U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
AMENDMENT NO. 1 TO
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _________________
Commission file number: 0-22600
EMPLOYEE SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
Arizona 86-0676898
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6225 North 24th Street, Phoenix, Arizona 85016
(Address of principal executive offices)
Issuer's telephone number: (602) 955-5556
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
None N/A
- -------------------- --------------------
Securities registered pursuant to Section 12(g) of the Act:
No Par Value Common Stock
-------------------------
(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 report(s)), 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 stock held by
non-affiliates of the Registrant, based upon the $6.0625 closing price of the
Registrant's Common Stock as reported on the NASDAQ National Market on March 27,
1997, was approximately $155 million. Shares of Common Stock held by each
officer and director and by each person who owns 10% or more of the outstanding
Common Stock have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily conclusive
for other purposes.
The number of outstanding shares of the Registrant's Common Stock as of
March 27, 1997 was 30,857,101.
<PAGE>
Employee Solutions, Inc. ("ESI" or the "Company") hereby amends its
annual report on Form 10-K for the year ended December 31, 1996 (the "1996
10-K") by adding thereto Items 10, 11, 12 and 13, as set forth below.
ITEM 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------------------------------------------------------------
The names of the Company's directors and nominees for director and
certain information about them are set forth below.
<TABLE>
<CAPTION>
Director
Name Age Position with Company Since
- ---- --- --------------------- -----
<S> <C> <C> <C>
Marvin D. Brody 53 Chairman of the Board, President, Chief Executive Officer and Director 1991
Harvey A. Belfer 59 Director 1991
Edward L. Cain, Jr. 37 Vice President of Sales and Director 1995
Jeffery A. Colby 43 Director; President of TEAM Services 1995
Robert L. Mueller 69 Director 1995
Henry G. Walker 50 Director 1996
</TABLE>
Marvin D. Brody co-founded the Company in 1991. He has been a Director
of the Company since its inception, became the Company's Chief Executive Officer
in November 1994 and has served as President since June 1996. Prior to becoming
the Company's Chief Executive Officer, Mr. Brody was engaged in the private
practice of law since 1973. He graduated from John Marshall Law School with a
Juris Doctorate degree in 1969. Mr. Brody served as an outside director of Prime
Financial Partners M.L.P. since 1987 and has resigned effective April 23, 1996.
Harvey A. Belfer co-founded the Company in 1991 and has been a Director
since the Company's inception. He was also the Company's Chief Executive Officer
from its founding until November 1994 and its President from its founding until
June 1996. From 1984 until 1991, Mr. Belfer was an executive officer of Contract
Personnel Systems, Inc. and Corporate Personnel Services, Inc., both PEOs.
Edward L. Cain, Jr. has been a Director of the Company since July 1995
and has been the Company's Vice President of Sales since April 1995. Mr. Cain
has been President of Employee Solutions-East, Inc. ("ESEI"), a subsidiary of
the Company, since June 1994. From 1990 until June 1994 he was the Director of
Sales and Marketing for Personal Benefits Group, an Atlanta-based company that
brokered PEO services. From 1987 to 1990, he was a sales agent in CIGNA's
individual financial service division in Springfield, Massachusetts and later in
Grand Rapids, Michigan.
Jeffery A. Colby has been a Director of the Company since November 1995.
Mr. Colby founded TEAM Services, L.P., a PEO in the music and advertising
industries, in 1992 and has been its Chief Executive Officer since 1994 and
President since January 1996. TEAM Services was acquired by the Company in 1996;
see Item 13 below. Since December 1986, Mr. Colby has served as President of
Colbyco, Inc., a Chicago-based company which provides consulting, audit and
freight bill payment services for the transportation industry. From 1975 to
1986, Mr. Colby was a principal at the Chicago-based law firm of Fox & Grove.
2
<PAGE>
Robert L. Mueller has been a Director of the Company since February
1995. Mr. Mueller has been an independent consultant since 1993. From 1987 to
1993, he was the President, Chief Operating Officer and a Director of Proler
International Corp., a steel recycler in Houston, Texas.
Henry G. Walker became a Director of the Company in November 1996. Mr.
Walker became president and chief executive officer of Sisters of Providence
Health System, Seattle, in 1997. Previously, Mr. Walker was president and CEO of
HealthPartners of Arizona, Inc., a statewide managed care company, from 1996 to
1997, and president of Health Partners of Southern Arizona from 1992 to 1995.
Section 16(a) Beneficial Ownership Reporting Compliance
Under the securities laws of the United States, the Company's directors,
its executive officers, and persons holding more than 10% of the Company's
Common Stock are required to report their initial ownership of the Company's
Common Stock and any subsequent changes in that ownership to the Securities and
Exchange Commission (the "Commission"). Specific due dates for these reports
have been established and the Company is required to disclose any failure to
file by these dates. All of these filing requirements were satisfied during the
year ended December 31, 1996, except that Mr. Brody did not file on a timely
basis two reports relating to a series of transactions resulting from a single
sell order of his spouse. Because the transactions were effected over a number
of days at various prices, the transactions were reported as 22 separate line
items. The filings have been brought current by Mr. Brody. In making these
disclosures, the Company has relied solely on written representations of its
directors and executive officers and copies of the reports that they have filed
with the Commission.
3
<PAGE>
ITEM 11. - EXECUTIVE COMPENSATION
- ---------------------------------
SUMMARY COMPENSATION TABLE
The following table sets forth, with respect to the years ended December
31, 1996, 1995 and 1994, compensation awarded to, earned by or paid to (i) the
Company's Chief Executive Officer and (ii) the other executive officers who were
serving as executive officers at December 31, 1996 and whose total salary and
bonus exceeded $100,000 in 1996.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Securities
Other Annual Underlying All Other
Name and Compensation Options/SARs Compensation
Principal Position Year Salary ($) ($) (#)(1) ($)
- ------------------- ---- ---------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Marvin D. Brody, 1996 276,246 (3) - 5,333 (4)
Chief Executive 1995 165,992 20,493 (5) - 5,244 (4)
Officer, President 1994 - 10,394 (5) - 4,366 (4)
(2)
Roy A. 1996 177,400 (3) 70,000 5,401 (4)
Flegenheimer, Chief 1995 151,699 (3) 360,000 (6) 5,508 (4)
Operating Officer 1994 138,846 (3) 160,000 (6) 4,663 (4)
</TABLE>
(1) Consist entirely of stock options; no stock appreciation rights
("SARs") were granted or are outstanding.
(2) Compensated as Chief Executive Officer since January 1995; became
President in June 1996.
(3) Less than 10% of the total of annual salary.
(4) Term life and health insurance premiums.
(5) Automobile lease.
(6) Includes options to purchase 160,000 shares of Common Stock issued in
February 1994 which were canceled in April 1995 and simultaneously
replaced by options to acquire the same number of shares.
4
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
The following table sets forth information about stock option grants during the
last fiscal year to the executive officers named in the Summary Compensation
Table receiving grants during such period. Mr. Brody did not receive option
grants.
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------------------ Potential Realizable Value
Number of % of Total at Assumed Annual Rates
Securities Option/SARs of Stock Price Appreciation
Underlying Granted to Exercise or for Option Term (2)
Options/SARs Employees in Base Price Expiration ---------------------------
Name Granted (#) Fiscal Year ($/sh) Date 5% 10%
- ------------------------- ---------------- ------------ ---------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Roy Flegenheimer 70,000 7.1% $14.50 6/25/01 $280,426 $619,668
</TABLE>
(1) Consist entirely of stock options and do not include SARs.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These
gains are based on assumed rates of stock appreciation of 5% or 10%
compounded annually from the date the respective options were granted
to their expiration date and are not presented to forecast possible
future appreciation, if any, in the price of the Common Stock. The
potential realizable value of the foregoing options is calculated by
assuming that the market price of the underlying security appreciates
at the indicated rate for the entire term of the option and that the
option is exercised at the exercise price and sold on the last day of
its term at the appreciated price. Based upon the $4.625 closing price
of the Common Stock on April 22, 1997, on that date these options had
no realizable value.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUE TABLE (1)
The following table sets forth information with respect to the executive
officers named in the Summary Compensation Table concerning option exercises
during the last fiscal year and the number and value of options outstanding at
the end of the last fiscal year. Mr. Brody did not exercise options in 1996 or
have options outstanding at year end.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End (#) at FY-End ($)(2)
----------------------------- --------------------------
Shares Acquired Value Realized
Name on Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ --------------- ------------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roy Flegenheimer 38,000 $315,300 288,666 203,334 $5,310,449 $2,772,071
</TABLE>
(1) No SARs are outstanding.
(2) Based on the last trade of the Company's Common Stock on the NASDAQ
National Market on December 31, 1996 at $20.50 per share. Based upon
the $4.625 closing price of the Common Stock on April 22, 1997, on that
date the value of Mr. Flegenheimer's exercisable and unexercisable
options was $727,876 and $235,394, respectively.
5
<PAGE>
Employment Contracts, Termination of Employment, and Change-in-Control
Arrangements
Roy A. Flegenheimer entered into an employment agreement with the
Company on April 21, 1993, which employment agreement has subsequently been
amended to revise Mr. Flegenheimer's compensation. The third amendment to Mr.
Flegenheimer's employment agreement became effective on October 1, 1995. The
third amendment set Mr. Flegenheimer's salary for the period from February 8,
1995 to September 30, 1995 at $98,808, from October 1, 1995 to February 7, 1996
at $60,577, from February 8, 1996 to February 7, 1997 at $175,000, and from
February 8, 1997 to February 7, 1998 at $185,000. Mr. Flegenheimer's agreement
also provided for the grant of certain stock options in 1993 and 1994. Mr.
Flegenheimer's employment agreement ends February 7, 1998, unless earlier
terminated.
Mr. Flegenheimer entered into a new employment agreement with the
Company on March 19, 1997, which terminated and replaced his previous employment
agreement. Under his new agreement, Mr. Flegenheimer earns a salary of $185,000,
which will be reviewed annually by the Company's compensation committee. The
agreement also provides that if Mr. Flegenheimer terminates his employment with
the Company for any reason other than for cause, by his disability, or by his
death, within 12 months from events which constitute a "change of control" (as
defined in the agreement), Mr. Flegenheimer will receive a lump sum equal to
2.99 times a base amount as well as a continuation of his medical coverage and
other benefits to which he, as a terminated employee, was entitled at the time
immediately prior to the change of control. Mr. Flegenheimer's agreement extends
indefinitely, but is terminable by either the Company or Mr. Flegenheimer with
stated notice. The Company has entered into substantially similar employee
agreements with two other executive officers not named in the compensation
table.
The Company's 1995 Option Plan provides that in the event of a merger,
consolidation or reorganization with another corporation in which the Company is
not the surviving corporation (an "Acquisition"), appropriate provision shall be
made with respect to outstanding and unexercised options to either (a)
substitute on an equitable basis appropriate shares of the surviving corporation
for such options or (b) cancel such options upon payment of the fair market
value of such options to the respective holders. The Company's 1993 Option Plan
provides that in the event of an Acquisition, appropriate provision shall be
made with respect to outstanding and unexercised options to either (a)
substitute on an equitable basis appropriate shares of the surviving corporation
for such options or (b) accelerate the vesting and permit the exercise of all
such options prior to such Acquisition.
Compensation of Directors
The Company's directors who do not receive a salary or commissions from
the Company receive $500 per each meeting attended, plus reimbursement for
reasonable out-of-pocket expenses incurred in attending Board of Directors'
meetings. Nonemployee directors of the Company are eligible for the grant of
stock options pursuant to the 1993 Option Plan, and are eligible under certain
circumstances for option grants under a formula grant provision of the 1995
Option Plan. Under the provisions of the 1995 Option Plan in effect prior to
June 1996, every nonemployee director of the Company was automatically granted
options to acquire 80,000 shares of the Company's Common Stock upon becoming a
director, and subsequently was automatically granted an additional 80,000
options at the fifth annual meeting of shareholders following the initial grant
if such director was still a nonemployee director of the Company at that time.
In June 1996, the 1995 Option Plan was altered to provide for annual grants of
options for 2,500 shares of Common Stock upon election and at the date of the
annual meeting (or other day of election) for each non-employee director for ten
years terms; provided, however, that directors elected prior to June 1996 are
not eligible to receive such options until the year 2000 annual meeting of
shareholders.
6
<PAGE>
In 1995, Robert L. Mueller and Jeffery A. Colby, both at that time
nonemployee directors, were each granted options for 80,000 shares of Common
Stock, with an exercise price equal to the fair market value of the Common Stock
on the date of grant. Mr. Mueller's options were immediately exercisable, and
Mr. Colby's options vest in equal installments on the first three anniversaries
of the date of grant. Mr. Walker was granted an option for 2,500 shares of
Common Stock, with an exercise price equal to the $21.25 market value of the
Common Stock on the date of grant, upon his election to the Board in November
1996; his options vest in equal installments on the first three anniversaries of
grant.
Harvey A. Belfer entered into a five-year employment agreement with the
Company effective January 1, 1993. Mr. Belfer also agreed not to engage in
certain activities that compete with the Company until two years after the
termination of the employment agreement. Mr. Belfer retired as President
effective June 26, 1996, at which time his employment agreement was terminated.
The Board of Directors replaced Mr. Belfer's employment agreement with a
five-year consulting agreement which provides for compensation of $35,000 per
year and contains non-competition provisions; $20,417 was paid to Mr. Belfer in
1996 under this Agreement.
ITEM 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock at March 27, 1997 with respect to (i)
each person who beneficially owns more than 5% of the Company's outstanding
Common Stock including such persons' address, (ii) each director of the Company
and each person nominated to become a director at the Annual Meeting, (iii) each
of the executive officers listed in the Summary Compensation Table below and
(iv) all directors and executive officers of the Company as a group.
Shares Beneficially Owned (1)
-----------------------------
Number Percent
------ -------
Harvey A. Belfer (2) 1,830,480 5.9%
6225 N. 24th Street
Phoenix, Arizona 85016
Marvin D. Brody (3) 2,709,088 8.8%
6225 N. 24th Street
Phoenix, Arizona 85016
Edward L. Cain, Jr. 656,370 2.1%
Jeffery A. Colby (4) 26,694 *
Roy A. Flegenheimer (5) 326,666 1.0%
Robert L. Mueller (2) 80,000 *
Henry G. Walker 0 *
All executive officers and directors as a 5,655,964 18.1%
group (10 persons) (6)
American Century Companies, Inc. (7) 2,656,400 8.7%
4500 Main Street
Kansas City, Missouri 64111
Putnam Investments, Inc. (8) 1,822,107 5.9%
One Post Office Square
Boston, Massachusetts 02109
* Less than one percent.
7
<PAGE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("SEC") and generally includes voting
or investment power with respect to securities. In accordance with SEC
rules, shares which may be acquired upon conversion or exercise of stock
options, warrants or convertible securities which are currently
exercisable or which become exercisable within 60 days are deemed
beneficially owned by the optionee. Except as indicated by footnote, and
subject to community property laws where applicable, the persons or
entities named in the table above have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by
them.
(2) Voting and investment power shared with spouse.
(3) Includes 2,309,088 shares held by a limited partnership of which Mr.
Brody and his spouse are the general partners and Mr. Brody, his spouse
and adult children are the limited partners. Also, includes 400,000
shares of Common Stock held by an entity wholly-owned by Mr. Brody's
spouse, as to which Mr. Brody disclaims beneficial ownership.
(4) Includes 26,666 shares which Mr. Colby has the right to acquire upon the
exercise of stock options.
(5) Includes 308,666 shares which Mr. Flegenheimer has the right to acquire
upon the exercise of stock options.
(6) In addition to the option referred to in the above notes, includes 26,666
shares which other executive officers have the right to acquire upon the
exercise of stock options.
(7) Information derived from a report on Schedule 13G dated February 5, 1997
filed by American Century Companies, Inc. ("ACC"), American Century
Investment Management, Inc. ("ACIM"), American Century Mutual Funds, Inc.
("ACMF") and James E. Stowers, Jr. ("Mr. Stowers"), reporting sole voting
and dispositive power as to 2,656,400 shares of Company Common Stock at
December 31, 1996. The report states that ACIM, a registered investment
advisor and wholly-owned subsidiary of ACC, manages investments of six
investment companies, including ACMF, and the assets of other
institutional investor accounts. At December 31, 1996, ACMF owned
2,600,000 of the shares of Common Stock that were the subject of the
report. ACC, as a result of its control of ACIM, and Mr. Stowers, as a
result of his control of ACC, are also deemed to beneficially own all
such shares deemed to be beneficially owned by ACIM; however, Mr.
Stowers, ACC and ACIM all disclaimed beneficial ownership of the reported
shares.
(8) Information derived from a report on Schedule 13G dated January 27, 1997
filed by Putnam Investments, Inc. ("PI"), Putnam Investment Management,
Inc. ("PIM"), the Putnam Advisory, Inc. ("PAC") and Marsh & McLennan
Companies, Inc. ("MMC"), reporting beneficial ownership of an aggregate
of 1,822,107 shares of Company common stock at December 31, 1996. The
report states that PIM, the investment advisor to the Putnam family of
mutual funds, had shared dispositive power as to 1,715,307 shares of
Common Stock and that PAC, investment advisor to Putnam institutional
clients, had shared dispositive power as to 106,800 shares of Common
Stock, with shared voting power as to 60,100 of such shares. PIM and PAC
are wholly-owned subsidiaries of PI, which in turn is a wholly-owned
subsidiary of MMC. Although PI reports beneficial ownership of the shares
held by PIM and PAC, MMC does not. PI and MMC both disclaim beneficial
ownership of the reported shares.
ITEM 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ---------------------------------------------------------
ESEI Acquisition/Cain Employment Agreement
Effective June 1994, the Company entered into an agreement with Mr. Cain,
an officer of the Company since that time and a Director of the Company since
July 1995, to conduct business in the southeastern United States pursuant to a
joint venture operating under the name of Employee Solutions-East, Inc.
("ESEI"). ESEI was 99%
8
<PAGE>
owned by Mr. Cain, and 1% owned by the Company. At that time, the Company
received an option to acquire Mr. Cain's interest in ESEI commencing June 1995
at a price equal to three times certain annualized fees. The initial term of the
venture was one year and was to be automatically extended for an additional
two-year period unless the Company exercised its option to purchase ESEI, during
which period the Company provided certain support services and financial support
to ESEI. In 1994, Mr. Cain received warrants to acquire 400,000 shares of the
Company's Common Stock at an exercise price of $2.125 per share which were to
expire through November 10, 2004, and were exercisable in five years or sooner
if certain events occur. In April 1995, such warrants were replaced with stock
options granted under the 1995 Plan and exercisable at the same price.
Effective January 1, 1996, the Company acquired the remaining 99% equity
interest in ESEI from Mr. Cain pursuant to its option. The base purchase price
consisted of 648,000 unregistered shares of Common Stock. Mr. Cain received
piggyback registration rights as to these shares during the period July 1
through December 31, 1996 and one demand registration right exercisable during
1997. In July 1996, the Company filed a registration statement registering such
shares for resale by Mr. Cain.
Mr. Cain was required to sign a promissory note in connection with the
ESEI acquisition in the principal amount of $385,624 payable, together with
interest at 8% per annum, on December 31, 1996 to reimburse the Company for
certain expenses incurred by ESEI. Such amounts have been repaid to the Company.
ESEI had entered into a five-year employment agreement beginning June
23, 1994 with Mr. Cain under which he served as ESEI's president and received
cash commissions, reimbursement of certain expenses and certain other
compensation. The Company guaranteed payment and performance of ESEI's
obligations under the employment agreement with Mr. Cain. Mr. Cain entered into
an Amended and Restated Employment Agreement with the Company effective January
1, 1996. The agreement provides for compensation in the form of commissions
based upon administrative fees collected from the Company's PEO business and
contains non-competition provisions which include certain exceptions during the
term of the employment agreement and thereafter. The term of Mr. Cain's
employment agreement ends June 23, 1999, unless earlier terminated.
Other Cain Arrangements
Under their noncompetition arrangements with the Company, Mr. Cain and
another person are permitted to sell certain PEO services which have been
declined by the Company, not otherwise meeting Company standards or meeting
certain other conditions. Mr. Cain is required to pay the Company 50% of all
commissions and similar compensations which he receives for such brokerage. The
amount paid in 1996 was approximately $24,975. In addition, Professional
Employer Resources Corporation ("Perc"), a company jointly owned by those
individuals, has an arrangement with the Company under which it receives
commissions for the referral of new business to the Company; a Company
subsidiary performs certain administrative services on behalf of Perc.
In 1996, the Company paid Perc $352,648 in aggregate commissions for the
referral of business (net of an adjustment described below). Perc also conducted
a number of activities in 1996 which were ultimately agreed among Mr. Cain, the
other individual and the Company that, although they were conducted in good
faith, may have been beyond the scope of activities which the individuals were
permitted to conduct. Perc has reimbursed the Company $543,550, constituting its
1996 estimated earnings resulting from these activities. In addition, Perc has
agreed to pay the Company $273,000 (plus 6% interest from January 1, 1997) not
later than December 31, 1997; that amount represents $157,000 in payment for
administrative services performed for Perc by a Company subsidiary in 1996 and
$116,000 representing an overpayment by the Company to Perc resulting from a
determination that commissions were not due with respect to a transaction. Mr.
Cain has agreed with the Company to divest his interest in Perc prior to the end
of 1997.
In certain instances, if it is determined upon review of year end
information that commissions have been overpaid during the course of the year,
persons who received those commissions payments are required to repay them to
the Company. During 1996, the Company overpaid commissions of up to $123,000 to
Mr. Cain, in addition to the adjustment for Perc referred to above. Mr. Cain and
the Company have agreed to reconcile final 1996 commissions and complete
repayments by the end of 1997.
TEAM Services Acquisition/Colby Employment Agreement
9
<PAGE>
On June 22, 1996, the Company acquired all the outstanding capital stock
of TEAM Services, a Burbank, California based company specializing in leasing
commercial talent, musicians, and recording engineers to the music and
advertising segments of the entertainment industry. In connection with the
acquisition, the Company assumed net liabilities of approximately $825,000. The
total purchase price will be four times total TEAM Services' pre-tax income for
the 12-month period ending June 30, 1999. The purchase price will be paid in the
form of net assumed liabilities and unregistered Common Stock. Any unregistered
shares of Common Stock which may be issued would be entitled to certain
piggy-back and demand registration rights. There is no stated maximum
consideration payable in the transaction. In connection with the acquisition,
the TEAM Services itself paid $41,000 of expenses properly allocable to the
former TEAM Services shareholders, which the director and other shareholders
have agreed to repay at December 31, 1996.
Mr. Colby, a member of the Company's Board of Directors since November
1995, was the controlling shareholder of TEAM Services, and served as Chief
Executive Officer of TEAM Services since 1993. In connection with the TEAM
Services acquisition, Mr. Colby entered into a three-year employment agreement
with the Company pursuant to which he will continue to act as TEAM Services'
President and will provide, among other services, certain marketing services.
Mr. Colby will be compensated by means of a base salary of $75,000 per year,
plus commissions equivalent to those of Company regional sales vice presidents,
but not less than $60,000.
Other
Mr. Belfer is part owner of M.D. Labs, Inc. ("MD"), a company which
utilizes the Company's employee leasing services. The Company billed MD $632,891
for employee leasing services during 1996.
In 1996, the Company paid Marsh & McLennan, Incorporated, an affiliate of
a greater-than-5% shareholder, approximately $150,000 for consulting and related
services.
10
<PAGE>
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.
Dated the 30th day of April, 1997.
EMPLOYEE SOLUTIONS, INC.
By /s/ Marvin D. Brody
-----------------------------------
Marvin D. Brody
Chief Executive Officer
11
