1998
Consolidated Statements of Operations for the years ended December 31,
1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997
Consolidated Statements of Redeemable Common Stock and Shareholders'
Equity for the years ended December 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
(a)(2) Except for the following, all schedules for which provision is made in
the applicable accounting regulations of the Securities and Exchange
Commission either have been included in the Consolidated Financial
Statements or are not required under the related instructions, or are
applicable and therefore have been omitted:
Report of Independent Public Accountants
Schedule II--Valuation and Qualifying Accounts.
(a)(3) Exhibits. The following exhibits are either provided with this Report
or are incorporated herein by reference.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
2.1 Agreement and Plan of Reorganization dated as of April 16,
1997 by and among Acsys and David C. Cooper & Associates,
Inc., DCCA Professional Temporaries, Inc., EKT, Inc., and
Infinity Enterprises, Inc., and Cooper Acquisition, Inc., DCCA
Acquisition, Inc., EKT Acquisition, Inc., and Infinity
Acquisition, Inc., and the shareholders named therein. (Filed
as Exhibit 2.1 to Acsys' Registration Statement on Form S-1,
File No. 333-38465 (the "February 1998 S-1") and incorporated
herein by reference.)
2.2 Agreement and Plan of Reorganization dated as of April 24,
1997 by and among Acsys, Cama of Tampa, Inc., Cama
Acquisition, Inc. and Stephen S. Tutwiler. (Filed as Exhibit
2.2 to the February 1998 S-1, and incorporated herein by
reference.)
2.3 Agreement and Plan of Merger by and among Acsys, RFCG Merger
Subsidiary, Inc., Rylan Forbes Consulting Group, Inc., and the
shareholders of Rylan Forbes Consulting Group, Inc. dated as
of July 25, 1997. (Filed as Exhibit 2.3 to the February 1998
S-1, and incorporated herein by reference.)
2.4 Agreement and Plan of Merger by and among Acsys, the
shareholders of Acsys, AcSys Resources, Inc., ASRI Merger
Subsidiary, Inc. and the shareholders of AcSys Resources, Inc.
dated as of September 3, 1997. (Filed as Exhibit 2.4 to the
February 1998 S-1, and incorporated herein by reference.)
</TABLE>
-23-
<PAGE> 24
<TABLE>
<S> <C>
2.5 Agreement and Plan of Merger among AcSys Resources, Inc.,
Acsys Staffing Acquisition Corp., Acsys Search Acquisition
Corp., Acsys Career Acquisition Corp., and C.P.A. Staffing,
Inc., C.P.A. Search, Inc., Career Placement Associates, Inc.
and John Ficquette and Louis Boohaker dated as of August 12,
1997. (Filed as Exhibit 2.5 to the February 1998 S-1, and
incorporated herein by reference.)
2.6 Agreement and Plan of Merger by and among Acsys, Icon Merger
Subsidiary, Inc., Icon Search and Consulting, Inc. ("Icon"),
and the shareholders of Icon named therein dated as of March
31, 1998. (Filed as Exhibit 2.6 to Acsys' Quarterly Report on
Form 10-Q dated May 15, 1998, File No. 000-23711, and
incorporated herein by reference.)
2.7 Agreement and Plan of Merger, dated as of August 3, 1998, by
and among Acsys, Inc., SE Merger Subsidiary, Inc., Staffing
Edge, Inc. and certain stockholders of Staffing Edge, Inc.
(Filed as Exhibit 2.1 to Acsys' Current Report on Form 8-K
dated August 19, 1998, File No. 000-23711, and incorporated
herein by reference.)
3.1 Articles of Incorporation of Acsys. (Filed as Exhibit 3.1 to
February 1998 S-1, and incorporated herein by reference.)
3.1.1 Articles of Amendment to Amended and Restated Articles of
Incorporation of Acsys. (Filed as Exhibit 3.1.1 to Acsys'
Registration Statement on Form S-1, File No. 333-67437 (the
"November 1998 S-1") and incorporated herein by reference.)
3.1.2 Articles of Amendment to Amended and Restated Articles of
Incorporation, as amended, filed with the Secretary of the
State of Georgia on June 20, 1999. (Filed as Exhibit 3.1
Acsys' Form 10-Q dated August 9, 1999, File No. 000-23711, and
incorporated herein by reference.)
3.2 Bylaws of Acsys. (Filed as Exhibit 3.2 to February 1998 S-1,
and incorporated herein by reference.)
4.1 Shareholder Protection Rights Agreement, dated June 20, 1999,
between Acsys and SunTrust Bank, Atlanta, as Rights Agent.
(Filed as Exhibit 99.1 to Acsys' Current Report on Form 8-K
dated June 20, 1999, and incorporated herein by reference.)
4.2 Specimen Common Stock Certificate. (Filed as Exhibit 4 to
Acsys' Registration Statement on Form 8-A filed on September
1, 1999, and incorporated herein by reference.)
10.1 Amended and Restated 1997 Stock Option Plan of Acsys. (Filed
as Exhibit 10.1 to February 1998 S-1, and incorporated herein
by reference.)
10.1.1 Amendment to Amended and Restated Stock Option Plan of Acsys
dated April 29, 1998. (Filed as Exhibit 10.1.1 to Acsys'
Annual Report on Form 10-K dated March 30, 1999, File No.
000-23711 (the "1998 10-K"), and incorporated herein by
reference.)
10.2 Employment Agreement by and between Acsys and Timothy Mann,
Jr. dated March 12, 1997. (Filed as Exhibit 10.3 to the
February 1998 S-1, and incorporated herein by reference.)
10.2.1 Amendment No. 1 to Employment Agreement by and between Acsys
and Timothy Mann, Jr. dated September 3, 1997. (Filed as
Exhibit 10.4 to February 1998 S-1, and incorporated herein by
reference.)
</TABLE>
-24-
<PAGE> 25
<TABLE>
<S> <C>
10.2.2 Amendment No. 2 to Employment Agreement by and between Acsys
and Timothy Mann, Jr. dated October 14, 1997. (Filed as
Exhibit 10.5 to February 1998 S-1, and incorporated herein by
reference.)
10.3 Employment Agreement by and between Acsys and Edward S.
Baumstein dated September 3, 1997. (Filed as Exhibit 10.6 to
February 1998 S-1, and incorporated herein by reference.)
10.3.1 Amendment No. 1 to Employment Agreement by and between Acsys
and Edward S. Baumstein dated as of October 14, 1997. (Filed
as Exhibit 10.7 to February 1998 S-1, and incorporated herein
by reference.)
10.4 Stock Option Agreement by and between Acsys and Timothy Mann,
Jr. dated May 19, 1997. (Filed as Exhibit 10.8 to February
1998 S-1, and incorporated herein by reference.)
10.5 Stock Option Agreement by and between Acsys and Timothy Mann,
Jr., dated May 19, 1997. (Filed as Exhibit 10.9 to February
1998 S-1, and incorporated herein by reference.)
10.6 Form of Employment Agreement between Acsys and key employees.
(Filed as Exhibit 10.11 to February 1998 S-1, and incorporated
herein by reference.)
10.7 Amended and Restated Registration Rights Agreement dated as of
September 3, 1997 by and among Acsys and certain holders of
the capital stock of Acsys. (Filed as Exhibit 10.12 to
February 1998 S-1, and incorporated herein by reference.)
10.7.1 Registration Rights Joinder Agreement dated May 22, 1998 by
and among Acsys and certain holders of the capital stock of
Acsys. (Filed as Exhibit 10.12.1 to Quarterly Report on Form
10-Q dated August 14, 1998, File No. 000-23711 (the "August
1998 10-Q"), and incorporated herein by reference.)
10.7.2 Registration Rights Joinder Agreement dated July 1, 1998 by
and among Acsys and Howard Sapolsky. (Filed as Exhibit 10.1 to
Quarterly Report on Form 10-Q dated November 16, 1998, File
No. 000-23711 (the "November 1998 10-Q"), and incorporated
herein by reference.)
10.7.3 Registration Rights Joinder Agreement dated August 3, 1998 by
and among Acsys and certain holders of capital stock of Acsys.
(Filed as Exhibit 10.2 to the November 1998 10-Q and
incorporated herein by reference.)
10.7.4 Registration Rights Joinder Agreement dated March 31, 1998 by
and among Acsys and certain holders of capital stock of Acsys.
(Filed as Exhibit 10.11.4 to November 1998 S-1, and
incorporate herein by reference.)
10.8 Revolving Credit Agreement dated May 16, 1997 by and among
Acsys and certain lenders. (Filed as Exhibit 10.13 to February
1998 S-1, and incorporated herein by reference.)
10.8.1 Amendment No. 1 to Credit Agreement dated January 29, 1998 by
and among Acsys, NationsBank, National Association as Lender,
and NationsBank, National Association as Agent for the
Lenders. (Filed as Exhibit 10.13.1 to the August 1998 10-Q,
and incorporated herein by reference.)
10.8.2 Amendment No. 2 to Credit Agreement dated August 3, 1998 by
and among Acsys, NationsBank, National Association as Lender
and NationsBank, National Association as Agent for the
Lenders. (Filed as Exhibit 10.3 to the November 1998 10-Q, and
incorporated herein by reference.)
</TABLE>
-25-
<PAGE> 26
<TABLE>
<S> <C>
10.8.3 Letter Agreement to Credit Agreement dated December 29, 1998
by and among Acsys, NationsBank, National Association, as
Agent and the Lenders party thereto. (Filed as Exhibit 10.12.3
to the 1998 10-K, and incorporated herein by reference.)
10.8.4 Letter Agreement to Credit Agreement dated March 23, 1999 by
and among Acsys, NationsBank, National association, as Agent
and the Lenders party thereto. (Filed as Exhibit 10.12.4 to
the 1998 10-K, and incorporated herein by reference.)
10.8.5 Amended and Restated Revolving Credit Agreement, dated April
13, 1999, by and among Acsys, Inc., as Borrower, and
NationsBank, N.A. as Agent and the Lenders party thereto.
(Filed as Exhibit 10.12.5 to Quarterly Report dated May 14,
1999, File No. 000-23711, and incorporated herein by
reference.)
10.8.6 Amendment No. 1 to Amended and Restated Credit Agreement dated
December 31, 1999 by and among Acsys, Bank America, N.A., as
Agent and the Lenders party thereto.
10.9 Form of Indemnification Agreement entered into between Acsys
and its directors and officers. (Filed as Exhibit 10.14 to
February 1998 S-1, and incorporated herein by reference.)
10.10 Form of S-corporation Tax Allocation and Indemnification
Agreement entered into between Acsys and certain of its
shareholders. (Filed as Exhibit 10.15 to February 1998 S-1,
and incorporated herein by reference.)
10.11 Employment Agreement between Acsys and Robert M. Kwatnez dated
as of March 31, 1998 and effective on May 22, 1998. (Filed as
Exhibit 10.18 to the August 1998 10-Q, and incorporated herein
by reference.)
10.12 Non-Solicitation and Non-Competition Agreement between Acsys
and Robert M. Kwatnez dated as of March 31, 1998 and effective
on May 22, 1998. (Filed as Exhibit 10.19 to the August 1998
10-Q, and incorporated herein by reference.)
10.13 Employment Agreement between Acsys and Brady W. Mullinax, Jr.,
dated as of August 21, 1998. (Filed as Exhibit 10.4 the
November 1998 Form 10-Q, and incorporated herein by
reference.)
10.14 Non-Qualified Stock Option Agreement by and between Acsys and
Brady W. Mullinax, Jr. dated August 21, 1998. (Filed as
Exhibit 10.5 to the November 1998 10-Q, and incorporated
herein by reference.)
10.15 Incentive Stock Option Agreement by and between Acsys and
Brady W. Mullinax, Jr. dated August 21, 1998. (Filed as
Exhibit 10.6 to the November 1998 10-Q, and incorporated
herein by reference.)
10.16 Incentive Stock Option Agreement by and between Acsys and
Timothy Mann, Jr., dated October 27, 1998. (Filed as Exhibit
10.21 to the 1998 10-K, and incorporated herein by reference.)
10.17 Non-Qualified Stock Option Agreement by and between Acsys and
Timothy Mann, Jr. dated October 27, 1998. (Filed as Exhibit
10.22 to the 1998 10-K, and incorporated herein by reference.)
10.18 Separation and Release Agreement by and between Acsys and
Edward S. Baumstein dated March 12, 1999. (Filed as Exhibit
10.23 to the 1998 10-K, and incorporated herein by reference.)
</TABLE>
-26-
<PAGE> 27
<TABLE>
<S> <C>
10.19 Separation and Release Agreement, dated November 23, 1999,
between Acsys, Inc. and Timothy Mann, Jr. (Filed as Exhibit
10.1 to Acsys' Current Report dated December 8, 1998, File No.
000-23711 (the "December 1999 8-K"), and incorporated herein
by reference.)
10.20 Shareholder and Restrictive Covenant Agreement dated November
23, 1999, between Acsys, Inc. and Timothy Mann, Jr. (Filed as
Exhibit 10.2 to the December 1999 8-K, and incorporated herein
by reference.)
10.21 Separation and Release Agreement, dated December 1, 1999
between Acsys, Inc. and Mary Beth Chase. (Filed as Exhibit
10.3 to the December 1999 8-K, and incorporated herein by
reference.)
10.22 Shareholder and Restrictive Covenant Agreement, dated December
1, 1999, between Acsys, Inc. and Mary Beth Chase. (Filed as
Exhibit 10.4 to the December 1999 8-K, and incorporated herein
by reference.)
10.23 Separation and Release Agreement, dated December 1, 1999,
between Acsys, Inc., Acsys IT, Inc. and Robert M. Kwatnez.
(Filed as Exhibit 10.5 to the December 1999 8-K, and
incorporated herein by reference.)
10.24 Shareholder and Restrictive Covenant Agreement, dated December
1, 1999, between Acsys, Inc. and Robert Kwatnez. (Filed as
Exhibit 10.6 to the December 1999 8-K, and incorporated herein
by reference.)
10.25 Separation and Release Agreement, dated December 1, 1999,
between Acsys, Inc., Acsys IT, Inc. and Steven M. Sutton.
(Filed as Exhibit 10.7 to the December 1999 8-K, and
incorporated herein by reference.)
10.26 Shareholder and Restrictive Covenant Agreement, dated December
1, 1999, between Acsys, Inc. and Steven M. Sutton. (Filed as
Exhibit 10.8 to the December 1999 8-K, and incorporated herein
by reference.)
10.27 Separation and Release Agreement, dated December 1, 1999,
between Acsys, Inc., Acsys IT, Inc. and Robert D. Bailey.
(Filed as Exhibit 10.9 to the December 1999 8-K, and
incorporated herein by reference.)
10.28 Shareholder and Restrictive Covenant Agreement, dated December
1, 1999, between Acsys, Inc. and Robert D. Bailey. (Filed as
Exhibit 10.10 to the December 1999 8-K, and incorporated
herein by reference.)
10.29 Employment Agreement between Acsys, Inc. and Patricia Kennedy
dated February 7, 2000
10.30 Incentive Stock Option Agreement by and between Acsys and
Brady W. Mullinax, Jr. dated February 2, 2000.
10.31 Incentive Stock Option Agreement by and between Acsys and
Patricia Kennedy dated February 21, 2000.
21.1 Subsidiaries of Acsys. (Filed as Exhibit 21.1 to the
Registration Statement on Form S-1 filed on November 17, 1998,
and incorporated herein by reference.)
23.1 Consent of Arthur Andersen LLP.
24.1 Power of Attorney [included on signature page].
27.1 Financial Data Schedule for the year ended December 31, 1999
(for SEC use only).
27.2 Financial Data Schedule for the year end December 31, 1998
(for SEC use only).
</TABLE>
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<PAGE> 28
(b) Reports on Form 8-K.
On December 8, 1999, we filed a current report on Form 8-K dated December
8, 1999 (date of earliest event reported). Under Item 5, Other Events, we
described separation and other agreements between Acsys and several
executive officers, directors and other employees. We did not file any
other Current Reports on Form 8-K during the quarter ended December 31,
1999.
-28-
<PAGE> 29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Acsys, Inc.
By: /s/ Brady W. Mullinax, Jr.
------------------------------
Brady W. Mullinax, Jr.
Executive Vice President,
Finance and Administration
March 28, 2000
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each of the undersigned officers and
directors of Acsys, Inc., a Georgia corporation, for himself and not for one
another, does hereby constitute and appoint David C. Cooper and Brady W.
Mullinax, Jr. and each of them, a true and lawful attorney in his name, place
and stead, in any and all capacities, to sign his name to any and all amendments
to this Annual Report on Form 10-K, and to cause the same (together with all
Exhibits thereto) to be filed with the Securities and Exchange Commission,
granting unto said attorneys and each of them full power and authority to do and
perform any act and thing necessary and proper to be done in the premises, as
fully to all intents and purposes as the undersigned could do if personally
present, and each of the undersigned for himself hereby ratifies and confirms
all that said attorneys or any one of them shall lawfully do or cause to be done
by virtue hereof.
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.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ DAVID C. COOPER Chairman of the Board of Directors March 28, 2000
- ----------------------------- and Chief Executive Officer
David C. Cooper
/s/ BRADY W. MULLINAX, JR. Executive Vice President, Finance March 28, 2000
- ----------------------------- and Administration and Director
Brady W. Mullinax, Jr.
/s/ BARRY M. ABELSON Director March 28, 2000
- -----------------------------
Barry M. Abelson
/s/ PAUL J. KLAASSEN Director March 28, 2000
- -----------------------------
Paul J. Klaassen
/s/ WILLIAM PORTER PAYNE Director March 28, 2000
- -----------------------------
William Porter Payne
/s/ HARRY J. SAUER Executive Director, Professional March 28, 2000
- ----------------------------- Services and Director
Harry J. Sauer
/s/ M. FAYE WILSON Director March 28, 2000
- -----------------------------
M. Faye Wilson
</TABLE>
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<PAGE> 30
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Acsys, Inc.:
We have audited the accompanying consolidated balance sheets of Acsys, Inc. and
Subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of operations, redeemable common stock and shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Acsys, Inc. and
Subsidiaries as of December 31, 1999 and 1998, 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 accounting principles generally accepted in
the United States.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 2, 2000
F-1
<PAGE> 31
ACSYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS-EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ -- $ 1,777
ACCOUNTS RECEIVABLE, (NET OF ALLOWANCES OF $1,953 AND $958 AT
DECEMBER 31, 1999 AND 1998, RESPECTIVELY) 23,525 22,836
PREPAID EXPENSES AND OTHER 1,508 2,073
DEFERRED INCOME TAXES 1,234 --
------- -------
TOTAL CURRENT ASSETS 26,267 26,686
PROPERTY AND EQUIPMENT, NET 7,597 4,979
GOODWILL AND OTHER INTANGIBLE ASSETS, NET 53,383 54,366
OTHER ASSETS 277 332
------- -------
TOTAL ASSETS $87,524 $86,363
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
CURRENT PORTION OF LONG-TERM DEBT 45 44
ACCOUNTS PAYABLE 4,751 3,777
ACCRUED LIABILITIES 9,168 7,086
DEFERRED INCOME TAXES -- 413
------- -------
TOTAL CURRENT LIABILITIES 13,964 11,320
------- -------
LONG-TERM DEBT 38,672 38,276
------- -------
DEFERRED INCOME TAXES 1,993 2,771
------- -------
OTHER LONG-TERM LIABILITIES 42 293
------- -------
COMMITMENTS AND CONTINGENCIES (NOTE 5)
SHAREHOLDERS' EQUITY:
PREFERRED STOCK, NO PAR VALUE, 5,000,000 SHARES AUTHORIZED, NO
SHARES ISSUED OR OUTSTANDING -- --
COMMON STOCK, NO PAR VALUE, 45,000,000 SHARES AUTHORIZED
14,502,736 AND 14,452,466 ISSUED AND OUTSTANDING AT
DECEMBER 31, 1999 AND 1998, RESPECTIVELY 30,548 30,499
RETAINED EARNINGS 2,305 3,204
------- -------
TOTAL SHAREHOLDERS' EQUITY 32,853 33,703
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $87,524 $86,363
======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
F-2
<PAGE> 32
ACSYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS - EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
1999 1998 1997
--------- --------- --------
<S> <C> <C> <C>
SERVICE REVENUES:
TEMPORARY STAFFING $ 135,851 $ 103,067 $ 60,057
PERMANENT PLACEMENT 30,475 26,831 18,071
--------- --------- --------
TOTAL SERVICE REVENUES 166,326 129,898 78,128
DIRECT COST OF SERVICES, CONSISTING OF
PAYROLL, PAYROLL TAXES AND BENEFIT COSTS FOR
TEMPORARY EMPLOYEES 92,771 72,170 42,583
--------- --------- --------
GROSS PROFIT 73,555 57,728 35,545
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 61,392 48,260 29,979
AMORTIZATION AND DEPRECIATION 3,288 1,730 1,797
COMBINATION EXPENSES -- 1,658 715
SEVERANCE AND OFFICE CLOSING
COSTS 5,479 650 682
--------- --------- --------
OPERATING INCOME 3,396 5,430 2,372
OTHER INCOME (EXPENSE):
INTEREST EXPENSE, NET (3,585) (1,129) (823)
OTHER, NET 251 -- 35
--------- --------- --------
INCOME BEFORE INCOME TAXES 62 4,301 1,584
INCOME TAX PROVISION 604 5,527 438
--------- --------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (542) (1,226) 1,146
EXTRAORDINARY ITEM, (LESS APPLICABLE INCOME TAX
BENEFIT OF $243) (398) -- --
--------- --------- --------
NET INCOME (LOSS) $ (940) $ (1,226) $ 1,146
========= ========= ========
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:
INCOME (LOSS) PER SHARE BEFORE EXTRAORDINARY ITEM $ (0.04) $ (0.09) $ 0.02
EXTRAORDINARY ITEM (0.03) -- --
--------- --------- --------
NET INCOME (LOSS) $ (0.06) $ (0.09) $ 0.02
========= ========= ========
SHARES USED IN COMPUTING BASIC NET INCOME (LOSS) PER SHARE 14,484 14,016 10,440
========= ========= ========
SHARES USED IN COMPUTING DILUTED NET INCOME (LOSS) PER SHARE 14,484 14,016 10,544
========= ========= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
F-3
<PAGE> 33
ACSYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REDEEMABLE COMMON STOCK
AND SHAREHOLDERS' EQUITY
(IN THOUSANDS- EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
REDEEMABLE ---------------------------------------------------------
COMMON STOCK COMMON STOCK
-------------------- ---------------------- RETAINED TREASURY
SHARES AMOUNT SHARES AMOUNT EARNINGS STOCK TOTAL
-------- ------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 122,012 $ 288 9,972,294 $ 530 $ 4,233 $(589) $ 4,174
DISTRIBUTIONS TO SHAREHOLDERS -- -- -- -- (1,243) -- (1,243)
ISSUANCE OF COMMON STOCK IN
CONNECTION WITH ACQUISITION -- -- 1,219,274 7,067 -- 589 7,656
ACCRETION OF REDEEMABLE COMMON
STOCK TO REDEMPTION VALUE -- 932 -- -- (932) -- (932)
NET INCOME -- -- -- -- 1,146 -- 1,146
-------- ------- ---------- -------- ------- ----- --------
BALANCE, DECEMBER 31, 1997 122,012 1,220 11,191,568 7,597 3,204 -- 10,801
ISSUANCE OF COMMON STOCK UPON INITIAL
PUBLIC OFFERING, NET OF OFFERING COSTS -- -- 2,842,500 20,070 -- -- 20,070
RESETTING OF RETAINED EARNINGS IN
CONNECTION WITH TERMINATION
OF S-CORPORATION STATUS -- -- -- (1,597) 1,597 -- --
TERMINATION OF REDEMPTION RIGHTS IN
CONNECTION WITH THE INITIAL PUBLIC OFFERING (122,012) (1,220) 122,012 1,220 -- -- 1,220
ISSUANCE OF COMMON STOCK IN
CONNECTION WITH ACQUISITIONS -- -- 229,337 3,031 -- -- 3,031
EXERCISE OF EMPLOYEE STOCK OPTIONS -- -- 67,049 178 -- -- 178
TAX BENEFIT OF NON-QUALIFIED
STOCK OPTION EXERCISES -- -- -- -- 221 -- 221
DISTRIBUTIONS TO SHAREHOLDERS
FOR TAXES ON S-CORPORATION EARNINGS -- -- -- -- (592) -- (592)
NET LOSS -- -- -- -- (1,226) -- (1,226)
-------- ------- ---------- -------- ------- ----- --------
BALANCE, DECEMBER 31, 1998 -- -- 14,452,466 30,499 3,204 -- 33,703
EXERCISE OF EMPLOYEE STOCK OPTIONS -- -- 50,270 -- 49
TAX BENEFIT OF NON-QUALIFIED
STOCK OPTION EXERCISES -- -- -- -- 41 -- 41
NET LOSS -- -- -- -- (940) -- (940)
-------- ------- ---------- -------- ------- ----- --------
BALANCE, DECEMBER 31, 1999 -- $ -- 14,502,736 $ 30,548 $ 2,305 $ -- $ 32,853
======== ======= ========== ======== ======= ===== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-4
<PAGE> 34
ACSYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
------- -------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (940) $ (1,226) $ 1,146
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
AMORTIZATION AND DEPRECIATION 3,317 1,658 715
IMPUTED INTEREST 45 61 74
DEFERRED TAX EXPENSE (1,446) 2,173 551
LOSS FROM EXTRAORDINARY ITEM 641 -- --
OTHER -- -- 8
CHANGES IN OPERATING ASSETS AND LIABILITIES, NET OF EFFECT OF
PURCHASE ACQUISITIONS:
ACCOUNTS RECEIVABLE, NET (689) (6,727) (2,860)
PREPAID EXPENSES AND OTHER 565 13 (1,200)
OTHER ASSETS 55 (87) 99
ACCOUNTS PAYABLE 1,015 829 1,466
ACCRUED LIABILITIES AND OTHER 1,103 (3,699) 1,377
OTHER LONG-TERM LIABILITIES (251) (84) 336
------- -------- -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 3,415 (7,089) 1,712
------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
NET CASH PAID FOR BUSINESS ACQUISITIONS -- (34,260) (1,996)
CAPITAL EXPENDITURES (4,424) (3,152) (1,214)
------- -------- -------
NET CASH USED IN INVESTING ACTIVITIES (4,424) (37,412) (3,210)
------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
NET PROCEEDS FROM INITIAL PUBLIC OFFERING -- 20,070 --
NET BORROWINGS OF LONG-TERM DEBT 352 26,566 1,725
DISTRIBUTIONS TO SHAREHOLDERS FOR TAXES ON S-CORPORATION EARNINGS -- (834) (843)
DEFERRED FINANCING COSTS (1,169) (72) (232)
PROCEEDS FROM EXERCISE OF EMPLOYEE STOCK OPTIONS 49 178 --
CHANGES IN RESTRICTED CASH -- -- 116
------- -------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (768) 45,908 766
------- -------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,777) 1,407 (732)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,777 370 1,102
------- -------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR $ -- $ 1,777 $ 370
======= ======== =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESES STATEMENTS
F-5
<PAGE> 35
ACSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS:
Acsys, Inc. is a specialty professional staffing firm that operates
approximately 40 offices serving 20 major metropolitan markets across the United
States with a more significant presence in the Eastern and Midwestern United
States.
The Company was formed on March 10, 1997 and effected a business combination on
May 16, 1997 in which it acquired all of the issued and outstanding common stock
of Infinity Enterprises, Inc.; David C. Cooper & Associates, Inc.; DCCA
Professional Temporaries, Inc.; and EKT, Inc. in exchange for 4,240,283 shares
of the Company's common stock (the "May 16 Pooling"). Subsequent to the May 16
Pooling, the Company acquired all of the issued and outstanding common stock of
the following companies, in the same manner:
<TABLE>
<CAPTION>
NAME ACQUISITION DATE SHARES ISSUED
---- ---------------- -------------
<S> <C> <C>
Cama of Tampa, Inc. ............................. May 19, 1997 131,143
Rylan Forbes Consulting Group, Inc. ............. July 25, 1997 462,292
Acsys Resources, Inc. ........................... September 3, 1997 3,659,502
ICON Search and Consulting, Inc. ................ May 22, 1998 2,820,360
</TABLE>
The business combinations referred to above have been accounted for under the
pooling of interests method of accounting. Thus, the accompanying financial
statements have been restated to include the accounts and operating results of
the combined companies for all dates and periods prior to the combinations.
Upon closing these acquisitions, the Company entered into employment agreements
with certain officers and employees (see Note 5). Those agreements provide for
reduced compensation from amounts previously charged to expense. The reduction
in compensation was approximately $1,330,000 and $2,341,000 for the years ended
December 31, 1998 and 1997, respectively. The following is an unaudited
supplemental pro forma presentation of the years ended December 31, 1998 and
1997 statements of operations to reflect the reduction of compensation and an
adjustment to reflect income taxes as if the Company terminated its
S-corporation status as of January 1, 1997. There were no pro forma adjustments
for the year ended December 31, 1999.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------
1998 1997
----------- ---------
(IN THOUSANDS-EXCEPT PER SHARE DATA)
<S> <C> <C>
Income before income taxes, as reported ................................... $ 4,301 $ 1,584
Supplemental pro forma adjustment to compensation expense ................. 1,330 2,341
-------- -------
Supplemental pro forma income, before pro forma income taxes .............. 5,631 3,925
Supplemental pro forma income taxes ....................................... 3,051 2,329
-------- -------
Supplemental pro forma net income after contractual reduction in
salaries and income taxes ............................................. $ 2,580 $ 1,596
======== =======
Net income (loss) per diluted share as reported ........................... $ (0.09) $ 0.02
======== =======
Supplemental pro forma net income per diluted share, as adjusted
for reduction in salaries and income taxes ............................. $ 0.18 $ 0.06
======== =======
Shares used in computing supplemental pro forma net income per
diluted share, as adjusted for reduction in salaries and income taxes .. 14,345 10,544
======== =======
</TABLE>
This supplemental pro forma presentation is shown solely as a result of the
significant change in the Company's compensation arrangements following the
acquisition, in order to assess the impact on the Company's results of
operations. This presentation assumes that the duties and responsibilities of
the officers and employees have not been diminished given the reduction in
compensation and, as such, that other costs will not be incurred that offset
this pro forma adjustment to compensation expense.
F-6
<PAGE> 36
ACSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. INITIAL PUBLIC OFFERING:
In February 1998, the Company completed its initial public offering ("IPO") of
2,842,500 shares of common stock at a price of $8.50 per share, generating net
cash proceeds of approximately $20.1 million after deducting underwriters'
discounts and offering costs of approximately $2.4 million.
In connection with the IPO, the Company terminated its S-corporation status and
recorded in the first quarter of 1998 income tax expense and a corresponding net
deferred tax liability of approximately $3.0 million, representing the tax
effect of differences in bases in assets and liabilities for financial reporting
and income tax purposes.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Risks and Uncertainties
The Company's future results of operations involve a number of risks and
uncertainties. Factors that could affect the Company's future operating results
and cause actual results to vary materially from expectations include, but are
not limited to the following: economic conditions facing the staffing industry
generally, uncertainties related to the job market and the ability to attract
qualified candidates, uncertainties associated with the Company's brief
operating history; the ability to manage debt level and interest expense; the
ability to achieve and manage growth; the ability to successfully identify
suitable acquisition candidates, complete acquisitions or integrate the acquired
business into operations; the ability to attract and retain qualified personnel;
the ability to develop new services; the ability to cross-sell our services to
existing clients; the ability to enhance and expand existing offices; the
ability to open new offices; general economic conditions; and other factors
discussed from time to time in the Company's filings with the Securities and
Exchange Commission.
Credit risk with respect to accounts receivable is dispersed due to the nature
of the business, the large number of customers, and the diversity of industries
serviced. At December 31, 1999 and 1998, no one customer represented greater
than 10% of accounts receivable or greater than 10% of revenues for the periods
then ended.
For the years ended December 31, 1999, 1998 and 1997, the Company recognized
14%, 21% and 35% of total revenues, respectively, from implementing SAP
Enterprise Resource Planning software.
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.
Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly owned. All significant intercompany
transactions and accounts have been eliminated.
Cash and Cash Equivalents
The Company considers cash on deposit with financial institutions and all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents. The Company generally limits its investments in cash
equivalents to money market funds and certificates of deposit.
F-7
<PAGE> 37
ACSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Property and equipment is stated at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are depreciated using the straight-line method over the shorter of
the estimated useful life of the asset or the remaining term of the lease.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
Useful Lives 1999 1998
------------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Office equipment, computers and software.... 3-7 years $ 7,750 $ 4,520
Office furniture and fixture................. 3-7 years 3,176 2,070
Leasehold improvements...................... 7 years 415 370
------- -------
11,341 6,960
Less--accumulated depreciation.............. (3,744) (1,981)
------- -------
$ 7,597 $ 4,979
======= =======
</TABLE>
Depreciation expense for the years ended December 31, 1999, 1998 and 1997 was
$1,806,000, $713,000 and $386,000, respectively.
Intangible Assets
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------------------
(IN THOUSANDS)
<S> <C> <C>
Goodwill...................................................... $55,618 $55,618
Deferred financing costs...................................... 1,092 288
Other......................................................... 242 267
------- -------
56,952 56,173
Less--accumulated amortization................................. (3,569) (1,807)
------- -------
$53,383 $54,366
======= =======
</TABLE>
Goodwill was recorded in connection with the acquisition on February 28, 1994 of
certain assets of a predecessor by Infinity Enterprises, Inc., the acquisition
on January 1, 1996 of common stock from the previous shareholders of Cama of
Tampa, Inc., the acquisitions of C.P.A. Staffing, Inc.; C.P.A. Search, Inc.;
Career Placement Associates (together "CPA Staffing") on August 12, 1997, and
the acquisitions on March 31, 1998, July 1, 1998 and August 4, 1998 of TGS
Resource Group, Inc., KPD Systems Inc. ("KPD") and Staffing Edge, Inc.,
respectively (see Note 11). Goodwill is being amortized on a straight-line basis
over 40 years.
Deferred financing costs are being amortized over the term of the credit
facility.
Amortization expense for intangible assets for the years ended December 31,
1999, 1998 and 1997 was $1,511,000, $945,000 and $329,000, respectively.
F-8
<PAGE> 38
ACSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Long-Lived Assets
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
121 "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for possible
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If changes in circumstances
indicate that the carrying amount of an asset that an entity expects to hold and
use may not be recoverable, future cash flows expected to result from the use of
the asset and its disposition will be estimated. If the undiscounted value of
the future cash flows is less than the carrying amount of the asset, an
impairment will be recognized. Management believes that there has been no
impairment of long-lived assets as of December 31, 1999.
Accrued Liabilities
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1999 1998
----------------------
(IN THOUSANDS)
<S> <C> <C>
Salaries and commissions .................... $4,171 $2,895
Acquisition-related transaction costs ....... 813 1,871
Payroll taxes ............................... 85 854
Accrued severance costs ..................... 2,240 278
Other ....................................... 1,859 1,188
------ ------
$9,168 $7,086
====== ======
</TABLE>
Revenue Recognition
The Company recognizes permanent placement revenues when the employment offer
and acceptance has occurred and the candidate's employment start date has been
established. Revenues from permanent placements are reported in the consolidated
statements of operations net of estimated adjustments due to placed candidates
that terminate employment within the Company's guarantee period (generally
90-180 days). The Company recognizes temporary staffing revenues when the
services are performed.
Gross Profit
Gross profit is determined by deducting the direct cost of services for
temporary staffing revenues (temporary and contract personnel payroll, payroll
taxes and benefit costs) from total service revenues. The primary costs
associated with permanent placement revenues are sales commissions, which
increase in proportion with service revenue from permanent placements.
Consistent with industry practice, these costs are included in selling, general
and administrative expenses.
Supplemental Cash Flow Information
For the years ended December 31, 1999, 1998, and 1997, the Company paid interest
of $3,409,000, $1,033,000 and $867,000, respectively.
F-9
<PAGE> 39
ACSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table displays the net non-cash assets that were acquired in 1998.
The 1998 assets acquired are from the Company's acquisitions of TGS Resource
Group, Inc., KPD and Staffing Edge, Inc. on March 31, 1998, July 1, 1998 and
August 4, 1998, respectively.` The following table displays the net non-cash
assets that were acquired in 1998. There were no acquisitions in 1999:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998
----------------
(IN THOUSANDS)
<S> <C>
Non-cash assets (liabilities)
Accounts receivable.................. $ 3,766
Prepaid expenses and other........... 568
Property and equipment............... 1,007
Other assets......................... 74
Goodwill............................. 39,456
Accounts payable..................... (684)
Accrued liabilities.................. (6,613)
Deferred tax liabilities............. (283)
-------------
Net non-cash assets acquired......... 37,291
Common stock issued.................. (3,031)
-------------
Net cash paid for acquisitions....... $ 34,260
=============
</TABLE>
Income Taxes
The Company follows SFAS No. 109, "Accounting for Income Taxes." Under SFAS No.
109, the liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using enacted tax rates that are expected to be in effect when the
differences reverse.
Prior to the IPO in February 1998 (see Note 2), the Company and its subsidiaries
were S-corporations for federal and state income tax reporting purposes except
for Icon Search and Consulting, Inc. ("ICON"), which was a C-corporation.
Accordingly, income tax expense and deferred taxes reflected in the Company's
financial statements prior to February 1998 were generated from the operating
activities of ICON.
In connection with the IPO, the Company and its subsidiaries terminated their
S-corporation status and recorded income tax expense and a corresponding net
deferred tax liability of approximately $3,000,000, representing the tax effect
of differences in bases of assets and liabilities for financial reporting and
income tax purposes.
Comprehensive Income
The Company reports comprehensive income in the statements of operations. Net
income is the sole component of comprehensive income.
Net Income (Loss) Per Share
The Company has presented net income (loss) per share pursuant to SFAS No. 128,
"Earnings Per Share," and the Securities and Exchange Commission Staff
Accounting Bulletin No. 98.
Basic net income (loss) per share is computed by dividing the net income (loss)
for each year by the weighted average number of common shares outstanding for
each year. Diluted net income (loss) per share is computed by dividing net
income (loss) for each year by the weighted average number of common shares and
dilutive common stock equivalents outstanding during each year. The average
number of common shares outstanding in 1997 excludes the redeemable common
shares, as the accretion on the redeemable common stock of
F-10
<PAGE> 40
ACSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$932,000 in 1997 is deducted in arriving at the net income (loss) available to
common shareholders. The average number of shares outstanding has been
retroactively restated to include the shares issued for the business
combinations accounted for as pooling of interests.
Fair Value of Financial Instruments
Management believes that the carrying amounts of certain financial instruments,
including cash and cash equivalents, accounts receivable, accounts payable and
accrued expenses approximate their fair values as of each balance sheet date
given the relatively short maturity of these instruments. The fair values of
long-term debt instruments have been estimated by discounting future cash flows
based on the current interest rate environment and remaining term to maturity.
The carrying amount of long-term debt approximates the fair value.
Reclassifications
Certain amounts in prior year's financial statements have been reclassified to
conform with the current year presentation.
4. DEBT:
The following table summarizes the Company's borrowings:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
---------------------
(IN THOUSANDS)
<S> <C> <C>
Revolving Credit Facility.................................................. $38,100 $37,660
Non-compete agreements with former shareholders of Infinity
Enterprises, Inc., maturing February 2009............................... 917 1,017
Other...................................................................... - 4
------- -------
39,017 38,681
Less--unamortized discount.................................................. (300) (361)
------- -------
38,717 38,320
Less--current portion....................................................... (45) (44)
------- -------
$38,672 $38,276
======= =======
</TABLE>
The Company's primary credit facility is provided by a syndicate of lenders
pursuant to that certain Amended and Restated Credit Agreement dated as of April
13, 1999 among the Company, Bank of America, N.A. (formerly NationsBank, N.A.),
as administrative agent and the Lenders party thereto from time to time.
Proceeds of the credit facility may be used to finance working capital and
general corporate purposes, capital expenditures and permitted acquisitions.
On December 31, 1999, pursuant to that certain Amendment No. 1 to Credit
Agreement among the Company, the Lenders and the Administrative Agent the
Company amended the credit facility to, among other things, modify the pricing,
modify certain covenants and reduce the borrowing capacity under the Credit
Facility from $80.0 million to $55.0 million. The Amendment also changed the
maturity date of the loans under the Credit Facility from April 12, 2002 to
October 31, 2001. Management believes that the reduction of the Company's
borrowing capacity will have a minimal impact on its ability to grow the
business internally. In addition, as set forth below, the interest rates charged
under the Credit Facility will increase unless the Company is able to reduce the
amount of outstanding borrowings by certain specified dates.
F-11
<PAGE> 41
ACSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As a result of the Amendment, the Company recorded an extraordinary item, net of
tax, of $398,000 related to the write-off of deferred loan costs. As of December
31, 1999, the Company had borrowed approximately $38.1 million under the Credit
Facility.
Interest under the Credit Facility accrues at a variable rate indexed, at the
Company's option, at the Administrative Agent's prime rate or the London
Interbank Offered Rate ("LIBOR"), plus an applicable margin that varies based on
certain financial covenant requirements such as the Company's Consolidated
Leverage Ratio and Consolidated Fixed Charge Ratio (as such terms are defined in
the Credit Facility) and the amount of borrowings outstanding under the Credit
Facility. Accordingly, interest rates may vary with respect to prime rate loans
from the prime rate to the prime rate plus 2.75% or with respect to LIBOR Loans
from LIBOR plus 1.5% to LIBOR plus 4.25%, provided, however, that until
September 30, 2000, the applicable margin for prime rate loans is fixed at 2%
and the applicable margin for LIBOR loans is fixed at 3.5%. The Company incurred
interest expense under the Credit Facility of $3,285,000, $1,150,000 and
$443,000 for the years ended December 31, 1999, 1998 and 1997, respectively. The
weighted average interest rate on borrowings under the Credit Facility was
7.86%, 7.75% and 7.51% for the years ended December 31, 1999, 1998 and 1997,
respectively.
The Company's obligations under the Credit Facility are secured by a lien on
substantially all of the Company's and its subsidiaries' assets, including
accounts receivable, inventory, equipment, general intangibles and other
property. Additionally, the Credit Facility is secured by a first priority
pledge of the capital stock of its subsidiaries.
The Credit Facility contains customary affirmative covenants and certain
operating and financial covenants. The financial covenants include requirements
to not exceed a specified consolidated leverage ratio, to maintain a certain
consolidated fixed charge coverage ratio and to maintain a minimum consolidated
net worth, and to not exceed certain consolidated capital expenditures and
rental payment levels.
The Company has discounted the non-compete obligations to reflect their fair
market value based on average borrowing rates available to the Company. The rate
used to determine the discount was approximately 9.25%. The discount is being
amortized over the term of the notes using the effective interest rate method.
Amortization expense included in interest expense in the accompanying statements
of operations for the years ended December 31, 1999, 1998 and 1997 was
approximately $57,000, $61,000 and $74,000, respectively. The obligations under
the non-compete agreements with former shareholders are secured by certain
property and equipment and common stock of the Company, and are personally
guaranteed by certain shareholders of the Company.
Annual maturities of long-term debt as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
----------------
<S> <C>
2000............................... $ 45
2001............................... 38,149
2002............................... 54
2003............................... 59
2004............................... 65
Thereafter......................... 345
================
$ 38,717
================
</TABLE>
F-12
<PAGE> 42
ACSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. COMMITMENTS AND CONTINGENCIES:
In connection with the business combinations, the Company entered into
employment agreements with certain shareholders who are also officers or
employees of the Company. Each employment agreement provides for a guaranteed
base salary over a three-year period and a discretionary bonus to be determined
by the board of directors. For the years ending December 31, 2000 and 2001, the
Company is obligated to pay approximately $1,418,000 and $178,000 respectively,
in salaries under these agreements. The agreements contain non-compete covenants
and can be terminated based on certain events, as defined. In addition, the
agreements provide for lump-sum payments equal to three times current salary
upon certain triggering events such as a change in control, among other events.
The Company leases office space under non-cancelable operating leases. Certain
leases require additional payments for taxes and operating expenses and provide
for renewal options. Future minimum payments required under operating leases
that have an initial or remaining non-cancelable lease term in excess of one
year at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
2000............................... $ 3,240
2001............................... 2,907
2002............................... 2,399
2003............................... 1,605
2004............................... 504
Thereafter......................... 561
--------------
$ 11,216
==============
</TABLE>
Rent expense for the years ended December 31, 1999, 1998 and 1997 was $3,284,000
$2,638,000 and $863,000, respectively.
From time to time, the Company is involved in litigation incidental to its
business including employment practices claims assessed by individuals or
governmental agencies. There is currently no litigation that management believes
is material.
6. SEVERANCE AND OFFICE CLOSING COSTS:
During 1999, the Company announced plans to reduce future selling, general and
administrative costs. These plans included the closure of an under-performing
office and the termination of certain former employees, principally related to
integration efforts. The Company expensed $5,500,000 of which
approximately $5,000,000 related to severance costs and $550,000 related to
office closing costs. These costs will be paid during fiscal year 2000.
The Company recorded a charge of $650,000 in 1998 consisting of severance
obligations resulting from consolidating its corporate offices in Atlanta,
Georgia.
The Company recorded a $512,000 charge in 1997 as a result of the termination of
employment of a former executive, representing the present value of future
severance payments due under his employment agreement. The severance obligation
is being paid in monthly installments of approximately $17,000 beginning
December 1997 and is recorded in other current and long-term liabilities in the
accompanying balance sheet.
As of December 31, 1999, approximately $2,240,000 of severance and office
closing costs remained to be paid out under the terms of the 1999, 1998 and 1997
arrangements. These costs will be paid during fiscal year 2000.
F-13
<PAGE> 43
ACSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. RETIREMENT SAVINGS PLAN:
The Company established a defined contribution retirement plan in 1999 for the
benefit of all eligible employees. The plan established in 1999 replaced the
Acsys Resources, Staffing Edge and ICON defined contribution retirement plans.
The plan qualifies under Section 401(k) of the Internal Revenue Code and allows
for eligible employees to contribute to the plan up to 15% of their pretax
compensation, subject to the maximum contributions allowed by the Internal
Revenue Code. The plan provides for discretionary matching contributions by the
Company based on a percentage of the participant's contributions to the plan and
a discretionary profit sharing contribution based on employee compensation. The
Company made matching contributions of $402,000, $55,000 and $35,000 in 1999,
1998 and 1997, respectively.
8. INCOME TAXES:
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
1999 1998 1997
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal:
Current..............$ 1,618 $ 2,781 $ (96)
Deferred............. (1,295) 1,859 464
------------ ------------ ------------
323 4,640 368
------------ ------------ ------------
State:
Current.............. 189 573 (17)
Deferred............. (151) 314 87
------------ ------------ ------------
38 887 70
------------ ------------ ------------
$ 361 $ 5,527 $ 438
============ ============ ============
</TABLE>
The tax effect of significant temporary differences is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1999 1998
------ ------
(IN THOUSANDS)
<S> <C> <C>
GROSS DEFERRED TAX ASSETS:
Reserves not currently deductible for tax ........................ $ 639 $ 432
Accrued liabilities .............................................. 595 78
Amortization and depreciation .................................... 355 --
Other ............................................................ 1,018 --
------- -------
2,607 510
GROSS DEFERRED TAX LIABILITY:
Difference between cash basis of accounting (tax) and
accrual basis of accounting (book) ........................... (1,740) (3,050)
Amortization and depreciation .................................... (780) (586)
Other ............................................................ 846) (58)
------- -------
(3,366) (3,694)
------ -------
Net deferred income tax liability ........................... $ (759) $(3,184)
======= =======
</TABLE>
F-14
<PAGE> 44
ACSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The federal statutory income tax rate is reconciled to the effective tax rate as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1999 1998 1997
---- ---- ---
<S> <C> <C> <C>
Federal statutory rate ........................... (34%) 34% 34%
Reinstatement of deferred taxes as a result of
termination of S-corporation status .............. -- 70 --
State income taxes, net of federal benefit ....... (4) 3 4
Income allocated to S-corporation period ......... -- (2) (12)
Expenses not deductible for tax purposes ......... 100 24 2
---- ---- ---
62% 129% 28%
==== ==== ===
</TABLE>
9. RELATED PARTIES:
The Company had outstanding advances totaling $87,000 and $244,000 at December
31, 1999 and 1998, respectively, to shareholders that are recorded as prepaid
and other current assets in the accompanying balance sheets.
10. CAPITAL TRANSACTIONS:
Stock Option Plans
The Company currently has three stock option plans that provide for the granting
of stock options to officers, employees and directors. The objectives of these
plans include attracting and retaining personnel, providing for additional
performance incentives, and promoting the success of the Company by providing
employees the opportunity to acquire the Company's common stock. As described
below, the Company's 1997 Stock Option Plan (the "1997 Option Plan") is the only
plan with stock option awards available for grant.
1997 Option Plan
In May 1997, the Company established the 1997 Option Plan authorizing 2,000,000
shares of common stock to be issued under the plan. The 1997 Option Plan
provides that the number of shares of common stock available for issuance
thereunder shall be automatically increased on the first trading day of each
calendar year by the lesser of (i) three percent of the number of shares
outstanding on the preceding trading day or (ii) 500,000 shares. Shares of
common stock which are attributable to awards which have expired, terminated or
have been canceled or forfeited during any calendar year are available for
issuance or use in connection with future awards during such calendar year. As
of January 1, 2000, the number of authorized shares of common stock available
for issuance under the plan was increased to 2,868,555 shares. The Company
issued options to certain employees and executive officers of the Company to
purchase 922,621 and 1,816,751 shares of common stock, net of cancellations, at
exercise prices that ranged from $1.81 to $4.69 per share and $8.50 to $18.50
per share in 1999 and 1998, respectively. In 1997, the Company issued 97,698
non-qualified stock options and 37,500 qualified stock options at $8.00 per
share to an officer of the Company.
F-15
<PAGE> 45
ACSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Acsys Resources Plan
In January 1997, prior to its acquisition by the Company, Acsys Resources issued
stock options to its officers and employees under the Acsys Resources 1996
Equity Compensation Plan (the "Acsys Resources Plan"). In September 1997, in
connection with the merger of the Company and Acsys Resources, the Acsys
Resources Plan stock options were exchanged for 109,622 of the Company's stock
options at an exercise price of $2.66 per share. The exchange ratio was based on
the exchange ratio used to effect the merger between Acsys Resources and the
Company on September 3, 1997. In connection with the merger, these options
became fully vested in accordance with change of control provision included in
the Acsys Resources Plan.
ICON Plan
In May 1997, prior to its acquisition by the Company, ICON issued stock options
to certain employees. In May 1998, in connection with the merger of the Company
and ICON, the ICON stock options were exchanged for 39,480 stock options at an
aggregate exercise price of $35.40. In connection with the merger, these options
became fully vested.
A summary of the status of the Company's stock options outstanding is as
follows.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS OUTSTANDING EXERCISE PRICE
-------------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Balance at December 31, 1997 284 $ 4.83
Options granted 1,999 10.48
Options exercised (67) 2.66
Options cancelled/forfeited (182) 9.20
-------------------- ---------------
Balance at December 31, 1998 2,034 $10.06
Options granted 923 3.45
Options exercised (50) 0.98
Options cancelled/forfeited (675) 10.06
-------------------- ---------------
Balance at December 31, 1999 2,232 $ 7.52
==================== ===============
Number of shares exercisable at December 31, 1999 627 $ 8.35
==================== ===============
</TABLE>
F-16
<PAGE> 46
ACSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company accounts for its option plan under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." In 1995, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). SFAS
123 established a fair value based method of accounting for stock-based
compensation plans. SFAS 123 requires that an employer's financial statements
include certain disclosures about stock-based employee compensation arrangements
regardless of the method used to account for the plan. Had the Company
recognized compensation cost for its stock option plans consistent with the
provisions of SFAS 123, the following pro forma net loss per common share for
the years ended December 31, 1999, 1998 and 1997 would have resulted:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
1999 1998 1997
----------------------------------------------
(IN THOUSANDS-EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net income (loss):
As reported ..................................................... $ (940) $ (1,226) $ 1,146
=========== =========== ===========
As calculated in accordance with SFAS 123 ....................... $ (3,380) $ (2,743) $ 871
=========== =========== ===========
Net income (loss) per common share:
As reported ..................................................... $ (0.06) $ (0.09) $ 0.02
=========== =========== ===========
As calculated in accordance with SFAS 123 ....................... $ (0.23) $ (0.20) $ (0.01)
=========== =========== ===========
Shares used in calculating net income per diluted common share .. 14,484 14,016 10,440
=========== =========== ==========
</TABLE>
The fair value of each option grant is estimated on the grant date using the
Black-Scholes option pricing model, with a risk-free interest rate of 5.4%, 5.4%
and 6.5% for the years ended December 31, 1999, 1998 and 1997, respectively, no
expected dividend yield and an expected life of five years. A volatility rate of
85% and 60% was assumed for 1999 and 1998, respectively. A volatility of 0% was
assumed for the year ended December 31, 1997 as the Company was privately held.
As of December 31, 1999, 1998 and 1997, the weighted average fair value of the
options outstanding was $2.38, $5.46 and $1.61 per option, respectively.
Redemption and Severance Agreements
In September 1996, Acsys Resources, entered into a Stock Redemption Agreement
with one of its shareholders. Under this agreement, Acsys Resources repurchased
a portion of the shares owned by this shareholder for $458,500. This agreement
initially required Acsys Resources to repurchase 122,012 shares of common stock
at a price based on an earnings formula defined in the Stock Redemption
Agreement. The owner of these 122,012 shares of redeemable common stock entered
into a contractual waiver of all redemption rights effective upon the IPO.
Accordingly, upon completion of the Company's IPO, these shares have been
reclassified as common stock.
In connection with the Stock Redemption Agreement, Acsys Resources and the
shareholder also entered into a severance agreement. Under this agreement, the
shareholder received $458,500, which was charged to expense in 1996. The Company
paid $200,000 and $717,000 in September 1996 and September 1997, respectively in
settlement of amounts due under this agreement.
F-17
<PAGE> 47
ACSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. ACQUISITIONS:
Pooling Transaction
On May 22, 1998, the Company acquired all of the outstanding stock of ICON, an
Atlanta-based information technology staffing company, in a stock-for-stock
merger. As noted earlier, this transaction was accounted for as a pooling of
interests for accounting purposes and as a tax-free reorganization. Under the
terms of the merger agreement, ICON shareholders received 2,820,360 shares of
common stock in exchange for all of the equity interests in ICON. In connection
with the merger, the Company recorded a charge for combination expenses of $1.7
million in 1998, including investment banking, legal and accounting fees, and
other transaction costs associated with the merger.
Purchase Transactions
On August 4, 1998, the Company acquired all of the outstanding stock of Staffing
Edge, a specialty professional staffing firm with offices throughout the
Midwestern United States, for $22,510,000 in cash, 81,766 shares of common stock
with an estimated fair value of $838,000, transaction costs of $2,101,000 and
assumption of debt of $7,040,000. The Company has accounted for this transaction
under the purchase method of accounting. The excess of approximately $32,512,000
of the purchase price over the estimated fair value of net assets acquired was
recorded as goodwill and is being amortized on a straight-line basis over 40
years. The results of operations for Staffing Edge are included from the date of
acquisition.
On July 1, 1998, the Company acquired all of the outstanding stock of KPD, an
information technology staffing firm located on Long Island, New York. The
Company accounted for this transaction under the purchase method of accounting.
The results of operations for KPD are included from the date of acquisition.
On March 31, 1998, the Company acquired all of the outstanding stock of TGS, an
accounting and finance staffing firm located in Richmond, Virginia. The Company
has accounted for this transaction under the purchase method of accounting. The
results of operations of TGS are included from the date of acquisition.
On August 12, 1997, the Company acquired all of the outstanding stock of C.P.A.
Staffing, Inc. for $1,900,000 in cash, 1,219,274 shares of common stock with an
estimated fair value of $7,770,000, and transaction costs of $144,000. The
Company has accounted for this transaction under the purchase method of
accounting. The excess of approximately $8,750,000 of the purchase price over
the estimated fair value of the net assets acquired was recorded as goodwill and
is being amortized on a straight-line basis over 40 years. The results of
operations for C.P.A. Staffing are included from the date of acquisition.
The following table summarizes the unaudited pro forma results of operations of
the Company for the years ended December 31, 1998 and 1997 assuming that the
acquisitions of C.P.A. Staffing, TGS, KPD and Staffing Edge had occurred on
January 1, 1997. There were no pro forma adjustments for the year ended December
31, 1999.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
------------------------------------
1998 1997
---------------- -------------
(IN THOUSANDS--EXCEPT PER SHARE DATA)
<S> <C> <C>
Service revenues.............................................. $148,303 $107,805
Pro forma net income.......................................... 1,503 15
Pro forma diluted net income (loss) per share................. 0.10 (0.08)
Shares used in computing pro forma diluted net income per
share amounts............................................ 14,452 11,420
</TABLE>
F-18
<PAGE> 48
ACSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. SEGMENT AND RELATED INFORMATION
The Company operates in approximately 20 major metropolitan markets in the
United States. Within each market, the Company offers a variety of professional
staffing services that result in differing profit margins. The Company has three
reportable segments: Permanent Placement, Temporary Services, and IT Contract
Services. While there is cross-selling, these segments are managed separately as
each business generally offers different services, has distinct candidate and
client pools, and requires different marketing strategies.
The Permanent Placement segment provides contingency-based placement services by
identifying, evaluating and recommending qualified candidates for permanent
employment by clients. The Permanent Placement segment generates revenue equal
to a percentage of a candidate's first-year annual salary. The Temporary
Services segment provides professional and clerical temporary employees to
clients, generally billing clients on an hourly basis. The IT Contract Services
segment provides qualified information technology professionals to clients on a
contracted or hourly basis to assist in enterprise resource planning software
implementation, systems integration services and information technology
services.
The Company does not allocate depreciation expense or assets to each of the
segments due to the nature of the Company's service-based operations, which are
not capital intensive. Depreciation expense is included in Corporate Overhead
Expense for each of the periods presented below. The Company evaluates
performance based on profit or loss from operations before depreciation,
amortization, interest and income taxes.
The revenues and operating income (loss) for each of the three identifiable
business segments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1999 1998 1997
--------- --------- --------
<S> <C> <C> <C>
Revenues: (IN THOUSANDS)
Permanent Placements $ 30,475 $ 26,831 $ 18,071
Temporary Services 81,826 61,197 40,879
IT Contract Services 54,025 41,870 19,178
--------- --------- --------
$ 166,326 $ 129,898 $ 78,128
========= ========= ========
Operating Income (Loss):
Permanent Placements 2,228 3,145 2,403
Temporary Services 5,983 7,628 5,279
IT Contract Services 3,951 4,538 1,695
Corporate (3,287) (7,501) (4,526)
Combination Costs -- (1,730) (1,797)
Severance and Franchise
Termination Costs (5,479) (650) (682)
--------- --------- --------
$ 3,396 $ 5,430 $ 2,372
========= ========= ========
</TABLE>
F-19
<PAGE> 49
ACSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. SHAREHOLDER PROTECTION RIGHTS AGREEMENT
During the second quarter of 1999, the Company adopted a shareholder protection
rights agreement (the "Rights Plan") and issued Rights in connection with the
Rights Plan. The Rights Plan provided that a dividend of one share purchase
Right be issued for each outstanding share of common stock to shareholders of
record as of the close of business on July 2, 1999. Generally, the Rights are
exercisable only if a person or group (other than certain existing shareholders)
acquires 15% or more of the Company's common stock or announces a tender offer.
Each Right entitles shareholders to buy one one-thousandth of a share of a new
series of junior participating preferred stock at an exercise price of $25.
If the Company is acquired after a person has acquired 15% or more of the
Company's common stock, each Right will entitle its holder to purchase, at the
Right's then-current exercise price, a number of shares of the acquiring
company's common stock having a market value of twice such price. Additionally,
if the Company is not acquired, a Rights holder (other than the person or group
acquiring 15% or more) will be entitled to purchase, at the Right's then-current
exercise price, a number of shares of the Company's common stock having a market
value of twice such price.
Following the acquisition of 15% or more of the Company's common stock, but less
than 50% by any Person or Group, the Board may exchange the Rights (other than
Rights owned by such person or group) at an exchange ratio of one share of the
Company's common stock for each Right.
F-20
<PAGE> 50
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Acsys, Inc.:
We have audited in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements of Acsys, Inc. and
Subsidiaries and have issued our report thereon dated February 2, 2000. Our
audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule of valuation and qualifying accounts
is the responsibility of management and is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 2, 2000
F-21
<PAGE> 51
ACSYS, INC. AND SUBSIDIARIES
SCHEDULE II: VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
CHARGED TO
BEGINNING COSTS AND ENDING
DESCRIPTION BALANCE EXPENSES DEDUCTIONS BALANCE
-------- --------- ---------- --------
<S> <C> <C> <C> <C>
1999
Allowance for doubtful accounts...................... $ 958 2,065 (1,070) $ 1,953
1998
Allowance for doubtful accounts...................... $ 503 1,140 (685) $ 958
1997
Allowance for doubtful accounts...................... $ 313 345 (155) $ 503
</TABLE>
F-22
<PAGE> 52
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
2.1 Agreement and Plan of Reorganization dated as of April 16,
1997 by and among Acsys and David C. Cooper & Associates,
Inc., DCCA Professional Temporaries, Inc., EKT, Inc., and
Infinity Enterprises, Inc., and Cooper Acquisition, Inc., DCCA
Acquisition, Inc., EKT Acquisition, Inc., and Infinity
Acquisition, Inc., and the shareholders named therein. (Filed
as Exhibit 2.1 to Acsys' Registration Statement on Form S-1,
File No. 333-38465 (the "February 1998 S-1") and incorporated
herein by reference.)
2.2 Agreement and Plan of Reorganization dated as of April 24,
1997 by and among Acsys, Cama of Tampa, Inc., Cama
Acquisition, Inc. and Stephen S. Tutwiler. (Filed as Exhibit
2.2 to the February 1998 S-1, and incorporated herein by
reference.)
2.3 Agreement and Plan of Merger by and among Acsys, RFCG Merger
Subsidiary, Inc., Rylan Forbes Consulting Group, Inc., and the
shareholders of Rylan Forbes Consulting Group, Inc. dated as
of July 25, 1997. (Filed as Exhibit 2.3 to the February 1998
S-1, and incorporated herein by reference.)
2.4 Agreement and Plan of Merger by and among Acsys, the
shareholders of Acsys, AcSys Resources, Inc., ASRI Merger
Subsidiary, Inc. and the shareholders of AcSys Resources, Inc.
dated as of September 3, 1997. (Filed as Exhibit 2.4 to the
February 1998 S-1, and incorporated herein by reference.)
2.5 Agreement and Plan of Merger among AcSys Resources, Inc.,
Acsys Staffing Acquisition Corp., Acsys Search Acquisition
Corp., Acsys Career Acquisition Corp., and C.P.A. Staffing,
Inc., C.P.A. Search, Inc., Career Placement Associates, Inc.
and John Ficquette and Louis Boohaker dated as of August 12,
1997. (Filed as Exhibit 2.5 to the February 1998 S-1, and
incorporated herein by reference.)
2.6 Agreement and Plan of Merger by and among Acsys, Icon Merger
Subsidiary, Inc., Icon Search and Consulting, Inc. ("Icon"),
and the shareholders of Icon named therein dated as of March
31, 1998. (Filed as Exhibit 2.6 to Acsys' Quarterly Report on
Form 10-Q dated May 15, 1998, File No. 000-23711, and
incorporated herein by reference.)
2.7 Agreement and Plan of Merger, dated as of August 3, 1998, by
and among Acsys, Inc., SE Merger Subsidiary, Inc., Staffing
Edge, Inc. and certain stockholders of Staffing Edge, Inc.
(Filed as Exhibit 2.1 to Acsys' Current Report on Form 8-K
dated August 19, 1998, File No. 000-23711, and incorporated
herein by reference.)
3.1 Articles of Incorporation of Acsys. (Filed as Exhibit 3.1 to
February 1998 S-1, and incorporated herein by reference.)
</TABLE>
F-23
<PAGE> 53
<TABLE>
<S> <C>
3.1.1 Articles of Amendment to Amended and Restated Articles of
Incorporation of Acsys. (Filed as Exhibit 3.1.1 to Acsys'
Registration Statement on Form S-1, File No. 333-67437 (the
"November 1998 S-1") and incorporated herein by reference.)
3.1.2 Articles of Amendment to Amended and Restated Articles of
Incorporation, as amended, filed with the Secretary of the
State of Georgia on June 20, 1999. (Filed as Exhibit 3.1
Acsys' Form 10-Q dated August 9, 1999, File No. 000-23711, and
incorporated herein by reference.)
3.2 Bylaws of Acsys. (Filed as Exhibit 3.2 to February 1998 S-1,
and incorporated herein by reference.)
4.1 Shareholder Protection Rights Agreement, dated June 20, 1999,
between Acsys and SunTrust Bank, Atlanta, as Rights Agent.
(Filed as Exhibit 99.1 to Acsys' Current Report on Form 8-K
dated June 20, 1999, and incorporated herein by reference.)
4.2 Specimen Common Stock Certificate. (Filed as Exhibit 4 to
Acsys' Registration Statement on Form 8-A filed on September
1, 1999, and incorporated herein by reference.)
10.1 Amended and Restated 1997 Stock Option Plan of Acsys. (Filed
as Exhibit 10.1 to February 1998 S-1, and incorporated herein
by reference.)
10.1.1 Amendment to Amended and Restated Stock Option Plan of Acsys
dated April 29, 1998. (Filed as Exhibit 10.1.1 to Acsys'
Annual Report on Form 10-K dated March 30, 1999, File No.
000-23711 (the "1998 10-K"), and incorporated herein by
reference.)
10.2 Employment Agreement by and between Acsys and Timothy Mann,
Jr. dated March 12, 1997. (Filed as Exhibit 10.3 to the
February 1998 S-1, and incorporated herein by reference.)
10.2.1 Amendment No. 1 to Employment Agreement by and between Acsys
and Timothy Mann, Jr. dated September 3, 1997. (Filed as
Exhibit 10.4 to February 1998 S-1, and incorporated herein by
reference.)
10.2.2 Amendment No. 2 to Employment Agreement by and between Acsys
and Timothy Mann, Jr. dated October 14, 1997. (Filed as
Exhibit 10.5 to February 1998 S-1, and incorporated herein by
reference.)
10.3 Employment Agreement by and between Acsys and Edward S.
Baumstein dated September 3, 1997. (Filed as Exhibit 10.6 to
February 1998 S-1, and incorporated herein by reference.)
10.3.1 Amendment No. 1 to Employment Agreement by and between Acsys
and Edward S. Baumstein dated as of October 14, 1997. (Filed
as Exhibit 10.7 to February 1998 S-1, and incorporated herein
by reference.)
10.4 Stock Option Agreement by and between Acsys and Timothy Mann,
Jr. dated May 19, 1997. (Filed as Exhibit 10.8 to February
1998 S-1, and incorporated herein by reference.)
10.5 Stock Option Agreement by and between Acsys and Timothy Mann,
Jr., dated May 19, 1997. (Filed as Exhibit 10.9 to February
1998 S-1, and incorporated herein by reference.)
10.6 Form of Employment Agreement between Acsys and key employees.
(Filed as Exhibit 10.11 to February 1998 S-1, and incorporated
herein by reference.)
</TABLE>
F-24
<PAGE> 54
<TABLE>
<S> <C>
10.7 Amended and Restated Registration Rights Agreement dated as of
September 3, 1997 by and among Acsys and certain holders of
the capital stock of Acsys. (Filed as Exhibit 10.12 to
February 1998 S-1, and incorporated herein by reference.)
10.7.1 Registration Rights Joinder Agreement dated May 22, 1998 by
and among Acsys and certain holders of the capital stock of
Acsys. (Filed as Exhibit 10.12.1 to Quarterly Report on Form
10-Q dated August 14, 1998, File No. 000-23711 (the "August
1998 10-Q"), and incorporated herein by reference.)
10.7.2 Registration Rights Joinder Agreement dated July 1, 1998 by
and among Acsys and Howard Sapolsky. (Filed as Exhibit 10.1 to
Quarterly Report on Form 10-Q dated November 16, 1998, File
No. 000-23711 (the "November 1998 10-Q"), and incorporated
herein by reference.)
10.7.3 Registration Rights Joinder Agreement dated August 3, 1998 by
and among Acsys and certain holders of capital stock of Acsys.
(Filed as Exhibit 10.2 to the November 1998 10-Q and
incorporated herein by reference.)
10.7.4 Registration Rights Joinder Agreement dated March 31, 1998 by
and among Acsys and certain holders of capital stock of Acsys.
(Filed as Exhibit 10.11.4 to November 1998 S-1, and
incorporate herein by reference.)
10.8 Revolving Credit Agreement dated May 16, 1997 by and among
Acsys and certain lenders. (Filed as Exhibit 10.13 to February
1998 S-1, and incorporated herein by reference.)
10.8.1 Amendment No. 1 to Credit Agreement dated January 29, 1998 by
and among Acsys, NationsBank, National Association as Lender,
and NationsBank, National Association as Agent for the
Lenders. (Filed as Exhibit 10.13.1 to the August 1998 10-Q,
and incorporated herein by reference.)
10.8.2 Amendment No. 2 to Credit Agreement dated August 3, 1998 by
and among Acsys, NationsBank, National Association as Lender
and NationsBank, National Association as Agent for the
Lenders. (Filed as Exhibit 10.3 to the November 1998 10-Q, and
incorporated herein by reference.)
10.8.3 Letter Agreement to Credit Agreement dated December 29, 1998
by and among Acsys, NationsBank, National Association, as
Agent and the Lenders party thereto. (Filed as Exhibit 10.12.3
to the 1998 10-K, and incorporated herein by reference.)
10.8.4 Letter Agreement to Credit Agreement dated March 23, 1999 by
and among Acsys, NationsBank, National association, as Agent
and the Lenders party thereto. (Filed as Exhibit 10.12.4 to
the 1998 10-K, and incorporated herein by reference.)
10.8.5 Amended and Restated Revolving Credit Agreement, dated April
13, 1999, by and among Acsys, Inc., as Borrower, and
NationsBank, N.A. as Agent and the Lenders party thereto.
(Filed as Exhibit 10.12.5 to Quarterly Report dated May 14,
1999, File No. 000-23711, and incorporated herein by
reference.)
10.8.6 Amendment No. 1 to Amended and Restated Credit Agreement dated
December 31, 1999 by and among Acsys, Bank America, N.A., as
Agent and the Lenders party thereto.
</TABLE>
F-25
<PAGE> 55
<TABLE>
<S> <C>
10.9 Form of Indemnification Agreement entered into between Acsys
and its directors and officers. (Filed as Exhibit 10.14 to
February 1998 S-1, and incorporated herein by reference.)
10.10 Form of S-corporation Tax Allocation and Indemnification
Agreement entered into between Acsys and certain of its
shareholders. (Filed as Exhibit 10.15 to February 1998 S-1,
and incorporated herein by reference.)
10.11 Employment Agreement between Acsys and Robert M. Kwatnez dated
as of March 31, 1998 and effective on May 22, 1998. (Filed as
Exhibit 10.18 to the August 1998 10-Q, and incorporated herein
by reference.)
10.12 Non-Solicitation and Non-Competition Agreement between Acsys
and Robert M. Kwatnez dated as of March 31, 1998 and effective
on May 22, 1998. (Filed as Exhibit 10.19 to the August 1998
10-Q, and incorporated herein by reference.)
10.13 Employment Agreement between Acsys and Brady W. Mullinax, Jr.,
dated as of August 21, 1998. (Filed as Exhibit 10.4 the
November 1998 Form 10-Q, and incorporated herein by
reference.)
10.14 Non-Qualified Stock Option Agreement by and between Acsys and
Brady W. Mullinax, Jr. dated August 21, 1998. (Filed as
Exhibit 10.5 to the November 1998 10-Q, and incorporated
herein by reference.)
10.15 Incentive Stock Option Agreement by and between Acsys and
Brady W. Mullinax, Jr. dated August 21, 1998. (Filed as
Exhibit 10.6 to the November 1998 10-Q, and incorporated
herein by reference.)
10.16 Incentive Stock Option Agreement by and between Acsys and
Timothy Mann, Jr., dated October 27, 1998. (Filed as Exhibit
10.21 to the 1998 10-K, and incorporated herein by reference.)
10.17 Non-Qualified Stock Option Agreement by and between Acsys and
Timothy Mann, Jr. dated October 27, 1998. (Filed as Exhibit
10.22 to the 1998 10-K, and incorporated herein by reference.)
10.18 Separation and Release Agreement by and between Acsys and
Edward S. Baumstein dated March 12, 1999. (Filed as Exhibit
10.23 to the 1998 10-K, and incorporated herein by reference.)
10.19 Separation and Release Agreement, dated November 23, 1999,
between Acsys, Inc. and Timothy Mann, Jr. (Filed as Exhibit
10.1 to Acsys' Current Report dated December 8, 1998, File No.
000-23711 (the "December 1999 8-K"), and incorporated herein
by reference.)
10.20 Shareholder and Restrictive Covenant Agreement dated November
23, 1999, between Acsys, Inc. and Timothy Mann, Jr. (Filed as
Exhibit 10.2 to the December 1999 8-K, and incorporated herein
by reference.)
10.21 Separation and Release Agreement, dated December 1, 1999
between Acsys, Inc. and Mary Beth Chase. (Filed as Exhibit
10.3 to the December 1999 8-K, and incorporated herein by
reference.)
10.22 Shareholder and Restrictive Covenant Agreement, dated December
1, 1999, between Acsys, Inc. and Mary Beth Chase. (Filed as
Exhibit 10.4 to the December 1999 8-K, and incorporated herein
by reference.)
</TABLE>
F-26
<PAGE> 56
<TABLE>
<S> <C>
10.23 Separation and Release Agreement, dated December 1, 1999,
between Acsys, Inc., Acsys IT, Inc. and Robert M. Kwatnez.
(Filed as Exhibit 10.5 to the December 1999 8-K, and
incorporated herein by reference.)
10.24 Shareholder and Restrictive Covenant Agreement, dated December
1, 1999, between Acsys, Inc. and Robert Kwatnez. (Filed as
Exhibit 10.6 to the December 1999 8-K, and incorporated herein
by reference.)
10.25 Separation and Release Agreement, dated December 1, 1999,
between Acsys, Inc., Acsys IT, Inc. and Steven M. Sutton.
(Filed as Exhibit 10.7 to the December 1999 8-K, and
incorporated herein by reference.)
10.26 Shareholder and Restrictive Covenant Agreement, dated December
1, 1999, between Acsys, Inc. and Steven M. Sutton. (Filed as
Exhibit 10.8 to the December 1999 8-K, and incorporated herein
by reference.)
10.27 Separation and Release Agreement, dated December 1, 1999,
between Acsys, Inc., Acsys IT, Inc. and Robert D. Bailey.
(Filed as Exhibit 10.9 to the December 1999 8-K, and
incorporated herein by reference.)
10.28 Shareholder and Restrictive Covenant Agreement, dated December
1, 1999, between Acsys, Inc. and Robert D. Bailey. (Filed as
Exhibit 10.10 to the December 1999 8-K, and incorporated
herein by reference.)
10.29 Employment Agreement between Acsys, Inc. and Patricia Kennedy
dated February 7, 2000
10.30 Incentive Stock Option Agreement by and between Acsys and
Brady W. Mullinax, Jr. dated February 2, 2000.
10.31 Incentive Stock Option Agreement by and between Acsys and
Patricia Kennedy dated February 21, 2000.
21.1 Subsidiaries of Acsys. (Filed as Exhibit 21.1 to the
Registration Statement on Form S-1 filed on November 17, 1998,
and incorporated herein by reference.)
23.1 Consent of Arthur Andersen LLP.
24.1 Power of Attorney [included on signature page].
27.1 Financial Data Schedule for the year ended December 31, 1999
(for SEC use only).
27.2 Financial Data Schedule for the year ended December 31, 1998
(for SEC use only).
</TABLE>
F-27
<PAGE> 1
EXHIBIT 10.8.6
AMENDMENT NO. 1
TO AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDMENT NO. 1 TO AMENDED AND RESTATED CREDIT AGREEMENT (the
"Amendment Agreement"), dated as of December 31, 1999 is made by and among
ACSYS, INC. a Georgia corporation having its principal place of business in
Atlanta, Georgia (the "Borrower"), BANK OF AMERICA, N.A., SUCCESSOR IN INTEREST
TO NATIONSBANK, N. A., a national banking association organized and existing
under the laws of the United States, as Lender, BANK OF AMERICA, N.A.,
SUCCESSOR IN INTEREST TO NATIONSBANK, N. A., in its capacity as administrative
agent for the Lenders (in such capacity, the "Agent"), and the Lenders party
hereto. Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed to such terms in the Credit Agreement (as defined below).
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Lenders have heretofore
entered into that certain Amended and Restated Revolving Credit Agreement dated
as of April 13, 1999 (as amended, modified, supplemented or amended and
restated from time to time, the "Credit Agreement") pursuant to which the
Lenders agreed to make a revolving credit facility to the Borrower; and
WHEREAS, each Domestic Subsidiary of the Borrower (each a "Guarantor"
and collectively the "Guarantors") is party to that certain Amended and
Restated Guaranty and Suretyship Agreement dated as of April 13, 1999 (as
amended, modified, supplemented or amended and restated from time to time, the
"Guaranty Agreement") pursuant to which the Guarantors guaranteed full payment
and performance of the Borrower's Obligations under the Credit Agreement; and
WHEREAS, the Borrower has requested that the Agent and the Lenders
amend the Credit Agreement in the manner provided herein; and
WHEREAS, upon the terms and conditions contained herein, the Agent and
the Lenders are willing to amend the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and conditions herein
set forth, it is hereby agreed as follows:
1. CREDIT AGREEMENT AMENDMENT. Subject to the conditions hereof,
the Credit Agreement is hereby amended, effective as of the date the conditions
set forth in Section 3 of this Amendment Agreement are satisfied, as follows:
(a) The definition of "Applicable Margin" in Section 1.02 is
hereby amended and restated as follows:
<PAGE> 2
"'Applicable Margin' means, at any time during the periods
below, that percent per annum for the fiscal quarter set
forth in Table I below which shall be based upon the
Revolving Credit Outstandings as at the last day of the
preceding fiscal quarter as specified in Table I below:
TABLE I
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Fiscal Quarter and Revolving Credit Applicable Margin for Applicable Margin for
Outstandings Base Rate Loans Eurodollar Rate Loans
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
October 1, 2000 to December 31, 2000 and
Revolving Credit Outstandings equal or exceed 2.25% 3.75%
$35,000,000 as at September 30, 2000
- ----------------------------------------------------------------------------------------------------------------------
January 1, 2001 to March 31, 2001 and Revolving
Credit Outstandings equal or exceed $30,000,000 2.50% 4.00%
as at December 31, 2000
- ----------------------------------------------------------------------------------------------------------------------
April 1, 2001 to June 30, 2001 and July 1, 2001
to October 31, 2001 and Revolving Credit 2.75% 4.25%
Outstandings equal or exceed $25,000,000 as at
March 31, 2001 and June 30, 2001, respectively
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
; provided, however that from January 1, 2000 to and
including September 30, 2000, the Applicable Margin shall be
2.00% for Base Rate Loans and 3.50% for Eurodollar Rate
Loans; provided, further, however, that if the Revolving
Credit Outstandings shall be less than the amounts described
in Table I above as at the last day of the fiscal quarter
specified, and the Compliance Certificate for the
Four-Quarter Period ending on such date indicates that the
Consolidated Leverage Ratio is not more than 3.00 to 1.00 and
the Consolidated Fixed Charge Coverage Ratio is not less than
1.75 to 1.00 and no other Default or Event of Default exists,
then the Applicable Margin shall be based on the Consolidated
Leverage Ratio as set forth in Table II below starting on the
date next following the date the Compliance Certificate for
such Four-Quarter Period is received:
2
<PAGE> 3
TABLE II
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Tier Consolidated Leverage Ratio Applicable Applicable
Margin for Base Margin for
Rate Loans Eurodollar Rate
Loans
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
I Equal to or less than 1.50 to 1.00 0.00% 1.50%
- ----------------------------------------------------------------------------------------------------------------------
II Greater than 1.50 to 1.00 and less than or 0.25% 1.75%
equal to 2.00 to 1.00
- ----------------------------------------------------------------------------------------------------------------------
III Greater than 2.00 to 1.00 and less than or 0.50% 2.00%
equal to 2.50 to 1.00
- ----------------------------------------------------------------------------------------------------------------------
IV Greater than 2.50 to 1.00 and less than or 0.75% 2.25%
equal to 3.00 to 1.00
- ----------------------------------------------------------------------------------------------------------------------
V Greater than 3.00 to 1.00 1.00% 2.50%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
and provided, further, however, that if the Revolving Credit
Outstandings shall be greater than or equal to the amounts
described in Table I above as at the last day of the fiscal
quarter specified, and the Compliance Certificate for the
Four-Quarter Period ending on such date indicates that the
Consolidated Leverage Ratio is not more than 3.00 to 1.00 and
the Consolidated Fixed Charge Coverage Ratio is not less than
1.75 to 1.00 and no other Default or Event of Default exists,
then the Applicable Margin shall be based on the Consolidated
Leverage Ratio as set forth in Table III below starting on
the date next following the date the Compliance Certificate
for such Four-Quarter Period is received:
TABLE III
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Tier Consolidated Leverage Ratio Applicable Applicable
Margin for Base Margin for
Rate Loans Eurodollar Rate
Loans
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
I Equal to or less than 1.50 to 1.00 1.00% 2.50%
- ----------------------------------------------------------------------------------------------------------------------
II Greater than 1.50 to 1.00 and less than or 1.25% 2.75%
equal to 2.00 to 1.00
- ----------------------------------------------------------------------------------------------------------------------
III Greater than 2.00 to 1.00 and less than or 1.50% 3.00%
equal to 2.50 to 1.00
- ----------------------------------------------------------------------------------------------------------------------
IV Greater than 2.50 to 1.00 and less than or 1.75% 3.25%
equal to 3.00 to 1.00
- ----------------------------------------------------------------------------------------------------------------------
V Greater than 3.00 to 1.00 2.00% 3.50%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The Applicable Margin shall be established at the end of each
fiscal quarter of the Borrower (each, a "Determination
Date"). With respect to changes in the Applicable Margin
based on the Consolidated Leverage Ratio set forth in the
Tables II and III above, each such change in the Applicable
Margin following each Determination Date shall be determined
based upon the computations set
3
<PAGE> 4
forth in the Compliance Certificate furnished to the Agent
pursuant to Section 8.01(a)(ii) and Section 8.01(b)(ii),
subject to review and approval of such computations by the
Agent, shall be effective commencing on the date following
the date such Compliance Certificate is received (or, if
earlier, the date such Compliance Certificate was required to
be delivered) until the date following the date on which a
new Compliance Certificate is delivered (or, if a new
Compliance Certificate is delivered later than required,
until the date preceding the date such Compliance Certificate
was required to have been delivered); provided, however, if
the Borrower shall fail to deliver any such Compliance
Certificate within the time period required by Section 8.01,
then the Applicable Margin shall be the Applicable Margin
listed in Table I above for the applicable fiscal quarter and
the type of Loan, regardless of the principal amount of
Revolving Credit Outstandings, until the appropriate
Compliance Certificate is so delivered.
(b) Section 1.02 is hereby amended by adding a new definition of
"Cash Collateral Account" as follows:
"`Cash Collateral Account' shall have the meaning ascribed
thereto in the Cash Collateral Agreement."
(c) Section 1.02 is hereby amended by adding a new definition of
"Cash Collateral Agreement" as follows:
"'Cash Collateral Agreement' means that certain Cash
Collateral Agreement entered into by and among the Borrower,
its Subsidiaries and the Agent on behalf of the Lenders
substantially in the form of Exhibit L hereof."
(d) The definition of "Change of Control" in Section 1.02 is
hereby amended by deleting section (ii) thereof and replacing
in its stead the following:
"(ii) the replacement of a majority of the Board of Directors
of the Borrower over an eighteen month period commencing on
December 31, 1999 from the directors who constituted the
Board of Directors of the Borrower at the beginning of such
period, and the election of each such replacement director
shall not have been approved by a vote of at least a majority
of the Board of Directors of the Borrower then still in
office who either were members of such Board of Directors at
the beginning of such period or whose election as a member of
such Board of Directors was previously so approved."
and by deleting section (iii) thereof and replacing in its
stead the following:
"(iii) any Person or two or more Persons, other than those
persons listed in clause (ii) hereof, acting in concert shall
have acquired by contract or otherwise, or shall have entered
into a contract or arrangement that, upon consummation
thereof, will result in its or their acquisition of the power
to exercise, directly or indirectly, a controlling influence
on the management or policies of the Borrower; provided,
4
<PAGE> 5
however, that the following shall not be included in this
definition of "Change of Control": the Borrower's entry into
(i) any contract or arrangement for the purchase or merger of
the Borrower by or with any Person or Persons which provides
in writing for payment in full of all of the Obligations
hereunder and reduction of the Total Revolving Credit
Commitment to zero prior to or concurrently with
effectiveness of such purchase or merger transaction or (ii)
a letter of intent (or similar documentation less binding
than, or intended to be preliminary to, a definitive purchase
and sale or merger agreement) for the negotiation of the
purchase or merger of the Borrower by or with any Person or
Persons and the conduct of due diligence relating thereto."
(e) The definition of "Consolidated EBITDA" in Section 1.02 is
hereby amended in its entirety so that as amended it reads as
follows:
"Consolidated EBITDA" means, with respect to the Borrower and
its Subsidiaries for the Four-Quarter Period ending on the
date of computation thereof, the sum of, without duplication
(i) Consolidated Net Income, (ii) Consolidated Interest
Expense, (iii) state and federal taxes on income (to the
extent accrued by the Borrower and its Subsidiaries), (iv)
amortization, (v) depreciation, and (vi) expenses incurred in
connection with the severance of employees by the Borrower or
any Subsidiary during the fiscal quarter ended December 31,
1999 in an amount not to exceed $2,200,000 for each of the
four Four-Quarter Periods which include the fiscal quarter
ended December 31, 1999 (in addition to any amounts
previously incurred in connection with the severance of
employees by the Borrower or any Subsidiary during the fiscal
quarters ended March 31, 1999 and September 30, 1999 as set
forth in the Compliance Certificates and supporting schedules
thereto previously delivered by the Borrower for such fiscal
quarters), all determined on a consolidated basis in
accordance with GAAP applied on a Consistent Basis."
(f) The definition of "Required Lenders" in Section 1.02 is
hereby amended by deleting the phrase "66 2/3%" in the
second line of such definition and replacing in its stead the
phrase "80%."
(g) The definition of "Stated Termination Date" in Section 1.02
is hereby amended in its entirety so that as amended it reads
as follows:
"Stated Termination Date" means October 31, 2001.
(h) The definition of "Total Revolving Credit Commitment" in
Section 1.02 is hereby amended in its entirety so that as
amended it reads as follows:
"Total Revolving Credit Commitment" means a principal amount
equal to $55,000,000, as reduced from time to time in
accordance with Section 2.07."
5
<PAGE> 6
(i) Section 2.12 is hereby amended in its entirety so that as
amended it reads as follows:
"2.12 Use of Proceeds. The proceeds of the Loans made
hereunder shall be used by the Borrower as follows: (i) a
principal amount not to exceed $45,000,000 at any time
outstanding may be used to finance working capital, capital
expenditures and other lawful general corporate purposes, and
(ii) a principal amount not to exceed $10,000,000 at any time
outstanding may be used to finance Acquisitions permitted
hereunder."
(j) Section 4.07 is hereby amended and restated in its entirety
so that as amended it reads as follows:
"4.07. Replacement Banks. If (a) a Lender requests
compensation from the Borrower pursuant to Section 4.01, (b)
it becomes unlawful for a Lender to make Eurodollar Rate
Loans as set forth in Section 4.03, (c) a Lender refuses or
otherwise fails to consent to any waiver, amendment or other
modification of any Loan Document which (i) requires the
written consent of more than the Required Lenders under
Section 12.06 and (ii) has been approved in writing by the
Required Lenders or (d) the Borrower elects to replace First
Union as a Lender, then so long as there does not then exist
any Default or Event of Default, the Borrower may, in its
sole discretion, on ten (10) Business Days' prior written
notice to the Agent and any such Lender described in clauses
(a), (b), (c) or (d) above, cause such Lender to (and such
Lender shall) assign, pursuant to Section 12.01, all of its
rights and obligations under this Agreement to an Eligible
Assignee designated by the Borrower which is willing to
become a Lender for a purchase price equal to the outstanding
principal amount of the Loans and Reimbursement Obligations
payable to such Lender plus any accrued but unpaid interest
on such Loans and Reimbursement Obligations, any accrued but
unpaid fees payable hereunder to such Lender and any other
amount payable to such Lender under this Agreement; provided,
however, that any expenses or other amounts which would be
owing to such Lender pursuant to any indemnification
provision hereof (including, if applicable, Section 4.05)
shall be payable by the Borrower as if the Borrower had
prepaid the Loans of such Lender rather than such Lender
having assigned its interest hereunder, and provided,
further, however, that the replacement of First Union as a
Lender shall require the approval of all Lenders other than
First Union. The Borrower or the assignee shall pay the
applicable processing fee under Section 12.01. This Section
4.07 shall not be applicable to the replacement of the Swing
Line Lender."
(k) Article VIII is hereby amended by adding the following
Section 8.21 to the end of such Article:
"8.21 Cash Collateral Agreement. Subject to the terms of the
Cash Collateral Agreement, ensure that all of the accounts
receivable of the Borrower and its
6
<PAGE> 7
Subsidiaries are paid directly by the account debtors into a
Cash Collateral Account established by the Borrower with the
Agent."
(l) Section 9.01 is hereby amended in its entirety so that as
amended it reads as follows:
"9.01 Consolidated Leverage Ratio. Permit at the end of each
fiscal quarter the Consolidated Leverage Ratio to exceed that
set forth opposite such period:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Four Quarter Periods Ending: Consolidated Leverage Ratio
- ------------------------------------------------------------------------------------------------------------
<S> <C>
December 31, 1999 3.35 to 1.00
- ------------------------------------------------------------------------------------------------------------
March 31, 2000 3.35 to 1.00
- ------------------------------------------------------------------------------------------------------------
June 30, 2000 3.35 to 1.00
- ------------------------------------------------------------------------------------------------------------
September 30, 2000 3.15 to 1.00
- ------------------------------------------------------------------------------------------------------------
December 31, 2000 and thereafter 3.00 to 1.00
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(m) Section 9.02 is hereby amended in its entirety so that as
amended it reads as follows:
"9.02 Consolidated Fixed Charge Coverage Ratio. Permit at the
end of each fiscal quarter the Consolidated Fixed Charge
Coverage Ratio to be less than that set forth opposite such
period:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Four Quarter Periods Ending: Consolidated Fixed Charge Coverage Ratio
- ------------------------------------------------------------------------------------------------------------
<S> <C>
December 31, 1999 1.50 to 1.00
- ------------------------------------------------------------------------------------------------------------
March 31, 2000 1.25 to 1.00
- ------------------------------------------------------------------------------------------------------------
June 30, 2000 1.25 to 1.00
- ------------------------------------------------------------------------------------------------------------
September 30, 2000 1.50 to 1.00
- ------------------------------------------------------------------------------------------------------------
December 31, 2000 and thereafter 1.75 to 1.00
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(n) Section 9.04 is hereby amended in its entirety so that as
amended it reads as follows:
"9.04 Capital Expenditures. Make or become committed to make
Capital Expenditures (i) which exceed $8,000,000 in the
aggregate for the combined two Fiscal Year period of the
Borrower commencing with the Fiscal Year ending December 31,
1999 and ending with the Fiscal Year ending December 31, 2000
or (ii) which exceed $4,000,000 in the aggregate in any
Fiscal Year of the Borrower commencing with the Fiscal Year
ending December 31, 2001 (on a noncumulative basis, provided
that the Borrower may carry forward to a subsequent Fiscal
Year up to $4,000,000 not expended in the previous Fiscal
Year).
7
<PAGE> 8
(o) Section 9.08 (iv)(D) is hereby amended in its entirety so
that as amended it reads as follows:
"(D) the consent of the Required Lenders shall be required
and"
(p) Section 9.10 is hereby amended in its entirety so that as
amended it reads as follows:
"9.10. Restricted Payments. Make any Restricted Payment or
apply or set apart any of their assets therefor or agree to
do any of the foregoing; provided, however, the Borrower (i)
may purchase up to $1,000,000 of its own stock in each Fiscal
Year so long as (A) such repurchased stock is immediately
retired and not held in treasury stock and (B) immediately
prior to and immediately after giving effect thereto no
Default or Event of Default shall exist or occur and be
continuing and (ii) shall be permitted to make or pay a
dividend or distribution on account of its capital stock or
on account of any Right (as defined hereinafter) consisting
of either (A) a right issued under any plan duly adopted by
the Board of Directors of the Borrower to acquire Permitted
Preferred Stock (as defined below) upon exercise of such
right (a "Right"), (B) the Borrower's common stock or (C)
Permitted Preferred Stock. As used herein, "Permitted
Preferred Stock" shall mean any preferred stock of the
Borrower that (I) does not require the Borrower to pay a
dividend on account of such preferred stock (other than in
connection with the requirement under any preferred stock, if
a dividend is being paid on the common stock, to pay a
dividend in an equal amount per share as that paid on the
common stock) and (II) is not mandatorily redeemable or
redeemable at the option of the holder thereof. The Borrower
agrees and acknowledges that it is prohibited from paying any
dividend or other distribution on account of its capital
stock or any Right other than dividends or distributions
payable in the Borrower's common stock, in a Right or in
Permitted Preferred Stock."
(q) Exhibit A of the Credit Agreement is hereby replaced with
Exhibit A attached hereto.
(r) The Credit Agreement is hereby amended by adding a new
Exhibit L consisting of the form of Cash Collateral Agreement
attached as Exhibit B hereto.
2. REPRESENTATIONS AND WARRANTIES. In order to induce the Agent
and the Lenders to enter into this Amendment Agreement, the Borrower hereby
represents and warrants that the Credit Agreement has been re-examined by the
Borrower and that except as disclosed by the Borrower in writing to the Lenders
as of the date hereof:
(a) The representations and warranties made by the
Borrower in Article VII thereof are true on and as of the date hereof
(except for those representations and warranties which expressly
relate to an earlier date) except that the financial statements
referred to in Section 7.01(f) shall be those most recently furnished
to each Lender pursuant to Section 8.01;
8
<PAGE> 9
(b) There has been no material adverse change in the
condition, financial or otherwise, of the Borrower and its
Subsidiaries since the Closing Date, other than changes in the
ordinary course of business, and no event has occurred which could
reasonably be likely to have a Material Adverse Effect; and
(c) No condition exists which would constitute a Default
or an Event of Default on the part of the Borrower under the Credit
Agreement or the Notes, either immediately or with the lapse of time
or the giving of notice, or both.
3. CONDITIONS PRECEDENT. The effectiveness of this Amendment
Agreement is subject to the receipt by the Agent of the following:
(a) five counterparts of this Amendment Agreement duly
executed by all signatories hereto; and
(b) five counterparts of the Cash Collateral Agreement
duly executed by all signatories thereto; and
(c) copies of all additional agreements, instruments and
documents which the Agent may reasonably request, such documents, when
appropriate, to be certified by appropriate governmental authorities;
and
(d) receipt of payment by the Agent for the pro rata
benefit of the Lenders of an amendment fee equal to $275,000; and
(e) receipt of payment by the Agent for all its fees,
costs and expenses incurred in connection with the preparation,
negotiation and execution of this Amendment Agreement, including
without limitation the reasonable fees and disbursements of counsel to
the Agent.
4. ENTIRE AGREEMENT. This Amendment Agreement sets forth the
entire understanding and agreement of the parties hereto in relation to the
subject matter hereof and supersedes any prior negotiations and agreements
among the parties relative to such subject matter. No promise, condition,
representation or warranty, express or implied, not herein set forth shall bind
any party hereto, and no one of them has relied on any such promise, condition,
representation or warranty. Each of the parties hereto acknowledges that,
except as in this Amendment Agreement otherwise expressly stated, no
representations, warranties or commitments, express or implied, have been made
by any party to the other. None of the terms or conditions of this Amendment
Agreement may be changed, modified, waived or canceled orally or otherwise, in
accordance with Section 12.06 of the Credit Agreement.
5. CONSENT OF GUARANTORS. The Guarantors have joined in the
execution of this Amendment Agreement for the purposes of consenting hereto and
for the further purpose of confirming their guaranty of the Obligations of the
Borrower as provided in the Guaranty Agreement.
9
<PAGE> 10
6. CONSENT OF FIRST UNION. By execution of this Amendment, First
Union National Bank authorizes its replacement as a Lender subject to the
provisions of Section 4.07 of the Credit Agreement, as amended.
7. FULL FORCE AND EFFECT OF AGREEMENT. Except as hereby
specifically amended, modified or supplemented, the Credit Agreement and all
other Loan Documents are hereby confirmed and ratified in all respects and
shall remain in full force and effect according to their respective terms.
8. COUNTERPARTS. This Amendment Agreement may be executed in any
number of counterparts, each of which shall be deemed an original as against
any party whose signature appears thereon, and all of which shall together
constitute one and the same instrument.
9. GOVERNING LAW. Section 12.14 of the Credit Agreement shall
apply to this Amendment Agreement.
10. ENFORCEABILITY. Should any one or more of the provisions of
this Amendment Agreement be determined to be illegal or unenforceable as to one
or more of the parties hereto, all other provisions nevertheless shall remain
effective and binding on the parties hereto.
11. CREDIT AGREEMENT. All references in any of the Loan Documents
to the Credit Agreement shall mean and include the Credit Agreement as amended
hereby.
12. SUCCESSORS AND ASSIGNS. This Amendment Agreement shall be
binding upon and inure to the benefit of each of the Borrower, the Lenders, the
Agent and their respective successors, assigns and legal representatives;
provided, however, that the Borrower, without the prior written consent of the
Lenders, may not assign any rights, powers, duties or obligations hereunder.
[Signature Pages Follow]
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Agreement to be duly executed by their duly authorized officers, all as of the
day and year first written above.
BORROWER:
ACSYS, INC.
BY:
--------------------------------------
NAME:
------------------------------------
TITLE:
-----------------------------------
GUARANTORS:
DAVID C. COOPER AND ASSOCIATES, INC.
ACSYS FINANCIAL STAFFING, INC.
EKT, INC.
INFINITY ENTERPRISES, INC.
CAMA OF TAMPA, INC.
ACSYS RESOURCES, INC.
C.P.A. STAFFING, INC.
RYLAN FORBES CONSULTING GROUP, INC.
ACSYS IT, INC.
DRAMONDI, INC.
KPD SYSTEMS, INC.
STAFFING EDGE, INC.
BY:
--------------------------------------
NAME:
------------------------------------
TITLE:
-----------------------------------
AI INVESTMENTS, INC.
BY:
--------------------------------------
NAME:
------------------------------------
TITLE:
-----------------------------------
11
<PAGE> 12
AGENT:
BANK OF AMERICA, N.A., as Agent for the
Lenders
BY:
--------------------------------------
NAME:
------------------------------------
TITLE:
-----------------------------------
LENDERS:
BANK OF AMERICA, N.A.
BY:
--------------------------------------
NAME:
------------------------------------
TITLE:
-----------------------------------
FIRST UNION NATIONAL BANK
BY:
--------------------------------------
NAME:
------------------------------------
TITLE:
-----------------------------------
WACHOVIA BANK, N.A.
BY:
--------------------------------------
NAME:
------------------------------------
TITLE:
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Exhibit A to Amendment No. 1
EXHIBIT A
Applicable Commitment Percentages
<TABLE>
<CAPTION>
Name of Lender Revolving Credit Applicable
- -------------- ---------------- ----------
Commitment Commitment Percentage
---------- ---------------------
<S> <C> <C>
Bank of America, N.A. $27,500,000 50.0000000%
First Union National Bank $13,750,000 25.0000000%
Wachovia Bank, N.A. $13,750,000 25.0000000%
TOTAL $55,000,000 100%
</TABLE>
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Exhibit B to Amendment No. 1
EXHIBIT L
Form of Cash Collateral Agreement
See attached.
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EXHIBIT 10.29
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), is made effective as of
____, 2000, (the "Effective Date") by and between PAT KENNEDY ("Executive"), a
resident of Illinois, and ACSYS, INC. ("Company"), a Georgia corporation.
Because Company desires to employ Executive and because Executive desires to be
employed by Company, both parties, in consideration of the mutual and exchanged
promises and agreements contained herein and of wages paid and services rendered
hereunder, hereby agree as follows:
SECTION 1. EMPLOYMENT.
(a) Subject to the terms contained in this Agreement, Company hereby
employs Executive and Executive hereby accepts such employment. Initially,
Executive shall have the title of Executive Director, IT Division of Company,
though this position and title subsequently may be changed by Company as
Company or its needs grow or change. Executive shall perform all duties
assigned by the Chief Executive Officer ("CEO") of Company or his or her
designee or by the Board of Directors or its designee. At least initially,
those duties shall include the duties set forth in Exhibit A, though such
duties may be changed from time to time by Company. Executive shall devote her
full business time and best efforts exclusively to rendering services on behalf
of Company. Executive agrees to perform faithfully, industriously, and to the
best efforts of Executive's experience and talent all of the duties that may be
required by the express and implicit terms of this Agreement, to the reasonable
satisfaction of Company. Such duties shall be provided at such place(s) and
time(s) as Company may require.
(b) The term of this Agreement (the "Term") shall commence on the
Effective Date and shall continue for a period of three (3) years thereafter,
unless terminated as set forth in Section 4 ("Termination") below. Upon the
expiration of the initial Term, this Agreement shall automatically renew for
successive additional terms ("Renewal Terms") of one (1) year each unless either
party notifies the other in writing of her/its intent to allow the Agreement to
expire at least thirty (30) days prior to the expiration of the then-current
Term or Renewal Term or unless either party terminates the Agreement in another
manner described in Section 4 ("Termination").
(c) Executive recognizes that she owes a duty of loyalty to Company
and she agrees that, while she is employed by Company pursuant to this
Agreement, she shall not be engaged in any other business. Executive shall
provide Company with all information, suggestions and recommendations Executive
conceives or learns regarding Company's business that could be of benefit to
Employer. Executive shall refrain from any activity or action that creates a
conflict of interest with Company, creates the appearance of a conflict of
interest with Company or reasonably could be expected to have a detrimental
effect upon any aspect of Company's performance or upon Executive's ability to
perform her duties. Executive shall not accept any position as a director,
trustee or other affiliate of any business organization, or as a director or
trustee of any civic or charitable organization.
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without the prior written approval of the Chief Executive Officer of Company,
which approval shall not unreasonably be withheld.
SECTION 2. COMPENSATION.
(a) Base Salary. While employed hereunder, Executive shall be paid a
salary at the annual rate of Two Hundred and Fifty Thousand Dollars
($250,000.00), less withholding for taxes and deductions for other appropriate
items ("Base Salary"). Executive's Base Salary shall be paid in approximately
equal installments no less than monthly. Any Base Salary adjustments shall be
in the discretion of the Chief Executive Officer or the Board of Directors but
Base Salary may not be reduced below $250,000.00 during the Term of this
Agreement. All compensation payments will cease upon termination of this
Agreement; provided, however, that Executive shall be paid for all time worked
prior to the termination.
(b) Bonus. During Executive's employment hereunder, Executive will
be eligible to receive certain cash bonus payments in an amount determined by
the Chief Executive Officer, if Executive's performance and the performance of
Company meet certain criteria set by the Chief Executive Officer, and Executive
otherwise complies fully with this Agreement. In no event shall the annual
bonus be less than Fifty Thousand Dollars ($50,000.00) during the Term of this
Agreement.
SECTION 3. BENEFITS.
(a) Employee Benefit Plans. Executive shall be provided the
opportunity to participate in employee benefit plans made available from time
to time to the majority of senior executive management employees of Company,
subject to the terms, conditions and eligibility requirements of each benefit
plan.
(b) Vacation. Executive shall be entitled to twenty-six (26) days
paid time off ("PTO") annually during her employment hereunder. Any PTO not
used during any calendar year shall be forfeited, except that eighty (80)
hours' unused PTO may be carried forward to the calendar year immediately
following the year in which such paid time off entitlement accrued.
(c) Business Expenses. Executive shall be entitled to reimbursement
of all ordinary and necessary business expenses reasonably incurred for
business travel, communications (including cell phones and pager),
entertainment and meals in connection with the performance of Executive's
duties under this Agreement for the benefit of Company and subject to Company's
established policies for reimbursement of business expenses. Company expects
Executive to attend and participate in continuing education seminars and
courses with respect to the staffing industry and business management related
to her duties, and Company will reimburse Executive for all ordinary and
necessary expenses of such attendance and participation subject to Executive
having obtained prior approval for such participation from the Chief Executive
Officer. Such continuing education courses and seminars will be scheduled in
conjunction with the other senior management employees of the Company in order
to assure coordination of schedules.
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SECTION 4. TERMINATION.
Notwithstanding anything contained herein to the contrary, this
Agreement may be terminated at any time by either party in accordance with the
following terms:
(a) Death. In the event of Executive's death, this Agreement shall
terminate immediately and Company shall be obligated to Executive's family or
estate only for pro-rated salary and bonus actually earned or accrued as of the
date of Executive's death.
(b) Termination -Without Cause. Company may terminate Executive's
employment at any time without cause by providing Executive with written notice
of the termination. If Company terminates Executive's employment hereunder,
Company shall be obligated to pay Executive's pro-rated salary and pro-rated
bonus, if any, only through the actual effective date of termination. In
addition, if Executive executes a separation agreement including a general
release and reaffirmation of certain covenants in this Agreement in a form
acceptable to Company, Company shall pay Executive an amount equal to one (1)
year of Executive's salary and guaranteed bonus; provided, however, that if such
termination occurs upon or after a Change in control, as defined below,
Executive shall be paid in accordance with Section 4(f) below. Company shall
have no other payment obligation under this Agreement or otherwise. Unless
specifically required to be paid by law, other compensation and benefits,
including accrued but unused PTO, will not be provided or paid after
termination.
(c) Termination for Cause. Company may terminate Executive's
employment at any time for Cause by providing Executive with written notice of
the termination. "Cause" shall include, but not be limited to, the following:
(i) any conduct by Executive involving moral turpitude that has
the potential to result in adverse publicity for Company or otherwise to damage
the business or reputation of Company;
(ii) Executive's commission or conviction of, or pleading guilty
or nolo contendere (or any similar plea or admission) to, a felony or a criminal
act involving dishonesty or other moral turpitude;
(iii) any misconduct on the part of Executive in complying with
the terms of this Agreement, in connection with her employment or in connection
with or affecting the business of the Company or any parent or subsidiary of
Company, if not remedied within ten (10) business days after Company's
providing notice thereof;
(iv) any failure or refusal on the part of Executive to perform
her duties under this Agreement or to obey lawful directives from the Chief
Executive Officer or Board of Directors of Company, or either of their
designees, if not remedied within ten (10) business days after Company's
providing notice thereof;
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(v) Executive's disability (defined as her inability to
perform the essential functions of her job for more than twelve (12) workweeks
in any one (1) year period);
(vi) any violation of any policy of Company relating to equal
employment opportunity or harassment;
(vii) any material violation of any policy of Company relating
to business conduct or conflict of interest if not remedied within ten (10)
business days after Company's providing notice thereof;
(viii) any breach by Executive of any obligation under this
Agreement if not remedied within ten (10) business days after Company's
providing notice thereof.
(ix) Executive's failure to meet performance expectations which
are reasonable and consistent with Executive's position, as determined by the
Company's Chief Executive Officer, provided, however, that in the event of this
Section 4(c)(ix) being the sole reason for termination for Cause, Executive
shall have the following cure provisions and rights: In the event of a
determination by the Company's Chief Executive Officer that Executive has
failed to meet performance expectations, the Company shall furnish to Executive
in writing a notice of proposed termination setting forth a specific statement
of the deficiencies in her performance. Executive shall then have a period of
thirty (30) days after the giving of such written notice of proposed
termination by the Company in which to attempt to effect a cure of the
specified deficiencies. If at the end of such thirty (30) day period no such
cure has been effected to the reasonable satisfaction of the Chief Executive
Officer of the Company, then Executive's employment shall be terminated as of
the end of such thirty (30) day period. The Company shall be obligated to
provide to Executive only one such notice of proposed termination, and if
subsequent to effecting a cure of specified deficiencies Executive is
determined by the Chief Executive Officer to have again failed to meet
performance expectations, then her employment may be terminated immediately
upon the Company's giving of notice of termination to Executive which specifies
her deficiencies in performance.
If Company terminates Executive's employment for Cause hereunder, Company shall
be obligated to pay Executive's prorated Base Salary and accrued guaranteed
bonus only through the actual effective date of termination and shall have no
other payment obligation or other liability to Executive under this Agreement
or otherwise. If Company terminates Executive's employment for Cause pursuant
to Section 4(c)(ix), Executive shall not be bound by the noncompetition
restriction in Section 7(c) below. Unless specifically required to be paid by
law, other compensation and benefits will not be provided or paid after
termination.
(d) Resignation Without Good Reason. Executive may resign from
employment hereunder at any time by providing Company with written notice at
least one (1) month in advance of the effective date of the resignation.
Company may, at its sole discretion, elect
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to pay Executive prorated salary and guaranteed bonus, if applicable, in lieu
of any part, or all, of the notice period and shall have no other payment
obligation under this Agreement or otherwise. In addition, in event of such
termination, Executive shall repay to Employer in a lump sum on the effective
date of her resignation that pro rata amount of any relocation expenses paid to
her, or on her behalf, by Company as the then-unexpired Term hereof bears to
the term of this Agreement.
(e) Resignation With Good Reason. Executive may resign from
employment for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) Company's material breach of any material provision of this
Agreement that is not cured within ten (10) business days after Company's
receipt of written notice from Executive describing the alleged breach;
(ii) After a Change of Control, as defined below, Company's
assignment to Executive, without the consent of Executive, of duties materially
inconsistent with Executive's position in Company, Company's removing Executive
from executive job status, Company's reduction in Executive's Base Salary as
defined above or Company's materially changing the method of operating the
business for which Executive was responsible prior to the Change of Control; or
For purposes of this Agreement a "Change in Control" shall mean an event as a
result of which: (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), is or
becomes the "beneficial owner" (as defined in Rule13d-3 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 30% of the total voting power of the voting stock of
the Company; (ii) the Company consolidates with, or merges with or into another
corporation or sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets to any person or any corporation
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding voting stock of the Company
is changed into or exchanged for cash, securities or other property, other than
any such transaction where (A) the outstanding voting stock of the Company is
changed into or exchanged for (x) voting stock of the surviving or transferee
corporation or (y) cash, securities (whether or not including voting stock) or
other property, and (B) the holders of the voting stock of the Company
immediately prior to such transaction own, directly or indirectly, not less
than 70% of the voting power of the voting stock of the surviving corporation
immediately after such transaction; or (iii) individuals who at the date
hereof constitute the Board of the Company (together with any new directors
whose election by such Board or whose nomination for election by the
stockholders of the Company was approved by a vote of 66-2/3% of the directors
then still in office who were directors at the date hereof or whose election or
nomination for election was previously so approved) ceased for any reason to
constitute a majority of the Board of the Company
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then in office; or (iv) the Company is liquidated or dissolved or adopts a plan
of liquidation.
(f) In the event of Executive's resignation for Good Reason prior to
a Change of Control, and if Executive executes a separation agreement including
a general release and reaffirmation of certain covenants in this Agreement in a
form acceptable to Company, Executive shall be entitled to severance pay of a
lump sum equal to one (1) year of Base Salary and guaranteed bonus at her
then-current rate. In the event of Executive's resignation for Good Reason that
occurs after a Change of Control, or the termination of her employment by
Company without Cause upon or after a Change of Control, and if Executive
executes a separation agreement including a general release, reaffirmation of
certain covenants in this Agreement and other promises in a form acceptable to
Company, Executive shall be entitled to severance pay of a lump sum equal to
three (3) times her Base Salary and guaranteed bonus at her then-current rate.
In the event of a Change in Control, there shall be deposited into escrow
immediately prior to the Change in Control the cash amounts payable to the
Executive pursuant to this Section 4(f). If, within one (1) year following the
Change of Control, the Executive terminates her employment for Good Reason
pursuant to Section 4(e) above or Company terminates Executive's employment
without Cause, the escrowed funds will be released to Executive at that time.
If Executive does not resign for Good Reason and her employment is not
terminated by Company without Cause within one (1) year following the Change of
Control, the escrowed funds will be released to the Company at the end of such
one-year period, without prejudice to the Company's obligation to pay such
amounts when and if they later become due under Section 4(e) or (f). Any
interest earned on the escrowed funds during escrow will be paid to the
Company.
(g) Limitation of Benefits.
(i) Notwithstanding anything in this Agreement to the
contrary, in the event it shall be determined that any benefit, payment or
distribution by the Company to or for the benefit of Executive (whether payable
or distributable pursuant to the terms of this Agreement or otherwise) (such
benefits, payments or distributions are hereinafter referred to as "Payments")
would, if paid, be subject to the excise tax (the "Excise Tax") imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
then the aggregate present value of the Payments shall be reduced (but not
below zero) to an amount expressed in present value that maximizes the
aggregate present value of the Payments without causing the Payments or any
part thereof to be subject to the Excise Tax and therefore nondeductible by the
Company because of Section 28OG of the Code (the "Reduced Amount"). For
purposes of this Section 4(g), present value shall be determined in accordance
with Section 280G(d)(4) of the Code. In the event, after the exhaustion of all
remedies, it is necessary to reduce the Payments, the Executive shall direct
which Payments are to be modified or reduced, and the difference between the
Payments and the Reduced Amount shall be treated for all purposes as a loan to
Executive, which Executive shall repay to the Company together with interest at
the applicable Federal rate provided for in Section 7872(f)(2) of the Code.
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(ii) All determinations required to be made under this Section
4(g), including whether an Excise Tax would otherwise be imposed, whether the
Payments shall be reduced, the amount of the Reduced Amount, and the
assumptions to be utilized in arriving at such determinations, shall be made by
Arthur Andersen LLP or such other certified public accounting firm reasonably
acceptable to the Company as may be designated by Executive (the "Accounting
Firm") which shall provide detailed supporting calculations both to the Company
and Executive within fifteen (15) business days of the receipt of notice from
Executive that a Payment is due to be made, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any determination by the Accounting Firm shall be
binding upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Payments
hereunder will have been unnecessarily limited by this Section 3.4
("Underpayment"), consistent with the calculations required to be made
hereunder. The Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive together with interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Code.
Termination of Executive's employment for any reason other than Retirement shall
constitute Executive's resignation from the Board of Directors of the Company,
to the extent that the Executive is a Director at such time.
SECTION 5. CONDITIONS OF EMPLOYMENT.
(a) In accordance with the Immigration Reform Control Act of 1986,
Executive must provide Company with documents demonstrating her identity and
authorization to work in the United States. If Executive fails to provide said
documents to Company, the Company's offer of employment pursuant to this
Agreement will be null and void.
(b) Executive shall sign an 1-9 form within the first three days of
Executive's employment.
SECTION 6. NONDISCLOSURE OF TRADE SECRETS AND CONFIDENTIAL INFORMATION.
(a) Trade Secrets Defined. As used in this Agreement, the term
"Trade Secrets" shall mean all secret, proprietary or confidential information
regarding Company or Company activities that fits within the definition of
"trade secrets" under the Georgia Trade Secrets Act. Without limiting the
foregoing or any definition of Trade Secrets, Trade Secrets protected hereunder
shall include all source codes and object codes for Company software and all
client consulting information and all lists of clients to the extent that such
information fits within the Georgia Trade Secrets Act. Nothing in this
Agreement is intended, or shall be construed, to limit the protections of the
Georgia Trade Secrets Act or any other applicable law protecting trade secrets
or other confidential information. "Trade Secrets" shall not include
information that has become generally available to the public by the act of one
who has the right to disclose such information without violating any right or
privilege of Company. This definition shall not limit any
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definition of "trade secrets" or any equivalent term under the Georgia Trade
Secrets Act or any other state, local or federal law.
(b) Confidential Information Defined. As used in this Agreement, the
term "Confidential Information" shall mean all information regarding Company,
Company's activities, Company's business or Company's clients that is not
generally known to persons not employed (as employees or independent agents) by
Company, that is not generally disclosed by Company practice or authority to
persons not employed by Company and is the subject of reasonable efforts to
keep it confidential. Confidential Information shall include, but not be
limited to product code, product concepts, production techniques, technical
information regarding Company products or services, production processes and
product/service development, operations techniques, product/service formulas,
information concerning Company techniques for use and integration of its
website and other products/services, current and future development and
expansion or contraction plans of Company, sale/acquisition plans and contacts,
marketing plans and contacts, information concerning the legal affairs of
Company and certain information concerning the strategy, tactics and financial
affairs of Company. "Confidential Information" shall not include information
that has become generally available to the public by the act of one who has the
right to disclose such information without violating any right or privilege of
Company. This definition shall not limit any definition of "confidential
information" or any equivalent term under the Georgia Trade Secrets Act or any
other state, local or federal law.
(c) Nondisclosure of Confidential Information. During Executive's
employment hereunder, except in the course of her duties hereunder and in
furtherance of the best interests of Company, and for a period of two (2) years
after Executive's employment with Company terminates for any reason, Executive
shall not directly or indirectly transmit or disclose any Trade Secrets or
Confidential Information to any person, concern or entity, or make use of any
such Confidential Information, directly or indirectly, for herself or for
others, without the prior express written consent of the Chief Executive
Officer of Company. During the term of this Agreement, except in the course of
her duties hereunder and in furtherance of the best interests of Company, and
perpetually thereafter, for so long as the information remains a Trade Secret,
Executive shall not directly or indirectly, for herself or for others, without
the prior express written consent of the Chief Executive Officer of Company,
transmit or disclose any Trade Secrets to any person, concern or entity, or
make use of any such Trade Secrets. Executive warrants that she has not
disclosed or used for her own benefit or the benefit of anyone other than
Company any Confidential Information or Trade Secrets prior to the execution of
this Agreement.
(d) Enforceability of Covenants. Executive and Company agree that
Executive's obligations under these nondisclosure covenants are separate and
distinct from other provisions of this Agreement, and a failure or alleged
failure of Company to perform their obligations under any provision of this
Agreement or other agreements with Company shall not constitute a defense to
the enforceability of these nondisclosure covenants.
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Nothing in this provision or this Agreement shall limit any rights or remedies
otherwise available to Company under federal, state or local law.
SECTION 7. NONRECRUITMENT, NONSOLICITATION AND NONCOMPETITION COVENANTS.
(a) Nonrecruitment of Employees. In consideration of the
compensation and benefits being paid and to be paid by Company to Executive
hereunder, Executive hereby agrees that, during employment with Company and for
one (1) year after the termination of Executive's employment for any reason,
Executive shall not, directly or indirectly solicit or recruit for employment
or encourage to leave employment with Company, on her own behalf or on behalf
of any other person or entity other than Company or any affiliate of Company,
any person with whom Executive worked during Executive's employment and who
performed services for Company clients or worked on Company products or
services while employed by Company and who has not thereafter ceased to be
employed by Company for a period of at least one (1) year. Executive agrees to
exercise her best efforts to prevent any of the activities listed in this
Section from occurring.
(b) Nonsolicitation of Customers. In consideration of the
compensation and benefits being paid and to be paid by Company to Executive
hereunder, Executive hereby agrees that, during employment with Company and
for one (1) year after the termination of Executive's employment, Executive
shall not, directly or indirectly, on behalf of herself or of anyone other than
Company, solicit or attempt to solicit for the purpose of providing permanent
and contract information technology staffing, information technology solutions
or information technology consulting services, any client of Company whom
Executive actively solicited or with whom Executive worked or otherwise had
material contact in the course of Executive's employment with Company.
Executive agrees to exercise her best efforts to prevent any of the activities
listed in this Section from occurring.
(c) Noncompetition. During the term of Executive's employment with
the Company, and for a period of one (1) year thereafter, except as provided in
Section 4(c)(ix) above Executive shall not, without the prior written consent
of the Board of Directors, which consent may be withheld at the sole discretion
of the Board of Directors, engage or participate in, as a business executive or
equity owner of any business or enterprise that directly competes in the
Restricted Area with Company, the Business Activities. For purposes of this
Section 7(c), the "Business Activities" shall be the business activities over
which Executive had authority and control at Company, which consist of: (i)
outsourcing of information technology staffing services; (ii) temporary
information technology staffing services; and (iii) permanent placement
information technology (including information technology staffing and solution
services) staffing and consulting services on a contingent fee basis. For
purposes of this Section 7(c), the "Restricted Area" shall be the area that
is within a thirty (30) mile radius of the city of Atlanta, and within a thirty
(30) mile radius of the cities where Executive is responsible for carrying out
the Business Activities on behalf of Company, which cities are listed on
Exhibit B. Exhibit B may be amended from time to time to ensure that it
accurately reflects the actual territory in which Executive has responsibility
for carrying out Business Activities and Executive agrees to execute amendments
proposed by Company for that
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purpose. Nothing in this Section 7(c) shall prohibit Executive from acquiring
or holding, for investment purposes only, less than five percent (5%) of the
outstanding publicly traded securities of any corporation which may compete
directly or indirectly with the Company.
(d) Enforceability of Covenants. Executive acknowledges that the
Company has a present and future expectation of business within the geographic
areas served by the Company and from the present and proposed customers of the
Company. Executive acknowledges the reasonableness of the term, geographic area
and scope of the covenants set forth in this Agreement, and agrees that she
will not, in any action, suit or other proceeding, deny the reasonableness of,
or assert the unreasonableness of, the premises, consideration or scope of the
covenants set forth herein. Executive further acknowledges that complying with
the provisions contained in this Agreement will not preclude her from engaging
in a lawful profession, trade or business, or from becoming gainfully employed.
Executive and Company agree that Executive's obligations under the above
covenant are separate and distinct under this Agreement, and the failure or
alleged failure of Company to perform its obligations under any other
provisions of this Agreement shall not constitute a defense to the
enforceability of this covenant. Executive agrees that any breach of this
covenant will result in irreparable damage and injury to Company and that
Company will be entitled to injunctive relief in any court of competent
jurisdiction without the necessity of posting any bond. Executive also agrees
that she shall be responsible for all damages incurred by Company due to any
breach of the restrictive covenants contained in this Agreement and that
Company shall be entitled to have Executive pay all costs and attorneys' fees
incurred by Company in enforcing the restrictive covenants in this Agreement.
SECTION 8. OWNERSHIP OF PROTECTED WORKS.
(a) Protected Works. The term "Protected Works" as used in this
Agreement means any and all ideas, inventions, formulas, source codes, object
codes, techniques, processes, concepts, systems, programs, software, software
integration techniques, hardware systems, schematics, flow charts, computer
data bases, client lists, trademarks, service marks, brand names, trade names,
compilations, documents, data, notes, designs, drawings, technical data and/or
training materials, including improvements thereto or derivatives therefrom,
whether or not patentable, or subject to copyright or trademark or trade secret
protection, developed and produced by Executive pursuant to this Agreement or
other agreements between Executive and Company and used or intended for use by
or on behalf of Company, or Company's clients.
(b) Ownership and Assignment of Protected Work. Executive agrees that
any and all Protected Works developed by Executive during her employment or
other engagement with Company under this Agreement and during her employment
with, or other engagement by Company prior to the execution of this Agreement
(whether as employee or independent contractor) are the sole property of
Company, and that no compensation in addition to the amounts set forth in
Section 2 of this Agreement is due to Executive for development or transfer of
such Protected Works. Executive hereby assigns
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and agrees to assign all of her respective rights, title and interest in
Protected Works, including all patents or patent applications, and all
copyrights therein, to Company. Executive further agrees at Company's request
and without further consideration, but at the expense of Company, that
Executive will communicate to Company any facts known to Executive and testify
in any legal proceedings, sign all lawful papers, make all rightful oaths,
execute all divisional, continuing, continuation-in-part, or reissue
applications, all assignments, all registration applications and all other
instruments or papers to carry into full force and effect, the assignment,
transfer and conveyance hereby made or intended to be made and generally do
everything possible for title to the Protected Works and all patents or
copyrights or trademarks or service marks therein to be clearly and exclusively
held by Company. Executive agrees that she will not apply for any state,
federal, or other jurisdiction's registration of rights in any of the Protected
Works and that she will not oppose or object in any way to applications for
registration of same by Company or others designated by Company. Executive
agrees to exercise reasonable care to avoid making the Protected Works
available to any third party. Executive also agrees that she shall be liable to
Company for all damages, including reasonable attorneys' fees and other
expenses of litigation, if the Protected Works are made available to third
parties in any manner by Executive, intentionally or because of her failure to
use reasonable care to avoid disclosure, without the express written consent of
Company.
(c) Executive agrees to disclose and describe to Company, as soon as
possible after their creation, (i) all copyrightable works, databases, data and
other "Protected Works," as defined in subsection (a) above, which are
created by Executive, either alone or with others, during the term of
Executive's employment, or in connection with the formation of Company, and
(ii) all Protected Works which are based in whole or in part upon Confidential
Information or Trade Secrets and are created by Executive, either alone or with
others, within one (1) year after Executive's leaving Company's employ.
(d) There is no other contract or duty on Executive's part now in
existence to assign Protected Works to anyone other than Company. Executive
will not disclose or induce Company to use any confidential information or
material that Executive is now or shall become aware of which belongs to
anyone other than Company.
SECTION 9. RIGHTS TO MATERIALS AND RETURN OF MATERIALS.
All records, files, software, software code, memoranda, reports, price
lists, customer lists, drawings, plans, sketches, documents, technical
information, information on the use, development and integration of software,
and the like (together with all copies of such documents and things) relating
to the business of Company, which Executive shall use or prepare or come in
contact with in the course of, or as a result of, Executive's employment or
other engagement by Company shall, as between the parties to this Agreement,
remain the sole property of Company. Laptop computers, other computers,
software and related data, information and things provided to Executive by
Company or obtained by Executive, directly or indirectly, from Company, also
shall remain the sole property of Company. Upon the termination of Executive's
employment or upon the prior demand of Company, Executive shall immediately
return all such materials and things to Company and shall not
-11-
<PAGE> 12
retain any copies or remove or participate in removing any such materials or
things from the premises of Company after termination or Company's request for
return.
SECTION 10. INVENTIONS, DISCOVERIES AND IMPROVEMENTS.
(a) Executive will promptly disclose and describe to Company (i) all
inventions, improvements, discoveries and technical developments, whether or
not patentable, made or conceived by Executive, either alone or with others
("Inventions"), during the term of Executive's employment with Company or other
engagement with Company, provided that Company shall receive such information
in confidence and (ii) all Inventions which are based in whole or in part upon
Confidential Information or Trade Secrets and are made or conceived by
Executive, either alone or with others, within one (1) year after Executive's
leaving Company's employ. All such Inventions, whether patentable or
unpatentable, made, devised or discovered by Executive, whether by herself or
jointly with others, which relate or pertain in any way to the business of
Company, shall be used solely for the benefit of Company and become and remain
their sole and exclusive property. Executive agrees to execute an assignment to
Company or its nominee of Executive's entire right, title and interest in and
to such Inventions made or conceived by Executive, either alone or with others,
during the term of Executive's employment or within one (1) year after
Executive's leaving Company's employ, and to execute any other instruments and
documents that may be requested by Company for the purpose of applying for and
obtaining patents with respect to such Inventions in the United States and in
all foreign countries. Executive further agrees, whether or not in the employ
of Company, to cooperate to the extent and in the manner reasonably requested
by Company in the prosecution or defense of any patent claims or any litigation
or other proceedings involving any such Inventions, but all of Executive's
reasonable expenses in connection with such litigation or other proceedings
shall be paid by Company.
(b) If a patent application or copyright registration is filed by
Executive or on Executive's behalf during Executive's employment or other
engagement with Company, whether before or after execution of this Agreement,
or within one (1) year after Executive's leaving Company's employ, describing
an Invention within the scope of Executive's work for Company or which
otherwise relates to a portion of Company's business, of which Executive had
knowledge during Executive's employment with Company, it is to be conclusively
presumed that the Invention was conceived by Executive during the period of
such employment.
(c) There is no other contract or duty on Executive's part now in
existence to assign Inventions other than to Company. Executive will not
disclose or induce Company to use any confidential information or material that
Executive is now or shall become aware of which belongs to anyone other than
Company.
(d) Executive warrants and represents that attached to this
Agreement as an Exhibit (Exhibit C) and incorporated in this Agreement by
reference is a complete list of all inventions, whether owned by Executive or
by others, conceived by Executive prior to Executive's employment by Company,
that these are the only inventions which are not
-12-
<PAGE> 13
subject to this Agreement, and that Executive has not conceived or reduced to
practice any invention not described on such Exhibit B.
SECTION 11. WORKS MADE FOR HIRE.
Company and Executive acknowledge that in the course of Executive's
employment (as employee or independent contractor) by Company, Executive may
from time to time create, and has previously created, for Company copyrightable
works. Such works may consist of manuals, pamphlets, instructional materials,
computer programs, software, software integration techniques, software codes,
and data, technical data, photographs, drawings, logos, designs, artwork or
other copyrightable material, or portions thereof, and may be created within or
without Company's facilities and before, during or after normal business hours.
All such works related to or useful in the business of Company are specifically
intended to be works made by hire by Executive, and Executive shall cooperate
with Company in the protection of Company's copyrights in such works and, to
the extent deemed desirable by Company, the registration of such copyrights.
SECTION 12. COMPLIANCE WITH POLICIES AND LAWS.
(a) Policies. Executive agrees to comply in all material respects
with any and all Company policies, work rules or standards of conduct and
pledges to observe order and discipline of work.
(b) Waiver. Executive agrees to abide by the laws of the United
States and all other applicable jurisdictions and to act in the best interest
of Company.
SECTION 13. MISCELLANEOUS.
(a) Severability. The covenants set forth in this Agreement shall be
considered and construed as separate and independent covenants. Should any part
or provision of any covenant be held invalid, void or unenforceable in any
court of competent jurisdiction, such invalidity, voidness or unenforceablity
shall not tender invalid, void or unenforceable any other part or provision of
this Agreement. If any portion of the foregoing provisions is found to be
invalid or unenforceable by a court of competent jurisdiction because of its
duration, the territory, the definition of activities or the definition of
information covered is invalid or unreasonable in scope, the invalid or
unreasonable term shall be redefined, or a new enforceable term provided, such
that the intent of Company and Executive in agreeing to the provisions of this
Agreement will not be impaired and the provision in question shall be
enforceable to the fullest extent of the applicable laws.
(b) Waiver. The waiver by any party to this Agreement of a breach of
any of the provisions of this Agreement shall not operate or be construed as a
waiver of any other or subsequent breach.
(c) Withholding of Taxes. Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes and
withholdings as shall be required pursuant to any applicable law, rule or
regulation.
-13-
<PAGE> 14
(d) Notice. For purposes of this Agreement, all communications
including, without limitation, notices, consents, requests or approvals,
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or five (5) business days after having been
mailed by United States registered mail or certified mail, return receipt
requested, postage prepaid, addressed to Company (to the attention of the
Secretary of the Company) at its principal executive office or to Executive at
her principal residence, or to such other address as any party may have
furnished to the other in writing and in accordance herewith, except the
notices of change of address shall be effective only upon receipt.
(e) Governing Law. This Agreement shall be deemed to be made in and
shall in all respects be interpreted, construed and governed by and in
accordance with the laws of the State of Georgia (without giving effect to the
conflict of law principles thereof), except for Section 7 ("Nonrecruitment,
Nonsolicitation and Noncompetition"), which shall be governed by Illinois law
(without giving effect to the conflict of law principles thereof). No provision
of this Agreement or any related documents shall be construed against, or
interpreted to the disadvantage of, any party hereto by any court or any
governmental or judicial authority by reason of such party having, or being
deemed to have, structured or drafted such provision.
(f) Entire Agreement. This Agreement is intended by the parties
hereto to be the final expression of their agreement with respect to the subject
matter hereof and this is the complete and exclusive statement of the terms of
their agreement, notwithstanding any representations, statements or agreements
to the contrary heretofore made. This Agreement supersedes any former agreements
governing the same subject matter. This Agreement may be modified only by a
written instrument signed by each of the parties hereto expressly stating that
it is intended to amend this Agreement. Nothing in this Agreement or Executive's
employment shall be construed to give Executive any rights, of ownership or
otherwise, in any Protected Works, Inventions, Works Made for hire or other
software, hardware, data or systems that she creates or obtains, or has created
or obtained, while employed or otherwise engaged by Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ACSYS, INC EXECUTIVE
By: /s/ /s/ Pat Kennedy
--------------------------- -------------------------
Title: CEO Pat Kennedy
2-28-2000 2-7-2000
- ------------------------------ -------------------------
DATE DATE
-14-
<PAGE> 15
EXHIBIT A
EXECUTIVE'S DUTIES
<PAGE> 16
EXHIBIT B
TERRITORY
Atlanta, GA
Tampa, FL
Lake Mary, FL
Charlotte, NC
Philadelphia, PA
Wayne, PA
Melville, NY
Los Colinas, TX
Dallas, TX
<PAGE> 17
EXHIBIT C
EXECUTIVE'S PRIOR INVENTIONS
<PAGE> 1
EXHIBIT 10.30
INCENTIVE STOCK OPTION AGREEMENT
under the
ACSYS, INC.
AMENDED AND RESTATED 1997 STOCK OPTION PLAN
Optionee: Brady W. Mullinax, Jr.
---------------------------------------------
Number Shares Subject to Option: 50,000
-----------------------
Exercise Price per Share: $1.938
------------------------------
Date of Grant: February 2, 2000
-----------------------------------------
1. Grant of Option. Acsys, Inc. (the "Company") hereby grants to
the Optionee named above (the "Optionee"), under the Acsys, Inc. Amended and
Restated 1997 Stock Option Plan (the "Plan"), an Incentive Stock Option to
purchase, on the terms and conditions set forth in this agreement (this "Option
Agreement"), the number of shares indicated above of the Company's common stock
(the "Stock"), at the exercise price per share set forth above (the "Option").
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned such terms in the Plan.
2. Vesting of Option.
(a) Normal Vesting. Unless the exercisability of the
Option is accelerated in accordance with Section (b) below or otherwise, the
Option shall vest (become exercisable) in accordance with the following
schedule:
<TABLE>
<CAPTION>
Number of Option
----------------
Date Shares Vested
---- -------------
<S> <C>
February 2, 2001 16,667
February 2, 2002 16,667
February 2, 2003 16,666
</TABLE>
(b) Change in Control. In the event of a Change in
Control (as defined in Optionee's Employment Agreement), the Option shall
become immediately exercisable in full.
<PAGE> 2
(c) Certain Terminations. In the event Optionee's
employment with the Company is terminated by the Company without Cause (as
defined in Optionee's Employment Agreement) or by Optionee for Good Reason (as
defined in Optionee's Employment Agreement), the Option shall become
immediately exercisable in full.
3. Period of Option and Limitations on Right to Exercise. The
Option will, to the extent not previously exercised, lapse under the earliest
of the following circumstances; provided, however, that the Committee may,
prior to the lapse of the Option under the circumstances described in
paragraphs (b), (c) and (d) below, provide in writing that the Option will
extend until a later date, but if Option is exercised after the dates specified
in paragraphs (b), (c) and (d) above, it will automatically become a
Non-Qualified Stock Option:
(a) The Option shall lapse as of 5:00 p.m., Eastern
Time, on the tenth anniversary of the date of grant (the "Expiration
Date").
(b) The Option shall lapse three months after Optionee's
termination of employment for any reason other than Optionee's death
or Permanent and Total Disability.
(c) In the event of termination of employment because of
Optionee's Permanent and Total Disability, the Option shall lapse one
year after the date of the Optionee's termination of employment.
(d) If the Optionee dies while employed by the Company
or any of its Subsidiaries, or during the three-month period described
in subsection (b) above, or during the one-year period described in
subsection (c) above, and before the Option otherwise lapses, the
Option shall lapse one year after the date of the Optionee's death.
Upon the Optionee's death, the Option may be exercised by the
Optionee's beneficiary.
If the Optionee or his beneficiary exercises an Option after
termination of employment, the Option may be exercised only with respect to the
shares that were otherwise vested on the Optionee's termination of employment.
4. Exercise of Option. The Option shall be exercised by written
notice directed to the Secretary of the Company at the principal executive
offices of the Company, in substantially the form attached hereto as Exhibit A,
or such other form as the Committee may approve. Such written notice shall be
accompanied by full payment in cash, shares of Stock previously acquired by the
Optionee, or any combination thereof, for the number of shares specified in
such written notice; provided, however, that if shares of Stock are used to pay
the exercise price, such shares must have been held by the Optionee for at
least six months. The Fair Market Value of the surrendered Stock as of the date
of the exercise shall be determined in valuing Stock used in payment of the
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<PAGE> 3
exercise price. To the extent permitted under Regulation T of the Federal
Reserve Board, and subject to applicable securities laws, the Option may be
exercised through a broker in a so-called "cashless exercise" whereby the
broker sells the Option shares and delivers cash sales proceeds to the Company
in payment of the exercise price.
Optionee must exercise the Option for at least the lesser of 100
shares or the number of shares of Purchasable Stock as to which the Option
remains unexercised. Subject to the terms of this Option Agreement, the Option
may be exercised at any time and without regard to any other option held by the
Optionee to purchase stock of the Company.
5. Limitation of Rights. The Option does not confer to the
Optionee or the Optionee's personal representative any rights of a shareholder
of the Company unless and until shares of Stock are in fact issued to such
person in connection with the exercise of the Option. Nothing in this Option
Agreement shall interfere with or limit in any way the right of the Company or
any Subsidiary to terminate the Optionee's employment at any time, nor confer
upon the Optionee any right to continue in the employ of the Company or any
Subsidiary.
6. Stock Reserve. The Company shall at all times during the term
of this Option Agreement reserve and keep available such number of shares of
Stock as will be sufficient to satisfy the requirements of this Option
Agreement.
7. Optionee's Covenant. The Optionee hereby agrees to use his
best efforts to provide services to the Company in a workmanlike manner and to
promote the Company's interests.
8. Restrictions on Transfer and Pledge. The Option may not be
pledged, encumbered, or hypothecated to or in favor of any party other than the
Company or a Parent or Subsidiary, or be subject to any lien, obligation, or
liability of the Optionee to any other party other than the Company or a Parent
or Subsidiary. The Option is not assignable or transferable by the Optionee
other than by will or the laws of descent and distribution or pursuant to a
Qualified Domestic Relations Order. The Option may be exercised during the
lifetime of the Optionee only by the Optionee (or by Optionee's guardian or
legal representative, should one be appointed).
9. Plan Controls. The terms contained in the Plan are
incorporated into and made a part of this Option Agreement and this Option
Agreement shall be governed by and construed in accordance with the Plan. In
the event of any actual or alleged conflict between the provisions of the Plan
and the provisions of this Option Agreement, the provisions of the Plan shall
be controlling and determinative.
10. Successors. This Option Agreement shall be binding upon any
successor of the Company, in accordance with the terms of this Option Agreement
and the Plan.
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<PAGE> 4
11. Severability. If any one or more of the provisions contained
in this Option Agreement are invalid, illegal or unenforceable, the other
provisions of this Option Agreement will be construed and enforced as if the
invalid, illegal or unenforceable provision had never been included.
12. Notice. Notices and communications under this Option
Agreement must be in writing and either personally delivered or sent by
registered or certified United States mail, return receipt requested, postage
prepaid. Notices to the Company must be addressed to:
Acsys, Inc.
75 14th Street
Atlanta, Georgia 30309
Attn: Secretary
or any other address designated by the Company in a written notice to the
Optionee. Notices to the Optionee will be directed to the address of the
Optionee then currently on file with the Company, or at any other address given
by the Optionee in a written notice to the Company.
13. Binding Agreement. This Agreement shall be binding upon the
parties hereto and their representatives, successors and assigns.
14. Governing Law. This Agreement is executed and delivered in,
and shall be governed by the laws of, the State of Georgia.
15. Amendments. This Agreement may not be modified except in a
writing executed by each of the parties hereto.
-4-
<PAGE> 5
IN WITNESS WHEREOF, Acsys, Inc., acting by and through its duly
authorized officers, has caused this Option Agreement to be executed, and the
Optionee has executed this Option Agreement, all as of the day and year first
above written.
Acsys, Inc.
By:
------------------------------------
Name: David C. Cooper
Title: Chairman and C.E.O.
OPTIONEE:
---------------------------------------
Brady W. Mullinax, Jr.
Address:
---------------------------------------
---------------------------------------
-5-
<PAGE> 6
EXHIBIT A
NOTICE OF EXERCISE OF OPTION TO PURCHASE
COMMON STOCK OF
ACSYS, INC.
Name:
---------------------------------------
Address:
---------------------------------------
---------------------------------------
Date:
---------------------------------------
Acsys, Inc.
75 14th Street
Atlanta, Georgia 30309
Attn: Secretary
Re: Exercise of Incentive Stock Option
I elect to purchase ______________ shares of Common Stock of Acsys,
Inc. pursuant to the Acsys, Inc. Incentive Stock Option Agreement dated
______________ and the Acsys, Inc. Amended and Restated 1997 Stock Option Plan.
The purchase will take place on the Exercise Date, which will be as soon as
practicable following the date this notice and all other necessary forms and
payments are received by the Company, unless I specify a later date (not to
exceed 30 days following the date of this notice).
On or before the Exercise Date, I will pay the full exercise price in
the form specified below (check one):
<PAGE> 7
[ ] Cash Only: by delivering a certified or a cashier's check to
Acsys, Inc. for $___________.
[ ] Cash and Shares: by delivering a certified or a cashier's
check to Acsys, Inc. for $_________ for the part of the
exercise price. I will pay the balance of the exercise price
by delivering to the Company a stock certificate with my
endorsement for shares of Acsys Stock that I have owned for
at least six months. If the number of shares of Acsys Stock
represented by such stock certificate exceeds the number
needed to pay the exercise price (based on the Fair Market
Value of the Acsys Stock on the date of delivery), the
Company will issue me a new stock certificate for the excess.
[ ] Shares Only: by delivering to the Company a stock certificate
with my endorsement for shares of Acsys Stock that I have
owned for at least six months. If the number of shares of
Acsys Stock represented by such stock certificate exceeds the
number needed to pay the exercise price (based on the Fair
Market Value of the Acsys Stock on the date of delivery), the
Company will issue me a new stock certificate for the excess.
[ ] Cash From Broker: by delivering the purchase price from
_______________________, a broker, dealer or other "creditor"
as defined by Regulation T issued by the Board of Governors
of the Federal Reserve System (the "Broker"). I authorize the
Company to issue a stock certificate in the number of shares
indicated above in the name of the Broker in accordance with
instructions received by the Company from the Broker and to
deliver such stock certificate directly to the Broker (or to
any other party specified in the instructions from the
Broker) upon receiving the exercise price from the Broker.
Please deliver the stock certificate to me (unless I have chosen to
pay the purchase price through a broker).
Very truly yours,
--------------------------------
AGREED TO AND ACCEPTED:
ACSYS, INC.
By:
--------------------------------------
Title:
-----------------------------------
Number of Option Shares
Exercised:
-------------------------------
Number of Option Shares
Remaining:
-------------------------------
Date:
------------------------------------
-2-
<PAGE> 1
EXHIBIT 10.31
INCENTIVE STOCK OPTION AGREEMENT
under the
ACSYS, INC.
AMENDED AND RESTATED 1997 STOCK OPTION PLAN
Optionee: Patricia Kennedy
----------------------------------------------------
Number Shares Subject to Option: 75,000
----------------------------
Exercise Price per Share: $1.813
------------------------------------
Date of Grant: February 21, 2000
-----------------------------------------------
1. Grant of Option. Acsys, Inc. (the "Company") hereby grants to
the Optionee named above (the "Optionee"), under the Acsys, Inc. Amended and
Restated 1997 Stock Option Plan (the "Plan"), an Incentive Stock Option to
purchase, on the terms and conditions set forth in this agreement (this "Option
Agreement"), the number of shares indicated above of the Company's common stock
(the "Stock"), at the exercise price per share set forth above (the "Option").
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned such terms in the Plan.
2. Vesting of Option. Unless the exercisability of the Option is
accelerated in accordance with Section (b) below or otherwise, the Option shall
vest (become exercisable) in accordance with the following schedule:
<TABLE>
<CAPTION>
Number of Option
Date Shares Vested
---- -------------
<S> <C>
February 21, 2001 25,000
February 21, 2002 25,000
February 21, 2003 25,000
</TABLE>
3. Period of Option and Limitations on Right to Exercise. The
Option will, to the extent not previously exercised, lapse under the earliest of
the following circumstances; provided, however, that the Committee may, prior to
the lapse of the Option under the circumstances described in paragraphs (b), (c)
and (d) below, provide in writing that the Option will extend until a later
date, but if Option is exercised after the dates specified in paragraphs (b),
(c) and (d) above, it will automatically become a Non-Qualified Stock Option:
<PAGE> 2
(a) The Option shall lapse as of 5:00 p.m., Eastern Time,
on the tenth anniversary of the date of grant (the "Expiration Date").
(b) The Option shall lapse three months after Optionee's
termination of employment for any reason other than Optionee's death or
Permanent and Total Disability.
(c) In the event of termination of employment because of
Optionee's Permanent and Total Disability, the Option shall lapse one
year after the date of the Optionee's termination of employment.
(d) If the Optionee dies while employed by the Company or
any of its Subsidiaries, or during the three-month period described in
subsection (b) above, or during the one-year period described in
subsection (c) above, and before the Option otherwise lapses, the
Option shall lapse one year after the date of the Optionee's death.
Upon the Optionee's death, the Option may be exercised by the
Optionee's beneficiary.
If the Optionee or his beneficiary exercises an Option after
termination of employment, the Option may be exercised only with respect to the
shares that were otherwise vested on the Optionee's termination of employment.
4. Exercise of Option. The Option shall be exercised by written
notice directed to the Secretary of the Company at the principal executive
offices of the Company, in substantially the form attached hereto as Exhibit A,
or such other form as the Committee may approve. Such written notice shall be
accompanied by full payment in cash, shares of Stock previously acquired by the
Optionee, or any combination thereof, for the number of shares specified in such
written notice; provided, however, that if shares of Stock are used to pay the
exercise price, such shares must have been held by the Optionee for at least six
months. The Fair Market Value of the surrendered Stock as of the date of the
exercise shall be determined in valuing Stock used in payment of the exercise
price. To the extent permitted under Regulation T of the Federal Reserve Board,
and subject to applicable securities laws, the Option may be exercised through a
broker in a so-called "cashless exercise" whereby the broker sells the Option
shares and delivers cash sales proceeds to the Company in payment of the
exercise price.
Optionee must exercise the Option for at least the lesser of 100 shares
or the number of shares of Purchasable Stock as to which the Option remains
unexercised. Subject to the terms of this Option Agreement, the Option may be
exercised at any time and without regard to any other option held by the
Optionee to purchase stock of the Company.
5. Termination of Employment.
-2-
<PAGE> 3
(a) In the event of the termination of the Optionee's
employment with the Company or any of its Subsidiaries, other than a
termination that is either (i) for cause, (ii) voluntary on the part of
the Optionee and without written consent of the Company, or (iii) for
reasons of death or disability or retirement, the Optionee may exercise
this Option at any time within 30 days after such termination to the
extent of the number of shares which were Purchasable hereunder at the
date of such termination.
(b) In the event of a termination of the Optionee's
employment that is either (i) for cause or (ii) voluntary on the part
of the Optionee and without the written consent of the Company, this
Option, to the extent not previously exercised, shall terminate
immediately and shall not thereafter be or become exercisable.
(c) In the event of the retirement of the Optionee at the
normal retirement date as prescribed from time to time by the Company
or Subsidiary, the Optionee shall continue to have the right to
exercise any Options for shares which were Purchasable at the date of
the Optionee's retirement provided that, on the date which is three
months after the date of retirement, the Options will become void and
unexercisable unless on the date of retirement the Optionee enters into
a noncompete agreement with the Company and continues to comply with
such noncompete agreement. This Option does not confer upon the
Optionee any right with respect to continuance of employment by the
Company or by any of its Subsidiaries. This Option shall not be
affected by any change of employment so long as the Optionee continues
to be an employee of the Company or one of its Subsidiaries.
6. Limitation of Rights. The Option does not confer to the
Optionee or the Optionee's personal representative any rights of a shareholder
of the Company unless and until shares of Stock are in fact issued to such
person in connection with the exercise of the Option. Nothing in this Option
Agreement shall interfere with or limit in any way the right of the Company or
any Subsidiary to terminate the Optionee's employment at any time, nor confer
upon the Optionee any right to continue in the employ of the Company or any
Subsidiary.
7. Stock Reserve. The Company shall at all times during the term
of this Option Agreement reserve and keep available such number of shares of
Stock as will be sufficient to satisfy the requirements of this Option
Agreement.
8. Optionee's Covenant. The Optionee hereby agrees to use his
best efforts to provide services to the Company in a workmanlike manner and to
promote the Company's interests.
9. Restrictions on Transfer and Pledge. The Option may not be
pledged, encumbered, or hypothecated to or in favor of any party other than the
Company or a Parent or Subsidiary, or be subject to any lien, obligation, or
liability of the Optionee to
-3-
<PAGE> 4
any other party other than the Company or a Parent or Subsidiary. The Option is
not assignable or transferable by the Optionee other than by will or the laws of
descent and distribution or pursuant to a Qualified Domestic Relations Order.
The Option may be exercised during the lifetime of the Optionee only by the
Optionee (or by Optionee's guardian or legal representative, should one be
appointed).
10. Plan Controls. The terms contained in the Plan are
incorporated into and made a part of this Option Agreement and this Option
Agreement shall be governed by and construed in accordance with the Plan. In the
event of any actual or alleged conflict between the provisions of the Plan and
the provisions of this Option Agreement, the provisions of the Plan shall be
controlling and determinative.
11. Successors. This Option Agreement shall be binding upon any
successor of the Company, in accordance with the terms of this Option Agreement
and the Plan.
12. Restrictive Covenants. The Company, which for purposes of this
paragraph, its sub-paragraphs and paragraph 13 includes Acsys, Inc., and any of
its Parents or Subsidiaries, is engaged in providing short-term and long-term
outsourcing, technical and professional staffing services, and professional
placement services (the "Business Activities"). The Optionee agrees that, in the
course of the Optionee's employment as an Executive Director of Information
Technology Services for the Company, the Optionee has learned valuable
confidential business information related to the Business Activities. The
Optionee further agrees that this information and the Business Activities of the
Company are legitimate business interests that justify reasonable temporary
restrictions on the Optionee's employment should the Optionee leave the
Company's employment. The Optionee acknowledges and agrees that the Optionee is
qualified and able to obtain reasonable employment without violating these
restrictions. Thus, in consideration of the rights granted to the Optionee
hereunder, the Optionee agrees to abide by the following reasonable restrictions
during the Optionee's employment with the Company, and for a one (1) year period
thereafter:
(a) Non-competition. The Optionee agrees that, while employed by
the Company, and for a one (1) year period after any termination of the
Optionee's employment with the Company, the Optionee shall not, within the
Territory, for the Optionee's own benefit or for the benefit of others, directly
or indirectly, engage in or hold a Competitive Position with any competing
business that engages in the Business Activities. As used herein, the
"Territory" shall mean the twenty-five (25) mile radius surrounding the office
of the Company to which the Optionee is assigned, which office is located at
2400 Lakeview Parkway, GA 400 Center, Bldg. One, Alpharetta, GA 30004, and a
"Competitive Position" is a position having the same or substantially similar
primary duties as the position of Executive Director of Information Technology
Services that the Optionee now holds with the Company.
(b) Non-Solicitation of Customers and Candidates. The confidential
information maintained by the Company about its customers and candidates
(including but not limited to those customers' and candidates' names and
employment needs) and the nature of its
-4-
<PAGE> 5
relationship with such customers and candidates are among the most valuable
assets of the Company. Thus, the Optionee agrees that while employed by the
Company, and for a one (1) year period after any termination of the Optionee's
employment with the Company, the Optionee shall not solicit the opportunity to
perform the Business Activities from any customer or candidate of the Company
whom the Optionee solicited or contacted on behalf of the Company during the
Optionee's employment with the Company.
(c) Non-Solicitation of Employees. The Company's employees are
among the Company's most valuable assets. Thus, the Optionee agrees that while
employed by the Company, and for a one (1) year period after any termination of
the Optionee's employment with the Company, the Optionee shall not solicit to
employ, on the Optionee's own behalf or on behalf of any other person, firm or
corporation, any person who (a) was employed with the Company as a sales
representative, management employee, temporary placement employee or permanent
placement employee during the Optionee's employment with the Company, and who
(b) has not ceased to be employed by the Company for a period of at least one
year.
(d) Previous Agreements. The language in paragraph 12 and its
sub-paragraphs shall supersede any inconsistent language in any prior stock
option agreements.
13. Confidentiality of Trade Secrets. The Optionee agrees that in
the course of employment with the Company, the Optionee has learned various
Trade Secrets possessed by the Company. "Trade Secret" means information,
without regard to form, including, but not limited to, technical or
non-technical data, a formula, a pattern, a compilation, a program, a device, a
method, a technique, a drawing, a process, financial data, financial plans,
product plans, or a list of actual or potential customers or suppliers which is
not commonly known by or available to the public and which information (1) the
Company derives economic value, actual or potential, from not being known to,
and not being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use; and (2) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.
Accordingly, in consideration for the rights granted the Optionee hereunder, the
Optionee agrees to maintain the confidentiality of the Company's Trade Secrets
while employed with the Company, and for as long thereafter as each particular
Trade Secret remains a Trade Secret pursuant to this Agreement or applicable
law. Nothing in this Agreement shall limit the definition of the term "Trade
Secret" or any similar term under applicable law.
14. Severability. All clauses of this Agreement are severable, and
the enforceability (or lack thereof) of one clause shall not affect the
enforceability of any other clause.
15. Reformation. Should any clause(s) of this Agreement be held
unenforceable by a court of competent jurisdiction, the parties agree that the
court may modify the unenforceable clause(s) to make the clause(s) enforceable,
so that the court
-5-
<PAGE> 6
may grant the relief reasonably necessary to protect each party's interests, as
reflected by this Agreement.
16. Notice. Notices and communications under this Option Agreement
must be in writing and either personally delivered or sent by registered or
certified United States mail, return receipt requested, postage prepaid. Notices
to the Company must be addressed to:
Acsys, Inc.
75 14th Street
Atlanta, Georgia 30309
Attn: Secretary
or any other address designated by the Company in a written notice to the
Optionee. Notices to the Optionee will be directed to the address of the
Optionee then currently on file with the Company, or at any other address given
by the Optionee in a written notice to the Company.
17. Binding Agreement. This Agreement shall be binding upon the
parties hereto and their representatives, successors and assigns.
18. Governing Law. This Agreement is executed and delivered in,
and shall be governed by the laws of, the State of Georgia.
19. Amendments. This Agreement may not be modified except in a
writing executed by each of the parties hereto.
-6-
<PAGE> 7
IN WITNESS WHEREOF, Acsys, Inc., acting by and through its duly
authorized officers, has caused this Option Agreement to be executed, and the
Optionee has executed this Option Agreement, all as of the day and year first
above written.
ACSYS, INC.
By:
----------------------
Name: David C. Cooper
Title: Chairman and CEO
OPTIONEE:
--------------------------
Name: Patricia Kennedy
Address:
--------------------------
--------------------------
-7-
<PAGE> 8
EXHIBIT A
NOTICE OF EXERCISE OF OPTION TO PURCHASE
COMMON STOCK OF
ACSYS, INC.
Name:
---------------------------------
Address:
---------------------------------
---------------------------------
Date:
---------------------------------
Acsys, Inc.
75 14th Street
Atlanta, Georgia 30309
Attn: Secretary
Re: Exercise of Incentive Stock Option
I elect to purchase ______________ shares of Common Stock of Acsys,
Inc. pursuant to the Acsys, Inc. Incentive Stock Option Agreement dated
______________ and the Acsys, Inc. Amended and Restated 1997 Stock Option Plan.
The purchase will take place on the Exercise Date, which will be as soon as
practicable following the date this notice and all other necessary forms and
payments are received by the Company, unless I specify a later date (not to
exceed 30 days following the date of this notice).
<PAGE> 9
On or before the Exercise Date, I will pay the full exercise price in
the form specified below (check one):
[ ] Cash Only: by delivering a certified or a cashier's check to
Acsys, Inc. for $___________.
[ ] Cash and Shares: by delivering a certified or a cashier's
check to Acsys, Inc. for $_________ for the part of the
exercise price. I will pay the balance of the exercise price
by delivering to the Company a stock certificate with my
endorsement for shares of Acsys Stock that I have owned for at
least six months. If the number of shares of Acsys Stock
represented by such stock certificate exceeds the number
needed to pay the exercise price (based on the Fair Market
Value of the Acsys Stock on the date of delivery), the Company
will issue me a new stock certificate for the excess.
[ ] Shares Only: by delivering to the Company a stock
certificate with my endorsement for shares of Acsys Stock that
I have owned for at least six months. If the number of shares
of Acsys Stock represented by such stock certificate exceeds
the number needed to pay the exercise price (based on the Fair
Market Value of the Acsys Stock on the date of delivery), the
Company will issue me a new stock certificate for the excess.
[ ] Cash From Broker: by delivering the purchase price from
_______________________, a broker, dealer or other "creditor"
as defined by Regulation T issued by the Board of Governors of
the Federal Reserve System (the "Broker"). I authorize the
Company to issue a stock certificate in the number of shares
indicated above in the name of the Broker in accordance with
instructions received by the Company from the Broker and to
deliver such stock certificate directly to the Broker (or to
any other party specified in the instructions from the Broker)
upon receiving the exercise price from the Broker.
Please deliver the stock certificate to me (unless I have chosen to pay
the purchase price through a broker).
Very truly yours,
------------------------
-2-
<PAGE> 10
AGREED TO AND ACCEPTED:
ACSYS, INC.
By:
--------------------------------------
Title:
------------------------------------
Number of Option Shares
Exercised:
-------------------------------
Number of Option Shares
Remaining:
-------------------------------
Date:
------------------------------------
-3-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Acsys, Inc.
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 10-K of our reports dated February 2, 2000 included in
Acsys Inc.'s Registration Statement File Numbers 333-67875 and 333-46465. It
should be noted that we have not audited any financial statements of the Company
subsequent to December 31, 1999 or performed any audit procedures subsequent to
the date of our report.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 28, 2000
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<ARTICLE> 5
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