AMENDMENT TO NOTE PURCHASE AGREEMENT
THIS AMENDMENT TO NOTE PURCHASE AGREEMENT (this "Amendment"), dated
January 11, 2001 with effect as of December 22, 2000, is between SOS Staffing
Services, Inc., a Utah corporation (the "Company"), and the entities listed as
Purchasers on the attached signature pages (the "Purchasers").
Recitals
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A. The Company and the Purchasers are parties to Note Purchase
Agreements (the "Note Purchase Agreements") each dated September 1, 1998,
pursuant to which the Company issued and the Purchasers purchased $5,000,000 of
the Company's Series A Notes and $30,000,000 of the Company's Series B Notes.
B. The Company and Xxxxxxx Xxxxxxxx, Inc. ("Xxxxxxx Xxxxxxxx") entered
into a letter of intent dated December 19, 2000 with respect to a transaction
(the "Transaction") pursuant to which the Company's wholly owned subsidiary
Inteliant Corporation ("Inteliant") would sell its consulting division (the
"Division") to Xxxxxxx Xxxxxxxx. The principal terms of the Transaction were as
follows:
(i) Inteliant was to sell the fixed assets of the Division for
$1,000,000 in cash payable at closing, plus a percentage of future
profits payable for four years after closing (the "Earn-out");
(ii) Inteliant was to retain approximately $10,000,000 in accounts
receivable attributable to the Division (the "Accounts Receivable");
and
(iii) The Company was to lend up to $3,500,000 to Xxxxxxx Xxxxxxxx
for up to 12 months after closing (the "Loan").
C. The Company expects to obtain a substantial refund of taxes paid in
previous years based on the loss the Company will incur in connection with the
Transaction (the "Tax Refund").
D. The consummation of the Transaction would cause the Company to
violate the Minimum Consolidated Net Worth covenant contained in the Note
Purchase Agreements. In order to induce the Purchasers to consent to the
Transaction, the Company is willing to agree to use a portion of the proceeds
from the Transaction to make prepayment of the Notes.
E. The Purchasers and the Company executed a letter agreement dated
December 22, 2000 pursuant to which the Purchasers agreed to amend the Minimum
Consolidated Net Worth covenant to permit the Transaction upon the terms and
conditions of this Amendment and subject to the consummation of the Transaction
and the execution and performance of this Amendment.
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F. The Company consummated the Transaction on December 29, 2000 in
accordance the foregoing terms.
G. Defined terms used without definition herein will have the meanings
assigned to them in the Note
Purchase Agreements.
Agreements
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The parties agree as follows:
1. Amendment to Note Purchase Agreements. In accordance with the terms
of this Amendment and upon satisfaction of the conditions set forth herein,
Section 10.7 of the Note Purchase Agreements shall be amended to read in its
entirety as follows:
Section 10.7 Minimum Consolidated Net Worth. The Company will not
permit Consolidated Net Worth at any time to be less than the sum of
(i) $82,000,000 and (ii) 50% of the Consolidated Net Income earned for
each fiscal quarter beginning with the quarter ending March 31, 2001,
to the extent such Consolidated Net Income for such quarter is a
positive number.
2. Mandatory Prepayments.
(a) The Company agrees to pay 50% of the sum of (i) the Earn-out
plus (ii) the Accounts Receivable plus (iii) the Tax Refund to the Purchasers as
prepayments (the "Prepayments") under the Notes. The Company will make the
Prepayments within 15 days of the end of each calendar quarter beginning with
March 31, 2001 with respect to the Earn-out received, the Accounts Receivable
collected and the Tax Refund received during such calendar quarter; provided,
however, the Company may use the Accounts Receivable received to fund
disbursements by it under the Loan, in which case the Company will include any
such Accounts Receivable so used in the Prepayment for the quarter in which the
repayment of the Loan funded by such Accounts Receivable is made. In the event
of any default in repayment of the Loan, the Company will promptly and in good
faith exercise its available remedies and 50% of all recovery shall be paid as a
Prepayment when received by the Company. Each Prepayment will be accompanied by
a certificate of a Senior Financial Officer certifying that the amount of the
Prepayment has been determined and paid in accordance with the provisions of
this Amendment.
(b) The Purchasers waive the payment of any Make Whole Amounts and
any penalties that would otherwise be payable with respect to the Prepayments.
In addition, the Purchasers waive the requirements contained in Section 8.2 of
the Note Purchase Agreements that each Prepayment be at least 10% of the
aggregate principal amount of the Notes then outstanding.
(c) The parties agree that, notwithstanding the last sentence of
Section 8.1(a) of the Note Purchase Agreements, each Prepayment will reduce the
principal amount of the last required repayments that remain to be paid on the
Notes.
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3. Representations. The Company hereby:
(a) confirms that the representations and warranties of the Company
set forth in the Note Purchase Agreements are true and correct in all material
respects as of the date hereof, and shall be deemed to be remade as of the date
hereof; and
(b) represents and warrants: (i) the Company has full power and
authority to execute and deliver this Amendment and to perform its obligations
hereunder; (ii) upon the execution and delivery hereof, this Amendment will be
valid, binding and enforceable upon the Company in accordance with its terms,
except as such enforceability may be limited by (A) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect affecting the enforcement of creditors' rights generally and (B)
equitable principles (whether or not any action to enforce such document is
brought at law or in equity); (iii) the execution and delivery of this Amendment
does not and will not contravene, conflict with, violate or constitute a default
under (A) its articles of incorporation or by-laws, none of which have been
amended, modified, supplemented or restated since September 1, 1998 or (B) any
applicable law, rule, regulation, judgment, decree or order or any agreement,
indenture or instrument to which the Company is a party or is bound or which is
binding upon or applicable to all or any portion of the Company's property; (iv)
as of the date hereof no Default or Event of Default exists; (v) as of the date
hereof (A) the Company has no Indebtedness except as permitted under Sections
10.3 and 10.4 of the Note Purchase Agreements and (B) there exist no Liens
except as permitted under Section 10.3 of the Note Purchase Agreements; and (vi)
attached hereto is a Schedule 5.4 which contains a complete and correct list of
the Company's Subsidiaries, showing, as to each Subsidiary, the correct name
thereof, the jurisdiction of its organization, and the percentage of shares of
each class of its capital stock or similar equity interests outstanding owned by
the Company and each other Subsidiary.
4. Effectiveness of Amendment. The amendment to Section 10.7 of the
Note Purchase Agreements set forth in Section 1 above shall be deemed effective
as of December 22, 2000 upon satisfaction of the conditions set forth in Section
5 below.
5. Conditions. The effectiveness of this Amendment is subject to the
fulfillment, prior to such effectiveness, of the following conditions (the date
all such conditions being fulfilled being referred to as the "Fulfillment
Date"):
(a) Amendment Fee. The Company shall have paid to each Purchaser in
immediately available funds an amendment fee in an amount equal to 0.15% of the
principal amount of the Notes initially purchased by such Purchaser.
(b) Representations and Warranties. The representations and
warranties of the Company in this Amendment shall be correct when made and at
the time of the Fulfillment Date.
(c) Performance; No Default. The Company shall have performed and
complied with all agreements and conditions contained in this Amendment required
to be performed or complied with by it prior to or at the Fulfillment Date, and
after giving effect to this Amendment, no Default or Event of Default shall have
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occurred and be continuing. Neither the Company nor any Subsidiary shall have
entered into any transaction since the date of the Memorandum that would have
been prohibited by Sections 10.1, 10.3, 10.4, 10.5 or 10.6 of the Note Purchase
Agreements had such Sections applied since such date.
(d) Compliance Certificates.
(i) Officer's Certificate. The Company shall have delivered to
the Purchasers an Officer's Certificate, dated the date of the Closing,
certifying that the conditions specified in Sections 5(b) and 5(c) have been
fulfilled.
(ii) Secretary's Certificate. The Company shall have delivered
to Purchasers a certificate certifying as to the resolutions attached thereto
and other corporate proceedings relating to the authorization, execution and
delivery of the this Amendment.
(e) Opinions of Counsel. Purchasers shall have received opinions in
form and substance satisfactory to Purchaser, dated the date of the Fulfillment
Date from Xxxx X. Xxxxxxxx, Esq., General Counsel for the Company, covering such
matters incident to the transactions contemplated hereby as the Purchaser or
their counsel may reasonably request.
(f) Delivery of Documents. This Amendment shall have been duly
executed and delivered and shall be in full force and effect.
(g) Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated by this Amendment and all
documents and instruments incident to such transactions shall be satisfactory to
Purchasers and their counsel, and Purchasers and their counsel shall have
received all such counterpart originals or certified or other copies of such
documents as Purchasers or their counsel may reasonably request.
6. Entire Agreement. This Amendment embodies the entire agreement and
understanding between the parties with respect to the subject matter hereof and
supercedes any prior agreements and understandings with respect thereto.
7. Costs and Expenses. The Company agrees to reimburse Purchasers for
all fees and expenses incurred in the preparation, negotiation and execution of
this Amendment and the consummation of the transactions contemplated hereby,
including, without limitation, the fees and expenses of counsel for Purchasers.
8. No Further Amendments; Ratification of Liability. Except as amended
hereby, the Note Purchase Agreements and the Other Agreements shall remain in
full force and effect in accordance with their respective terms. The Company
hereby ratifies and confirms its liabilities, obligations and agreements under
the Note Purchase Agreements and the Other Agreements, all as amended by this
Amendment and acknowledges that (i) it has no defenses, claims or set-offs to
the enforcement by Purchasers of such liabilities, obligations and agreements,
(ii) Purchasers have fully performed all obligations to the Company which any of
them may have had or has on and as of the date hereof and (iii) other than as
specifically set forth herein, Purchasers do not waive, diminish or limit any
term or condition contained in the Note Purchase Agreements or the Other
Agreements. The agreement of Purchasers to the terms of this Amendment or any
other amendment of the Note Purchase Agreements shall not be deemed to establish
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or create a custom or course of dealing between Purchasers and the Company. The
Note Purchase Agreements, as amended by this Amendment, contain the entire
agreement between Purchasers and the Company with respect to the transactions
contemplated thereby.
9. Counterparts. This Amendment may be executed in any number of
counterparts, each of which will be an original but all of which together will
constitute one instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.
* * * * *
[SIGNATURE PAGES FOLLOW]
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The parties hereto have executed this Amendment on the day first
set forth above.
THE COMPANY
SOS Staffing Services, Inc.
By:_________________________________________
Its:________________________________________
THE PURCHASERS
PPM America, Inc. as Attorney in Fact, on
Behalf of Xxxxxxx National Life Insurance
Company
By:_________________________________________
Its:________________________________________
Great-West Life & Annuity Insurance Company
By:_________________________________________
Its:________________________________________
By:_________________________________________
Its:________________________________________
Farm Bureau Life Insurance Company of
Michigan
By:_________________________________________
Its:________________________________________
Farm Bureau Mutual Insurance Company of
Michigan
By:_________________________________________
Its:________________________________________
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The Canada Life Assurance Company, as
beneficial owner
By:_________________________________________
Its:________________________________________
Canada Life Insurance Company of New York,
as beneficial owner
By:_________________________________________
Its:________________________________________
Canada Life Insurance Company of America, as
beneficial owner
By:_________________________________________
Its:________________________________________
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Schedule 5.4
Subsidiaries
Devon & Devon Personnel Services, Inc. (non-operating)
California corporation
0000 Xxxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxx, XX 00000
SOS owns 2,153 shares of Common Stock, no par value,
which represents 100% of issued and outstanding shares
Fed Id. No. 00-0000000
Inteliant Corporation (formerly Xxxxx & Associates, Inc.)
Delaware corporation
0000 Xxxxx 000 Xxxx, Xxxxx 000
Xxxxxx, XX 00000
SOS owns 30,000,000 shares of Common Stock $.001 par value,
which represents 100% of issued and outstanding shares
Fed. Id. No. 00-0000000
ServCom Staff Management, Inc.
Utah corporation
0000 Xxxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxx, XX 00000
(000) 000-0000
SOS owns 1,000 shares of Common Stock $.01 par value,
which represents 100% of issued and outstanding shares
Fed Id. No. 00-0000000
SOS Collection Services, Inc.
Arizona corporation
0000 Xxxx Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
(000) 000-0000
SOS owns 1,000 shares of Common Stock, no par value
Which Represents 100% of issued and outstanding shares
Arizona corporation operating solely in Arizona.
Fed Id No. 00-0000000
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