SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 8-K/A
Current Report
--------------
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
-----------------------
Date of Report (Date of earliest event reported): October 1, 1997
------------------------
AMENDMENT NO. 1
-------------------------
SOS Staffing Services, Inc.
---------------------------
(Exact name of registrant as specified in its charter)
Utah 0-26094 87-0295503 .
- ------------------------------- --------------------- -------------------
(State or other jurisdiction of (Commission File No.) (IRS Employer
incorporation) Identification No.)
1415 South Main Street
Salt Lake City, Utah 84115 .
----------------------------
(Address of principal executive offices, including zip code)
(801) 484-4400 .
-------------------
(Registrant's telephone number, including area code)
<PAGE>
TABLE OF CONTENTS
Page
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits 1
a. Financial Statments and Pro Forma Financial Information 1
b. Exhibits 1
SIGNATURES 2
1
<PAGE>
This Amendment No. 1 to Current Report is filed (i) to change the Date of
Report indicated above, to October 1, 1997 (ii) to provide a copy of the Asset
Purchase Agreement identified in Item 7.b below.
Item 7. Financial Statements , Pro Forma Financial Information and Exhibits.
(a) Financial Statments and Pro Forma Financial Information.
As of the date of this filing, it is impracticable for SOS Staffing
Services, Inc. (the "Company") to provide the financial statements and pro
forma financial information specified in Item 7 of Form 8-K. The Company
intends to file an amended Form 8-K to include such financial statements
and pro forma financial information not later than December 16, 1997.
(b) Exhibits.
2.1- Asset Purchase Agreement, dated as of October 1, 1997, among SOS
Staffing Services,Inc., as buyer; Century Personnel, Inc., doing
business as The Century Group and Centech; M.A. Jones
Enterprises, Inc., doing business as Century Personnel,
collectively, as sellers, and Michael A. Jones, as the
shareholder of such sellers.
99.1- Press Release dated October 2, 1997*
- ------------------------
* Previously filed.
1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this Amendment No. 1 to Current Report to be signed on
its behalf by the undersigned thereto duly authorized.
SOS STAFING SERVICES, INC.
\S\ Gary B. Crook
------------------------------------------
Gary B. Crook
Vice President, Chief Financial Officer
and Treasurer
Date: October 15, 1997
2
ASSET PURCHASE
AGREEMENT
CENTURY PERSONNEL, INC.
M. A. JONES ENTERPRISES, INC.
================================================================================
<PAGE>
ASSET PURCHASE AGREEMENT
COME NOW, SOS Staffing Services, Inc., a Utah corporation at 1415 South
Main Street, Salt Lake City, Utah 84115 (hereinafter referred to as "Buyer");
Century Personnel, Inc., a Kansas corporation, doing business as The Century
Group and Centech at 8400 West 110th Street, Suite 310, Overland Park, Kansas,
66210 (hereinafter referred to as "Century"); M. A. Jones Enterprises, Inc., a
Missouri corporation, doing business as Century Personnel at 8400 West 110th
Street, Suite 310, Overland Park, Kansas, 66210 (hereinafter referred to as
"MAE") (Century and MAE may hereinafter collectively be referred to as
"Seller"); and Michael A. Jones (hereinafter referred to as "Principal") and
agree as follows:
WITNESSETH:
WHEREAS, Seller owns the assets and business set out in Article 1 and
Exhibits A and B herein and desires to sell them to Buyer;
WHEREAS, Principal is an officer of Seller, is authorized to vote all of
the outstanding shares of Seller, is Seller's sole shareholder and stands to
benefit from Seller transferring said assets to Buyer;
WHEREAS, Buyer desires to purchase said assets and business from Seller
for cash and other consideration;
WHEREAS, the parties desire to enter into a written Agreement describing
and setting forth the terms and conditions under which they will transfer
ownership of said assets and business;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and conditions hereinafter set forth, and for other good and valuable
consideration, the parties agree as follows:
1. Buyer agrees to purchase and Seller agrees to sell, convey, transfer, and
deliver to Buyer the business and assets as set out more specifically in
Exhibits A and B which are hereby incorporated by reference as if fully set
forth herein (the "Assets" or "Business"). Buyer is only purchasing the assets
set forth on Exhibits A and B. Seller is conveying to Buyer only the assets
listed on Exhibits A and B. The Assets specifically exclude cash, cash
equivalents, accounts receivable, any policies of insurance on the life of the
Principal, bank accounts and deposits for rent, automobiles, utilities, workers'
compensation and general liability insurance policies, all as of the Closing
date of this Agreement and shall not be transferred hereby to Buyer. Buyer shall
assume from Seller and Seller shall assign to Buyer the deposits for real
property leases, equipment leases and other deposits described on Schedule A
(i). Buyer shall pay Seller the amount of any such deposits at Closing in
addition to the purchase price described in Article 2 herein. The Assets also
specifically exclude personal property of the Principal, consisting of personal
office furniture and accessories., as of the Closing date of this Agreement and
<PAGE>
shall not be transferred hereby to Buyer. Assets not referenced or identified on
Exhibits A or B, and any schedule thereto, shall not be transferred to Buyer.
Seller agrees to sell or convey to Buyer and Buyer hereby agrees to purchase and
assume the equipment leases, third party contracts and/or other liabilities
listed in Exhibit C of this Agreement. Seller shall remain fully responsible and
liable for all liabilities, except for the liabilities specifically identified
on Exhibit C, which Buyer hereby agrees to assume. With respect to the
liabilities identified in Exhibit C, Buyer is assuming only those liabilities
arising after the Closing of this Agreement. Seller shall remain responsible for
all liabilities, including those listed in Exhibit C, to the extent performance
is required before the Closing. Buyer does not in any way or manner assume any
debt, liability, or obligation of Seller, other than those set forth in Exhibit
C, whether known or unknown, whether asserted or un-asserted, whether absolute
or contingent. Buyer hereby specifically assumes the obligations for real
property leases, contingent upon each respective landlord's approval, arising
after Closing for the real property referenced in Exhibit A, Schedule A-1.
For transition purposes, Buyer at its option may utilize Seller's existing
payroll bank accounts. All cash in said account as of the Closing Date, less
expenditures made by Seller, shall remain the property of Seller. Buyer shall
fund and maintain the account after Closing. After a reasonable time for
reconciliation after the Closing Date of this Agreement, the Buyer shall
reimburse the Seller for the reconciled balance.
2. In consideration for receiving said assets and in consideration of the
representations, warranties, and covenants of Seller set forth herein, Buyer
agrees to pay Seller the following amounts on the conditions set forth herein:
(a) The total purchase price for the Assets including all Earnout
Payments made pursuant to this Article 2 shall in no event exceed
Twenty-five Million Dollars ($25,000,000.00).
(b) Upon execution of this Agreement Buyer shall pay Seller Three
Million Dollars ($3,000,000.00) as a deposit to be applied towards
the Initial Purchase Price at the time of Closing. At the time of
Closing of this Agreement, Buyer shall pay Seller an additional
Eleven Million Nine Hundred Twenty-nine Thousand One Hundred
Eighty-two Dollars ($11,929,182.00) (the $3,000,000.00 and
$11,929,182 payments are referred to collectively as the "Initial
Purchase Price"), by direct wire transfer (or other method
designated by Seller) to an account which has been designated by
Seller. The Initial Purchase Price shall be adjusted as described in
Article 6 herein.
(c) The "First Earnout Period" shall commence on the date of Closing
of the Agreement and continue for fifty-two (52) weeks thereafter.
2
<PAGE>
Buyer shall pay Seller six (6) times the difference between the
earnings before interest and taxes ("EBIT") earned by the Business
during the First Earnout Period and the Verified EBIT Base, as
defined in Article 2 (f) below. Such payment shall be made no later
than forty-five (45) days from the close of the First Earnout
Period.
(d) The "Second Earnout Period" shall commence on the day following
the close of the First Earnout Period continue for fifty-two (52)
weeks thereafter. Buyer shall pay Seller two (2) times the
difference in EBIT earned by the Business during the Second Earnout
Period and the EBIT earned by the Business during the First Earnout
Period. Such payment shall be made no later than forty-five (45)
days from the close of the Second Earnout Period.
(e) (i) "EBIT" as used in this Agreement means gross sales (total
sales of goods and services) less adjustments and discounts; the
cost of sales (temporary employee programs, direct costs, temporary
payroll, temporary payroll taxes, i.e. FICA, unemployment, etc.,
temporary worker's compensation, drug testing and bonding
insurance); branch staff expenses (branch staff payroll, temporary
staff payroll, commissions and bonuses, branch staff and temporary
staff payroll taxes, i.e. FICA, unemployment insurance, etc., branch
staff worker's compensation, sales and travel, group insurance,
background checks, and drug testing); advertising expenses
(specialty items, classified ads, yellow pages, promotional events,
other advertising); operation expenses (telephone, office supplies,
legal, professional, postage and delivery, petty cash, training
expenses, and other operating expenses); facilities expenses (rent,
repair and maintenance, utilities, depreciation and leasehold
amortization); bad debt (to constitute a bad debt, the receivable
must be actually written off. No receivable aged less than one
hundred twenty (120) days shall be written off without the
permission of Seller. As to any receivable aged over one hundred
twenty (120) days as of August 31, 1997, such receivable shall not
be considered a bad debt if there is a bona fide payment plan in
place. As to any receivable which arises after the Closing Date, an
account shall be considered a bad debt when it is aged more than one
hundred twenty (120) days, unless it is subject to a payment plan
which requires substantial and regular payments to be completed
within one year. Upon breach of any such payment plan, the
receivable shall be considered a bad debt. All recoveries made on
any receivables written off as a bad debt shall be added back to
total sales. No adjustment shall be made for any account receivable
which was aged more than one hundred twenty (120) days as of
September 1, 1996); miscellaneous expenses (dues and subscriptions,
adjustments/recoveries, and reimbursements); printing expenses;
computer expenses; consultation expenses; taxes (exclusive of
federal, state and local income tax) and insurance; gain or loss on
disposal of assets; depreciation of assets and other expenses
(career fair; services fees, internal expenses, etc.); plus other
income (bad debt recovery, finance charges collected and other
income). EBIT shall exclude any additional purchase price paid in
3
<PAGE>
the form of the Earnout Payments. EBIT shall exclude expenses
directly related to the acquisition of Assets contemplated by this
Agreement and any other costs to convert Assets to Buyer's systems,
procedures, name, etc., as well as any other expenses and related
costs associated with any other acquisition made by Buyer and
supervised by Principal. EBIT shall exclude the amortization of
goodwill or intangible assets, as well as any increase in
depreciation of tangible assets acquired by Buyer under this
Agreement. In the event Buyer acquires additional businesses which
Principal will direct or supervise, then the parties will modify
this Agreement as necessary to take into account the impact on the
Earnout calculations of such new office openings or acquisitions.
During the Earnout Periods, Principal may open new offices with the
consent of Buyer to operate under the Principal's direction and
control. The profit or loss from the operations of any such new
office opening shall be included in EBIT for purposes of calculating
the Earnout Payments. During the Earnout Periods, no acquisition or
new office opening within fifty (50) miles of any existing office of
Seller may be made without the consent of each party hereto. In all
respects, EBIT shall be calculated on an accrual basis consistent
with generally accepted accounting principles.
(ii) Seller acknowledges and agrees that EBIT will be based on
Buyer's operation of the Business and acknowledges that Buyer's
workers' compensation insurance, unemployment insurance, bonding
insurance, cost of interest, cost of employee benefits and other
costs differ from Seller's and past performance will not necessarily
be indicative of future profits. Seller further acknowledges that
Buyer's payroll taxes are not adjusted for purposes of reporting
EBIT on branch statements (GPI Report) for limits on FICA or federal
or state unemployment insurance (FUTA, SUTA). Seller further
acknowledges that branch statements report interest expense. Buyer
agrees that its branch statements shall be adjusted at the end of
each Earnout Period to deduct interest expense and to show actual
expenditures for FICA , FUTA and SUTA for purposes of determining
the EBIT for payment of the Earnouts. Buyer believes that it will be
entitled to be considered a successor employer for purposes of FICA,
FUTA and SUTA caps. Each party shall submit all necessary forms and
reports to the IRS and any state agency to enable Buyer to achieve
successor employer status for FICA, FUTA and SUTA purposes. If Buyer
does not qualify as a successor employer, Buyer agrees that there
will be no charge to EBIT for the First Earnout Period with respect
to any FICA, FUTA or SUTA expenses during the remainder of calendar
year 1997 to the extent such expenses exceed the maximums that would
have been paid by Seller during calendar 1997, had this transaction
not taken place. Notwithstanding the foregoing, for purposes of
4
<PAGE>
calculating EBIT during each Earnout Period, Buyer's costs, as a
percent of sales, of worker's compensation insurance, unemployment
insurance, fidelity bonding insurance, employee benefits, liability
insurance, errors and omissions insurance, short and long term
disability insurance, and hired, non-owned motor vehicle insurance,
in the aggregate shall not be greater than Seller's aggregate cost
for such items as a percent of sales for the twelve (12) month
period immediately preceding the Closing and EBIT shall be adjusted
accordingly. Additionally, other costs solely related from the
acquisition, such as changes in signage, shall be excluded from the
EBIT.
(f) "Verified EBIT Base" shall mean the Business's EBIT for the
fifty-two week period ending August 25, 1997 as verified through
the due diligence review and audit described in Article 6. Such
EBIT shall be adjusted as follows: the Business's loss on the
Learning Center and the Business's loss on the Olathe office
opening during such fifty-two (52) week period shall be added to
EBIT; and all compensation and expenses paid to Principal in
excess of $125,000.00 shall be added to EBIT. In no event shall
the Verified EBIT Base exceed $2,488,197.00
(g) During the Earnout Periods, Buyer shall take no action that would
diminish Seller's ability to maximize the Earnout Payments. By
way of illustration, in order to support and preserve the
integrity of the Earnout Payments payable by Buyer, Buyer
covenants and agrees that until the expiration of the second
Earnout Period, Buyer shall use commercially reasonable efforts
to maximize the Business's EBIT and shall not divert any of the
business of Century Personnel with clients existing as of or
prior to the Closing to any affiliate of Buyer or other division
of Buyer. Moreover, during such time, Buyer will not acquire
another company engaged in a business competitive with that of
Century Personnel having an office within fifty (50) miles from
any of the Century Personnel offices unless Buyer and the
Principal have mutually agreed on any appropriate revisions to
the Earnout formula. Buyer acknowledges that the Principal shall
be permitted freely to solicit and attract new clients, provided
that such new clients meet Buyer's criteria for providing
services, such criteria include, credit worthiness, safe work
sites and risk management. Buyer shall not incur any unnecessary
expense in order to diminish EBIT.
(h) The parties agree that the initial purchase payment of Fourteen
Million Nine Hundred Twenty-nine Thousand One Hundred Ninety-seven
Dollars ($14,929,182.00) shall be allocated as
follows:
As to MAE:
to Goodwill: $ 1,000.00;
5
<PAGE>
to the Non-Competition Covenant: $1,000.00; and
to Property, Facilities and Equipment $2,000.00.
As to Century:
to Goodwill: $ 14,925,182.00;
to Customer Lists: $10,000.00;
to Employee Lists: $10,000.00;
to the Non-Competition Covenant: $49,000.00; and
to Property, Facilities and Equipment: $8,800.00;
Any adjustment to the Initial Purchase Price shall be adjusted
dollar for dollar to the allocation for Goodwill. All other payments
made pursuant to this Article 2 will be payable to Century and
allocated to Goodwill.
All parties agree to file IRS Form 8594 reflecting the
purchase price allocation contained herein.
3. As further consideration for Buyer to enter into this Agreement and in
consideration for Buyer making payments to Principals and Seller pursuant to
Article 2 and in consideration for Principals benefiting from this Agreement,
Principals agree to the following:
(a) For a period commencing at the Closing Date of this Agreement
and continuing to the later of thirty-six (36) months after the
Closing or twenty-four (24) months after the termination of the
employment of Principal pursuant to the employment agreement
referenced in Article 14 herein or any extension thereof (the
"Covenant Period"), Principal shall not, for any reason except as
set forth in Paragraph 3 (b) below, within fifty (50) miles of any
existing office or branch of Seller or any other office or branch of
Buyer which comes under the supervision or management of Principal
or reports to Principal during the Term of Principal's employment as
defined in the employment agreement of Principal, (i) engage in the
temporary staffing, consulting personnel, staff leasing, payrolling,
executive placement, permanent placement, or employee testing
business; information system or information technology consulting,
or contract staffing ; or provide any other related service; (ii)
enter the employ of, or render any services to or consult with, any
person or entity engaged in competition with the Buyer, any
affiliate of Buyer or any of their successors in interest; (iii)
acquire an ownership interest in in any such person or entity or act
as a partner, officer, director, principal, agent or trustee for any
such person or entity; provided, however, Principal may own,
directly or indirectly, solely as an investment, securities of any
6
<PAGE>
person traded on any national securities exchange or
over-the-counter if Principal is not a controlling person of, or a
member of a group which controls, such person and does not, directly
or indirectly, own 5% or more of any class of securities of such
person or entity, (iv) solicit or otherwise deal with any client of
the Buyer, any affiliate of Buyer or any of their successors in
interest in a manner designed to (or that could) take business away
from the Buyer, any affiliate of Buyer or any of their successors in
interest; (v) solicit or otherwise induce any employee of the Buyer,
any affiliate of Buyer or any of their successors in interest to
terminate his/her employment with the Buyer, any affiliate of Buyer
or any of their successors in interest; or (vi) hire or solicit any
consultant under contract with the Buyer, any affiliate of Buyer or
any of their successors in interest or encourage such consultant to
terminate such relationship.
(b) Notwithstanding the covenants contained in Article 3 (a) above,
after the expiration of the Term, including any extension
thereof, of the Principal's employment agreement with the Buyer,
Principal may during the Covenant Period may engage in the
executive search/permanent placement business with any entity
which had executive search/permanent placement billings of
$40,000.00 or less with the Business during the twelve (12) month
period prior to the termination of Principal's employment with
Buyer without violating any term of this Agreement.
Additionally, if Buyer terminates Principal without cause (as
such term is defined in the Principal's employment agreement
which is referenced in Article 14 herein), then the Principal may
immediately engage in the executive search/permanent placement
business with any entity which had executive search/permanent
placement billings of $40,000.00 or less with the Business during
the twelve (12) month period prior to the termination of
Principal's employment with Buyer.
(c) The Principal agrees not to disclose to any unauthorized person
any confidential information they may obtain or have obtained
regarding Seller's, Buyer's, any affiliate of Buyer's, or their
successors' services, products, customers, employees or methods of
doing business, nor use such information in violation of Article 3
(a) during said period.
(d) The Principal acknowledges that he will be able to earn a
livelihood without violating the foregoing restrictions. The
Principal further acknowledges: (1) that compliance with the
restrictive covenant contained in this Article 3 is necessary to
protect the business and goodwill of the Buyer, any affiliate of
Buyer's or its successors in interest, and (2) that a breach will
result in irreparable and continuing damage to the Buyer or its
successors in interest, for which money damages may not provide
adequate relief. Consequently, the Principal agrees that, in the
7
<PAGE>
event that he breaches or threatens to breach the restrictive
covenant of this Article 3, the Buyer or its successors in interest
shall be entitled to seek: (1) a preliminary or permanent injunction
to prevent the continuation of harm, and (2) money damages insofar
as they can be determined. Nothing in this Agreement shall be
construed to prohibit the Buyer or its successors in interest from
also pursuing any other remedy, the parties having agreed that all
remedies are cumulative.
(e) The parties have attempted to limit the Principal's right to
compete only to the extent necessary to protect the Buyer or its
successors in interest from unfair competition. The parties
recognize that reasonable people may differ in making a
determination. Consequently, the parties agree that, if the scope or
enforceability of the restrictive covenant is in any way disputed at
any time, a court, arbitrator or other trier of fact may modify and
enforce the covenant to the extent that it believes to be reasonable
under the circumstances existing at the time.
4. The "Closing" of the transactions contemplated by this Agreement shall
take place on any Monday on or before October 27, 1997 (the "Closing Date") at
time and place to be designated in writing by the parties.
This Agreement shall be effective upon execution by each party hereto. The
transfer of the Assets and Business herein described to Buyer is hereby
recognized as occurring at 12:01 a.m. on the Closing Date, regardless of the
date when this Agreement shall be executed. At 12:01 a.m. on the Closing Date,
Buyer will also commence operation of Seller's Business with respect to the
Assets purchased.
Within a reasonable time after the execution of this Agreement, Seller and
Buyer agree to submit to the United States Department of Justice ("DOJ") and the
Federal Trade Commission ("FTC") a Hart-Scott-Rodino filing. Buyer shall pay the
filing fee of $45,000.00. Each party shall pay its own costs and expenses
related to the preparation of the application. The parties acknowledge and agree
that the Closing of this Agreement is subject to the approval by the FTC or DOJ.
The parties agree that the Closing Date may be extended past October 27, 1997
pending FTC or DOJ approval. If approval is granted after October 27, 1997, then
the Closing Date shall be the first Monday following such approval.
5. (a) At Closing, Seller and Principal shall deliver to Buyer the
following:
(i) A Bill of Sale for all items of personal and
tangible property to be transferred hereby;
(ii) An assignment of all trademarks and trade names to be
transferred hereby;
8
<PAGE>
(iii) All Assets to be transferred hereby;
(iv) Lien releases for any encumbered Asset;
(v) Consents to the assignment of all leases and contracts
to be assumed by Buyer. If any such consent is not
available at Closing then it shall be delivered as soon
as reasonably possible thereafter. Buyer shall provide
reasonable assistance to obtain such consents; and
(vi) Consents to the assignment of all service contracts with
Seller's customers to the extent such contracts require
consent for assignment to Buyer.
(b) At Closing, Buyer shall deliver to Seller or Principal the following:
(i) All funds or monies described in Article 2 herein;
(ii) Certificate that all necessary consents have been
obtained;
(iii) Certificate that all stock options to be granted
hereunder have been approved; and
(iv) Executed Employment Agreement between Buyer and
Principal.
6. The Initial Purchase Price described in Article 2 (b) of this Agreement
shall be based upon the due diligence and financial review of Seller's books and
records by Buyer. The due diligence review shall consist of two (2) parts.
(a) (i) Prior to the execution of this Agreement, Buyer caused
its representatives to review the general business practices of
Seller, including, risk management issues, legal risks, payroll tax
liabilities, benefits and general accounting records and practices,
including 1996 closing entries and adjustments.
(ii) Additionally, as part of the due diligence review, the
Company's representatives verified that the EBIT (as adjusted as
described in Article 6 (b)(ii) below) for the eight (8) months
period ending August 31, 1997 ("Base Period") was not less than
$1,756,000.00. The eight month's EBIT of $1,756,000.00 is consistent
with an estimated 1997 twelve (12) month EBIT of $2,488,197. The
Initial Purchase Price of $14,929,182 is six (6) times the estimated
1997 twelve month EBIT of $2,488,197.
9
<PAGE>
(b) (i) Within five (5) business days from the execution of
this Agreement, Buyer shall cause its representatives to commence
the second part of the due diligence and financial audit. Buyer
shall cause its independent public accountants to perform an audit
of Seller's financial books and records based on generally accepted
accounting principles and audit standards. To meet Securities and
Exchange Commission ("SEC") regulatory requirements, the accountants
will audit the calendar year 1996 and year to date 1997 through
September 30, 1997. If Seller cannot provide the September 1997
financial books, records, and statements, then the audit will
include calendar years 1995, 1996 and year to date 1997 through
August 31, 1997. The review shall also establish the Verified EBIT
Base (defined in Article 2 (f)) and the Base Period EBIT described
below. Such review shall be completed within fifteen (15) days from
the execution of this Agreement and at least five (5) days prior to
the Closing Date. The Verified EBIT Base shall for purposes of
determining the First Earnout Payment as described and defined in
Article 2 (c) and (f) shall not exceed $2,488,197.00.
(ii) The Initial Purchase Price is based upon Seller's
adjusted EBIT for the Base Period of $1,658,800 (8/12 x $2,488,200 =
$1,658,800). The EBIT for the Base Period shall mean EBIT as defined
in Article 2 (e) herein adjusted as follows: the Business's loss on
the Learning Center and the Business's loss on the Olathe office
opening during the Base Period shall be added to the Base Period
EBIT; and all compensation and expenses paid to Principal in excess
of $83,333.33 (8/12 of $125,000.00) during the Base Period shall be
added to the Base Period EBIT.
(iii) If based on the audit, the Base Period EBIT is
determined to be greater than $1,558,800.00 (which provides a
$100,000 cushion from $1,658,800 for audit adjustments), then there
shall be no adjustment to the Initial Purchase Price. If the Base
Period EBIT is less than $1,558,800.00, then the Initial Purchase
Price shall be reduced by an amount which is equal to the difference
between $1,558,800.00 and the Base Period EBIT multiplied by 9
($14,929,182/$1,658,800 = 9). For example, if the Base Period EBIT
is $1,500,000, then the Initial Purchase Price would be
$13,762.982.00 ($1,558,800 - $1,500,000 = $58,800; $58,800 x 9 =
$529,900; $14,292,182 - $529,900 = $13,732,982).
(c) Seller shall provide Buyer and its agents access to all
documents, books and records necessary, in the sole judgment of
Buyer or its agents, to complete the due diligence review and audit.
10
<PAGE>
7. If this Agreement does not close due to the fault of the Buyer, Buyer
shall pay Seller its attorneys' fees related to the transaction contemplated
hereby. Such payment shall not exceed Fifteen Thousand Dollars ($15,000.00).
8. In the event the transaction contemplated by this Agreement does not
close, Buyer shall return to Seller any and all copies of information provided
by Seller pertaining to the Business, Assets, operations of Seller or any other
matters pertaining to Seller and, for a period of five (5) years from the date
of this Agreement, Buyer will maintain as confidential all proprietary
information and shall not use for any reason any proprietary information which
it or any of its representatives may obtain from Seller, any of its employees or
the Principals. This restriction shall not apply, however, (i) as may otherwise
be required by law (if such disclosure is required by legal process, Buyer shall
notify Seller, prior to any response to such legal process. Thereafter, Seller,
at its sole cost and expense, may oppose such disclosure), (ii) to the extent
such information (A) shall be or have become publicly available, (B) was legally
available to Buyer on a non-confidential basis prior to its disclosure by Seller
or (C) becomes available to Buyer on a non-confidential basis from a person
other than Seller or (iii) with respect to disclosure by Buyer to parties to
whom disclosure may be required or desirable in connection with the transactions
contemplated by this Agreement, provided such parties agree to be bound by the
provisions of this Article 8. This confidentiality Agreement will also apply to
any proprietary information not purchased by Buyer regardless of whether the
transaction closes.
9. Seller and Principal represent and warrant to the Buyer that the
statements made below are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date. As used in this Article
9, "material" shall mean any discrepancy in the financial statements or
representations that in the aggregate have an impact of more than one hundred
twenty thousand dollars ($120,000.00).
(a) Century is a corporation duly organized, validly existing, and
in good standing under the laws of the state of Kansas. Century has
full corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the business in which it is
engaged and to own and use the properties owned and used by it.
Century is not in default under or in violation of any provision of
its charter, articles of incorporation, or bylaws.
(b) MAE is a corporation duly organized, validly existing, and in
good standing under the laws of the state of Missouri. MAE has full
corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the business in which it is
engaged and to own and use the properties owned and used by it. MAE
is not in default under or in violation of any provision of its
charter, articles of incorporation, or bylaws.
11
<PAGE>
(c) Seller has good and marketable title to all the assets listed in
Exhibits A and B. All assets are free and clear of mortgages, liens,
pledges, charges, encumbrances, equities, or claims, except for
leases of the following equipment:
.
(d) Neither the execution nor the delivery of this Agreement will
(i) violate any statute, regulation, judgment, order, or other
restriction of any governmental agency or court; or (ii) conflict
with, result in a breach or default under any Agreement, contract,
license, or other arrangement to which Seller is a party.
(e) Seller has filed all income tax returns that it was required to
file, has paid in full all taxes associated with such tax returns
and is not deficient on any tax payments or liabilities.
(f) Seller has complied with all environmental, health, and safety
laws in all material respects and does not have any material
liability relating to any environmental, health, and safety laws.
(g) Seller has complied with all federal, state and local equal
employment opportunity and anti-discrimination laws in all material
respects and does not have any material liability relating to any
federal, state and local equal employment opportunity and
anti-discrimination laws.
(h) Seller has complied with Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), in all material respects and does not
have any material liability relating to ERISA.
(i) Seller has complied with the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA") in all material
respects and does not have any material liability relating to COBRA.
(j) Seller has paid all payroll taxes and other withholdings
mandated by federal, state and local laws.
(k) Seller has complied with all other employment and labor laws not
specifically enumerated in all material respects and does not have
any material liability relating to any employment or labor law.
(l) Seller has disclosed all lawsuits, claims or causes of actions
that have arisen against Seller that are known or that it should
reasonably be expected to know.
12
<PAGE>
(m) Seller warrants that all financial information and records
provided to Buyer are true and complete in all material respects.
(n) Seller warrants that it has not used the services of any broker
or agency in connection with the transaction contemplated by this
Agreement. Seller warrants that it is not obligated to pay any
broker, agency or finder's fee in connection with the transaction
contemplated by this Agreement.
10. Buyer represents and warrants to Seller and Principals that the
statements made below are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date.
(a) Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the state of Utah. Buyer has full
corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the business in which it is
engaged and to own and use the properties owned and used by it.
Buyer is not in default under or in violation of any provision of
its charter, articles of incorporation, or bylaws.
(b) The Buyer's board of directors have approved the terms of this
Agreement and the officers of Buyer have been duly authorized to
enter into and execute this Agreement.
(c) The Buyer has obtained all necessary consents to enter into this
Agreement.
(d) Neither the execution nor the delivery of this Agreement will (i)
violate any statute, regulation, judgment, order, or other
restriction of any governmental agency or court; or (ii) conflict
with, result in a breach or default under any Agreement, contract,
license, or other arrangement to which Buyer is a party.
(e) Buyer warrants that it has not used the services of any broker or
agency in connection with the transaction contemplated by this
Agreement. Buyer warrants that it is not obligated to pay any
broker, agency or finder's fee in connection with the transaction
contemplated by this Agreement.
11. Seller and Principal agree to indemnify Buyer and hold Buyer harmless
from any material loss, damage, expense, liability, or claim, including without
limitation, attorney's fees and expenses of litigation, to which Buyer may
become subject arising out of: (a) any material misstatement of the Seller or
Principals as warranted in Article 9; (b) any material failure of Seller or
Principals to perform any of its covenants, Agreements or undertakings contained
in this Agreement or in any other Agreement executed in connection with the
13
<PAGE>
transactions contemplated herein; or (c) any other action or inaction of Seller,
Principals, or their designees, which action or inaction is not a result of any
fault on the part of Buyer.
Seller and Principals further agree to indemnify Buyer and hold
Buyer harmless from any material loss, damage, expense, liability, or claim
(whether known or unknown, whether asserted or un-asserted, whether absolute or
contingent), including without limitation, attorney's fees and expenses of
litigation, for any claim arising or occurring prior to the Closing Date for
which Buyer may be liable because of its purchase of Seller's assets.
As used in this Article 11, "material" shall mean losses, damages,
expenses, liabilities or claims, including without limitation, attorney's fees
and expenses of litigation which are one hundred twenty thousand dollars
($120,000.00) in the aggregate.
Further, notwithstanding anything herein contained to the contrary,
the obligation of Seller and Principal to indemnify Buyer as provided in this
Article 11 shall expire two (2) years from the Closing Date except as to any
claim made by Buyer prior to the expiration of such two (2) year period. Further
the indemnification obligation of Seller and Principal hereunder shall in no
event exceed the total purchase price, including any Earnout Payments, described
in Article 2 herein.
12. Buyer agrees to indemnify Seller and Principal and hold Seller and
Principal harmless from any material loss, damage, expense, liability, or claim,
including without limitation, attorney's fees and expenses of litigation, to
which Seller and Principal may become subject arising out of: (a) any material
failure of Buyer to perform any of its covenants, Agreements or undertaking
contained in this Agreement or in any other Agreement executed in connection
with the transactions contemplated herein; (b) any material misstatement of
Buyer as warranted in Article 10; or (c) any other action or inaction of Buyer,
or its designees, which action or inaction is not a result of any fault on the
part of Seller or Principal.
Buyer agrees to indemnify Seller and Principal and hold Seller and
Principal harmless from any material loss, damage, expense, liability, or claim
(whether known or unknown, whether asserted or un-asserted, whether absolute or
contingent), including without limitation, attorney's fees and expenses of
litigation, for any claim arising or occurring after the Closing Date by reason
of Buyer's failure to perform any assumed liability or for which Seller or
Principals may be otherwise liable because of Buyer's operation of the Business.
As used in this Article 12, "material" shall mean losses, damages,
expenses, liabilities or claims, including without limitation, attorney's fees
and expenses of litigation which are one hundred twenty thousand dollars
($120,000.00) in the aggregate.
Further, notwithstanding anything herein contained to the contrary,
the obligation of Buyer to indemnify Seller and Principal as provided in this
14
<PAGE>
Article 11 shall expire two (2) years from the Closing Date except as to any
claim made by Seller or Principal prior to the expiration of such two (2) year
period. Further the indemnification obligation of Buyer hereunder shall in no
event exceed the total purchase price, including any Earnout Payments, described
in Article 2 herein.
13. Seller and Principal agree from the time of the execution of this
Agreement through the Closing Date that Seller and Principal will conduct the
Business only in the ordinary course consistent with past practices and will not
enter into any agreement which would materially affect the business or the
assets to be purchased which would binding upon Buyer after the closing, without
Buyer's consent.
14. Buyer agrees to employ Principal for a period of two (2) years
following the Closing Date pursuant to the terms and conditions of a separate
employment agreement. The form of such agreement is attached hereto as Exhibit
D.
15. For each of Seller's former staff employees hired by Buyer, Buyer
shall recognize time of service with Seller as time of service with Buyer for
purposes of non-health, life or disability benefits, such as, 401(k) eligibility
and matching contribution vesting, C-125, vacation entitlement, etc. Buyer shall
provide Seller's former staff employees hired by Buyer the same total number of
paid vacation days and holidays as provided by Seller; however, Buyer may pay
additional vacation days in lieu of paid holidays as long as the total number of
paid days, including holidays, is the same or greater than when such employees
were employed by Seller. Seller acknowledges that Buyer maintains a drug-free
workplace policy and that all of Seller's former employees hired by Buyer will
be subject to such policy. Such staff employees shall be exempt from the
pre-employment drug screen, but shall be subject to all other provisions of the
policy, including random drug screens or post incident screening. After the
Closing, each of Seller's employees hired by Buyer will be subject to post
incident screening. After 180 days from the Closing, each of Seller's employees
hired by Buyer shall be subject to random screening pursuant to Buyer's policy.
Buyer may modify its policy at any time to reflect changes in statutory or case
law or for any other reason consistent with good business judgment, such as
analysis of whether such practice could nullify or otherwise affect the
enforceability of the covenants not to compete signed by Seller's employees.
16. SOS shall issue options to purchase a combined twenty-five thousand
(25,000) shares of SOS's common stock to certain key employees of Seller which
as a result of this Agreement are subsequently employed by Buyer. Such stock
options will be issued under a separate agreement pursuant to and in accordance
with SOS's May 1995 Incentive Stock Option Plan and shall vest over a period of
five (5) years pursuant to such separate agreement (the form of such agreement
is attached hereto as Exhibit E). The exercise price of such options shall be
the closing sales price of the stock on the date of grant as reported by the
Wall Street Journal. The plan requires that any specific grant be approved by
the compensation committee of Buyer's board of directors. Seller shall provide
15
<PAGE>
to Buyer as a list of key employees and number of shares to be granted as
indicated in Exhibit F.
17. SOS shall agree to employ the six (6) key employees identified in
Exhibit F under an employment agreement which shall be for a term of up to one
(1) year, shall provide for automatic one-year term renewals and shall provide
for six (6) months severance pay in the event of termination of employment
without cause. The form of such Agreement is attached as Exhibit G.
18. SOS shall issue options to purchase ten thousand (10,000) shares of
SOS's common stock to Principal. Such stock options shall be issued under a
separate agreement pursuant to and in accordance with the SOS's May 1995
Incentive Stock Option Plan and shall vest over a period of five (5) years
pursuant to such separate agreement. The exercise price of such options shall be
the closing sales price of the stock on the date of grant as reported by the
Wall Street Journal.
19. Seller shall pay all staff benefits, costs and expenses earned prior
to the Closing date of this Agreement. Before the Closing Date, Seller shall pay
each staff employee for any and all benefits, including vacation pay earned by
each such employee prior to the Closing Date of this Agreement. If after the
Closing Date, a staff employee actually takes vacation for which the Seller has
already paid, the vacation will be without compensation, and accordingly there
will be no charge to EBIT for compensation for such employee during his or her
vacation. Further Buyer acknowledges that accruals for vacation do not occur for
EBIT calculations until an Employee reaches his or her anniversary date of
employment. Likewise, Buyer acknowledges that certain of Seller's benefits (such
as bonuses and trips) are not deemed earned until actually received.
Seller shall pay all temporary employee wages or salaries earned
prior to the Closing Date, but to be paid after the Closing Date. Such payments
may be made on the next regular payday following the Closing Date. Buyer shall
pay all other payments to temporary employees as such payments come due. Any
such payment shall be treated as an expense for purposes of calculating the
EBIT.
20. Buyer agrees to assist Seller to collect accounts receivable. Such
assistance shall be consistent with the collection process used in the past by
Seller. If Buyer receives payment for both its services as well as Seller's,
Buyer will deposit said funds in its accounts and pay the amount due Seller to
Seller. Payments for which no invoice is designated shall be applied to the
oldest outstanding invoice.
Seller agrees if it receives any payment for any account receivable
due Buyer that it will turn over such payment to Buyer when received by Seller.
If Seller receives payment for both its services as well as Buyer's, Seller will
deposit said funds in its accounts and pay the amount due Buyer to Buyer.
16
<PAGE>
Payments for which no invoice is designated shall be applied to the oldest
outstanding invoice.
21. Within five (5) days from the date of Closing, each Seller shall
change their respective corporate names to any name that does not use Century,
Centech or M. A. Jones in part, in whole or in any manner.
22. Buyer, Seller, and Principals agree to take such further action as is
necessary to carry out the purpose of this Agreement, including the execution
and delivery of such further instruments and documents as any party reasonably
may request.
23. Buyer and Seller agree that prior to the commencement of any action
for breach of this agreement they will submit to non-binding mediation or
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in effect at the time of the action. The parties agree
to negotiate in good faith to resolve the breach or enter a settlement. An
arbitrator will be chosen by the Buyer and Seller. If the parties are unable to
agree upon an arbitrator, an arbitrator shall be selected pursuant to the rules
of the American Arbitration Association then in effect. Arbitration shall take
place in Denver, Colorado.
24. This Agreement and all documents executed and delivered hereunder
shall be governed by and interpreted in accordance with the laws of the State of
Utah.
25. In the event of the commencement of any litigation or arbitration to
enforce any provision of this Agreement or that is related to this Agreement,
the prevailing party shall be entitled to its costs for such action, including
reasonable attorney's fees, expert witness fees and other reasonable costs
incurred related to such action.
26. Any notice or other communication required or permitted hereunder
shall be in writing and shall be delivered personally, telegraphed, telexed,
sent by facsimile transmission or sent by certified, registered or express mail,
postage prepaid. Any such notice shall be deemed given when so delivered
personally, telegraphed, telexed or sent by facsimile transmission or, if
mailed, five days after the date of deposit in the United States mail, as
follows:
(i) if to Buyer, to:
SOS Staffing Services, Inc.
1415 South Main Street
Salt Lake City, Utah 84115
Attn: Legal Department
(ii) if to Seller or Principal:
17
<PAGE>
Michael A. Jones
11700 Aberdeen
Leawood, KS 66211
Any party may change its address for notice hereunder by written
notice to the parties hereto.
27. Any term or provision of this Agreement that is invalid or
unenforceable shall not affect the validity and enforceability of the remaining
terms and provisions of this Agreement.
28. Each party shall bear its own costs and expenses incurred in
connection with this Agreement except as otherwise provided herein.
29. Each party acknowledges that it has sought the advice (or has had the
opportunity to do so) of competent legal counsel and tax advisors with respect
to the subject matter of this Agreement and the legal and tax consequences of
entering this Agreement.
30. This Agreement, together with the exhibits incorporated herein,
constitutes the entire agreement of the parties with respect to the subject
matter herein. This Agreement may only be modified by written instrument
executed by the parties hereto.
31. This Agreement may be executed in any number of counterparts, each of
which when executed and delivered shall be an original, but all such
counterparts shall constitute one and the same instrument. As used herein,
"counterparts" shall include full copies of this Agreement signed and delivered
by facsimile transmission, as well as photocopies of such facsimile
transmission.
32. Time is of the essence of this Agreement and all its provisions.
33. Seller acknowledges that upon execution of this Agreement, Buyer will
make a public announcement via the Dow Jones wire service that it has entered
into such Agreement and may disclose general information about the nature of the
Agreement, the general terms and conditions of the Agreement and general
information concerning the Seller, including current sales levels, geographic
areas of operation, and the nature of the Business.
[THIS SPACE INTENTIONALLY LEFT BLANK]
18
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement.
DATED this day of , 1997. DATED this 1st day of October , 1997.
--- ------- --- -------
Buyer Seller/Principal
SOS Staffing Services, Inc. by: Century Personnel, Inc. d/b/a The
Century Group and Centech; and M. A.
Jones Enterprises, Inc. d/b/a Century
Personnel
/s/Richard D. Reinhold /s/Michael A. Jones
- ------------------------------ --------------------------------
Richard D. Reinhold Michael A. Jones, In his capacity as
Chairman of the Board President of Century and MAE, and in
his individual capacity as Principal
<PAGE>
EXHIBIT A
<PAGE>
EXHIBIT A
The following assets are to be purchased and assumed by Buyer from Seller:
(a) The real property leases for the demised premises described in Schedule A-1
which attached hereto and incorporated by reference, together with all rights
and privileges under said leases to real property subject to said leases; and
(b) All papers and records in Seller's care, custody or control relating to the
operational aspects of Seller's staffing business or any of the Assets to be
transferred under this Agreement, including but not limited to all personnel and
labor relations records, environmental control records, sales records,
accounting and financial records, maintenance and production records, except
that Seller shall either have unlimited access to or copies of such records for
the purpose of preparing governmental reports, payroll and tax returns or any
other form, report or return; and
(c) All records in any way related to Seller, its customers, business,
employees, etc. that are maintained at any location;
(d) Telephone numbers of Seller which are described in Schedule A-1; and
(e) Facsimile telephone numbers of Seller which are described in Schedule
A-1; and
(f) E-mail addresses of Seller; and
(g) All of Seller's Intangibles relating to its staffing business, including:
(i) all assumed business or trade names to the extent such trade names are
used in connection with providing staffing services, including temporary help
services, payroll services, permanent placement or employee leasing. Such names
to be transferred include but are not limited to: "Century Personnel", "The
Century Group", "Centech", any other derivation of "Century" to which Seller may
have any right, and all other assumed business names and trade names owned or
used by Seller; and all other slogans, trademarks and service marks related to
Seller; and
(ii) all employee lists, including, but not limited to complete personnel
files, work histories, employment agreements between Seller and employees of
Seller, employee Confidentiality and non-compete agreements between Seller and
employees of Seller, and all other documents related to employees of Seller; and
(iii) all customer lists, including but not limited to all telephone
numbers, credit histories, sales histories and other documents related to
Seller's customers; and
(iv) Seller's goodwill; and
<PAGE>
(v) all other intangibles of Seller; and
(h) All proprietary and other software and hardware; and
(i) All prepaid expenses relating to any of the assets, facilities, and
operations being taken over by Buyer which are described in Schedule A (i)
attached hereto, for which Buyer shall pay Seller in addition to the Initial
Purchase Price at Closing; and
(j) All operational assets of Seller including, but not limited to all
inventory, office furniture, phones, electronic and computer equipment and all
other equipment used by Seller to conduct business which are listed in Exhibit
B;
<PAGE>
SCHEDULE A-1
Page 1
CENTURY BRANCH LISTING
THE CENTURY GROUP & CENTECH LEE'S SUMMIT OFFICE
8400W. 110th Street, Ste 310 506 SE M-291 Hwy, #H
Overland Park, KS 66210 Lee's Summit, MO 64063
(913) 451-7666 (816) 525-8333
Fax: (913) 451-2161 Fax: (816) 525-9969
SOUTH OFFICE INDEPENDENCE OFFICE
5300 College Blvd. 1003 E. 23rd Street, Ste F
Overland Park, KS 66211 Independence, MO 64055
(913) 451-8333 (816) 833-8333
Fax: (913) 451-2043 Fax: (816) 833-4696
PLAZA OFFICE WYANDOTTE OFFICE
1101 Westport Road 7567 State Ave.
Kansas City, MO 64111 Kansas City, KS 66112
(816) 931-0304 (913) 334-8333
Fax: (816) 931-4696 Fax: (913) 788-0304
NORTH OFFICE LAWRENCE OFFICE
4256 North Oak Trfwy 1009 New Hampshire, #C
Kansas City, MO 64116 Lawrence, KS 66044
(816) 455-0304 (785) 832-0004
Fax: (816) 455-4696 Fax: (785) 749-4696
LIBERTY OFFICE TOPEKA OFFICE
226 N. M-291 Hwy. 1133 SW Gage Avenue
Liberty, MO 64068 Topeka, KS 66604
(816) 781-4414 (785) 228-0006
Fax: (816) 781-4565
<PAGE>
SCHEDULE A-1
Page 2
COFFEYVILLE OFFICE
914 1/2 West 8th Street
Coffeyville, KS 67337
(800) 465-4360
Fax: (316) 251-4066
NEODESHA OFFICE
509 Main Street
Neodesha, KS 66757
(316) 325-3434
OLATHE OFFICE
104 S. Clairborn
Olathe, KS 66062
(913) 393-3434
Fax: (913) 393-4696
<PAGE>
EXHIBIT B
<PAGE>
[Exhibit B shall consist of the asset inventory provided by Seller]
<PAGE>
EXHIBIT C
<PAGE>
[Exhibit C shall consist of leases and third party contracts provided by
Seller. Include automobile leases.]
<PAGE>
EXHIBIT D
<PAGE>
EMPLOYMENT, NONDISCLOSURE AND NON-COMPETITION AGREEMENT
-------------------------------------------------------
THIS EMPLOYMENT, NONDISCLOSURE AND NON-COMPETITION AGREEMENT (the
"Agreement") is entered into this ___ day of September, 1997 by and between SOS
Staffing Services, Inc., a Utah corporation (the "Company"), and Michael A.
Jones ("Jones").
WHEREAS, the Company desires to employ Jones based on the terms and
conditions of this Agreement; and
WHEREAS, Jones desires to accept such employment on the terms and
conditions of this Agreement.
Accordingly, the parties agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company hereby agrees to employ
Jones as a full-time employee of the Company. The Company will employ Jones in
the position of Area Manager which is a company title that is comparable to
others employed by the Company with similar responsibilities, but will allow
Jones to use the title "President", The Century Group (which will remain the
name of the Executive Search/Permanent Placement business), in his local market.
Jones will render such services and perform such duties consistent with those
duties he has performed in the past for Century Personnel, Inc. and as the
management of the Company shall reasonably request. Such duties shall include
the supervision and management of the various offices and branches which were
acquired by the Company in accordance with that certain Asset Purchase Agreement
dated September , 1997 between the Company, Jones, Century Personnel, Inc. and
M. A. Jones Enterprises, Inc. (the "Asset Purchase Agreement"). Notwithstanding
the foregoing, Jones' position and duties may be reasonably modified or changed
from time to time at the discretion of the management without additional
compensation so long as the change will not have the effect of diminishing his
ability to maximize the Earnout Payments under the Asset Purchase Agreement. Any
material change to Jones' position or duties, including relocation, must be
agreed to by Jones. Jones shall also serve during all or any part of the Term in
any other office (office does not refer to any physical office) to which he may
be appointed or elected without any compensation therefor other than that
specified in this Agreement. The Asset Purchase Agreement describes adjustments
made to the Earnout in the event of an acquisition or new office opening for
which Jones has management responsibility.
1.2 Acceptance of Employment by Jones. Jones hereby accepts such
continued employment and shall render the services described above. Jones will
faithfully, and at all times, and to the best of his ability, experience and
talents, perform all of the duties which are required of him under this
Agreement, including devoting of his full business time to and for the exclusive
<PAGE>
benefit of the Company, and shall keep free from conflicting enterprises or any
other activities which would be detrimental to or interfere with the business of
the Company or the devotion of his full time to the business of the Company
consistent with his devotion of time to performance of duties on behalf of
Century Personnel, Inc. prior to the acquisition referenced in the Asset
Purchase Agreement. Jones agrees to use his best efforts to comply with any and
all instructions that management may give him from time to time, and to promote
and maintain the success, quality, professionalism and reputation of the
Company.
2. Term of Agreement and Employment. The term of this Agreement and Jones'
employment hereunder (the "Term") shall commence on , 1997 (the "Commencement
Date") and shall continue for a period of two (2) years thereafter (such period
may hereinafter be referred to as the "Initial Term") or as otherwise terminated
as provided in Article 5 hereof. Thereafter, the Term may be extended on such
terms and conditions as the parties may agree; however the compensation and
benefits therefor shall be similar to or greater than the compensation and
benefits provided by the Company to other employees with similar duties and
responsibilities.
3. Compensation and Other Benefits.
3.1 Compensation. As compensation for services to be rendered
pursuant to this Agreement, the Company shall pay Jones, during the Term, a
salary of $125,000.00 per annum (the "Annual Salary"), subject to such increases
as the management may, at its discretion, approve.
3.2 Expenses. Jones shall be entitled to reimbursement of his
reasonable expenses incurred related to the performance of his duties hereunder
pursuant to the Company's expense reimbursement program. The expenses covered by
such policy include policy include mileage reimbursement for business related
travel or reimbursement for actual allowable automobile expenses or mileage,
reimbursement for other business related travel, entertainment of potential and
current customers of the Company, etc. Jones shall submit to the Company
receipts and the Company's expense reimbursement report. The Company shall
reimburse Jones within a reasonable time after the appropriate Company employee
receives the expense reimbursement report and supporting documentation. Jones
may additionally be reimbursed for other business expenses such as supplies and
equipment that cannot reasonably or timely be paid through the accounts payable
process. These expenses will normally be charged on his personal credit card
when the circumstances require the same.
3.3 Automobile. Jones shall have the use of a Company owned or
leased automobile of quality similar to which he had a an employee of Century
Personnel, Inc.. The provision of the automobile to Jones shall be treated as
taxable income to the extent required by the Internal Revenue Code and
associated regulations.
3.4 Other Compensation. Jones shall be eligible for such other
compensation, whether in the form of additional stock options, stock
appreciation rights, restricted stock awards or otherwise, in such amounts and
upon such terms and conditions as the Board of Directors (or a compensation
committee thereof) may, at its discretion, approve. All compensation described
<PAGE>
in Articles 3.2, 3.3 and 3.4 shall be collectively referred to as "Additional
Compensation."
3.5 Stock Options. The Company shall issue to Jones options to
purchase ten thousand (10,000) shares of the Company's common stock. Such stock
options will be issued under a separate agreement pursuant to and in accordance
with the Company's May 1995 Incentive Stock Option Plan and shall vest over a
period of five (5) years pursuant to such separate agreement. All stock options
to be issued hereby shall be granted on the Commencement Date and shall bear an
exercise price which is equivalent to the closing trading price of the Company's
stock on the Commencement Date as reported by the Wall Street Journal.
3.6 Payment. The Annual Salary and the Additional Compensation shall
be payable in accordance with the applicable payroll and/or other compensation
policies and plans of the Company as from time to time in effect, less such
deductions as shall be required to be withheld by applicable law and
regulations.
3.7 Participation in Employee Benefit Plans. Jones shall be
permitted, during the Term to participate in any group life, hospitalization or
disability insurance plan, health program, pension plan, nonqualified deferred
compensation plan, similar benefit plan or other so-called "fringe benefits" of
the Company for which he may be eligible pursuant to the terms of such plans on
the same terms and conditions as other employees of the Company.
4. Non-Competition. The terms of the non-competition, non-disclosure and
other covenants contained in Article 3 of the Asset Purchase Agreement are
hereby incorporated herein by reference and are fully adopted as if fully set
forth herein.
5. Termination of Agreement and Employment.
5.1 Termination upon Death. If Jones dies during the Term, this
Agreement and Jones' employment hereunder shall terminate, except that Jones'
legal representatives, successors, heirs or assigns shall be entitled to receive
the Annual Salary, the Additional Compensation, other accrued benefits, if any,
earned up to the date of Jones' death; provided, however, if any Additional
Compensation or other benefits are governed by the provisions of any written
employee benefit plan or policy of the Company, any written agreement
contemplated thereunder, or any other separate written agreement entered into
between Jones and the Company, the terms and conditions of such plan, policy or
agreement shall control in the event of any discrepancy or conflict with the
provisions of this Agreement regarding such Additional Compensation or other
benefit upon the death, termination or disability of Jones pursuant to this
Article 5.
5.2 Termination for Cause. The Company has the right, at any time
during the Term, subject to all of the provisions hereof, exercisable by serving
notice, effective in accordance with its terms, to terminate this Agreement and
Jones' employment hereunder and discharge Jones for "Cause" (as hereinafter
3
<PAGE>
defined). If such right is exercised, the Company's obligation to Jones shall be
limited to the payment of any unpaid Annual Salary, Additional Compensation and
other benefits, if any, accrued up to the effective date (which shall not be
retroactive) specified in the Company's notice of termination. As used in this
Section 5.2, the term "Cause" shall mean and include (i) breach by Jones of the
material terms, such as job performance, of this Agreement and failure of Jones
to cure such breach within thirty (30) days of the receipt by Jones of written
notice specifying the breach, provided however, that if such breach is one which
cannot reasonably be cured within thirty (30) days and Jones commences curative
procedures within thirty (30) days and so long as Jones diligently endeavors to
cure such breach to completion, then Jones may not be terminated for Cause for
such breach; provided further however, that any breach of the provisions
contained in Article 5.2 (ii) through (vi) shall not be subject to the cure
provision of this Article 5.2 (i) and shall be deemed a non-curable breach ,
(ii) wrongful misappropriation of any money or other assets or properties of the
Company or any subsidiary or affiliate of the Company, (iii) the conviction of
Jones for any felony, (iv) use of illegal drugs, (v) use of alcohol if such use
renders Jones unable to perform the essential functions of his job, (vi) Jones'
gross moral turpitude relevant to his office or employment with the Company or
any subsidiary or affiliate of the Company ("gross moral turpitude" as used
herein shall mean any act involving dishonesty, fraud or deliberate
misrepresentation. "Gross moral turpitude" shall also mean any other act that is
morally repugnant to society and which act causes material economic harm to the
Company. Notwithstanding the foregoing, cause shall not include non-performance
by Jones if the Branches under his supervision and management which were
acquired by the Company in accordance with the Asset Purchase Agreement maintain
a twelve (12) month trailing EBIT equal to or greater than the Verified EBIT
Base as defined in the Asset Purchase Agreement.
5.3 Suspension upon Disability. If during the Term, Jones becomes
physically or mentally disabled, whether totally or partially, as evidenced by
the written statement of (2) competent physicians licensed to practice medicine
in the United States, so that Jones is unable to substantially perform his
services hereunder for (i) a period of six consecutive months, or (ii) for
shorter periods aggregating six months during any twelve-month period, the
Company may at any time after the last day of the six consecutive months of
disability, or on the day on which the shorter periods of disability equal an
aggregate of six months, by written notice to Jones, suspend Jones' employment
and the performance of the Company's obligations hereunder, including payments
of the Annual Salary, Additional Compensation and other benefits. If at any time
Jones shall no longer be disabled, as evidenced by the written statement of two
(2) competent physicians licensed to practice medicine in the United States, the
Company may, at its election, fully reinstate this Agreement and Jones'
employment hereunder, and all of the terms of this Agreement, including payment
of the Annual Salary, shall resume in full force for the balance of the Term.
Nothing in this Section 5.3 shall be deemed, however, to extend the Term.
Additionally, nothing in this Section 5.3 shall limit or diminish Company's
obligations towards Jones with respect to the Americans with Disabilities Act of
1990, as amended, the Family and Medical Leave Act of 1993, as amended, or any
similar state laws.
4
<PAGE>
5.4 Termination other than for Cause. Jones cannot be terminated
other than for Cause as defined in Article 5.2 herein during the Initial Term.
If this Agreement is extended beyond the Initial Term, then at any time after
the Initial Term, either party may terminate this Agreement without cause upon
the giving of thirty (30) days written notice.
5.5 Effect of Termination of Agreement. If this Agreement and Jones
employment hereunder is terminated for any reason whatsoever, it is specifically
acknowledged and agreed by the Company that such termination shall in no event
affect the obligations of the Company to make any and all remaining payments due
under the Asset Purchase Agreement.
6. Insurance. The Company may, from time to time, apply for and take out,
in its own name and at its own expense, naming itself or others as the
designated beneficiary (which is may change from time to time), policies for
health, accident, disability or other insurance upon Jones in any amount or
amounts that it may deem necessary or appropriate to protect its interest. Jones
agrees to aid the Company in procuring such insurance by submitting to
reasonable medical examinations and by filling out, executing and delivering
such applications and other instruments in writing as may reasonably be required
by an insurance company or companies to which any application or applications
for insurance may be made by or for the Company.
7. Continuing Obligations. Notwithstanding the expiration or early
termination of the Term of this Agreement pursuant to Section 2 or Section 5
hereof, respectively, any provision of this Agreement calling for performance by
any party after such expiration or termination, including, without limitation,
the obligations of Jones set forth in Section 4 hereof, shall continue in full
force and effect.
8. Other Provisions.
8.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, five days after the date of deposit in the United States mail, as
follows:
(i) if to the Company, to:
SOS Staffing Services, Inc.
1415 South Main Street
Salt Lake City, UT 84115
Attn: Legal Department
(ii) if to Jones to:
5
<PAGE>
Michael A. Jones
11700 Aberdeen
Leawood, KS 66211
Any party may change its address for notice hereunder by written
notice to the parties hereto.
8.2 Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties with respect to the subject matter hereof
and supersedes all prior agreements, written or oral, with respect thereto;
provided, however, that nothing herein shall in any way limit the obligation,
rights or liabilities of the parties under any written stock option agreement
separately entered into by the parties.
8.3 Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.
8.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Utah.
8.5 Arbitration. Each party agrees that with respect to any dispute
related to or arising out of this Agreement or Jones' employment with the
Company that the parties shall submit to binding arbitration in accordance with
the Arbitration Rules for Employment Contracts of the American Arbitration
Association in effect at the time of the action. The parties agree to negotiate
in good faith to resolve the breach or enter a settlement. An arbitrator will be
chosen by the parties. If the parties are unable to agree upon an arbitrator, an
arbitrator shall be selected pursuant to the rules of the American Arbitration
Association then in effect. Arbitration shall take place in Denver, Colorado.
8.6 Assignment. This Agreement, and any rights and obligations
hereunder, may not be assigned by either party hereto without the prior written
consent of the other party.
8.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
6
<PAGE>
8.8 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
SOS Staffing Services, Inc.
By:
----------------------------------
Peter R. Sollenne
President
- --------------------------------------
Michael A. Jones
7
<PAGE>
EXHIBIT E
<PAGE>
STOCK OPTION AGREEMENT
for the
SOS STAFFING SERVICES, INC.
STOCK INCENTIVE PLAN
<PAGE>
STOCK OPTION AGREEMENT
for the
SOS STAFFING SERVICES, INC.
STOCK INCENTIVE PLAN
This Stock Option Agreement (the "Agreement") is made and entered into
effective as of the ____ day of _____, 19__, by and between SOS Staffing
Services, Inc., a Utah corporation (the "Corporation"), and _____ (the
"Optionee"). Capitalized terms used herein without definition shall have the
meanings set forth in the SOS Staffing Services, Inc. Stock Incentive Plan, as
amended from time to time (the "Plan").
R E C I T A L S :
A. The Plan has been adopted by the Board and has been approved by
the shareholders of the Corporation;
B. The Optionee is an employee to whom the Committee has determined
to grant or has granted options (the "Options") to purchase Common Shares
under the Plan; and
C. The Committee, on behalf of the Corporation, and the Optionee now
desire to set forth the terms and conditions that will govern the issuance,
holding and exercise of the Options to be granted to the Optionee, subject in
all respects to the provisions contained in the Plan.
NOW, THEREFORE, upon these premises and in consideration of the mutual
covenants and promises contained herein, and for other good and valuable
consideration, the adequacy and receipt of which are hereby acknowledged, the
parties hereto agree as follows:
1. Number of Stock Options. The Corporation hereby acknowledges and
confirms the grant to the Optionee, upon the terms and conditions set forth in
this Agreement, of the following Options:
_____ Incentive Stock Options ("ISOs").
Each Option shall entitle the Optionee to purchase, upon the terms and
conditions set forth in this Agreement, one Common Share. The number of Common
Shares to which each Option pertains shall be adjusted, as necessary, in
accordance with the provisions of Article 11 of the Plan.
1
<PAGE>
2. Exercise Price. The price for which each Option granted to the Optionee
may be exercised shall be payable in any manner provided under Article 6 of the
Plan in the following amounts: $__._____ per Common Share.
3. Time for Exercise. The Options granted to the Optionee shall be
exercisable during the following periods of time:
(a) Incentive Stock Options. Subject to any provisions contained in
the Plan regarding the exercisability of ISOs, the ISOs shall be exercisable in
accordance with the following schedule:
[20%] options shall be exercisable on or after _____ __, 1997;
[16%] options shall be exercisable on or after _____ __, 1998;
[16%] options shall be exercisable on or after _____ __, 1999;
[16%] options shall be exercisable on or after _____ __, 2000;
[16%] options shall be exercisable on or after _____ __, 2001; and
[16%] options shall be exercisable on or after _____ __, 2002.
All such ISOs shall be exercisable until _____ __, 2007, unless the period of
exercise is sooner terminated in accordance with the provisions of the Plan or
as set forth below. Unless the Committee provides otherwise in writing, upon the
termination of an Optionee's employment with the Company for any reason, (i) the
Optionee shall have no rights with respect to that portion of the ISOs which has
not yet vested and become exercisable in accordance with the above schedule or
paragraph (b) below, and (ii) the Optionee may for a period of ninety (90) days
after such termination exercise his or her ISOs to the extent, and only to the
extent, that such ISOs or portion thereof were vested and exercisable as of the
date the Optionee's employment was terminated, after which time the unexercised
portion of any ISOs shall automatically terminate in full. The preceding
sentence shall not be construed to extend the term of any Option or to permit
anyone to exercise any Option after the expiration of its term.
(b) Change in Control. In the event a Change in Control occurs with
respect to the Company, all outstanding Options evidenced by this Agreement
shall become fully exercisable as to all Common Shares subject to the Options.
(c) Right to Exercise. The Optionee understands and hereby agrees
that he or she has no right whatsoever to exercise any Option except during the
times provided herein and except as may be limited by any provisions of the
Plan.
2
<PAGE>
4. Governing Documents. This Agreement hereby incorporates by reference
all of the provisions of the Plan, as presently existing and as hereafter
amended. The Optionee expressly acknowledges and agrees that the terms and
conditions of this Agreement are subject in all respects to the provisions of
the Plan; that the terms and conditions of this Agreement in no way limit or
modify any provision of the Plan; and that in case of any conflict between the
provisions of the Plan and the terms and conditions of this Agreement, the
provisions of the Plan, as the case may be, shall control and shall bind the
parties hereto. The Optionee also hereby expressly agrees and represents as
follows:
(a) Optionee acknowledges receipt of a copy of the Plan, and
represents that he or she is familiar with the provisions of the Plan.
(b) Optionee acknowledges and understands that the establishment of
the Plan and the existence of this Agreement are not sufficient, in and of
themselves, to cause ISOs granted pursuant to the Plan to qualify for the
favorable tax treatment described in Section 422 of the Code, and that to be
entitled to such treatment, the Optionee must comply with all of the applicable
requirements of Section 422 of the Code, including without limitation, the
following requirements:
(1) Holding Period. The Optionee must not sell or otherwise
dispose of any Common Shares acquired through the exercise of an ISO
before the later of (i) two years after the date on which the Optionee was
granted the ISO or (ii) one year after the date on which the Optionee
received Common Shares pursuant to the exercise of the ISO.
(2) Employment. At all times during the period of time
beginning on the date on which an ISO is granted to the Optionee and
ending on the day that is three months before the date on which the
Optionee exercises the ISO, the Optionee must be an employee of the
Corporation or of a corporation (or parent or subsidiary corporation of
such corporation) issuing or assuming such ISOs in a transaction to which
Section 424(a) of the Code applies.
(c) Optionee acknowledges and understands that the establishment of
the Plan and the existence of this Agreement are not sufficient, in and of
themselves, to exempt the Optionee from the reporting requirements and
short-swing liability provisions of Section 16 of the Exchange Act and any rules
or regulations promulgated thereunder, and that Optionee shall not be exempt
from the short-swing liability provisions pursuant to Rule 16b-3 unless and
until Optionee shall comply with all applicable requirements of Rule 16b-3,
including without limitation, the requirement that the Optionee must not sell or
otherwise dispose of any Common Shares acquired upon exercise of an Option
unless and until a period of at least six months shall have elapsed between the
date upon which such Option was granted to the Optionee and the date upon which
the Optionee desires to sell or otherwise dispose of any Common Shares acquired
upon exercise of such Option.
3
<PAGE>
(d) Optionee acknowledges and understands that the exercise of an
Option could have substantial adverse tax consequences to the Optionee, and that
the Corporation recommends that the Optionee consult with a knowledgeable tax
advisor before exercising any Option.
5. Representations and Warranties. As a condition to the exercise of any
Option, the Corporation may require the Optionee to make any representations and
warranties to the Corporation that legal counsel for the Corporation may
reasonably determine to be advisable for the Corporation.
6. Restrictions on Encumbrances. During the lifetime of Optionee, the
Optionee agrees and covenants that no Options will be pledged or otherwise
encumbered in any manner, whether voluntarily or involuntarily, by operation of
law or otherwise. The foregoing sentence shall not be deemed or construed,
however, to prohibit any transfer otherwise allowed by will or by the laws of
descent and distribution.
7. Notices.
(a) All notices, demands or requests provided for or permitted to be
given pursuant hereto must be in writing. All notices, demands and requests
shall be deemed to have been properly given or served when deposited in the
United States mail, addressed to the individual or entity to whom notice is
given, postage prepaid and registered or certified with return receipt
requested, at the last known address of such individual or entity.
(b) By giving at least fifteen days prior written notice, the
Corporation and the Optionee shall have the right from time to time and at any
time during the term of this Agreement to change their addresses and to specify
any other address within the United States of America.
8. Titles and Captions. All Section and Paragraph titles and captions in
this Agreement are for convenience or reference only, and shall in no way
define, limit, extend or describe the scope or intent of any provision hereof.
9. Applicable Law. This Agreement shall be construed in accordance with
and shall be governed by the laws of the State of Utah, without reference to
choice of law rules.
10. Binding Effect. This Agreement shall be binding upon the Optionee and
upon the Optionee's heirs, executors, administrators, successors and legal
representatives. This Agreement shall be binding upon and shall inure to the
benefit of the Corporation, its successors and assigns.
11. Creditors. None of the provisions of this Agreement shall be for the
benefit of or shall be enforceable by any creditor of the Optionee.
12. Entire Agreement. This Agreement, including the provisions of the Plan
incorporated herein, constitutes the entire understanding and agreement between
the Corporation and the Optionee regarding the subject matter hereof. Any prior
4
<PAGE>
agreement, commitment, negotiation or understanding concerning any stock option,
stock appreciation right or similar award to be granted by the Corporation and
not reflected herein or in a separately executed Stock Option Agreement is
hereby superceded and cancelled in all respects. This Agreement may not be
amended or supplemented in any manner except in a writing duly executed by both
parties hereto.
13. Severability. In the event that any condition, covenant or other
provision herein contained is held to be invalid or void by any court of
competent jurisdiction, the same shall be deemed severable from the remainder of
this Agreement and shall in no way affect any other covenant, condition or
provision herein contained. If such condition, covenant or other provision shall
be deemed invalid due to its scope or breadth, such condition, covenant or
provision shall be deemed valid to the extent of the scope or breadth permitted
by law.
IN WITNESS WHEREOF, the Corporation and the Optionee have executed this
Agreement effective as of the date first set forth above.
"Corporation"
SOS STAFFING SERVICES, INC.,
a Utah corporation
By:
----------------------------------------
Title:
Attest: -------------------------------------
- ----------------------------
Secretary
"Optionee"
Name:
--------------------------------------
5
<PAGE>
EXHIBIT F
<PAGE>
LIST OF KEY EMPLOYEES OF SELLER
-------------------------------
TO BE GRANTED STOCK OPTIONS
---------------------------
Tim Thornton
John Thompson
Nova Maack
Kerry Humphrey
Lisa Lowe
Randy Sewell
Allocation % to be provided at later date.
<PAGE>
EXHIBIT G
<PAGE>
[Exhibit G shall be the form of the employment agreements for Seller's key
employees identified in Exhibit F]
FOR IMMEDIATE RELEASE: Thursday, October 2, 1997
CONTACT: Gary B. Crook Madeleine Franco
Chief Financial Officer or Andrew Graft
801-484-4400 Jordan Richard Assoc.
801-595-8611
SOS STAFFING SERVICES, INC. TO ENTER KANSAS AND MISSOURI
WITH PURCHASE OF CENTURY PERSONNEL, INC.
SALT LAKE CITY, UTAH -- In its largest acquisition to date, SOS Staffing
Services, Inc. (NASDAQ/NMS: SOSS) announced today that it has signed an
agreement to purchase the assets of Century Personnel, Inc. (Century) of
Overland Park, Kan.
Century offers a broad range of staffing services through its 13 offices in
Kansas and Missouri, generating annual revenues of approximately $20 million.
The company specializes primarily in commercial staffing, with other divisions
dedicated to information technology staffing and executive search/permanent
placement in high-level professional occupations.
Howard W. Scott, Jr., chief executive officer of SOS Staffing Services,
indicated that SOS intends to retain Century's current management and that the
transaction is expected to close in late October or early November.
"This acquisition creates a solid platform upon which SOS can establish and
expand its presence in the Plains states and adjoining areas of the Midwest,"
said Scott. "We look forward to working closely with the experienced and
talented management team at Century to grow its current base of 13 offices and
capitalize upon the opportunities afforded SOS in this new region."
SOS Staffing Services, Inc. offers a full range of staffing services through its
network of more than 100 offices located in the states of Arizona, California,
Colorado, Idaho, Louisiana, Minnesota, Montana, Nevada, New Mexico, North
Dakota, Oklahoma, Oregon, Texas, Utah, Washington and Wyoming. With the close of
its transaction with Century Personnel, Inc., SOS will
officially operate in Kansas and Missouri.
# # #
