FIRST AMENDMENT TO
EMPLOYMENT, NONDISCLOSURE AND NON-COMPETITION AGREEMENT
This First Amendment to Employment, Nondisclosure and Non-Competition
Agreement (the "Amendment") is entered into between SOS Staffing Services, Inc.,
a Utah corporation (the "Company"), and XxXxx X. Xxxxxx ("Xxxxxx"):
RECITALS:
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A. On or about August 4, 1997, the Company and Xxxxxx entered into that
certain Employment, Nondisclosure and Non-Competition Agreement (the "Employment
Agreement"), whereby, the Company agreed to employ Xxxxxx as Vice Chairman on a
two-thirds time basis and Xxxxxx agreed to accept such employment with the
Company under the terms and conditions contained therein.
B. In September 1997, Xxxxxx was appointed Executive Vice President of
the Company.
C. On or about February 27, 1998, Xxxxxx was appointed Chairman of the
Company's Board of Directors and the Company agreed to employ Xxxxxx on a full
time basis and Xxxxxx agreed to accept such employment.
D. On October 29, 1998, the Company appointed Xxxxxx Chief Executive
Officer and Xxxxxx accepted such appointment. On March 24, 1999, the Company
also appointed Xxxxxx as President of the Company and Xxxxxx agreed to accept
such appointment.
E. In connection with the foregoing, the parties wish to amend the
Employment Agreement as hereinafter provided.
AGREEMENTS:
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IN CONSIDERATION of the mutual covenants, conditions, representations
and warrantees contained in the Employment Agreement and those hereinafter set
forth, the parties hereby agree as follows:
1. Article 1 of the Employment Agreement shall be deleted and the
following inserted in lieu thereof:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company hereby agrees to
employ Xxxxxx as an employee of the Company in the position and office of
Chairman, President and Chief Executive Officer, for the Term as hereinafter
defined, to render such services and to perform such duties as the Board of
Directors of the Company shall reasonably request. Such services shall be
provided on a full time basis. Notwithstanding the foregoing, Xxxxxx'x position
and duties may be reasonably modified or changed from time to time at the
discretion of the Board of Directors. No substantial change to Xxxxxx'x position
or duties may be made without Xxxxxx'x consent. Xxxxxx may also serve during all
or any part of the Term in any other office to which she may be appointed or
elected without any compensation therefor other than that specified in this
Agreement. Xxxxxx may decline any such appointment or election.
1.2 Acceptance of Employment by Xxxxxx. Xxxxxx hereby accepts
such continued employment and shall render the services described above. Xxxxxx
will faithfully, and at all times, and to the best of her ability, experience
and talents, perform all of the duties which are required of her under this
Agreement 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 all of her working time to the business of the
Company. Xxxxxx agrees to use her best efforts to comply with any and all
instructions that the Board of Directors may give her from time to time, and to
promote and maintain the success, quality, professionalism and reputation of the
Company.
2. Article 2 of the Employment Agreement shall be deleted and the
following inserted in lieu thereof:
The term of Xxxxxx'x employment under the Employment Agreement (the
"Term") shall continue until December 31, 2003 or as otherwise terminated as
provided in Article 5 hereof. Thereafter, the Term shall be extended
automatically for successive one-(1) year periods unless either the Company or
Xxxxxx give six (6) months written notice of its or her intent not to extend the
contract. As used in this Agreement, "Term" shall mean and include the period
described above and any extension thereof.
3. Article 3 of the Agreement shall be deleted in its entirety and the
following inserted in lieu thereof:
3.1 Compensation. As compensation for services to be rendered
pursuant to this Agreement, the Company shall pay Xxxxxx, during the Term, a
salary of $300,000.00 per annum (the "Annual Salary"), subject to such increases
as the Board of Directors may, at its discretion, approve.
3.2 Expenses. Xxxxxx shall be entitled to reimbursement of
her reasonable expenses incurred related to the performance of her duties
hereunder pursuant to the Company's expense reimbursement program. The expenses
covered by such 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. Xxxxxx shall submit to the Company
receipts and the Company's expense reimbursement report. The Company shall
reimburse Xxxxxx within a reasonable time after the appropriate Company employee
receives the expense reimbursement report and supporting documentation. Xxxxxx
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 her personal credit card
when the circumstances require the same.
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3.3 Bonus. Xxxxxx shall also be eligible, during the Term, to
receive bonuses, to be paid annually or quarterly, in such amounts and upon such
terms and conditions as the Board of Directors (or a compensation committee
thereof) may, at its discretion, approve.
3.4 Other Compensation. Xxxxxx 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 compensations described
in Articles 3.2 through 3.4 shall be collectively referred to as "Additional
Compensation."
3.5 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.
3.5.1 Payment upon Termination. Xxxxxx shall be paid the amount
of Annual Salary or Additional Compensation as described in Article 5 of this
Agreement if her employment is terminated.
3.6 Participation in Employee Benefit Plans. Xxxxxx 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 she may be eligible pursuant to the terms of such plans on
the same terms and conditions as other employees of the Company.
4. Article 4 of the Employment Agreement shall be deleted and the
following inserted in lieu thereof:
4.1 Acknowledgments. Xxxxxx acknowledges that: (i) the
Company, including any subsidiaries and affiliates that may be formed or
incorporated during the Covenant Period (as defined in Section 4.2), is
currently engaged in the business of providing temporary staffing, consulting
and outsourcing services to customers in the Western United States and
elsewhere, including clerical, industrial, marketing, technical, telephony,
information systems and technology, professional, construction and manufacturing
personnel, as well as related services, including staff leasing, payrolling,
employee testing and risk management consulting, and does now and may in the
future expand its business during the Term of this Agreement to include other
activities and to operate in other states of the United States, provinces of
Canada or elsewhere (all states, provinces or territories in which the Company
operates and activities in which the Company engages, whether currently or in
the future during the Term of Xxxxxx'x employment with the Company, are
collectively referred to herein as the "Business"); (ii) she is one of a limited
number of persons who will perform a significant role in the management and
development of the Business, and whose services will be unique and
extraordinary, and will contribute to an enhance the goodwill of the Company;
(iii) her work for the Company will give her access to "know-how," trade
secrets, customer lists, details of client or consultant contracts, pricing
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policies, operational methods, marketing plans or strategies, business
acquisition plans, new personnel acquisition plans, and financial information
and general confidential business information (collectively, "Trade Secrets")
that are confidential and unique, not generally known in the industry, and which
will give the Company a competitive advantage and significantly enhance the
Company's goodwill; (iv) the agreements and covenants contained in this Article
4 are essential to protect the Business and goodwill of the Company, to prevent
competitors from acquiring, appropriating, or discovering the Company's Trade
Secrets, and to maintain and protect the Company's competitive advantage in the
industry; and (v) she has means to support himself and her dependents other than
by engaging in the Business, and the provisions of this Article 4 will not
appear such ability. Accordingly, Xxxxxx covenants and agrees as follows:
4.2 Covenants and Reformation.
4.2.1. Non-Competition Covenants. For a period commencing on the
effective date of this Amendment and continuing until the earlier of (i) two
years after the date of termination of Xxxxxx'x employment with the Company, for
any reason, with or without cause, and whenever such termination may occur,
whether prior to, concurrently with, or after the expiration or early
termination of this Agreement, except for a termination related to the Company's
election not to extend the Term pursuant to Article 2 of this Amendment; or (ii)
one year after the termination of Xxxxxx'x employment due to the Company's
election not to extend the Term pursuant to Article 2 of this Amendment (the
"Covenant Period"), Xxxxxx shall not, within any state in which the Company
conducts the Business, directly or indirectly, (i) engage in the Business or any
aspect of the Business for Xxxxxx'x own account in competition with the Company;
(ii) enter the employ of, or render any services to or consult with, any person
engaged in competition with the Company; (iii) become associated with or
interested in any such person in any capacity, including, without limitation, as
an individual, partner, shareholder, officer, director, principal, agent or
trustee; provided, however, Xxxxxx may own, directly or indirectly, solely as an
investment, securities of any entity traded on any national securities exchange
or over-the-counter if Xxxxxx 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; (iv) solicit or otherwise
deal with any client of the Company in a manner designed to (or that could) take
business away from the Company; (v) solicit or otherwise induce any employee of
the Company to terminate his/her employment with the Company; or (vi) hire or
solicit any consultant then under contract with the Company or encourage such
consultant to terminate such relationship.
4.2.1.1. Limitation on Non-Competition Covenants. If Xxxxxx
voluntarily terminates her employment during the Term of the Agreement other
than for Good Reason due to a Change in Control, as hereinafter defined, then
the Covenant Period for items 4.2.1 (i), (ii) and (iii) shall be one year, but
Covenant Period described for items 4.2.1. (iv), (v) and (vi) shall remain as
stated in Section 4.2.1. above.
4.2.2. Reformation or "Blue-Pencilling". The Company intends to
restrict legitimate business under Section 4.2.1 only to the extent necessary to
protect the Company's legitimate business interests. Xxxxxx and the Company
agree that the terms and conditions hereof should be enforced to the fullest
extent permitted by law. If any court determines that any provision of Section
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4.2.1, or any part thereof, is unenforceable because of the scope, duration or
geographic breadth of such provision, such court shall have the power to reform
such provision to the maximum scope, duration or geographical breadth, as the
case may be, that such court has determined is enforceable in accordance with
the law.
4.3 Nondisclosure Covenant. During the Covenant Period and
forever thereafter, Xxxxxx shall not, without the prior written consent of the
Company, intentionally or unintentionally, reveal, make accessible, or
disseminate to any person not an employee of the Company, or to any other
entity, or use for the benefit of himself or others, the Trade Secrets and any
and all other confidential matters of the Company. Xxxxxx covenants and agrees
that she shall not exploit for her own benefit, or the benefit of others,
personal relationships with customers, suppliers or agents of the Company in a
manner that would or may adversely affect the Company.
4.4 Property of the Company. All of the Company's Trade
Secrets, and all tangible items, including, without limitation, all memoranda,
notes, lists, records and other documents or papers (and all copies thereof),
including such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of Xxxxxx, or made available to Xxxxxx
relating to the past, existing, or contemplated business or work of the Company,
other than purely personal matters, are and shall remain the Company's exclusive
property and shall be delivered to the Company promptly upon the termination of
Xxxxxx'x employment (whether for Cause or otherwise) or at any other time on
request of the Company.
4.5 Rights and Remedies upon Breach. If Xxxxxx breaches, or
threatens to commit a breach of, any of the provisions of Sections 4.2.1, 4.3,
or 4.4 (collectively, the "Restrictive Covenants"), the Company shall have the
following rights and remedies, each of which rights and remedies shall be
independent of the others and severally enforceable, and each of which is in
addition to, and not in lieu of, any other rights and remedies available to the
Company under law or in equity:
4.5.1 Specific Performance. The right and remedy to
have the Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed by the parties hereto that any breach or
threatened breach of the Restrictive Covenants would cause irreparable injury to
the Company and that money damages would not provide an adequate remedy to the
Company.
4.5.2 Accounting. The right and remedy to require
Xxxxxx to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits derived or received by Xxxxxx as
the result of any transactions constituting a breach of the Restrictive
Covenants.
4.6 Severability of Covenants. Xxxxxx acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in scope, and
geographical and temporal breadth and in all other respects. If any court
determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, the remainder of the Restrictive Covenants shall not
thereby be affected and shall be given full effect, without regard to the
invalid portions.
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4.7 Enforceability in Jurisdictions. The Company and Xxxxxx
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of the
Restrictive Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of their scope or
otherwise, it is the intention of the Company and Xxxxxx that such determination
not bar or in any way affect the Company's right to the relief provided above in
the courts of any other jurisdiction within the geographical scope of the
Restrictive Covenants, as to breaches of such covenants in such other respective
jurisdictions, such covenants as they relate to each jurisdiction being, for
this purpose, severable into diverse and independent covenants.
5. Article 5 of the Employment Agreement shall be deleted and
the following inserted in lieu thereof:
5. Termination of Agreement and Employment.
5.1 Termination upon Death. If Xxxxxx dies during the Term,
this Agreement and Xxxxxx'x employment hereunder shall terminate, except that
Xxxxxx'x legal representatives, successors, heirs or assigns shall be entitled
to receive the Annual Salary, the Additional Compensation and other accrued
benefits, if any, earned up to the date of Xxxxxx'x 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 Xxxxxx 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
Xxxxxx 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 Xxxxxx'x employment hereunder and discharge Xxxxxx for "Cause" (as
hereinafter defined). If such right is exercised, the Company's obligation to
Xxxxxx 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) material
breach by Xxxxxx of the terms of this Agreement, (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 Xxxxxx for any felony or other
serious crime, (iv) use of illegal drugs, (v) use of alcohol if such use renders
Xxxxxx unable to perform the essential functions of her job, (vi) Xxxxxx'x gross
moral turpitude relevant to her office or employment with the Company or any
subsidiary or affiliate of the Company, (vii) any act or omission by Xxxxxx that
materially xxxxx the Company's business reputation, trade name(s) or goodwill;
(viii) Xxxxxx'x violation of the Company's sexual harassment or
anti-discrimination policy, or (ix) Xxxxxx'x violation of other established
Company policies, whether currently in place or adopted during the Term, where
such violations ordinarily result in termination. The determination of whether
the Company has adequate Cause hereunder to terminate Xxxxxx'x employment shall
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be subject to the arbitration provision contained in Article 8.5 of the
Employment Agreement.
5.3 Suspension upon Disability. If during the Term, Xxxxxx
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 Xxxxxx is unable to
substantially perform her 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 Xxxxxx,
suspend Xxxxxx'x 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 Xxxxxx 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 Xxxxxx'x 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 Xxxxxx 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.
5.3.1 Selection of Physicians. If there is a dispute as
to whether Xxxxxx is disabled, then each party shall select one of the competent
physicians referenced above. If said physicians disagree as to whether Xxxxxx is
disabled, then they shall select a third competent physician whose judgment
would be determinative.
5.4 Termination other than for Cause. If Xxxxxx is terminated
other than for cause as defined in Article 5.2 herein or due to a change in
control as defined in Article 5.5 herein, then the Company shall pay Xxxxxx an
amount equal to two year's of Annual Salary. Additionally, the Company shall pay
Xxxxxx'x health/dental/vision insurance continuation premiums under COBRA for a
period of two years or until Xxxxxx is no longer eligible for COBRA if earlier.
If Xxxxxx is terminated under this Article 5.4, the Company's liability shall be
limited to such payments.
5.5 Termination due to a Change in Control. If Xxxxxx'x
employment hereunder is Terminated Due to a Change in Control by the Company or
by Xxxxxx for Good Reason, as each respective term is hereinafter defined, then
the Company shall pay Xxxxxx, subject to the limitations contained in Article
5.5.3 herein, the greater of either an amount equal to the Annual Salary for the
remainder of the Term or an amount equal to two year's Annual Salary.
Additionally, the Company shall pay Xxxxxx'x health/dental/vision insurance
continuation premiums under COBRA for a period of two years or until Xxxxxx is
no longer eligible for COBRA, if earlier. If Xxxxxx'x employment hereunder is
Terminated Due to a Change in Control by Xxxxxx without Good Reason, then the
Company shall pay Xxxxxx an amount equal to one year's Annual Salary and shall
pay Xxxxxx'x health/dental/vision insurance continuation premiums under COBRA
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for a period of one year or until Xxxxxx is no longer eligible for COBRA, if
earlier. If Xxxxxx is terminated under this Article 5.5, the Company's liability
shall be limited to such payments.
5.5.1 Change in Control. "Change in Control" shall mean
an acquisition or merger of the Company, sale of substantially all of the assets
of the Company or other change in control as defined in Article 17.5 of the
Company's May 5, 1995 Stock Incentive Plan.
5.5.2 Terminated Due to a Change in Control. As used in
this Agreement, "Terminated Due to a Change in Control" shall mean and is
defined as the termination of Xxxxxx'x employment by the Company for any reason,
except for Cause, within a one-year period following the effective date of a
Change in Control. "Terminated Due to a Change in Control" shall mean and is
also defined as the termination of Xxxxxx'x employment by Xxxxxx for Good Reason
due to a Change in Control. Good Reason means any change in Xxxxxx'x position,
job duties or working conditions, including specifically, without limitation,
any reduction in Xxxxxx'x Annual Salary, Additional Compensation or other
benefits, or the relocation of Xxxxxx, without Xxxxxx'x consent.
5.5.3 Limitation on Payments Related to a Termination
Due to a Change in Control. In no event shall the payments made to Xxxxxx
pursuant to Article 5.5 be greater than 2.99 times Xxxxxx'x "annualized
includible compensation for the base period" as such term is defined by Section
280G(d) of the Internal Revenue Code.
5.6 Expiration of Term. If Xxxxxx is terminated due to the
Company's election not to extend the Term pursuant to Article 2 of this
Amendment, then the Company shall pay Xxxxxx one year's Annual Salary.
Additionally, the Company shall pay Xxxxxx'x health/dental/vision insurance
continuation premiums under COBRA for a period of one year or until Xxxxxx is no
longer eligible for COBRA, if earlier. If Xxxxxx is terminated under this
Article 5.6, the Company's liability shall be limited to such payments.
6. This Amendment shall be effective April 1, 1999.
7. This Amendment may be executed in multiple counterparts, each of
which shall, for all purposes, be deemed an original and all of which, taken
together, shall constitute one in the same agreement.
8. Except as expressly modified by this Amendment the Employment
Agreement remains unchanged and in full force in effect.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment.
DATED this day of July, 1999. DATED this day of July, 1999.
Company XxXxx X. Xxxxxx
SOS Staffing Services, Inc., by:
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Xxxx X. Xxxxx, Executive Vice President XxXxx X. Xxxxxx
and Chief Financial Officer
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