<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number 0-28148
THE VINCAM GROUP, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2452823
- -------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2850 Douglas Road Coral Gables, Florida 33134
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(305) 460-2350
----------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
----------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__ No ____
As of May 8, 1997, The Vincam Group, Inc. had 8,581,109 shares of common
stock, $.001 par value, outstanding.
1
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THE VINCAM GROUP, INC.
FORM 10-Q
TABLE OF CONTENTS
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements .................................... 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ......... 14
PART II OTHER INFORMATION
Item 1. Legal Proceedings ...................................... 21
Item 2. Changes in Securities .................................. 21
Item 5. Other Information ...................................... 21
Item 6. Exhibits and Reports on Form 8-K ....................... 22
SIGNATURES ............................................................... 23
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Page
----
THE VINCAM GROUP, INC.
Consolidated Balance Sheets as of March 31, 1997 and
December 31, 1996................................................. 4
Consolidated Statements of Income for the Three Months
Ended March 31, 1997 and 1996..................................... 5
Consolidated Statement of Changes in Stockholders' Equity
for the Three Months Ended March 31, 1997......................... 6
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1997 and 1996.............................. 7
Notes to Consolidated Financial Statements.......................... 9
3
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THE VINCAM GROUP, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1997 1996
------------- -------------
Assets
Current assets:
Cash and cash equivalents .................... $ 12,094,792 $ 16,374,288
Investments .................................. 318,764 149,626
Restricted cash .............................. 2,331,917 2,331,917
Accounts receivable .......................... 26,639,573 22,111,756
Due from affiliates .......................... 276,678 235,927
Deferred taxes ............................... 1,480,246 1,457,280
Reinsurance recoverable ...................... 3,001,800 1,728,000
Prepaid workers' compensation
insurance premium ........................... 4,792,244 5,483,972
Prepaid expenses and other current assets .... 1,095,981 784,159
------------- -------------
Total current assets .................. 52,031,995 50,656,925
Property and equipment, net .................. 5,454,938 4,164,596
Deferred taxes ............................... 606,404 628,626
Reinsurance recoverable ...................... 1,472,000 1,472,000
Client contracts and other assets ............ 1,919,513 1,686,176
Goodwill ..................................... 5,303,730 4,791,836
------------- -------------
$ 66,788,580 $ 63,400,159
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses ........ $ 2,563,045 $ 3,406,633
Accrued salaries, wages and payroll taxes .... 18,546,678 15,364,364
Amounts due under acquisition agreement ...... 2,210,937 2,623,437
Reserve for claims ........................... 4,791,506 5,085,016
Income taxes payable ......................... 1,760,641 1,307,576
Current portion of long term borrowings ...... 89,167 89,167
Deferred compensation ........................ 6,617 242,013
Deferred gain ................................ 530,240 323,157
------------- -------------
Total current liabilities ............. 30,498,831 28,441,363
Long term borrowings, less current portion ....... 786,495 807,883
Reserve for claims ............................... 2,332,200 2,846,188
Income taxes payable ............................. -- 672,818
Deferred compensation ............................ -- 41,200
Deferred gain .................................... 528,744 275,275
Other liabilities ................................ 63,338 45,338
------------- -------------
Total liabilities ..................... 34,209,608 33,130,065
------------- -------------
Commitments and contingencies (Note 7) ........... -- --
------------- -------------
Stockholders' equity:
Common stock, $.001 par value, 60,000,000
shares authorized, 8,574,442 shares
issued and outstanding ..................... 8,574 8,013
Additional paid in capital ................... 34,233,325 33,241,867
Accumulated deficit .......................... (1,662,927) (2,979,786)
------------- -------------
Total stockholders' equity ............ 32,578,972 30,270,094
------------- -------------
$ 66,788,580 $ 63,400,159
============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
4
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THE VINCAM GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
MARCH 31,
-------------------------------
1997 1996
-------------- --------------
Revenues ................................ $ 170,075,503 $ 96,969,598
-------------- --------------
Direct costs:
Salaries, wages and employment
taxes of worksite employees ....... 150,738,554 85,811,918
Health care and workers' compensation 7,002,124 4,619,440
State unemployment taxes and other .. 1,576,798 842,095
-------------- --------------
Total direct costs ............ 159,317,476 91,273,453
-------------- --------------
Gross profit ............................ 10,758,027 5,696,145
-------------- --------------
Operating expenses:
Administrative personnel ............ 4,584,274 2,676,981
Other general and administrative .... 2,277,253 1,401,093
Sales and marketing ................. 1,417,787 804,448
Provision for doubtful accounts ..... 240,500 144,000
Depreciation and amortization ....... 374,055 126,702
-------------- --------------
Total operating expenses ...... 8,893,869 5,153,224
-------------- --------------
Operating income ........................ 1,864,158 542,921
Interest (expense) income, net .......... 190,901 19,816
------------- --------------
Income before taxes ..................... 2,055,059 562,737
Provision for income taxes .............. (738,000) (223,048)
-------------- --------------
Net income .............................. $ 1,317,059 $ 339,689
============== ==============
Net income per common and common
equivalent share .................... $ 0.15 $ 0.05
============== ==============
Weighted average number of shares
outstanding used in earnings per
share calculation ................... 9,053,823 6,982,207
============== ==============
The accompanying notes are an integral part of these consolidated financial
statements.
5
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THE VINCAM GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Retained
Common Stock Additional Earnings
------------------------- Paid In (Accumulated
Shares Par Value Capital Deficit) Total
----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 ........ 8,013,332 $ 8,013 $33,241,867 $(2,979,786) $30,270,094
Issuance of common stock under
acquisition agreements ............. 520,000 520 868,169 (200) 868,489
Issuance of common stock to
employees under stock option plans.. 41,110 41 123,289 -- 123,330
Net income .......................... -- -- -- 1,317,059 1,317,059
----------- ------------ ------------ ------------ ------------
Balance at March 31, 1997 ........... 8,574,442 $ 8,574 $34,233,325 $(1,662,927) $32,578,972
=========== ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
THE VINCAM GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................ $ 1,317,059 $ 339,689
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization ........................... 346,116 126,702
Provision for doubtful accounts ......................... 240,500 144,000
Deferred gain ........................................... 460,552 --
Deferred income tax benefit ............................. (744) (155,033)
Changes in assets and liabilities:
Increase in accounts receivable ....................... (4,768,317) (1,131,174)
Increase in due from affiliates ....................... (40,751) (195,093)
Increase in reinsurance recoverable ................... (1,273,800) --
Decrease in prepaid workers' compensation
insurance premium ................................... 691,728 --
Increase in prepaid expenses and other current assets (311,822) (122,714)
Decrease (increase) in other assets ................... 32,326 (133,090)
Decrease in accounts payable and accrued expenses ..... (843,588) (442,047)
Increase in accrued salaries, wages and payroll taxes . 3,182,314 1,277,267
(Decrease) increase in reserve for claims ............. (807,498) 587,229
(Decrease) increase in income taxes payable ........... (219,753) 217,594
Decrease in deferred compensation ..................... (276,596) (174,087)
Increase in other liabilities ......................... 18,000 --
------------- -------------
Net cash (used in) provided by operating activities .......... (2,254,274) 339,243
------------- -------------
Cash flows from investing activities:
Purchases of property and equipment ....................... (1,545,526) (403,452)
Purchases of short term investments ....................... (169,138) (94,421)
Cash acquired from acquisition ............................ 124,253 --
Payment of amounts due under acquisition agreement ........ (412,500) --
------------- -------------
Net cash used in investing activities ........................ (2,002,911) (497,873)
------------- -------------
Cash flows from financing activities:
Principal payments on borrowings .......................... (21,388) (27,213)
Issuance of common stock to employees under stock plans ... 123,330 --
------------- -------------
Net cash provided by (used in) financing activities .......... 101,942 (27,213)
------------- -------------
Net decrease in cash and cash equivalents .................... (4,155,243) (185,843)
Cash and cash equivalents, beginning of period ............... 16,250,035 1,169,570
------------- -------------
Cash and cash equivalents, end of period ..................... $ 12,094,792 $ 983,727
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
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THE VINCAM GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
ACQUISITION OF MINORITY INTEREST OF STAFF ADMINISTRATORS OF WESTERN COLORADO,
INC.
On January 7, 1997, the Company acquired the 49% minority interest in Staff
Administrators of Western Colorado, Inc., a subsidiary of Staff Administrators,
Inc. ("SAI"), in a transaction accounted for as a purchase. The fair value of
the interest acquired and the consideration paid were as follows:
Fair value of net assets acquired:
Client contracts ................................... $301,848
Accounts receivable ................................ 220,643
Property and equipment ............................. 36,807
---------
Fair value of non-cash assets acquired ............. 559,298
---------
Accounts payable and accrued expenses .............. 8,938
Accrued salaries, wages and payroll taxes .......... 240,630
Other liabilities .................................. 140,624
---------
Fair value of liabilities assumed .................. 390,192
---------
Fair value of net assets acquired, excluding cash... 169,106
Cash acquired ...................................... 124,253
---------
Fair value of net assets acquired .................. $293,359
=========
Purchase price (20,000 shares x $43.00) ............ $860,000
=========
The following is a reconciliation of the purchase price to the excess of
costs associated with the acquisition over the estimated fair value of net
assets acquired allocated to goodwill:
Purchase price .................................... $ 860,000
Net assets acquired ............................... (293,359)
----------
Amount allocated to goodwill ...................... $ 566,641
==========
The accompanying notes are an integral part of these consolidated financial
statements.
8
<PAGE>
THE VINCAM GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND DECEMBER 31, 1996
Note 1 - Basis for Presentation of Consolidated Financial Statements
The accompanying unaudited consolidated financial statements of The Vincam
Group, Inc. have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions for Form
10-Q and Rule 10-01 of Regulation S-X. They do not include all information and
notes required by generally accepted accounting principles for complete
financial statements and should be read in conjunction with the audited
consolidated financial statements and notes thereto for the year ended December
31, 1996 included in the Company's Annual Report on Form 10-K and the pooled
consolidated financial statements for the year ended December 31, 1996, included
in the Company's Current Report on Form 8-K, dated May 8, 1997. The financial
information furnished reflects all adjustments, consisting only of normal
recurring accruals, which are, in the opinion of management, necessary for a
fair presentation of the financial position, results of operations and of cash
flows for the interim periods presented. The results of operations for the
periods presented are not necessarily indicative of the results for the entire
year.
The accompanying unaudited financial statements include the accounts of The
Vincam Group, Inc. and its subsidiaries (the "Company"). All material
intercompany balances and transactions have been eliminated.
Note 2 - Acquisitions
On August 30, 1996, the Company acquired substantially all of the assets
and liabilities of The Stone Mountain Group, Inc. ("SMG"), a professional
employer organization ("PEO") in Snellville, Georgia for $4,980,751 in cash and
notes (the "SMG Acquisition"). Of the $4,980,751 purchase price, $2,357,314 was
paid at closing, $412,500 was paid in January 1997, $960,937 will be payable in
August 1997, and $1,250,000 was placed in escrow for potential purchase price
adjustments in the event that, among other things, client retention fails to
meet certain targets. The SMG Acquisition was accounted for by the Company using
the purchase method of accounting. Excess of costs over the estimated fair value
of net assets acquired of $4,856,064 associated with the SMG Acquisition was
allocated to goodwill and is being amortized over a period of 25 years.
On January 7, 1997, the Company acquired Staff Administrators, Inc.
("SAI"), a privately held PEO headquartered in Denver, Colorado (the "SAI
Acquisition"). The Company issued 500,000 shares of its common stock in exchange
for all of the outstanding shares of common stock of SAI. The transaction has
been accounted for in accordance with the pooling of interests accounting
treatment; accordingly, all prior period financial statements presented herein
have been retroactively restated to include the assets and liabilities and
results of operations of SAI. In connection with the acquisition of SAI, the
Company also acquired, in a transaction accounted for as a purchase, a 49%
minority interest in Staff Administrators of Western Colorado, Inc. ("SAWCI"), a
51% subsidiary of SAI (the "SAWCI Acquisition"). The Company issued 20,000
shares of its common stock for the 49% interest in SAWCI. The most significant
adjustments to the balance sheet resulting from the SAWCI Acquisition are
disclosed in the supplemental disclosure of non-cash investing and financing
activities in the accompanying consolidated statements of cash flows.
9
<PAGE>
Note 3 - Initial Public Offering
In May 1996, the Company completed its initial public offering and received
proceeds of approximately $27,900,000, net of $2,100,000 underwriting discounts
and commissions, from the sale of 2,000,000 shares of common stock of the
Company. The Company used a portion of the proceeds to retire a subordinated
promissory note in the amount of $1,200,000 and to pay a $700,000 distribution
payable related to the Company's repurchase of an option to purchase the
Company's headquarters. In addition, the Company incurred approximately $960,000
in other costs in connection with the offering.
Note 4 - Accounts Receivable
At March 31, 1997 and December 31, 1996, accounts receivable consisted of
the following:
1997 1996
------------- -------------
Billed to clients ................... $ 9,117,725 $ 7,935,584
Unbilled revenues ................... 17,809,793 14,752,822
------------- -------------
26,927,518 22,688,406
Less: allowance for doubtful accounts (287,945) (576,650)
------------- -------------
$ 26,639,573 $ 22,111,756
============= =============
Note 5 - Reserve for Claims
In December 1996, the Company entered into an agreement with a national
insurance company to provide workers' compensation insurance coverage for 1997
through 1999, subject to a deductible of $2,000 per medical only claim.
Accordingly, effective January 1, 1997, the Company records workers'
compensation costs based primarily on the fixed portion of its premium under
such policy, rather than through the previous practice of applying actuarial
estimates.
In addition, in December 1996 and March 1997, the Company entered into
agreements to reinsure substantially all of the remaining claims under the
Company's large deductible worker's compensation insurance policies for the
years 1994, 1995 and 1996, for an aggregate premium of $5,070,000. Since
reserves for claims for these years have been previously provided, the Company
has recorded the premium as a reinsurance recoverable and a deferred gain in the
amount of $1,149,451, of which $90,467 has been recognized to income based on
the proportion of cumulative claims paid through March 31, 1997, to the total
estimated liability for claims.
In connection with the reinsurance of claims exposure from 1994 to 1996,
the insurance carrier has provided $4,100,959 in letters of credit in favor of
the Company to secure the insurance carrier's obligation for the payment of
workers' compensation claims.
10
<PAGE>
As a consequence of the reinsurance agreements described above, the Company
has classified as current the estimated amounts of reserves for claims and
reinsurance recoverable expected to be paid and to be collected, respectively,
within one year, as well as the related deferred gain expected to be recognized
within one year.
At March 31, 1997 and December 31, 1996, the Company's reserves for claims
costs are as follows:
1997 1996
------------ ------------
Accrued workers' compensation claims ...... $ 4,797,803 $ 6,476,630
Accrued health care claims ................ 1,125,000 929,109
Reserve for behavioral health care claims . 1,200,903 525,465
------------ ------------
7,123,706 7,931,204
Less: workers' compensation claims expected
to be settled in more than one year ....... (2,332,200) (2,846,188)
------------ ------------
Reserve for claims--current ............... $ 4,791,506 $ 5,085,016
============ ============
Note 6 - Borrowings
Borrowings at March 31, 1997 and December 31, 1996, are as follows:
1997 1996
---------- ----------
Note payable to bank, original amount of $1 million,
repayable in monthly instalments of $4,167, plus
interest at 8.5% per annum, through November 1998
when a balloon payment of $750,000 is due, secured
by land and building ................................. 833,227 841,561
Note payable for state unemployment taxes,
maturing in 1998 with monthly payments of $3,264 ..... 42,435 55,489
---------- ----------
875,662 897,050
Less: current portion ................................ (89,167) (89,167)
---------- ----------
$ 786,495 $ 807,883
========== ==========
11
<PAGE>
In April 1997, the Company entered into a revolving line of credit
agreement for an aggregate amount of $50,000,000 with a group of banks (the
"Credit Agreement") . The Credit Agreement provides for a revolving credit
facility with a sublimit of $15,000,000 to fund working capital advances and
standby letters of credit. The Credit Agreement also provides for advances to
finance acquisitions. Amounts outstanding under the revolving credit facility
mature on April 24, 2000. If on April 24, 2000, certain conditions are
satisfied, any amounts outstanding under the revolving line of credit may be
converted into a term loan payable in eight quarterly instalments commencing on
August 1, 2000. The Company is required to pay an unused facility fee ranging
from .20% to .35% per annum on the facility, depending upon certain financial
covenants.
The Credit Agreement is secured by a pledge of the shares of all of the
Company's subsidiaries. The Credit Agreement contains customary events of
default and covenants which prohibit, among other things,incurring additional
indebtedness in excess of a specified amount, paying dividends, creating liens
and engaging in certain mergers or combinations without the prior written
consent of the lender. The Credit Agreement also contains certain financial
covenants relating to current ratio, debt to capital ratio, debt and fixed
charges coverage and minimum tangible net worth, as defined in the Credit
Agreement.
Interest under the Credit Agreement accrues at rates based, at the
Company's option, on the Bank's Prime Rate plus a margin of as much as .25%, or
its Eurodollar Rate (as defined in the Credit Agreement) plus a margin of 1.00%
to 1.75%, depending on certain financial covenants.
Under the revolving credit facility, the Company had outstanding $6,250,000
in standby letters of credit at March 31, 1997, which guarantee the payment of
claims to the Company's former workers' compensation insurance carrier. As of
that date there were no other amounts outstanding under the revolving line of
credit.
The Company also has $1.2 million in standby letters of credit with another
bank at March 31, 1997, which guarantee to SAI's former workers' compensation
insurance carrier the payment of workers' compensation claims acquired upon the
SAI Acquisition.
As of March 31, 1997, the scheduled annual maturities of the Company's long
term debt are summarized as follows:
1997.............. $ 89,167
1998.............. 786,495
-----------
$ 875,662
===========
Note 7 - Commitments and Contingencies
The Company is a defendant in a lawsuit related to a wrongful death and
premises liability claim involving a worksite employee. The plaintiff's original
complaint sought damages in excess of $10,000,000; however, such complaint was
dismissed in part and amended to seek damages in excess of $15,000. The court
has sustained plaintiff's amended complaint alleging premises liability against
both the Company and its client as a result of a worksite accident at client's
premises. The Company is asserting that its liability under this claim, if any,
should be limited to $100,000 due to the immunity provisions of the Florida
workers' compensation statute involving worksite accidents. The Company's motion
for summary judgment on that basis was recently denied, and discovery in the
proceeding continues. While there can be no assurance that the ultimate outcome
of this lawsuit will not have a material adverse effect on the Company's
financial condition or results of operations, management believes, based on
consultations with the Company's counsel, that the ultimate outcome of this
lawsuit should not have such an effect.
12
<PAGE>
The Company is a defendant in a lawsuit brought in Dade County Circuit
Court in November 1995 by an individual who alleges that he was injured by a
worksite employee of a client of the Company, which owns and operates a hotel
and was a co-defendant in the litigation. The plaintiff recently settled with
the Company's client who had been a co-defendant in the lawsuit. The plaintiff
alleges that the employee, while he was working as a valet parking attendant,
was negligent in a motor vehicle collision and severely and permanently injured
the plaintiff. The plaintiff alleged damages in excess of $50,000 in his amended
complaint for, among other things, bodily injury, medical costs, pain and
suffering, and lost ability to earn income. A jury trial is currently scheduled
for August 1997. Based on consultations with the Company's counsel, management
of the Company believes that it has meritorious defenses to the plaintiff's
claims and that if the lawsuit is adversely determined, the Company may be
entitled to indemnification from its client and/or its liability insurance
carrier. Although management believes that the Company's ultimate liability in
this matter should not be material, there can be no assurance that the Company
will prevail in the litigation, in a related claim for indemnification, or that
the liability of the Company, if any, would not have a material adverse effect
on the Company's financial condition and results of operations.
In October 1996, the Company received a notice of assessment in the
discounted amount of approximately $53,500 from The Treasurer of the State of
Florida Department of Insurance as Receiver of United States Employer Consumer
Self Insurance Fund of Florida, a workers' compensation insurance fund which was
declared insolvent (the "Fund"). The Company paid the discounted assessment in
January 1997. The Company had certain worksite employees covered by the Fund
during the fiscal years ended December 31, 1992, 1993 and 1994. The court order
authorizing the assessment provides that the Company, by paying the discounted
assessment, is deemed to have paid its assessment in full and is not subject to
any further assessment for policyholder loss claims. The Company may be subject
to additional liability for the assessments of other Fund members. The Company
believes that there are approximately 700 members of the Fund which have been
assessed $37.0 million in the aggregate. Although the amount of the potential
exposure, if any, for such additional liability is not yet determinable,
management believes that the Company would have meritorious defenses to such
additional liability and that its ultimate liability in this matter will not
have a material adverse effect on the Company's financial condition or results
of operations. There cannot, however, be any assurance that any such liability
will not have such material adverse effect.
The Company is also involved in other legal and administrative proceedings
arising in the ordinary course of business. The outcomes of these actions are
not expected to have a material effect on the Company's financial position or
results of operations.
* * * * * * * * * *
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements and Notes thereto contained herein, the
Consolidated Financial Statements and the Notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations
appearing in the 1996 Annual Report on Form 10-K , and the Current Report on
Form 8-K dated May 8, 1997, filed by The Vincam Group, Inc. ("Vincam" or the
"Company').
The following discussion contains forward-looking statements. The Company's
actual results could differ materially from those discussed in such
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below and elsewhere in this Form 10-Q. In
connection with the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 (the "Reform Act"), the Company is hereby providing
cautionary statements identifying important factors that could cause the
Company's actual results to differ materially from those projected in
forward-looking statements (as such term is defined in the Reform Act) made by
or on behalf of the Company herein or orally, whether in presentations, in
response to questions or otherwise. Any statements that express, or involve
discussions as to, expectations, beliefs, plans, objectives, assumptions or
future events or performance (often, but not always, through the use of words or
phrases such as "will result," "are expected to," "will continue," "is
anticipated," "estimated," "projection" and "outlook") are not historical facts
and may be forward-looking and, accordingly, such statements involve estimates,
assumptions, and uncertainties which could cause actual results to differ
materially from those expressed in the forward-looking statements. Such
uncertainties include, among others, the following: (i) potential for
unfavorable interpretation of government regulations relating to labor, taxes,
insurance, employment matters and the provision of managed care services; (ii)
the Company's ability to obtain or maintain all required licenses or
certifications required to further expand the range of specialized managed care
services offered by the Company; (iii) potential increases in the Company's
costs, such as health care costs, that the Company may not be able to reflect
immediately in its service fees; (iv) the Company's ability to offer its
services to prospective clients in additional states where it has less or no
market penetration; (v) the level of acquisition opportunities available to the
Company and the Company's ability to efficiently price and negotiate such
acquisitions on a favorable basis; (vi) the financial condition of the Company's
clients; (vii) additional regulatory requirements affecting the Company; (viii)
the impact of competition from existing and new professional employer
organizations; (ix) the failure to properly manage growth and successfully
integrate acquired companies and operations; and (x) other factors which are
described in further detail in the Company's filings with the Securities and
Exchange Commission.
The Company cautions that the factors described above could cause actual
results or outcomes to differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company. Any
forward-looking statement speaks only as of the date on which such statement is
made, and the Company undertakes no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for
management to predict all of such factors. Further, management cannot assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
14
<PAGE>
Overview
Vincam, one of the largest professional employer organizations ("PEOs") in
the industry, provides small and medium-sized businesses with an outsourcing
solution to the complexities and costs related to employment and human
resources. The Company's continuum of integrated employment-related services
consists of human resource administration, employment regulatory compliance
management, workers' compensation coverage, health care and other employee
benefits. The Company establishes a co-employer relationship with its clients
and contractually assumes substantial employer responsibilities with respect to
worksite employees. In addition, the Company offers certain specialty managed
care services on a stand-alone basis to health and workers' compensation
insurance companies, HMOs, managed care providers and large, self-insured
employers.
The Company's revenues include all amounts billed to clients for gross
salaries and wages, related employment taxes, and health care and workers'
compensation coverage of worksite employees. The Company is obligated to pay the
gross salaries and wages, related employment taxes and health care and workers'
compensation costs of its worksite employees whether or not the Company's
clients pay the Company on a timely basis or at all. The Company believes that
including such amounts as revenues appropriately reflects the responsibility
which the Company bears for such amounts and is consistent with industry
practice. In addition, the Company's revenues are subject to fluctuations as the
result of (i) changes in the volume of worksite employees serviced by the
Company; (ii) changes in the wage base and employment tax rates of worksite
employees; and (iii) changes in the mark-up charged by the Company for its
services.
The Company's primary direct costs are (i) salaries, wages, the employer's
portion of social security, Medicare premiums, federal unemployment taxes and
the compensation portion of the Michigan Single Business Tax, (ii) health care
and workers' compensation costs, and (iii) state unemployment taxes and other
direct costs. The Company can significantly impact its gross profit margin by
actively managing the direct costs described in clauses (ii) and (iii).
The Company's health care costs consist of medical insurance premiums,
payments of and reserves for claims subject to deductibles and the costs of
vision care, disability, employee assistance and other similar benefit plans.
The Company's health care benefit plans consist of a mixture of fully insured,
minimum premium arrangements, partially self-insured plans and guaranteed cost
programs. Under minimum premium arrangements and partially self-insured plans,
liabilities for health care claims are recorded based on the Company's health
care loss history. The Company maintains reserves for medical and behavioral
health claims which reserves are estimates based on periodic reviews of open
claims, past claims experience and other factors deemed relevant by management.
While the Company believes that such reserves are adequate, the Company cannot
predict with certainty the ultimate liability associated with health care costs
and past claims experience may not be indicative of future results. Accordingly,
if estimated reserve amounts prove to be less than the ultimate liability with
respect to such claims, the Company's financial condition, results of operations
and liquidity could be materially adversely affected.
Workers' compensation costs include medical costs and indemnity payments
for lost wages, administrative costs and insurance premiums related to the
Company's workers' compensation coverage. Prior to 1997, the Company was insured
under a large deductible insurance plan. Under this plan, the Company was
obligated to reimburse its insurance carrier for a portion of the insurance risk
related to workers' compensation claims up to a predetermined deductible per
occurrence of $500,000 or $1,000,000. Workers' compensation costs for 1994, 1995
and 1996 also include reserves for claims which have been incurred but not
reported and for anticipated loss development. The Company has recently entered
into an arrangement with an insurance company under which substantially all of
the cost of the Company's workers' compensation coverage for the years 1997 to
1999 is fixed. Additionally, the Company entered into agreements whereby the
Company reinsured substantially all of the remaining claims under the Company's
large deductible workers' compensation insurance policies for the years 1994,
1995, and 1996.
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The Company's primary operating expenses are administrative personnel
expenses, other general and administrative expenses, and sales and marketing
expenses. Administrative personnel expenses include compensation, fringe
benefits and other personnel expenses related to internal administrative
employees. Other general and administrative expenses include rent, office
supplies and expenses, legal and accounting fees, insurance and other operating
expenses. Sales and marketing expenses include compensation of sales executives
and the marketing staff, as well as marketing and advertising expenses.
Recent Developments
In January 1997, the Company acquired Staff Administrators, Inc. ("SAI"), a
Colorado PEO, by merger transaction in an acquisition accounted for as a pooling
of interests (the "SAI Acquisition"). Prior period results have been
retroactively restated in accordance with the pooling of interests accounting
treatment of the SAI Acquisition. The Company recognized nonrecurring
transaction expenses of approximately $165,000 in the first quarter of 1997
resulting from the SAI Acquisition. In connection with the SAI Acquisition, the
Company also acquired, in a transaction accounted for as a purchase, a 49%
minority interest in Staff Administrators of Western Colorado, Inc. ("SAWCI"), a
51% subsidiary of SAI (the "SAWCI Acquisition"). The Company issued 20,000
shares of its common stock for the 49% interest in SAWCI. The most significant
adjustments to the balance sheet resulting from the SAWCI Acquisition are
disclosed in the supplemental disclosure of non-cash investing and financing
activities in the accompanying consolidated statements of cash flows.
In March 1997, the Company entered into an agreement with Reliance National
and Commercial Risk Re-Insurance Company to reinsure substantially all of the
Company's responsibility for remaining claims of SAI under SAI's large
deductible workers' compensation insurance policies for the years 1994, 1995 and
1996 for an aggregate premium of $1.9 million. As a result, the Company has
recorded a deferred gain in the amount of approximately $600,000 which will be
recognized to income in future periods based on the proportion of cumulative
claims paid to the total estimated liability for claims.
On April 24, 1997, the Company entered into a three-year revolving $50
million credit facility (the "Credit Agreement") with a group of banks for which
Fleet National Bank acted as agent. See "Liquidity and Capital Resources" below.
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Results of Operations
The following table sets forth, for March 31, 1997 and 1996, certain
selected income statement data expressed as a percentage of revenues:
Three Months Ended
March 31,
------------------
1997 1996
-------- --------
Revenues ............................................... 100.0% 100.0%
-------- --------
Direct costs:
Salaries, wages and employment taxes of worksite
employees ......................................... 88.6% 88.5%
Health care and workers' compensation ............... 4.1% 4.6%
State unemployment taxes and other .................. 1.0% 1.0%
-------- --------
Total direct costs ................................ 93.7% 94.1%
-------- --------
Gross profit ........................................... 6.3% 5.9%
-------- --------
Operating expenses:
Administrative personnel ............................ 2.7% 2.8%
Other general and administrative, including
provision for doubtful accounts ................... 1.5% 1.6%
Sales and marketing ................................. 0.8% 0.8%
Depreciation and amortization ....................... 0.2% 0.1%
-------- --------
Total operating expenses .......................... 5.2% 5.3%
-------- --------
Operating income ....................................... 1.1% 0.6%
Interest income (expense), net ......................... 0.1% 0.0%
-------- --------
Income before taxes .................................... 1.2% 0.6%
Provision for income taxes ............................. 0.4% 0.2%
-------- --------
Net income ............................................. 0.8% 0.4%
======== ========
Three Months Ended March 31, 1997 Compared to three Months Ended March 31, 1996
The Company's revenues for the three months ended March 31, 1997 were
$170.1 million compared to $97.0 million for the three months ended March 31,
1996, representing an increase of $73.1 million, or 75.4%. This increase was due
primarily to an increased number of PEO clients and worksite employees. In
addition, $11.9 million of the increase is attributable to the operations of SMG
which were acqured by the Company in August 1996. Between March 31, 1997 and
March 31, 1996, the number of PEO clients increased by 61.5%, from 592 to 956,
of which 137 were acquired from SMG. The number of worksite employees increased
73.9% over the same period, from 15,545 worksite employees to 27,032, of which
1,987 were acquired from SMG.
Salaries, wages and employment taxes of worksite employees were $150.7
million for the three months ended March 31, 1997, compared to $85.8 million for
the same period in 1996, representing an increase of $64.9 million, or 75.7%.
Salaries, wages and employment taxes of worksite employees were 88.6% of
revenues for the three months ended March 31, 1997, compared to 88.5% for the
same period in 1996. The increase of salaries, wages and employment taxes of
worksite employees as a percentage of revenues is a result of a change in the
Company's client mix towards clients having more favorable workers' compensation
risk profiles which allows the Company to charge a lower mark-up.
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Health care and workers' compensation costs were $7.0 million for the three
months ended March 31, 1997, compared to $4.6 million for the same period in
1996, representing an increase of $2.4 million, or 51.6%. This increase was due
mainly to the higher volume of health care and workers' compensation claims paid
and/or reserved during the three months ended March 31, 1997, which was a direct
function of the increase in the number of PEO clients and worksite employees.
Health care and workers' compensation costs were 4.1% of revenues for the three
months ended March 31, 1997, compared to 4.6% for the same period in 1996. The
decrease of health care and workers' compensation costs as a percentage of
revenues was due mainly to a reduction of workers' compensation costs resulting
from the Company's guaranteed fixed premium insurance program.
State unemployment taxes and other direct costs were $1.6 million for the
three months ended March 31, 1997, compared to $0.8 million for the same period
in 1996, representing an increase of $0.7 million or 87.3%. This increase was
due mainly to the higher volume of salaries and wages paid during the three
months ended March 31, 1997 which was a direct function of the increase in the
number of PEO clients and worksite employees, an increased number of client
companies using other services and products (e.g., 401(k), the drug free
workplace program, etc.), as well as an increase in other direct costs related
to the Company's specialty managed care services. State unemployment taxes and
other direct costs were 1.0% of revenues for the three months ended March 31,
1997 and 1996.
Gross profit was $10.8 million for the three months ended March 31, 1997,
compared to $5.7 million for the same period in 1996, representing an increase
of $5.1 million, or 88.9%, due mainly to the increase in revenues resulting from
an increase in the number of PEO clients and worksite employees. Gross profit
was 6.3% of revenues for the three months ended March 31, 1997, compared to 5.9%
for the same period in 1996. This increase was due mainly to the Company's
elimination of the sensitivity of workers' compensation costs to the ongoing
loss development of historical claims as a result of the Company's guaranteed
fixed premium insurance program and its reinsurance of substantially all of its
responsibility for prior periods claims.
Administrative personnel expenses were $4.6 million for the three months
ended March 31, 1997, compared to $2.7 million for the same period in 1996,
representing an increase of $1.9 million, or 71.4%. This increase was primarily
attributable to increased staffing to support the Company's growth, including
management and senior executive personnel. The Company anticipates that this
trend in administrative personnel expenses will continue in future periods as a
result of the Company's growth and the expansion of its service offerings.
Administrative personnel expenses were 2.7% of revenues for the three months
ended March 31, 1997, compared to 2.8% for the same period in 1996.
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Other general and administrative expenses, including the provision for
doubtful accounts, were $2.5 million for the three months ended March 31, 1997,
compared to $1.5 million for the same period in 1996, representing an increase
of $1.0 million, or 63.0%. This increase in other general and administrative
expenses was primarily attributable to the growth of the Company's business.
Other general and administrative expenses, including the provision for doubtful
accounts, were 1.5% of revenues for the three months ended March 31, 1997,
compared to 1.6% for the same period in 1996.
Sales and marketing costs were $1.4 million for the three months ended
March 31, 1997, compared to $0.8 million for the same period in 1996,
representing an increase of $0.6 million, or 76.2%. The increase reflects the
addition of sales executives and marketing personnel, consistent with the
Company's strategy to increase its client base in its existing markets. Sales
and marketing costs were 0.8% of revenues for the three months ended March 31,
1997 and 1996.
Net income was $1.3 million for the three months ended March 31, 1997,
compared to $0.3 million for the same period in 1996, representing an increase
of $1.3 million, or 287.7%. Earnings per share were $0.15 for the three months
ended March 31, 1997, compared to $0.05 for the same period in 1996,
representing an increase of $0.10, or 200.0%.
Liquidity and Capital Resources
At March 31, 1997, the Company had working capital of $21.5 million,
compared to $22.2 million at December 31, 1996. The Company had $14.4 million in
cash at March 31, 1997. Of this amount, $2.3 million is restricted.
The Company's Credit Agreement with a group of banks for which Fleet
National Bank ("Fleet Bank") acted as agent provides for a $50.0 million
revolving line of credit with a sublimit of $15.0 million for standby letters of
credit and revolving credit loans for working capital purposes. The Credit
Agreement also provides for advances to finance acquisitions. The Company uses
letters of credit primarily to secure its obligations to reimburse its former
workers' compensation insurance carrier for workers' compensation payments
subject to the policy deductible. Borrowings bear interest at rates based, at
the Company's option, on Fleet Bank's Prime Rate plus a margin of as much as
0.25% or its Eurodollar Rate (as defined in the Credit Agreement) plus a margin
of 1.00% to 1.75%, depending on certain financial covenants. The facility is
secured by a pledge of the shares of all of the Company's subsidiaries. The
revolving line of credit matures on April 24, 2000. If on April 24, 2000,
certain conditions are satisfied, any amounts otstanding under the revolving
line of credit may be coverted into a term loan payable in eight quarterly
instalments commencing on August 1, 2000. The Credit Agreement contains
customary events of default and covenants which prohibit, among other things,
incurring additional indebtedness in excess of a specified amount, paying
dividends, creating liens and engaging in certain mergers or combinations
without the prior written consent of the lender. The Credit Agreement also
contains certain financial covenants relating to current ratio, debt to capital
ratio, debt and fixed charges coverage and minimum tangible net worth, as
defined in the Credit Agreement. The Company is required to pay an unused
facility fee ranging from .20% to .35% per annum on the facilities, depending
upon certain financial covenants. Under the revolving credit facility, the
Company had outstanding approximately $6.3 million in standby letters of credit
at March 31, 1997 which guarantee the payment of claims to the Company's
previous workers' compensation insurance carrier. As of that date, there were no
other amounts outstanding under the revolving line of credit.
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Under the Company's large deductible workers' compensation insurance
policies for 1994, 1995 and 1996, the Company is required to provide its former
insurance carriers with $7.2 million in letters of credit, of which $6.3 has
been issued by the lenders under the Credit Agreement. In connection with the
reinsurance of the Company's responsibility for remaining claims (the "Remaining
Claims"), Commercial Risk Re-Insurance Company ("Commercial Risk") has provided
a $4.1 million letter of credit in favor of the Company to secure Comercial
Risk's obligation for the payment of Remaining Claims.
The Company also has $1.2 million in standby letters of credit with another
bank at March 31, 1997, which guarantee to SAI's former workers' compensation
insurance carrier the payment of workers' compensation claims acquired upon the
SAI Acquisition.
The Company anticipates that available cash, cash flows from operations and
borrowing availability under the Credit Agreement will be sufficient to satisfy
the Company's liquidity and working capital requirements for the foreseeable
future; however, to the extent that the Company should desire to increase its
financial flexibility and capital resources or require or choose to fund future
capital commitments from sources other than operating cash or from borrowings
under its revolving line of credit or its acquisition loan facility, the Company
may consider raising capital through the offering of equity and/or debt
securities in the public or private markets, as well as from banks.
Net cash used in operating activities was $2.3 million for the three months
ended March 31, 1997, compared to cash provided by operating activities of
approximately $339,000 for the same period in 1996. The difference between the
Company's net income of $1.3 million for the three months ended March 31, 1997,
and its negative operating cash flow was due primarily to a $4.8 million
increase in accounts receivable, a $1.3 million increase in reinsurance
recoverable, an increase in prepaid expenses and other current assets of
$311,000, a decrease in accounts payable and accrued expenses of $844,000, and a
decrease in reserve for claims of $807,000, partially reduced by an increase in
deferred gain of $460,500, a decrease in prepaid workers' compensation insurance
premium of $691,000, and an increase in accrued salaries, wages, and payroll
taxes of $3.2 million. The increase in accounts receivable resulted from both a
higher number of PEO clients and worksite employees served during 1997 and the
timing of the payroll cycle. The Company's accounts receivable and accrued
salaries, wages, and payroll taxes are subject to fluctuations depending on the
proximity of the closing date of the reporting period to that of the payroll
cycle. The increase in reinsurance recoverable was due mainly to the loss
portfolio risk transfer of substantially all of the Company's responsibility for
remaining claims acquired upon the SAI Acquisition under SAI's large deductible
workers' compensation policies for 1994, 1995 and 1996.
Net cash used in investing activities was $2.0 million for the three months
ended March 31, 1997, compared to $498,000 in the same period in 1996. This
reflects payment of $413,000 due under SMG Acquisition agreement and $1.5
million in expenditures for property and equipment to support the Company's
growth.
Net cash provided by financing activities was $102,000 million for the
three months ended March 31, 1997, compared to $27,000 used in financing
activities in the same period in 1996. The 1997 cash flow reflects the Company's
issuance of shares of common stock to employees under the Company's stock option
plans.
Inflation
The Company believes the effects of inflation have not had a significant
impact on its results of operations or financial condition.
20
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Part I, Item 3. Legal Proceedings in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996.
With respect to the lawsuit filed by Angela Isabel Sanchez and her minor
children in December 1995 against the Company, its client and certain officers
of the Company and such client, the Company's motion for summary judgment on the
Company's claim that its liability, if any, should be limited to $100,000 due to
the immunity provisions of the Florida workers' compensation statute involving
worksite accidents was denied, and discovery in the proceeding continues. While
there can be no assurance that the ultimate outcome of this lawsuit will not
have a material adverse effect on the Company's financial condition and results
of operations, management believes, based on consultations with the Company's
counsel, that the ultimate outcome of this lawsuit should not have such an
effect.
With respect to the lawsuit filed by James Byrnes in November 1995 against
the Company, Atlantic View Partners, Ltd., Atlantic View, Inc. and Days Inn of
America, Inc., the plaintiff recently settled with all of the defendants other
than the Company. A jury trial with respect to this lawsuit is currently
scheduled for August 1997. Based on consultations with the Company's counsel,
management of the Company believes that it has meritorious defenses to the
plaintiff's claims and that if the lawsuit is adversely determined, the Company
may be entitled to indemnification from its client and/or its liability
insurance carrier. Although management believes that the Company's ultimate
liability in this matter should not be material, there can be no assurance that
the Company will prevail in the litigation, in a related claim for
indemnification, or that the liability of the Company, if any, would not have a
material adverse effect on the Company's financial condition and results of
operations.
ITEM 2. CHANGES IN SECURITIES
On January 7, 1997, the Company issued an aggregate of 520,000 shares of
its common stock, par value $.001 per share, to Robert J. Quinnette, Michael C.
Koltak and Kris A. Smith as consideration for all of the outstanding equity of
Staff Administrators, Inc. and its subsidiaries, and 49% of Staff Administrators
of Western Colorado, Inc. The issuance of such shares of common stock was exempt
from the registration requirements of the Securities Act of 1933, as amended,
pursuant to the provisions of Section 4(2) thereof.
ITEM 5. OTHER INFORMATION
On March 26, 1997, the Company announced that it has entered into an
agreement with Commercial Risk Re-Insurance Company and Reliance National
Insurance Company to reinsure substantially all of the remaining claims under
the large deductible workers' compensation policies for the years 1994, 1995,
and 1996 of Staff Administrators, Inc. which was acquired earlier this year, for
an aggregate premium of $1.9 million. As a result, the Company has recorded the
premium as a reinsurance recoverable and a deferred gain in the amount of
approximately $600,000 which will be recognized to income in future periods
based on the proportion of cumulative claims paid to the total estimated
liability for claims.
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The agreement also contains a loss commutation provision which allows the
Company the opportunity to buy back its losses, for each year, at any time in
the future. Effectively, this allows the Company to benefit from a
better-than-expected loss experience with a limited downside risk. The Company
intends to continue to manage its workers' compensation costs in order to permit
it to take advantage of its right to elect to assume the responsibility for
claims.
On April 24, 1997, the Company entered into a three-year revolving $50
million credit facility (the "Credit Agreement") with a group of banks for which
Fleet National Bank acted as agent. See Part I, Item 2. Management's Discussion
and Analysis of Financial Condition and Results of Operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
No. Description
10 Credit Agreement dated as of April 24, 1997, among The Vincam Group,
Inc. its subsidiaries and Fleet National Bank as Agent and Various
Financial Institutions.
11 Statement re Computation of Per Share Earnings.
27 Financial Data Schedule
(b) Reports on Form 8-K
On January 3, 1997, the Company filed a current report on Form 8-K dated
December 10, 1996 with the Securities and Exchange Commission (the "Commission")
reporting information under Item 5, Other Events.
On January 17, 1997, the Company filed a current report on Form 8-K dated
January 7, 1997 with the Commission reporting information under Item 2,
Acquisition or Disposition of Assets and Item 7, Financial Statements, Pro Forma
Financial Information and Exhibits.
On March 18, 1997, the Company filed an amendment to current report on Form
8-K/A dated January 7, 1997 with the Commission reporting information under Item
7, Financial Statements, Pro Forma Financial Information and Exhibits.
On May 9, 1997, the Company filed a current report on Form 8-K dated May 8,
1997 with the Commission reporting information under Item 5, Other Events.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE VINCAM GROUP, INC.
May 8, 1997 By:/s/ STEPHEN L. WAECHTER
- ----------- --------------------------------------------------
Date Stephen L. Waechter, Chief Financial Officer,
Senior Vice President Finance and Administration
(Principal Financial Officer)
May 8, 1997 By:/s/ MARTINIANO J. PEREZ
- ----------- --------------------------------------------------
Date Martiniano J. Perez, Vice President and Controller
(Principal Accounting Officer)
23
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THE VINCAM GROUP, INC.
FORM 10-Q
EXHIBIT INDEX
Exhibit
No. Description
10 Credit Agreement dated as of April 24, 1997, among The Vincam Group,
Inc. its subsidiaries and Fleet National Bank as Agent and Various
Financial Institutions.
11 Statement re Computation of Per Share Earnings.
27 Financial Data Schedule
<PAGE>
CREDIT AGREEMENT
Dated as of April 24, 1997
among
THE VINCAM GROUP, INC.
ITS SUBSIDIARIES
and
FLEET NATIONAL BANK
as AGENT
and
VARIOUS FINANCIAL INSTITUTIONS
NOW OR HEREAFTER PARTIES HERETO
as LENDERS
<PAGE>
TABLE OF CONTENTS
PAGE
Section 1 Definitions .................................................2
1.1 Certain Definitions ...................................................2
1.2 Accounting Terms .....................................................15
1.3 Rules of Interpretation ..............................................15
Section 2 Loans; Letters of Credit ...................................16
2.1 Revolving Credit Loan ................................................16
2.2 Notes ................................................................16
2.3 Lending Office .......................................................16
2.4 Requests For Loans ...................................................16
2.5 Letters of Credit ....................................................16
2.6 Conversion To Term Loans .............................................19
2.7 Termination or Reduction of Commitment ...............................19
2.8 Company as Agent for Borrowers .......................................20
Section 3 [Intentionally Omitted] ....................................20
Section 4 Interest Rates; Fees; Payments .............................20
4.1 Interest Rates .......................................................20
4.2 Commitment Fee .......................................................21
4.3 Letter of Credit Fees ................................................22
4.4 Late Fee .............................................................22
4.5 Certain Notices ......................................................22
4.6 Non-Receipt of Funds by the Agent ....................................23
4.7 Sharing of Payment; Waiver of Enforcement Without
Consent, Etc .........................................................23
4.8 Minimum and Maximum Amounts ..........................................25
4.9 Computations .........................................................25
4.10 Manner and Place of Payment .....................................25
4.11 Pro Rata Treatment ..............................................25
4.12 Payments Due on Saturdays, Sundays and Holidays .................26
4.13 Additional Costs ................................................26
4.14 Limitation on Types of Loans ....................................27
4.15 Illegality ......................................................27
4.16 Substitute Prime Rate Loans .....................................28
4.17 Compensation ....................................................28
4.18 Capital Adequacy ................................................29
4.19 Optional Prepayments ............................................29
Section 5 Security ...................................................30
5.1 Security Interests ...................................................30
Section 6 Conditions Precedent .......................................30
6.1 Conditions to all Loans and Letters of Credit ........................30
6.2 Satisfaction of Conditions ...........................................32
<PAGE>
Section 7 Representations and Warranties....................................33
7.1 Corporate Status..............................................33
7.2 No Violation..................................................33
7.3 Corporate Power and Authority.................................33
7.4 Enforceability................................................33
7.5 Consents or Approvals.........................................33
7.6 Financial Statements..........................................34
7.7 No Material Change............................................35
7.8 Litigation....................................................35
7.9 Compliance with Other Instruments; Compliance with Law........35
7.10 Subsidiaries..................................................35
7.11 Investment Company Status; Limits on Ability to Incur
Indebtedness..............................................35
7.12 Title to Property.............................................36
7.13 ERISA.........................................................36
7.14 Taxes.........................................................36
7.15 Environmental Matters.........................................37
7.16 Intellectual Property.........................................37
7.17 Level of Borrowing............................................37
7.18 Defaults......................................................38
7.19 Labor Relations...............................................38
7.20 Disclosure....................................................38
Section 8 Affirmative Covenants.............................................38
8.1 Use of Proceeds...............................................39
8.2 Conduct of Business; Maintenance of Existence.................39
8.3 Compliance with Laws..........................................39
8.4 Insurance.....................................................39
8.5 Financial Statements, Etc.....................................40
8.6 Notice of Default.............................................41
8.7 Environmental Matters.........................................41
8.8 Taxes and Other Liens.........................................42
8.9 ERISA Information.............................................43
8.10 Inspection....................................................43
8.11 Certain Obligations Respecting Subsidiaries...............43
8.12 Intellectual Property.....................................44
8.13 Further Assurances............................................44
Section 9 Negative Covenants................................................44
9.1 Transactions with Affiliates..................................44
9.2 Consolidation, Merger or Acquisition..........................45
9.3 Disposition of Assets.........................................46
9.4 Indebtedness..................................................47
9.5 Guarantees....................................................48
9.6 Liens.........................................................48
9.7 Restricted Payments...........................................49
9.8 Investments...................................................49
9.9 Sale and Leaseback........................................50
9.10 ERISA.........................................................50
<PAGE>
9.11 Fiscal Year...................................................51
Section 10 Financial Covenants..............................................51
10.1 Debt Coverage................................................51
10.2 Fixed Charges Coverage.......................................51
10.3 Debt to Capital Ratio........................................51
10.4 Current Ratio................................................51
10.5 Minimum Tangible Net Worth...............................51
Section 11 Events of Default................................................52
11.1 Events of Default............................................52
11.2 Remedies Upon an Event of Default............................54
Section 12 The Agent........................................................55
12.1 Appointment, Powers and Immunities...........................55
12.2 Reliance by Agent............................................55
12.3 Defaults.....................................................56
12.4 Rights as a Lender...........................................56
12.5 Events.......................................................56
12.6 Non-Reliance on Agent and Other Lenders......................57
12.7 Failure to Act...............................................57
12.8 Resignation of Agent.........................................58
Section 13 General..........................................................58
13.1 Amendments, Etc..............................................58
13.2 Notices, Etc.................................................59
13.3 No Waivers; Remedies.........................................59
13.4 Right of Set-off.............................................59
13.5 Expenses; Indemnification....................................59
13.6 Successors and Assigns.......................................61
13.7 Severability.................................................62
13.8 GOVERNING LAW................................................62
13.9 WAIVER OF JURY TRIAL.........................................62
13.10 VENUE, CONSENT TO SERVICE OF PROCESS.........................62
13.11 Headings.....................................................63
13.12 Counterparts.................................................63
13.13 Confidentiality..............................................63
EXHIBITS
A - Note
B - Stock Pledge Agreement
C - Compliance Certificate
SCHEDULES
A - Disclosure Schedule
1 - Applicable Margin and Commitment Fees
2 - Commitments of the Lenders
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of April 24, 1997 by and
among THE VINCAM GROUP, INC. (the "Company"); VINCAM HUMAN
RESOURCES, INC.; VINCAM HUMAN RESOURCES, INC. I; VINCAM HUMAN
RESOURCES, INC. II; VINCAM HUMAN RESOURCES, INC. III; VINCAM
HUMAN RESOURCES, INC. IV; VINCAM HUMAN RESOURCES, INC. V; VINCAM
HUMAN RESOURCES, INC. VI; VINCAM HUMAN RESOURCES, INC. XII;
VINCAM HUMAN RESOURCES OF MICHIGAN, INC.; VINCAM OCCUPATIONAL
HEALTH SYSTEMS, INC.; PERSONNEL RESOURCES, INC.; VINCAM INSURANCE
SERVICES, INC.; VINCAM PRACTICE MANAGEMENT, INC.; AMERICAN
PEDIATRIC SYSTEMS, INC.; and PSYCH/CARE, INC., each of which is a
Florida corporation and each of which has its principal place of
business and chief executive offices at 2850 Douglas Road, Coral
Gables, Florida 33134 (collectively, the "Florida Borrowers"),
VINCAM/STAFF ADMINISTRATORS, INC. (d/b/a STAFF ADMINISTRATORS,
INC.), VINCAM/STAFF ADMINISTRATORS OF WESTERN COLORADO, INC.
(d/b/a STAFF ADMINISTRATORS OF WESTERN COLORADO, INC.); STAFF
ADMINISTRATORS OF CO, INC.; and STAFF ADMINISTRATORS OF
CALIFORNIA, INC., each of which is a Colorado corporation and
each of which has its principal place of business and chief
executive offices at 12075 East 45th Avenue, Denver, Colorado
80239 (together with the Florida Borrowers, each a "Borrower" and
collectively, the "Borrowers"); FLEET NATIONAL BANK, a national
banking association, with its principal place of business at 75
State Street, Boston, Massachusetts 02109-1810 (together with its
successors, "Fleet"); each other lender which may from time to
time become a signatory hereto (individually, together with its
successors as well as Fleet, a "Lender" and collectively,
together with their respective successors, the "Lenders"); and
Fleet, as agent for the Lenders (in such capacity, together with
its successors in such capacity, the "Agent").
WHEREAS, the Borrowers are an integrated group of
corporations which provide management and financial support to
each other in order to achieve efficiencies and economies of
scale in providing professional employer services to their client
companies and, accordingly, require a single credit facility
available to all of them.
WHEREAS, the Borrowers have requested the Lenders to extend
credit to the Borrowers in the form of loans and letters of
credit and the Lenders are willing to extend such credit upon the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as
follows:
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Section 1 Definitions.
1.1 Certain Definitions. The following terms are used
herein with the meanings assigned to them below:
"Accountants" shall mean Price Waterhouse LLP or another
accounting firm of national reputation or, with the approval of
the Agent, any other certified public accountants selected by the
Borrowers.
"Acquired Company" shall mean each Person acquired by the
Borrowers in a Permitted Acquisition.
"Additional Costs" shall have the meaning set forth in
Section 4.13.
"Adjusted EBITDA" shall mean, in respect of the Borrowers or
any Person, as the case may be, EBITDA of the Borrowers or such
Person for the twelve-month period then ended less (i)EBITDA for
each Acquired Company for such fiscal period plus (ii) EBITDA for
each Acquired Company on a pro forma basis for the twelve months
preceding the end of such fiscal period, provided, however, that
the EBITDA for Acquired Companies may be adjusted, for certain
one-time savings or other acquisition related costs identified to
and approved in each instance by the Agent such as normalization
of owners' salaries and adjustments for certain non cash charges.
"Affected Eurodollar Loan" shall have the meaning set forth
in Section 4.17.
"Affiliate" shall mean, with respect to any specified Person
(the "specified person"), any Person directly or indirectly
controlling, controlled by or under direct or indirect common
control with, the specified person and, without limiting the
generality of the foregoing, includes (i) any director or officer
of the specified person or any Affiliate of the specified person,
(ii) any such director's or officer's parent, spouse, child or
child's spouse (a "relative"), (iii) any group acting in concert,
of one or more such directors, officers, relatives or any
combination thereof (a "group"), (iv) any Person controlled by
any such director, officer, relative or group in which any such
director, officer, relative or group beneficially owns or holds
5% or more of any class of voting securities or a 5% or greater
equity or profits interest and (v) any Person or group which
beneficially owns or holds 5% or more of any class of voting
securities or a 5% or greater equity or profits interest in the
specified person. For the purposes of this definition, the term
"control" when used with respect to any specified person means
the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such
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specified person, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" shall have the meaning set forth in the preamble to
this Agreement.
"Agreement" shall mean this Credit Agreement.
"Applicable Lending Office" shall mean, for each Lender and
for each Type of Loan, the Lending Office of such Lender (or of
an affiliate of such Lender) designated for such Type of Loan on
Schedule 2 hereof or such other office of such Lender (or of an
affiliate of such Lender) as such Lender may from time to time
specify to the Agent and the Borrowers as the office by which its
Loans of such Type are to be made.
"Applicable Margin" shall mean, in respect of any Type of
Loan, the amount for such Type of Loan determined pursuant to
Schedule 1 attached hereto.
"Banking Day" shall mean any day, excluding Saturday and
Sunday and excluding any other day which in The Commonwealth of
Massachusetts is a legal holiday or a day on which banking
institutions are authorized by law to close.
"Borrower" and "Borrowers" shall have the meaning set forth
in the preamble to the Agreement.
"Borrower Group Property" shall mean any real property
owned, occupied, or operated by the Borrowers or any of their
Subsidiaries.
"Capital Expenditures" shall mean any expenditures in
respect of property, plant or equipment (excluding expenditures
in respect of Permitted Acquisitions) made by the Borrowers or
any of their Subsidiaries, including the capitalized amount of
Capital Lease Obligations incurred during the relevant period.
"Capital Lease Obligations" shall mean, as to any Person,
the obligations of such Person to pay rent or other amounts under
a lease of (or other agreement conveying the right to use) real
and/or personal property which obligations are required to be
classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards
Board) and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined
in accordance with GAAP (including such Statement No. 13).
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"Capitalization" shall mean, at any date, the sum,
calculated in accordance with GAAP, of total stockholders equity
of the Borrowers plus Total Funded Debt.
"CERCLA" shall have the meaning set forth in Section 7.15.
"Closing Date" shall mean the first date on which the
conditions set forth in Section 6.1 have been satisfied and any
Loans are to be made or any Letters of Credit are to be issued
hereunder.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Collateral" shall have the meaning given that term in the
Security Instruments.
"Commitment" shall mean in relation to any particular
Lender, the maximum dollar amount which such Lender has agreed to
loan to the Borrowers or make available to the Borrowers upon the
terms and subject to the conditions of this Agreement, initially
as set forth in Schedule 2 attached hereto, as such Lenders'
Commitment may be modified pursuant hereto and in effect from
time to time. Schedule 2 shall be amended from time to time to
reflect any changes in the Commitments of the Lenders.
"Commitment Percentage" shall mean in relation to any
particular Lender, the percentage which such Lender's Commitment
represents of the aggregate Commitments of all the Lenders,
initially as set forth on Schedule 2 attached hereto as such
Lender's Commitment Percentage may be modified pursuant hereto
and in effect from time to time. Schedule 2 shall be amended
from time to time to reflect any changes in the Commitment
Percentages of the Lenders.
"Company" shall have the meaning set forth in the preamble
to this Agreement.
"Contractual Obligation" shall mean, as to any Person, any
provision of any security issued by such Person or of any
agreement, instrument or other undertaking to which such Person
is a party or by which it or any of its property is bound.
"Controlled Group" shall mean all members of a controlled
group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with the
Borrowers, are treated as a single employer under Section 414 of
the Code.
"Current Assets" shall mean, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as
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current assets on the consolidated balance sheet of the
Borrowers, as at such date.
"Current Liabilities" shall mean, as of any applicable date,
all amounts that should be, in accordance with GAAP, be included
as current liabilities on the consolidated balance sheet of the
Borrowers, as at such date.
"Default" shall mean any condition or event that constitutes
an Event of Default or that with the giving of notice or lapse of
time or both would, unless cured or waived, become an Event of
Default.
"Deposited Funds" shall have the meaning set forth in
Section 4.7.
"EBITDA" shall mean, for any fiscal period, an amount equal
to Net Income for such period, plus each of the following
(without duplication), to the extent deducted in computing such
Net Income: (i) Interest Expense, (ii) taxes accrued, (iii)
depreciation, and (iv) amortization of goodwill and other
intangibles.
"Environmental Laws" shall mean all federal, state, local
and foreign laws, and all regulations, notices or demand letters
issued, promulgated or entered thereunder, relating to pollution
or protection of the environment and to occupational health and
safety, including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or Hazardous Substances into
the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata)
or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals or Hazardous
Substances.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, or any successor statutes.
"Excluded Property" means all real and tangible personal
property (but not any accounts, general intangibles or
instruments or any proceeds of accounts, general intangibles or
instruments) subject to a lien or security interest created by
that certain Florida Real Estate Mortgage and Security Agreement,
dated November 2, 1993, as amended by that certain Addendum dated
November 2, 1993, and that certain Second Addendum dated
November 2, 1993, made by the Company in favor of Consolidated
Bank, N.A., as in effect and delivered to the Lenders on the date
hereof, but not any subsequent amendments thereto.
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"Eurodollar Lending Office" shall mean, initially, the
Agent's office at 75 State Street, Boston, Massachusetts 02109-
1810 and, thereafter, such other office of the Agent as shall be
making or maintaining Eurodollar Loans.
"Eurodollar Loan" shall mean, at any time, that principal
amount of the Loans, the interest on which is determined at such
time on the basis of rates referred to in the definition of
"Eurodollar Rate".
"Eurodollar Rate" shall mean with respect to any Interest
Period pertaining to a Eurodollar Loan, the rate per annum
(rounded upwards, if necessary, to the nearest 1/16th of 1%)
equal to the quotient of (a) the average of the rates at which
the Agent's Eurodollar Lending Office is offered U.S. Dollar
deposits two Working Days prior to the beginning of such Interest
Period in the interbank Eurodollar market where the foreign
currency and exchange operations of such Eurodollar Lending
Office are customarily conducted at 10:00 a.m., Boston time, for
delivery on the first day of such Interest Period for the number
of days comprised therein and in an amount equal to the amount of
the Eurodollar Loan to be outstanding during such Interest
Period, divided by (b) a number equal to 1.00 minus the Reserve
Requirement for such Eurodollar Loan during such Interest Period.
"Event of Default" has the meaning set forth in Section
11.1.
"Extension of Credit" shall mean the making of any Loan or
the issuance of any Letter of Credit.
"Federal Funds Effective Rate" shall mean for any day, a
fluctuating interest rate per annum equal to the weighted average
of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal Funds brokers,
as published for such day (or, if such day is not a Banking Day,
for the next preceding Banking Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day
that is a Banking Day, the average of the quotations for such day
on such transactions received by Agent from three Federal funds
brokers of recognized standing selected by the Agent.
"Fleet" shall have the meaning set forth in the preamble to
this Agreement.
"Florida Borrowers" shall have the meaning set forth in the
preamble to the Agreement.
"Financial Statements Date" shall mean December 31, 1996.
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"Fixed Charges" shall mean, for any fiscal period, the sum
of (i) the amount of the scheduled installments of principal
payable in respect of Indebtedness of the Borrowers and their
Subsidiaries during such period, plus (ii) Interest Expense for
such period, plus (iii) the tax provision of the Borrowers and
their Subsidiaries paid or required to be paid in cash for such
period, plus (iv) Capital Expenditures made by the Borrowers and
their Subsidiaries during such period, plus (v) any distribution
of cash by the Company to the holders of shares of capital stock
of the Company other than the distribution of cash in the
aggregate amount of $700,000 to Carlos A. Saladrigas and Jose M.
Sanchez during May of 1996.
"GAAP" shall mean accounting principles generally accepted
in the United States applied on a consistent basis.
"Governmental Approval" shall mean any authorization,
consent, order, approval, license, lease, ruling, permit, tariff,
rate, certification, validation, exemption, filing or
registration by or with, or notice to, any Governmental
Authority.
"Governmental Authority" shall mean any federal, state,
municipal or other governmental department, commission, board,
bureau, agency, court, tribunal or other instrumentality,
domestic or foreign, and any arbitrator.
"Guarantee" by any Person shall mean any obligation,
contingent or otherwise, of such Person directly or indirectly
guaranteeing any Indebtedness or other obligation of any other
Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise of such
Person (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation
(whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or
services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (b) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part);
provided that the term Guarantee shall not include endorsements
for collection or deposit in the ordinary course of business.
The term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Substances" shall mean all hazardous and toxic
substances, wastes or materials, hydrocarbons (including
naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, urea formaldehyde insulation, radioactive
materials, biological substances, PCBs, pesticides, herbicides
and any other kind and/or type of pollutants, or contaminates
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and/or any other similar substances or materials which, because
of toxic, flammable, explosive, corrosive, reactive, radioactive
or other properties that may be hazardous to human health or the
environment, are included under or regulated by any Environmental
Laws.
"Indebtedness" of any Person at any date shall mean, (a) all
indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (excluding
current trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices, but
including any class of capital stock of such Person with fixed
payment obligations or with redemption at the option of the
holder), or which is evidenced by a note, bond, debenture or
similar instrument, (b) all obligations of such Person under
leases that should be treated as capitalized leases in accordance
with GAAP, (c) all obligations of such Person in respect of
acceptances issued or created for the account of such Person, and
all reimbursement obligations (contingent or otherwise) of such
Person in respect of any letters of credit issued for the account
of such Person to the extent not secured by cash and without
duplication of any underlying Indebtedness, (d) all liabilities
secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for
the payment thereof, and (e) without duplication, all Guaranties.
"Intellectual Property" shall have the meaning specified in
Section 7.16.
"Interest Expense" shall mean, for any fiscal period, the
sum (determined without duplication) of the aggregate amount of
interest required to be paid in cash during such period on
Indebtedness of the Borrowers and their Subsidiaries (on a
consolidated basis), including the interest portion of payments
under Capital Lease Obligations and any capitalized interest.
"Interest Period" shall mean, with respect to any Eurodollar
Loan, the period commencing on the date such Eurodollar Loan is
made or converted from a Prime Rate Loan or the last day of the
next preceding Interest Period with respect to such Eurodollar
Loan and ending on the numerically corresponding day in the
first, second, third or sixth calendar month thereafter, as the
Borrowers may select as provided in Section 4.5, except that each
such Interest Period which commences on the last Working Day of a
calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month)
shall end on the last Working Day of the appropriate subsequent
calendar month.
Notwithstanding the foregoing: (i) no Interest Period may
end after the final scheduled date of repayment of the Loans;
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(ii) each Interest Period which would otherwise end on a day
which is not a Working Day shall end on the next succeeding
Working Day (or, if such next succeeding Working Day falls in the
next succeeding calendar month, on the next preceding Working
Day); and (iii) no Interest Period shall have a duration of less
than one month and, if the Interest Period therefor would
otherwise be a shorter period, such Eurodollar Loan shall not be
available hereunder.
"Investments" shall mean, with respect to any Person (the
"Investor"), any investment by the Investor in any other Person,
whether by means of share purchase, capital contribution,
purchase or other acquisition of a partnership or joint venture
interest, loan, time deposit, demand deposit or otherwise.
"Lender" and "Lenders" shall have their respective meanings
set forth in the preamble to this Agreement.
"Letter of Credit" shall mean any standby letter of credit
issued by Fleet for the account of the Borrowers as provided in
this Agreement.
"Letter of Credit Usage" shall mean, at any time, the
aggregate at such time of (a) the maximum amount then available
to be drawn under all outstanding Letters of Credit, and (b) all
then unreimbursed drawings under any Letters of Credit.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority or other security agreement of
any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any lease
that should be capitalized in accordance with GAAP, and the
filing of a financing statement under the UCC or comparable law
of any jurisdiction), together with any renewal or extension
thereof.
"Loans" shall have the meaning set forth in Section 2.1.
"Loan Documents" shall mean, collectively, this Agreement,
the Notes, the Security Instruments and all other agreements and
instruments that are from time to time executed in connection
with this Agreement, as each of such agreements and instruments
may be amended, modified or supplemented from time to time.
"Majority Lenders" shall mean, at any time while no Loans
are outstanding the Lenders having at least fifty-one percent
(51%) of the aggregate amount of the Commitments and, at any
time, while Loans are outstanding, Lenders holding at least
fifty-one percent (51%) of the outstanding aggregate principal
amount of the Loans.
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"Material Adverse Effect" shall mean a material adverse
effect on (a) the business, operations, property, condition
(financial or otherwise) or prospects of the Borrowers taken as a
whole, (b) the ability of the Borrowers taken as a whole to
perform their obligations under this Agreement, the Notes or any
of the other Loan Documents or (c) the validity or enforceability
of this Agreement, the Notes or any of the other Loan Documents.
"Maximum Rate" shall have the meaning set forth in Section
4.1(d).
"Multiemployer Plan" shall mean at any time an employee
pension benefit plan within the meaning of Section 4001(a)(3) of
ERISA to which the Borrowers or any member of the Controlled
Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made
contributions, including for these purposes any Person which
ceased to be a member of the Controlled Group during such five
year period.
"Net Income" or "Net Loss" for any period in respect of
which the amount thereof shall be determined, shall mean the
aggregate of the consolidated net income (or net loss) after
taxes for such period of the Borrowers and their Subsidiaries,
determined in accordance with GAAP.
"Net Worth" shall mean, at any date as of which the amount
thereof is to be determined, all assets that should, in
accordance with GAAP, be classified as assets on the consolidated
balance sheet of the Borrowers and their Subsidiaries, minus
Total Liabilities at such date.
"Note" and"Notes" shall have the meaning set forth in
Section 2.2.
"Notice Date" shall have the meaning set forth in Section
12.8.
"Obligations" shall mean all obligations of the Borrowers to
the Agent and the Lenders, whether such obligations are now
existing or hereafter incurred or created, joint or several,
direct or indirect, absolute or contingent, due or to become due,
matured or unmatured, liquidated or unliquidated, arising by
contract, operation of law or otherwise, in respect of (a) all
principal of and interest (including, without limitation, any
interest which accrued after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency
or reorganization of any Borrower) on any advance to the
Borrowers under, or the Notes issued by the Borrowers pursuant
to, this Agreement; (b) all other amounts (including, without
limitation, any fees or expenses) payable by Borrowers under the
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Loan Documents; (c) all amounts payable to Fleet in connection
with the issuance of any letter of credit by Fleet for the
account of any Borrower or any drawing thereunder, including,
without limitation, any reimbursement obligation and letter of
credit fees payable under any letter of credit application or
reimbursement agreement executed by any Borrower in connection
with any such letter of credit; and (d) any renewals,
refinancings or extensions of any of the foregoing.
"Office of the Agent" shall mean the banking office of the
Agent located at 75 State Street, Boston, MA 02109-1810 or such
other location of which the Agent shall notify the Borrowers.
"Payor" shall have the meaning set forth in Section 4.6.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
or any entity succeeding to any or all of its functions under
ERISA.
"Permitted Acquisition" shall have the meaning set forth in
Section 9.2.
"Permitted Liens" shall have the meaning set forth in
Section 9.6.
"Person" shall mean and include any individual, firm,
corporation, trust, limited liability company or other
unincorporated organization or association or other enterprise or
any government or political subdivision, agency, department or
instrumentality thereof.
"Plan" means any employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and is either (a)
maintained by the Borrowers or any member of the Controlled Group
for employees of the Borrowers or any member of the Controlled
Group or (b) maintained pursuant to a collective bargaining
agreement or any other arrangement under which more than one
employer makes contributions and to which the Borrowers or any
member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five
plan years made contributions.
"Post-Default Rate" shall mean (i) with respect to any
Eurodollar Loan, the rate of interest per annum equal to 3% above
the interest rate otherwise applicable to such Eurodollar Loan at
the applicable time, (ii) with respect to any Prime Rate Loan,
the rate of interest per annum equal to 3% above the interest
rate otherwise applicable to such Prime Rate Loan, and (iii) with
respect to any other amount payable by the Borrowers under this
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Agreement which is not paid when due, the rate of interest per
annum equal to 4% above the Prime Rate at the applicable time.
"Prime Rate" shall mean the per annum rate of interest from
time to time announced and made effective by Fleet as its Prime
Rate (which rate may or may not be the lowest rate available from
Fleet at any given time).
"Prime Rate Loan" means at any time the principal amount of
the Loans which bears interest at the Prime Rate.
"Principals" shall mean Carlos A. Saladrigas and Jose M.
Sanchez.
"Proforma Statements" shall have the meaning set forth in
Section 7.6.
"Regulation D" means Regulation D of the Board of Governors
of the Federal Reserve System as the same may be amended or
supplemented from time to time.
"Regulatory Change" means any change on or after the date of
this Agreement in United States federal, state or foreign laws or
regulations, including Regulation D, or the adoption or making on
or after such date of any interpretations, directives or requests
applying to a class of lenders including any of the Lenders of or
under any United States federal or state, or any foreign, laws or
regulations (whether or not having the force of law) by any court
or governmental or monetary authority charged with the
interpretation or administration thereof (other than changes
which affect taxes measured by or imposed on the overall net
income of any Lender or of its Eurodollar Lending Office by the
jurisdiction in which any Lender has its principal office or
Eurodollar Lending Office).
"Reimbursement Obligation" shall mean the obligation of the
Borrowers to reimburse Fleet and the Lenders on account of any
drawing under any Letter of Credit as provided in Section 2.5.
"Remaining Interest Period" shall have the meaning set forth
in Section 4.17.
"Required Payment" shall have the meaning set forth in
Section 4.6.
"Reserve Requirement" shall mean, for any Eurodollar Loans
for any Interest Period therefor, the average maximum rate at
which reserves (including any marginal, supplemental or emergency
reserves) are required to be maintained during such Interest
Period under Regulation D by the Lenders against "Eurocurrency
liabilities" (as such term is used in Regulation D).
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"Responsible Officer" shall mean the President, the Vice
Chairman or the Chief Financial Officer, Senior Vice President-
Finance and Administration of the Company.
"Restricted Payment" shall mean, with respect to the
Borrowers or any Subsidiary thereof, (a) any dividend or other
distribution on any shares of capital stock of the Borrowers or
such Subsidiary (except dividends payable solely to the Borrowers
or any Subsidiary), and (b) any payment on account of the
purchase, redemption, retirement or acquisition of (i) any shares
of the capital stock of any Borrower or a Subsidiary thereof or
(ii) any option, warrant, convertible security or other right to
acquire shares of the capital stock of the Borrowers or a
Subsidiary thereof, other than, in either case, payments made
solely to the Borrowers or such Subsidiary.
"Revolver Maturity Date" shall mean April 24, 2000.
"Revolving Credit Commitment" shall have the meaning
specified in Section 2.1.
"SAI" shall have the meaning set forth in Section 7.6.
"SEC" means the Securities and Exchange Commission.
"Security Instruments" shall mean, collectively, the Stock
Pledge Agreements and each other instrument or agreement that
purports to secure the Obligations of the Borrowers to the
Lenders.
"Seller Debt" shall have the meaning set forth in Section
9.4(i).
"Stated Rate" shall have the meaning set forth in Section
4.1(d).
"Stock Pledge Agreements" shall have the meaning set forth
in Section 5.1.
"Sublimit" shall have the meaning set forth in Section 2.1.
"Subordinated Debt" shall mean Indebtedness of the Borrowers
that is subordinated to the Indebtedness of the Borrowers owing
to the Lenders either (a) pursuant to a subordination agreement
in form and substance satisfactory to the Majority Lenders
between the Lenders (or the Agent) and the holder(s) of such
Indebtedness, or (b) pursuant to the terms thereof, where the
Majority Lenders have confirmed in writing that such terms are
satisfactory to them.
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"Subsidiary" shall mean, with respect to any Person, any
corporation or other entity of which securities or other
ownership interests having ordinary voting power to elect a
majority of the board of directors or other Persons performing
similar functions are at the time directly or indirectly owned by
such Person.
"Tangible Net Worth" shall mean, at any date as of which the
amount thereof is to be determined, an amount equal to Net Worth,
minus (i) the sum of any amounts attributable to the book value,
net of applicable reserves, of all intangible assets of the
Borrowers and their Subsidiaries, including, without limitation,
goodwill, trademarks, copyrights, patents and any similar rights,
and unamortized debt discount and expense, and (ii) intercompany
accounts with Subsidiaries and Affiliates (including receivables
due from Subsidiaries and Affiliates).
"Total Funded Debt" shall mean the following (without
duplication) with respect to the Borrowers and their
Subsidiaries: (i) all indebtedness for borrowed money (other
than trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices);
(ii) all obligations evidenced by bonds, indentures, notes and
similar instruments; (iii) all obligations with respect to
letters of credit and other similar instruments not fully secured
by cash other than those letters of credit issued as security for
indebtedness described in subsection (i) but only to the extent
of the maximum amount available to be drawn under such letters of
credit; (iv) all Capital Lease Obligations; and (v) all
liabilities secured by any Lien on any property owned by the
Borrowers, regardless of whether such liabilities are non-
recourse.
"Type" shall mean a Prime Rate Loan or a Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as in effect in
The Commonwealth of Massachusetts.
"Unfunded Liabilities" means, with respect to any Plan, at
any time, the amount (if any) by which (a) the present value of
all benefits under such Plan exceeds (b) the fair market value of
all Plan assets allocable to such benefits, all determined as of
the then most recent valuation date for such Plan, but only to
the extent that such excess represents a potential liability of
the Borrowers or any member of the Controlled Group to the PBGC
or such Plan under Title IV of ERISA.
"Wholly-owned Subsidiary" shall mean, as to any Person, a
Subsidiary of such Person all of whose outstanding shares of
capital stock (except directors' qualifying shares) are owned
directly or indirectly by such Person.
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"Working Capital Usage" shall mean at any time, the
aggregate at such time of outstanding Loans which have been used
for purposes other than financing Permitted Acquisitions.
"Working Day" shall mean any day on which dealings in
foreign currencies and exchange between banks may be carried on
in the place where the Eurodollar Lending Office is located and
in Boston, Massachusetts.
1.2 Accounting Terms. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted,
all determinations with respect to accounting matters hereunder
shall be made, and all financial statements and certificates and
reports as to financial matters required to be delivered
hereunder shall be prepared, in accordance with GAAP; provided
that if any change in GAAP in itself materially affects the
calculation of any financial covenant in this Agreement, the
Borrowers may by notice to the Agent, or the Agent may by notice
to the Borrowers, require that such covenant thereafter be
calculated in accordance with GAAP as in effect, and applied by
the Borrowers, immediately before such change in GAAP occurs. If
such notice is given, the compliance certificates delivered
pursuant to Section 8.5(c) after such change occurs shall be
accompanied by reconciliations of the difference between the
calculation set forth therein and a calculation made in
accordance with GAAP as in effect from time to time after such
change occurs.
1.3 Rules of Interpretation.
(a) A reference to any document or agreement shall
include such document or agreement as amended, modified or
supplemented and in effect from time to time in accordance with
its terms and the terms of this Agreement.
(b) The singular includes the plural and the plural
includes the singular.
(c) A reference to any Person includes its permitted
successors and permitted assigns.
(d) The words "include", "includes" and "including"
are not limiting.
(e) The words "herein", "hereof", "hereunder" and
words of like import shall refer to this Agreement as a whole and
not to any particular section or subdivision of this Agreement.
(f) All terms not specifically defined herein or by
GAAP, which terms are defined in the UCC, shall have the meanings
assigned to them therein.
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Section 2 Loans; Letters of Credit.
2.1 Revolving Credit Loan. Upon the terms and subject
to conditions set forth herein, and in reliance upon the
representations, warranties and covenants of the Borrowers
herein, the Lenders agree to make loans (each a "Loan" and
collectively the "Loans") to the Borrowers at the Borrowers'
request from time to time from and after the Closing Date and
prior to the Revolver Maturity Date in an aggregate principal
amount not to exceed at any one time outstanding the sum of
$50,000,000 (the "Revolving Credit Commitment"), as the same may
be reduced or terminated pursuant to the provisions hereof,
provided that (i) the sum of all outstanding Loans and Letter of
Credit Usage shall not at any time exceed the Revolving Credit
Commitment and (ii) the sum of the Working Capital Usage and the
Letter of Credit Usage shall not at any time exceed $15,000,000
(the "Sublimit"). Within the foregoing limits and subject to the
terms and conditions hereof, the Borrowers may request Letters of
Credit and may borrow, repay and reborrow Revolving Credit Loans
at any time or from time to time until the Revolver Maturity Date
or the earlier termination of the Revolving Credit Commitment.
2.2 Notes. The Loans shall be evidenced by separate
promissory notes made by the Borrowers in favor in each Lender,
substantially in the form attached hereto as Exhibit A, dated as
of the Closing Date and completed with appropriate insertions
(each such note being referred to herein as a "Note," and
collectively as the "Notes") and shall be payable with interest
in accordance with Section 4 below.
2.3 Lending Office. The Loans of each Type made by
each Lender shall be made and maintained at such Lender's
Applicable Lending Office for Loans of such Type.
2.4 Requests For Loans. Whenever a Borrower desires
to obtain a Revolving Credit Loan or to convert an outstanding
Loan from one Type to another, it shall notify the Agent in
accordance with the provisions of Section 4.5 below. Not later
than 1:00 p.m. Boston time on the date specified for each such
borrowing hereunder, each Lender shall, subject to the terms and
conditions of this Agreement, make available the amount of the
Loan to be made by it on such date to the Agent at the Office of
the Agent, for the account of the Borrowers. Subject to the
terms and conditions of this Agreement, the amounts received by
the Agent shall be made available to the Borrowers by wiring the
funds to such account as the Borrowers shall specify.
2.5 Letters of Credit.
(a) The Borrowers may also use the Revolving Credit
Commitment for Letters of Credit to be issued by Fleet, provided
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that in each case (a) the requesting Borrower executes and
delivers a letter of credit application and reimbursement
agreement reasonably satisfactory to Fleet and complies with any
conditions to the issuance of such Letter of Credit (including
payment of any applicable fees); (b) Fleet has approved the form
of such Letter of Credit; (c) the requested Letter of Credit is
for a purpose permitted by Section 8.1 hereof; (d) such Letter of
Credit bears an expiration date not later than one year from its
date of issuance and in any event not later than the Revolver
Maturity Date; (e) the conditions set forth in Section 6.1 shall
have been satisfied as of the date of the issuance of the Letter
of Credit; and (f) both before the issuance of the requested
Letter of Credit and after giving effect to the issuance thereof
the sum of (i) all outstanding Loans and Letter of Credit Usage
shall not exceed the Revolving Credit Commitment; and (ii) the
sum of the Letter of Credit Usage and the Working Capital Usage
shall not exceed the Sublimit.
(b) Effective upon the issuance of each Letter of
Credit and without any further action on the part of Fleet or the
Lenders in respect thereof, Fleet shall grant to each Lender, and
each Lender shall acquire from Fleet, a participating interest in
such Letter of Credit to the extent of such Lender's Commitment
Percentage thereof and each Lender severally agrees that it shall
be absolutely liable, without regard to the occurrence of any
Default or Event of Default, to the extent of such Lender's
Commitment Percentage thereof, to reimburse Fleet on demand for
the amount of each draft paid by the Fleet under each Letter of
Credit to the extent that such amount is not reimbursed by the
Borrowers.
(c) In order to induce Fleet to issue, extend and
renew each Letter of Credit, the Borrowers hereby agree to
reimburse or pay to Fleet, for the account of Fleet or (as the
case may be) the Lenders, with respect to each Letter of Credit
issued, extended or renewed by Fleet hereunder, on each date that
any draft presented under any Letter of Credit is honored by
Fleet or Fleet otherwise makes payment with respect thereto, (i)
the amount paid by Fleet under or with respect to such Letter of
Credit, and (ii) the amount of any taxes (other than taxes on or
measured by the net income of Fleet), fees, charges or other
reasonable costs and expenses whatsoever incurred by Fleet or any
Lender in connection with any payment made by Fleet under, or
with respect to, such Letter of Credit.
(d) If any draft shall be presented or other demand
for payment shall be made under any Letter of Credit, Fleet shall
promptly notify the Borrowers of the date and amount of the draft
presented or demand for payment and of the date and time when it
expects to pay such draft or honor such demand for payment. On
the date that such draft is paid or other payment is made by
Fleet, Fleet shall promptly notify the Lenders of the amount of
any unpaid Reimbursement Obligation. All such unpaid
Reimbursement Obligations with respect to Letters of Credit shall
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be deemed to be Prime Rate Loans. No later than 12:00 noon
(Boston time) on the Banking Day next following the receipt of
such notice, each Lender shall make available to the Agent, at
the Agent's head office, in immediately available funds, such
Lender's Commitment Percentage of such unpaid Reimbursement
Obligation, together with an amount equal to the product of (i)
the average, computed for the period referred to in clause (iii)
below, of the weighted average Federal Funds Effective Rate paid
by Fleet for federal funds acquired by Fleet during each day
included in such period, times (ii) the amount equal to such
Lender's Commitment Percentage of such unpaid Reimbursement
Obligation, times (iii) a fraction, the numerator of which is the
number of days that have elapsed from and including the date
Fleet paid the draft presented for honor or otherwise made
payment until the date on which such Lender's Commitment
Percentage of such unpaid Reimbursement Obligation shall become
immediately available to the Agent and the denominator of which
is 365. The responsibility of Fleet to the Borrowers shall be
only to determine in good faith that the documents (including
each draft delivered under each Letter of Credit in connection
with such presentment) shall be in conformity in all material
respects with such Letter of Credit.
(e) The Borrowers' Reimbursement Obligations shall be
absolute and unconditional under any and all circumstances and
irrespective of the occurrence of any Default or Event of Default
or any condition precedent whatsoever or any set off,
counterclaim or defense to payment which the Borrower may have or
have had against Fleet, the Agent, the Lenders or any beneficiary
of a Letter of Credit. The Borrowers further agree that Fleet,
the Agent and the Lenders shall not be responsible for, and the
Borrowers' Reimbursement Obligations shall not be affected by,
among other things, the validity or genuineness of documents or
any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, fraudulent or forged,
or any dispute between or among the Borrowers, the beneficiary of
any Letter of Credit or any financing institution or other party
to which any Letter of Credit may be transferred or any claims or
defenses whatsoever of the Borrowers, against the beneficiary of
any Letter of Credit or any such transferee.
(f) Fleet, the Agent and the Lenders shall not be
liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice,
however transmitted, in connection with any Letter of Credit.
The Borrowers agree that any action taken or omitted by Fleet,
the Agent or the Lenders under or in connection with each Letter
of Credit and the related drafts and documents, if done in good
faith, shall be binding upon the Borrowers and shall not result
in any liability on the part of Fleet, the Agent or the Lenders
to the Borrowers except, in the case of any such party, any such
liability resulted from the gross negligence or willful
misconduct of such party.
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2.6 Conversion To Term Loans. If on the Revolver
Maturity Date no Default shall have occurred and be continuing
and all of the conditions set forth in Section 6 shall have been
satisfied, the aggregate unpaid principal balance of the Loans
shall be payable in eight(8) equal quarterly installments,
payable on the first day of each August, November, February and
May commencing August 1, 2000. If on the Revolver Maturity Date
any Default shall have occurred and be continuing or any
condition set forth in Section 6 shall not have been satisfied,
then notwithstanding any other provision of the Loan Documents,
the Borrowers shall pay in full on such date the unpaid principal
balance of the Loans, together with all unpaid interest thereon
and all fees and other amounts due with respect thereto.
2.7 Termination or Reduction of Commitments.
(a) The Revolving Credit Commitment shall
automatically terminate at 5:00 p.m. Boston time on the Revolver
Maturity Date. The Borrowers, upon notice to the Agent and each
Lender in accordance with Section 4.5 and the repayment in full
of the outstanding principal balance of the Loans (and accrued
interest thereon) and the payment in full of any expenses or
other fees owed by the Borrowers to the Agent and the Lenders
under or pursuant to this Agreement and subject to the
requirements of the next sentence, may elect to terminate the
Revolving Credit Commitment permanently whereupon the Commitments
of the Lenders shall be terminated entirely. If any Letters of
Credit would remain outstanding after the effective date of any
such termination, in addition to the satisfaction of all other
applicable terms and conditions of this Agreement, the Borrowers
shall either deposit with and pledge to Fleet, as Agent for the
Lenders, cash in an amount equal to 100% of the Letter of Credit
Usage at the effective date of such termination, or (ii) arrange
for the termination of such Letters of Credit and the return
thereof to Fleet. No such termination may be reinstated.
(b) The Borrowers may also, upon notice to the Agent
and each Lender in accordance with Section 4.5, reduce the
Revolving Credit Commitment in integral multiples of $500,000
whereupon the Revolving Credit Commitments of the Lenders shall
be reduced pro rata in accordance with their respective
Commitment Percentages of the aggregate amount specified in such
notice. If, as a result of any such reduction in the Revolving
Credit Commitment, the aggregate outstanding balance of the
Revolving Credit Loan plus the Letter of Credit Usage would
exceed the Revolving Credit Commitment, the Borrowers shall, as a
condition precedent to any such reduction, deposit with and
pledge to Fleet cash in an amount equal to 100% of such excess.
No such reduction may be reinstated.
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2.8 Company as Agent for Borrowers. Each Borrower
(other than the Company) hereby appoints the Company as its agent
with respect to the receiving and giving of any notices,
requests, instructions, reports, schedules, revisions, financial
statements or any other written or oral communications hereunder.
The Company shall keep complete, correct and accurate records of
all Loans and the application of proceeds thereof, all Letters of
Credit and all payments in respect of Loans and other amounts due
hereunder. The Company shall determine the allocation of
proceeds of Loans among the Borrowers, subject to the terms and
conditions hereof. The Agent is hereby entitled to rely on any
communications given or transmitted by the Company as if such
communication were given or transmitted by each and every
Borrower; provided, however, that any communication given or
transmitted by any Borrower other than the Company shall be
binding with respect to such Borrower. Any communication given
or transmitted by the Agent to the Company shall be deemed given
and transmitted to each and every Borrower.
Section 3. [Intentionally Omitted]
Section 4. Interest Rates; Fees; Payments.
4.1 Interest Rates.
(a) The Borrowers agree to pay to the Agent for the
account of each Lender interest on the unpaid principal amount of
each Loan for each day from and including the date such Loan is
made to but excluding the date the principal of such Loan is paid
in full at the following rates per annum:
(i) for Loans which are Prime Rate Loans, at a rate
per annum equal to the Prime Rate plus the
Applicable Margin; and
(ii) for Loans which are Eurodollar Loans, at a rate
per annum equal to the Eurodollar Rate plus the
Applicable Margin.
(b) Notwithstanding the foregoing, if an Event of
Default shall occur, then at the option of the Agent or the
Majority Lenders, the unpaid balance of Loans shall bear interest
at a rate per annum equal to the Post-Default Rate, until such
Event of Default is cured or waived, and any other amount payable
hereunder which is not paid in full when due shall bear interest
at a rate per annum equal to the Prime Rate plus 4% until such
Event of Default is cured or waived.
(c) Accrued interest on each Prime Rate Loan shall be
payable monthly in arrears on the first day of each month,
accrued interest on Eurodollar Loans shall be payable on the last
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day of each Interest Period and, if any such Interest Period is
longer than three months, at intervals of three months after the
first day thereof, and interest on all Loans shall be payable in
any event upon the payment, prepayment or conversion thereof, but
only on the principal so paid or prepaid or converted; provided
that interest payable pursuant to Section 4.1(b) during the
pendency of an Event of Default shall be payable from time to
time on demand of the Agent. Promptly after the determination of
any interest rate provided for herein or any change therein, the
Agent shall notify the Borrowers and each of the Lenders thereof.
(d) Notwithstanding the foregoing provisions of this
Section 4.1, if at any time the rate of interest set forth in
subparagraph (a) or (b) above (the "Stated Rate") exceeds the
maximum non-usurious interest rate permissible for any Lender to
charge a commercial borrower under applicable law (the "Maximum
Rate"), the rate of interest charged on the Loans by such Lenders
hereunder shall be limited to the Maximum Rate. In the event the
Stated Rate that has theretofore been subject to the preceding
sentence at any time is less than the Maximum Rate in respect of
the Loans by any Lender hereunder, the principal amount of the
Loans shall bear interest at the Maximum Rate until the total
amount of interest paid to such Lender or accrued on such Loans
by such Lender hereunder equals the amount of interest which
would have been paid to such Lender or accrued on the Loans by
such Lender hereunder if the Stated Rate had at all times been in
effect. In the event that upon payment in full of all amounts
payable hereunder, the total amount of interest paid to any
Lender or accrued on such Lender's Loans under the terms of this
Agreement is less than the total amount of interest which would
have been paid to such Lender or accrued on such Lender's Loans
if the Stated Rate had at all times been in effect, then the
Borrowers shall, to the extent permitted by applicable law, pay
to such Lender an amount equal to the difference between (a) the
lesser of (i) the amount of interest which would have accrued on
such Lender's Loans if the Maximum Rate had at all times been in
effect or (ii) the amount of interest which would have accrued on
such Lender's Loans if the Stated Rate had at all times been in
effect and (b) the amount of interest actually paid to such
Lender or accrued on such Lender's Loans under this Agreement.
In the event any Lender ever receives, collects or applies as
interest any sum in excess of the Maximum Rate, such excess
amount shall be applied to the reduction of the principal balance
of such Lender's Loans or to other amounts (other than interest)
payable hereunder, and if no such principal is then outstanding,
such excess or part thereof remaining shall be paid to the
Borrowers.
4.2 Commitment Fee. The Borrowers shall pay to the
Agent for the ratable account of each Lender quarterly in arrears
on the first day of each calendar quarter and on the Revolver
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Maturity Date a commitment fee on the unutilized portion of the
Revolving Credit Commitment for the preceding quarter at a rate
per annum determined pursuant to Schedule 1 attached hereto.
4.3 Letter of Credit Fees. In connection with the
issuance of each Letter of Credit and at the time of such
issuance, the Borrowers shall pay to Fleet, as Agent for the
Lenders, (i) any applicable fronting, issuance, amendment,
transfer and similar fees in accordance with Fleet's customary
charges and (ii) a commission equal to the then effective
Applicable Margin for Eurodollar Loans of the total face amount
of such Letter of Credit.
4.4 Late Fee. Without limiting any of the Agent's or
any Lender's other rights hereunder or by law, if any Loan or any
portion thereof or any interest thereon or any other payment due
hereunder or under any other Loan Document is not paid within ten
(10) days after the same is due (such due date to be determined
without regard to any grace periods), the Borrowers shall pay to
the Agent, for the ratable benefit of the Lenders, on demand, a
late fee equal to five percent (5%) of the amount of the payment
due.
4.5 Certain Notices. Notices to the Agent of
conversions and prepayments of Loans, of the duration of Interest
Periods and of termination or reduction of Commitments shall be
irrevocable and shall be effective only if received by the Agent
not later than 12:00 noon Boston time on the number of Banking
Days prior to the date of the borrowing, conversion, prepayment,
termination or reduction specified below:
Number of Banking
Days Prior Notice
Borrowings or prepayment
of Prime Rate Loans 0
Borrowings of, prepayment
of, conversion into, or
duration of Interest Periods
for Eurodollar Loans 3
Termination or reduction 2
of Commitments
Each notice of borrowing, conversion or prepayment shall specify
the amount, the Type and purpose (working capital or for a
Permitted Acquisition) of the Loan to be borrowed, converted or
prepaid, the date of borrowing, conversion or prepayment (which
shall be a Banking Day in the case of the prepayment of a Prime
Rate Loan, or a Working Day in the case of the conversion or
prepayment of a Eurodollar Loan) and, in the case of Eurodollar
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Loans, the duration of the Interest Period therefor (subject to
the definition of Interest Period). Each such notice of duration
of an Interest Period shall specify the Loans to which such
Interest Period is to relate. In the event that the Borrowers
fail to select the duration of any Interest Period for any
Eurodollar Loan within the time period and otherwise as provided
in this Section 4.5, such Eurodollar Loan will be automatically
converted into a Prime Rate Loan on the last day of the then
current Interest Period for such Eurodollar Loan or (if
outstanding as Prime Rate Loans) will remain as, or (if not then
outstanding) will be made as Prime Rate Loans.
4.6 Non-Receipt of Funds by the Agent. Unless the
Agent shall have been notified by a Lender or the Borrowers (the
"Payor") prior to the date on which such Lender is to make
payment to the Agent of the proceeds of a Loan to be made by it
hereunder or the Borrowers are to make payment to the Agent for
the account of one or more of the Lenders, as the case may be
(such payment being herein called the "Required Payment"), which
notice shall be effective upon receipt, that the Payor does not
intend to make the Required Payment to the Agent, the Agent may
assume that the Required Payment has been made and may, in
reliance upon such assumption (but shall not be required to),
make the amount thereof available to the intended recipient on
such date and, if the Payor has not in fact made the Required
Payment to the Agent, the recipient of such payment shall, on
demand, pay to the Agent the amount made available to it together
with interest thereon in respect of the period commencing on the
date such amount was so made available by the Agent until the
date the Agent recovers such amount at a rate per annum equal to
the Federal Funds Effective Rate for such period.
4.7 Sharing of Payment; Waiver of Enforcement Without
Consent, Etc. (a) the Borrowers agree that, in addition to (and
without limitation of) any right of set-off, banker's lien or
counterclaim any Lender may otherwise have, each Lender shall be
entitled, at its option and without regard to the adequacy of any
of the Collateral held by or for the benefit of such Lender, to
offset balances (whether based on provisional or final credits or
on collected or uncollected funds) held by it for the account of
any Borrower at any of its offices, in Dollars or in any other
currency (collectively, the "Deposited Funds"), against any
principal of or interest on any Loans to the Borrower by any
Lender hereunder, or any other obligation of the Borrower
hereunder which is not paid when due (regardless of whether such
balances are then due to the Borrowers), in which case it shall
promptly notify the Borrowers, the Agent and the other Lenders
thereof, provided that such Lender's failure to give such notice
shall not affect the validity thereof. The Borrowers agree, to
the fullest extent they may effectively do so under applicable
law, that any Person purchasing a participation in the Loans
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made, or other obligations held, by another Person, whether or
not acquired pursuant to the foregoing arrangements, may exercise
all rights of set-off, banker's lien, counterclaim or similar
rights with respect to such participation as fully as if such
Lender were a direct holder of Loans or other obligations in the
amount of such participation.
(b) The Lenders agree among themselves that no Lender
shall, except with the written consent of the Majority Lenders,
exercise any right pursuant to Section 4.7(a) or exercise, with
respect to any Loans or other obligations hereunder, any other
right of set-off, banker's Lien, counterclaim or similar right,
so long as any Lender has any Commitment hereunder or any amounts
due hereunder remain unpaid.
(c) If a Lender shall obtain payment of any principal of or
interest on any Loan made by it under this Agreement, or on any
other obligation then due to such Lender hereunder, through the
exercise of any right of set-off, banker's lien, counterclaim or
similar right, or otherwise, it shall promptly notify the Agent
and purchase from the other Lenders participations in the Loans
made, or other obligations held, by the other Lenders in such
amounts, and make such other adjustments from time to time as
shall be equitable to the end that all the Lenders shall share
the benefit of such payment (net of any expenses which may
incurred by such Lender in obtaining or preserving such benefit)
pro rata in accordance with the unpaid principal and interest on
the Loans or other obligations then due to each of them. To such
end, all of the Lenders shall make appropriate adjustments among
themselves (by the resale of participations sold or otherwise) if
such payment is rescinded or must otherwise be restored
(including the payment of interest to the extent that the Lender
obligated to return such funds is obligated to return interest).
(d) Each Lender waives all rights to enforce, and shall not
attempt to enforce, any rights hereunder, under the Notes or
under any other Loan Document without the prior written consent
of the Majority Lenders. Each Lender further agrees that all
rights under the Security Instruments shall be exercised only
through the Agent under the Security Instruments.
(e) Nothing contained herein shall require any Lender to
exercise any right of set-off, banker's Lien, counterclaim or
similar right or shall affect the right of any Lender to
exercise, and retain the benefits of exercising, any such right
with respect to any other indebtedness or obligations of any
Borrower.
(f) This Section 4.7 is for the benefit of the Lenders only
and does not constitute a waiver of any rights against the
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Borrowers or against any property held as security for the
Obligations.
4.8 Minimum and Maximum Amounts. Each borrowing,
conversion and prepayment of principal of Loans shall be in an
aggregate principal amount equal to (a) in the case of Eurodollar
Loans, $250,000 or a larger multiple of $100,000, and (b) in the
case of Prime Rate Loans, $50,000 or an integral multiple thereof
(conversions or prepayments of Revolving Credit Loans of
different Types or, in the case of Eurodollar Loans, having
different Interest Periods, at the same time hereunder shall be
deemed separate conversions and prepayments for purposes of the
foregoing, one for each Type or Interest Period); provided that
any payment or prepayment in full of the Loans may be in the
aggregate outstanding principal amount thereof.
4.9 Computations. All interest and fees shall be
computed on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day)
occurring in the period for which payable.
4.10 Manner and Place of Payment. All payments under
this Agreement shall be made not later than 1:00 p.m. (Boston
Time) on the date when due and shall be made in immediately
available funds at the Office of Agent for the account of each
Lender or by the Borrowers' check drawn on the depositary
account(s) maintained by the Borrowers with the Agent payable to
the Agent for the account of each Lender or its order. All
payments shall be made without setoff, counterclaim, withholding
or reduction of any kind whatsoever. The Agent may (but shall
not be obligated to) debit the amount of any such payment on the
date when due to any ordinary deposit account of the Borrowers
with the Agent, without notice to the Borrowers. The Borrowers
shall, at the time of making each payment hereunder or under any
Note, specify to the Agent the Loans or other amounts payable by
the Borrowers hereunder to which such payment is to be applied
(and in the event that they fail to so specify, or if an Event of
Default has occurred and is continuing, the Agent may apply such
payment for the benefit of the Lenders as it may elect in its
sole discretion, but subject to the other terms and conditions of
this Agreement, including without limitation, Section 4.11
hereof). Each payment received by the Agent hereunder or under
any Note for the account of a Lender shall be paid promptly to
such Lender, in immediately available funds, for the account of
such Lender's Applicable Lending Office.
4.11 Pro Rata Treatment. Except to the extent
otherwise provided herein: (a) each borrowing from the Lenders
under Section 2 hereof shall be made from the Lenders and the
payment of the commitment fee under Section 4.2 hereof shall be
made for the account of the Lenders pro rata according to the
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Lenders' Commitment Percentage, (b) each payment by the Borrowers
of principal of or interest on Loans of a particular Type shall
be made to the Agent for the account of the Lenders pro rata in
accordance with the respective unpaid principal amounts of such
Loans held by the Lenders and (c) each conversion of Loans of a
particular Type shall be made pro rata among the Lenders in
accordance with the respective principal amounts of such Loans
held by the Lenders.
4.12 Payments Due on Saturdays, Sundays and Holidays.
Whenever any payment to be made hereunder or under the Notes
shall be due on a day which is not a Banking Day, such payment
may be made on the next succeeding Banking Day, and such
extension of time shall be included in computing any interest or
fees due.
4.13 Additional Costs. (a) The Borrowers shall pay
to the Agent for the account of each Lender from time to time
such amounts as such Lender may determine to be necessary to
compensate it for any costs incurred by such Lender which such
Lender determines are attributable to its making or maintaining
of any Eurodollar Loans hereunder or its obligation to make any
of such Loans hereunder, or any reduction in any amount
receivable by such Lender hereunder in respect of any Eurodollar
Loan or such obligation (such increases in costs and reductions
in amounts receivable being herein called "Additional Costs"), in
each case resulting from any Regulatory Change which:
(i) changes the basis of taxation (other than taxes on
or measured by the net income of any Lender) of
any amounts payable to such Lender under this
Agreement or the Notes in respect of any
Eurodollar Loan; or
(ii) imposes or modifies any reserve, special deposit
or similar requirements relating to any extensions
of credit or other assets of, or any deposits with
or other liabilities of, such Lender (including
any Eurodollar Loan or any deposits referred to in
the definition of "Eurodollar Rate" below).
Each Lender will notify the Borrowers of any event occurring
after the date of this Agreement which will entitle such Lender
to compensation pursuant to this Section as promptly as
practicable after it obtains knowledge thereof and determines to
request such compensation. Each Lender will furnish the
Borrowers with a statement, in reasonable detail, setting forth
the basis and amount of each request by such Lender for
compensation under this Section.
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(b) Without limiting the effect of the foregoing
provisions of this Section, in the event that, by reason of any
Regulatory Change, such Lender either (i) incurs Additional Costs
based on or measured by the excess above a specified level of the
amount of a category of deposits or other liabilities of such
Lender which includes deposits by reference to which the interest
rate on Eurodollar Loans is determined as provided in this
Agreement or a category of extensions of credit or other assets
of such Lender which includes Eurodollar Loans or (ii) becomes
subject to restrictions on the amount of such a category of
liabilities or assets which it may hold, then, if such Lender so
elects by notice to the Borrowers, the obligation of such Lender
to make Eurodollar Loans hereunder shall be suspended until the
date such Regulatory Change ceases to be in effect.
(c) Determinations and allocations by such Lender for
purposes of this Section of the effect of any Regulatory Change
on its costs of maintaining its obligations to make Eurodollar
Loans or of making or maintaining Eurodollar Loans or on amounts
receivable by it in respect of Eurodollar Loans, and of the
additional amounts required to compensate such Lender in respect
of any Additional Costs, shall be conclusive absent manifest
error, provided that such determinations and allocations are made
in good faith and on a reasonable basis.
4.14 Limitation on Types of Loans. Anything herein to
the contrary notwithstanding, if, with respect to any Eurodollar
Loans, the Majority Lenders determine (which determination shall
be conclusive) that the relevant rates of interest referred to in
the definition of "Eurodollar Rate" upon the basis of which the
rates of interest for any Eurodollar Loan are to be determined do
not accurately reflect the cost to such Lenders of making or
maintaining such Eurodollar Loans for the Interest Period
therefor, then the Agent shall promptly notify the Borrowers, and
so long as such condition remains in effect, the Lenders shall be
under no obligation to convert Prime Rate Loans into Eurodollar
Loans and the Borrowers shall, on the last day(s) of the then
current Interest Period(s) for the outstanding Eurodollar Loans,
either prepay such Eurodollar Loans or convert such Eurodollar
Loans into Prime Rate Loans.
4.15 Illegality. Notwithstanding any other provision
of this Agreement to the contrary, in the event that it becomes
unlawful for any Lender or its Eurodollar Lending Office to (a)
honor its obligation to make Eurodollar Loans hereunder, or (b)
maintain Eurodollar Loans hereunder, then such Lender shall
promptly notify the Borrowers thereof (identifying the illegality
in question in reasonable detail) and such Lender's obligation to
make Eurodollar Loans hereunder shall be suspended until such
time as such Lender may again make and maintain Eurodollar Loans.
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4.16 Substitute Prime Rate Loans. If the obligation
of any Lender to make Eurodollar Loans shall be suspended
pursuant to Section 4.13, 4.14 or 4.15 hereof, all Loans which
would otherwise be made by such Lender as Eurodollar Loans shall
be made instead as Prime Rate Loans (and, if an event referred to
in Section 4.15(b) has occurred and such Lender so requests, by
notice to the Borrowers, each Eurodollar Loan of such Lender then
outstanding shall be automatically converted into a Prime Rate
Loan on the date specified by such Lender in such notice) and, to
the extent that Eurodollar Loans are so made as (or converted
into) Prime Rate Loans, all payments of principal which would
otherwise be applied to such Eurodollar Loans shall be applied
instead to such Prime Rate Loans.
4.17 Compensation. If any payment, prepayment or
conversion of a Eurodollar Loan occurs on a date other than the
last day of an Interest Period for such Loan, the Borrowers shall
pay to the Agent for the account of each Lender, upon the request
of the Lender through the Agent, as compensation for any loss,
cost or expense incurred by such Lender as the result of such
payment, prepayment or conversion, an amount (if a positive
number) equal to:
A x (B-C) X D
360
where:
"A" equals the principal amount of the Eurodollar Loan so
paid, prepaid or converted (the "Affected Eurodollar Loan");
"B" equals the Eurodollar Rate (expressed as a decimal)
applicable to the Affected Eurodollar Loan;
"C" equals the applicable Eurodollar Rate (expressed as a
decimal) in effect on or about the date of such payment,
prepayment or conversion, for deposits in an amount equal
approximately to the principal amount of the Affected
Eurodollar Loan with an Interest Period (the "Remaining
Interest Period") beginning on the date of such payment,
prepayment or conversion to but excluding the last day of
the existing Interest Period; and
"D" equals the number of days in the Remaining Interest
Period;
and any other reasonable out-of-pocket loss or reasonable expense
(including any internal processing charge customarily charged by
such Lender) suffered by such Lender in liquidating deposits
prior to maturity in amounts which correspond to the principal
amount of the Affected Eurodollar Loan; provided that such Lender
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shall have delivered to the Borrowers a certificate, in
reasonable detail, as to the amount of such loss and expense
along with the basis for calculation thereof.
4.18 Capital Adequacy. If any Lender shall determine
that the applicability of any law, rule, regulation or guideline
adopted pursuant to or arising out of the July 1988 report of the
Basle Committee on Banking Regulations and Supervisory Practices
entitled "International Convergence of Capital Measurement and
Capital Standards", or the adoption after the date hereof of any
other applicable law, rule, regulation or guideline regarding
capital adequacy, or any change in the foregoing or in the
enforcement, interpretation or administration thereof by any
Governmental Authority charged with the enforcement,
interpretation or administration thereof, or compliance by any
Lender or any Person controlling such Lender (a "Parent") with
any request or directive regarding capital adequacy (whether or
not having the force of law) of any such Governmental Authority,
has or would have the effect of reducing the rate of return on
capital of such Lender or its Parent as a consequence of such
Lender's obligations hereunder to a level below that which such
Lender (or its Parent) could have achieved but for such
applicability, adoption, change or compliance (taking into
consideration the policies of such Lender (or its Parent) with
respect to capital adequacy) by an amount reasonably deemed by
such Lender to be material, then from time to time, within the
second Banking Day after demand by such Lender, the Borrowers
shall pay to such Lender such additional amount or amounts as
will compensate such Lender for such reduction, and if such
amount is not paid within thirty days after such demand, then the
Borrowers shall also pay interest on each such amount from the
thirtieth day after such demand until payment in full thereof (as
well after as before judgement) at the Post-Default Rate. A
statement of such Lender, in reasonable detail, claiming
compensation under this Section and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive
absent manifest error; provided that the determination thereof is
made on a reasonable basis. In determining such amount, such
Lender may use any reasonable averaging and attribution methods.
4.19 Optional Prepayments. The Borrowers shall have
the right to prepay the Loans in whole or in part and to convert
Loans of one Type into another Type, without premium or penalty,
at any time and from time to time, provided that (i) at the time
of the prepayment in full of all Loans and other Extensions of
Credit, the Borrowers shall pay all interest accrued on the
amount prepaid; (ii) the Borrowers shall give the Agent notice of
such prepayment as provided in Section 4.5; (iii) Eurodollar
Loans may be converted into Prime Rate Loans only on the last day
of an Interest Period thereof; and (iv) the Agent for the account
of each Lender shall be paid, at the time of any prepayment of a
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Eurodollar Loan that is being prepaid on other than the last day
of an Interest Period therefor, the amount provided for in
Section 4.17.
Section 5 Security.
5.1 Security Interests. The Borrowers agree to enter
into one or more stock pledge agreements in favor of the Agent
for the ratable benefit of the Lenders in the form of Exhibit B
attached hereto (the "Stock Pledge Agreements") and to deliver
and pledge to the Agent for the ratable benefit of the Lenders
all outstanding capital stock of all present and future
Subsidiaries of the Company and to deliver to the Agent, for the
ratable benefit of the Lenders, certificates representing all
such shares accompanied by undated stock powers or other
appropriate instruments of transfer duly executed in blank.
Section 6 Conditions Precedent.
6.1 Conditions to all Loans and Letters of Credit.
The Lenders shall not be obligated to make any of the Loans to
the Borrowers or to issue any Letter of Credit hereunder until
the following conditions have been satisfied to the satisfaction
of the Agent:
(a) This Agreement, the Notes and the Security
Instruments. This Agreement, the borrowings hereunder, the
Notes, the Security Instruments and all transactions contemplated
by this Agreement and the Security Instruments shall have been
duly authorized by the Borrowers. The Borrowers shall have duly
executed and delivered to the Agent this Agreement, the Notes and
the Security Instruments to the Agent in form and substance
satisfactory to the Agent and its counsel.
(b) No Default or Event of Default. On the date
hereof and on the date of making each Extension of Credit, no
Default or Event of Default shall have occurred and be
continuing.
(c) Correctness of Representations. On the Closing
Date and on the date of each Extension of Credit, all
representations and warranties made by the Borrowers in Section 7
below or otherwise in writing in connection herewith shall be
true and correct with the same effect as though such
representations and warranties had been made on and as of today's
date, except that representations and warranties expressly
limited to a certain date shall be true and correct as of that
date.
(d) Opinion of Counsel for the Borrowers. On the
Closing Date, the Agent shall have received the favorable opinion
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of counsel to the Borrowers addressed to the Agent and the
Lenders, in form and substance reasonably satisfactory to the
Agent and its counsel.
(e) Approvals. On the Closing Date and on the date of
each Extension of Credit, all necessary consents, approvals,
licenses, permissions, registrations or validations of any
Governmental Authority or any other Person required for the
execution, delivery, performance or carrying out of the
provisions of this Agreement, the Notes and the Security
Instruments, or for the validity or enforceability of the
obligations incurred thereunder, shall have been obtained and
shall be in full force and effect and copies thereof certified by
a duly authorized officer of the Borrowers to such effect shall
have been delivered to the Agent.
(f) Supporting Documents. On or before the date
hereof, there shall have been delivered to the Agent the
following supporting documents:
(i) a long form legal existence and corporate good
standing certificates with respect to each of the
Borrowers dated as of a recent date issued by the
appropriate Secretary of State or other official;
(ii) certificates dated as of a recent date with
respect to the due qualification of each of the
Borrowers to do business in each jurisdiction
where the failure to be so qualified would have a
Material Adverse Effect, issued by the Secretary
of State of each such jurisdiction;
(iii) copies of the corporate charters of each of the
Borrowers, certified by the appropriate Secretary
of State or other officials, as in effect on the
date hereof;
(iv) a certificate of the Secretary or Assistant
Secretary of each of the Borrowers certifying as
to (a) the By-Laws of the Borrowers, as in effect
on the date hereof; (b) the incumbency and
signatures of the officers of the Borrowers who
have executed any documents in connection with the
transactions contemplated by this Agreement; and
(c) the resolutions of the Boards of Directors of
the Borrowers authorizing the execution, delivery
and performance of this Agreement and the making
of the Loans hereunder, and the execution and
delivery of the Notes and other Loan Documents;
and
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(v) all other information and documents which the
Agent or its counsel may reasonably request in
connection with the transactions contemplated by
this Agreement.
(g) Compliance Certificates. The Borrowers shall have
furnished to the Agent a Compliance Certificate in the form of
attached Exhibit C appropriately completed and signed by a
Responsible Officer of the Borrowers, which certificate shall
reflect compliance by the Borrowers with the requirements of this
Credit Agreement as of the date thereof.
(h) Litigation. No litigation, arbitration,
proceeding or investigation shall be pending or, to the knowledge
of the Borrowers or the Principals, threatened against any
Borrower or any Subsidiary of a Borrower which, in the sole
judgement of the Agent, might have a Material Adverse Effect.
(i) Fees and Expenses. On or before the Closing Date,
the Borrowers shall have (i) paid to the Agent for the account of
the Lenders all amounts payable under Section 4 hereof identified
by the Agent on or before the Closing Date; and (ii) pay to the
Agent all fees due under a certain letter between the Agent and
the Borrowers, dated March 14, 1997.
(j) Legal Matters. All documents and legal matters
incident to the transactions contemplated by this Agreement shall
be reasonably satisfactory to Sullivan & Worcester LLP, special
counsel for the Agent.
(k) Regulatory Changes. No change shall have occurred
in any law or regulation or interpretation thereof that, in the
opinion of counsel for any Lender, would make it illegal or
against the policy of any governmental agency or authority for
such Lender to make the Loans hereunder or, in the opinion of
counsel for Fleet, for Fleet to issue any Letter of Credit
hereunder (as the case may be).
(l) Notice of Borrowing. The Agent shall have
received a notice of borrowing from the Borrowers containing the
information required under Section 4.5 hereof.
(m) Additional Documentation. The Agent and the
Lenders shall have received such other documents, instruments,
opinions and certificates as the Agent or any Lender may
reasonably deem necessary or appropriate.
6.2 Satisfaction of Conditions. Each request by the
Borrowers for any Extension of Credit hereunder shall constitute
a representation and warranty by the Borrowers to the Agent and
the Lenders that all of the conditions specified in this Section
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6 have been complied with as of the time of any such Extension of
Credit.
Section 7 Representations and Warranties.
In order to induce the Agent and the Lenders to enter into
this Agreement and to make the contemplated Extensions of Credit,
the Borrowers hereby represent and warrant as follows (except to
the extent qualified by supplemental disclosure set forth on
Schedule A hereto) and the following representations and
warranties (to the extent so qualified, if any) shall survive the
execution and delivery of this Agreement and the Notes:
7.1 Corporate Status. Each of the Borrowers is a duly
organized and validly existing corporation in good standing under
the laws of its jurisdiction of incorporation as set forth on
Schedule A hereto and is duly qualified or licensed as a foreign
corporation in good standing in each jurisdiction in which the
failure to do so would have a Material Adverse Effect.
7.2 No Violation. Neither the execution, delivery or
performance of this Agreement or any other Loan Document, nor
consummation of the contemplated transactions will contravene any
law, statute, rule or regulation to which the Borrowers are
subject or any judgment, decree, franchise, order or permit ap
plicable to the Borrowers, or will conflict or be inconsistent
with or will result in any breach of, or constitute a default
under, or result in or require the creation or imposition of any
Lien (other than the liens created by the Security Instruments)
upon any of the property or assets of the Borrowers pursuant to,
any Contractual Obligation of the Borrowers, or violate any
provision of the corporate charters or by-laws of the Borrowers.
7.3 Corporate Power and Authority. The execution,
delivery and performance of this Agreement and the other Loan
Documents are within the corporate powers of the Borrowers and
have been duly authorized by all necessary corporate action.
7.4 Enforceability. This Agreement and each other
Loan Document constitutes valid and binding obligations of the
Borrowers enforceable against the Borrowers in accordance with
its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting
the enforcement of creditors' rights generally and subject to
general principles of equity, whether applied in a court of
equity or at law.
7.5 Consents or Approvals. No order, permission,
consent, approval, license, authorization, registration or
validation of, or filing with, or exemption by, any Governmental
Authority or any other Person is required to authorize, or is
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required in connection with, the execution, delivery and
performance of this Agreement or any other Loan Document by the
Borrowers, or the taking of any action contemplated hereby or
thereby.
7.6 Financial Statements. (a) The Company has
furnished the Agent with complete and correct copies of the
audited consolidated balance sheet of the Company and its
Subsidiaries as of the December 31, 1996, and the related audited
consolidated statements of income and of cash flows for the
fiscal year of the Company and its Subsidiaries ended on such
date, examined by the Accountants. Such financial statements
(including the related schedules and notes) taken together with
the Pooled Combined Proforma Financial Statements included in
Schedule A hereto (the "Proforma Statements") fairly present the
consolidated financial condition of the Company and its
Subsidiaries as of December 31, 1996, and the consolidated
results of their operations and their consolidated cash flows for
the fiscal year then ended.
(b) Neither the Borrowers nor any of their
Subsidiaries have any material liabilities, contingent or
otherwise, including liabilities for taxes or any unusual forward
or long-term commitments or any Guarantee, which are not
disclosed by or included in the above-referenced financial
statements or the accompanying notes, taken together with the
Proforma Statements, and there are no unrealized or anticipated
losses from any unfavorable commitments of the Borrowers or any
of their Subsidiaries which may have a Material Adverse Effect.
During the period from the Financial Statements Date to the date
hereof: (i) there has been no sale, transfer or other
disposition by the Borrowers or any of their Subsidiaries of any
material part of their business or property and, other than the
acquisition of Staff Administrators, Inc. ("SAI") no purchase or
other acquisition of any business or property (including any
capital stock of any Person) material in relation to the
consolidated financial condition of the Borrowers and their
Subsidiaries at the Financial Statements Date; and (ii) neither
the Borrowers nor any of their Subsidiaries have made a
Restricted Payment, or agreed or committed to make a Restricted
Payment.
(c) The Borrowers have and, after giving effect to the
Loans to be made on the Closing Date, will have, assets (both
tangible and intangible having a fair saleable value in excess of
the amount required to pay the probable liability on their then-
existing debts (whether matured or unmatured, liquidated or
unliquidated, fixed or contingent); the Borrowers have and will
have access to adequate capital for the conduct of their business
and the discharge of their debts incurred in connection therewith
as such debts mature; the Borrowers were not insolvent
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immediately prior to the making of the Loans on the Closing Date
and immediately after giving effect thereto, the Borrowers will
not be insolvent.
(d) All the above-referenced financial statements
(including the related schedules and notes) have been prepared in
accordance with GAAP applied consistently throughout the periods
involved (except as approved by the Accountants and disclosed
therein and, in the case of interim financial statements, subject
to normal year-end adjustments and the absence of footnotes and
schedules).
7.7 No Material Change. Since the Financial
Statements Date (other than as reflected by the Proforma
Statements) there has been no development or event, or to the
best knowledge of the Borrowers, any prospective development or
event, which has had or could reasonably be anticipated to have a
Material Adverse Effect. Since the date hereof, no event,
condition or other development has occurred relating to any
matter disclosed on Schedule A hereto that has, or could
reasonably be expected to have, a Material Adverse Effect. The
Borrowers are not party to or bound by any contract, agreement or
instrument, nor subject to any charter or other corporate
restriction which will, under current or foreseeable conditions,
have a Material Adverse Effect.
7.8 Litigation. Except as set forth in Schedule A,
there are no actions, suits or proceedings pending or threatened
against or affecting the Borrowers or any of their Subsidiaries
which in any one case or in the aggregate, if determined
adversely to the interests of such party, could reasonably be
anticipated to have a Material Adverse Effect.
7.9 Compliance with Other Instruments; Compliance with
Law. Neither the Borrowers nor any of their Subsidiaries are
(after taking into account applicable cure periods) in default
under any Contractual Obligation (including any Contractual
Obligation relating to any Indebtedness of the Borrowers) where
such default could reasonably be anticipated to have a Material
Adverse Effect. Neither the Borrowers nor any of their
Subsidiaries are in default and or in violation of any applicable
statute, rule, writ, injunction, decree, order or regulation of
any Governmental Authority having jurisdiction over the Borrowers
or their Subsidiaries which default or violation could reasonably
be anticipated to have a Material Adverse Effect.
7.10 Subsidiaries. The Borrowers do not have any
Subsidiaries except as set forth on attached Schedule A.
7.11 Investment Company Status; Limits on Ability to
Incur Indebtedness. None of the Borrowers is an "investment
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company" or a company "controlled by" an investment company
within the meaning of the Investment Company Act of 1940, as
amended. None of the Borrowers is subject to regulation under
any Federal or State statute or regulation which limits its
ability to incur Indebtedness.
7.12 Title to Property. Except as set forth in
Schedule A, the Borrowers have good and marketable title to all
of their properties and assets, including the properties and
assets reflected in the consolidated balance sheet of the
Borrowers as of the Financial Statements Date, except such as
have been disposed of since that date in the ordinary course of
business, and none of such properties or assets is subject to any
Lien except for (a) Permitted Liens, or (b) a defect in title or
other claim other than defects and claims that, in the aggregate,
would have no Material Adverse Effect. The Borrowers enjoy
peaceful and undisturbed possession under all leases necessary in
any material respect for the operation of their properties and
assets and no material default exists under such leases (after
taking into account applicable cure periods under said leases).
All such leases are valid and subsisting and are in full force
and effect.
7.13 ERISA. The Borrowers and each member of the
Controlled Group have fulfilled their obligations under the
minimum funding standards of ERISA and the Code with respect to
each Plan and are in compliance in all material respects with the
presently applicable provisions of ERISA and the Code, and have
not incurred any liability to the PBGC or a Plan under Title IV
of ERISA (other than to make contributions or premium payments in
the ordinary course).
7.14 Taxes. All tax returns of the Borrowers and
their Subsidiaries required to be filed have been timely filed,
all material taxes, fees and other governmental charges (other
than those being contested in good faith by appropriate
proceedings diligently conducted and with respect to which
adequate reserves have been established and, in the case of ad
valorem taxes or betterment assessments, no proceedings to
foreclose any lien with respect thereto have been commenced and,
in all other cases, no notice of lien has been filed or other
action taken to perfect or enforce such lien) shown thereon which
are payable have been paid. The charges and reserves on the
books of the Borrowers and their Subsidiaries for all income and
other taxes are adequate, and the Borrowers know of no additional
assessment or any basis therefor. The Federal income tax returns
of the Borrowers and their Subsidiaries have not been audited
within the last three years, all prior audits have been closed,
and there are no unpaid assessments, penalties or other charges
arising from such prior audits.
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7.15 Environmental Matters. (a) The Borrowers and
all of their Subsidiaries have obtained all Governmental
Approvals that are required for the operation of their business
under any Environmental Law, except where the failure to so
obtain a Governmental Approval would not have a Material Adverse
Effect.
(b) The Borrowers and all of their Subsidiaries are in
compliance with all terms and conditions of all required
Governmental Approvals and are also in compliance with all terms
and conditions of all applicable Environmental Laws,
noncompliance with which would have a Material Adverse Effect.
(c) There is no civil, criminal or administrative ac
tion, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter pending or, to
the best knowledge of the Borrowers threatened against the
Borrowers or any of their Subsidiaries relating in any way to the
Environmental Laws, and there is no Lien of any private entity or
Governmental Authority against any property of the Borrowers or
any Subsidiary thereof relating in any way to the Environmental
Laws.
(d) There has been no claim, complaint, notice, or
request for information received by the Borrowers with respect to
any site listed on the National Priority List promulgated
pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA") 42 USC Sec. 9601 et seq.
or any state list of sites requiring investigation or cleanup
with respect to contamination by Hazardous Substances.
(e) To the best of the Borrowers' knowledge, there has
been no release or threat of release of any Hazardous Substance
at any Borrower Group Property which would likely result in
liability being imposed upon the Borrowers or any Subsidiary
thereof, which liability would have a Material Adverse Effect.
7.16 Intellectual Property. The Borrowers own or
license such copyrights, patents, trademarks and similar rights
("Intellectual Property") as are necessary for the conduct of
their respective businesses as now conducted, without any known
conflict with the rights of others which would have a Material
Adverse Effect. Following the occurrence and during the
continuance of an Event of Default, the Borrowers shall, upon the
request of the Agent, make reasonably diligent efforts to prepare
and deliver to the Agent a reasonably detailed listing of all
such Intellectual Property, provided that nothing herein shall
require the registration of any such Intellectual Property.
7.17 Level of Borrowing. After giving effect to any
Extensions of Credit to be made as of the date hereof under this
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Agreement,(a) the sum of all outstanding Loans and the Letter of
Credit Usage does not exceed the Revolving Credit Commitment, and
(b) the sum of the Working Capital Usage and the Letter of Credit
Usage does not exceed the Sublimit.
7.18 Defaults. As of the date of this Agreement, no
Default exists.
7.19 Labor Relations. There is (i) no unfair labor
practice complaint pending against the Borrowers or any of their
Subsidiaries or, to the best knowledge of the Borrowers,
threatened, before the National Labor Relations Board, and no
grievance or arbitration proceeding arising out of or under any
collectively bargaining agreement is so pending against the
Borrowers or any of their Subsidiaries or, to the best knowledge
of the Borrowers, threatened, except for such complaints,
grievances or arbitration proceedings which, if adversely
decided, would not have a Material Adverse Effect, (ii) no
strike, labor dispute, slow down or stoppage is pending against
the Borrowers or any of their Subsidiaries or, to the best
knowledge of the Borrowers, threatened against the Borrowers or
any of their Subsidiaries, except for any such labor action as
would not have a Material Adverse Effect and (iii) to the best
knowledge of the Borrowers, no union representation question
existing with respect to the employees of the Borrowers or any of
their Subsidiaries and, to the best knowledge of the Borrowers,
no union organizing activities are taking place, except for any
such question or activities as would not have a Material Adverse
Effect.
7.20 Disclosure. None of the representations and
warranties made by the Borrowers in this Agreement, or in any
other document furnished to the Agent or the Lenders by or on
behalf of the Borrowers in connection herewith contains (or will
contain on the Closing Date) any untrue statement of material
fact or omits (or will omit on the Closing Date) to state any
material fact necessary to make the statements herein or therein,
in light of the circumstances under which they are made, not
misleading. There is no fact known to the Borrowers on the date
of this Agreement which has any reasonable likelihood of having a
Material Adverse Effect which has not been set forth in or
referred to in this Agreement.
Section 8 Affirmative Covenants.
The Borrowers covenant and agree that for so long as this
Agreement is in effect and until the Notes, together with all
interest thereon and all other Obligations of the Borrowers to
the Lenders are paid or satisfied in full unless the Majority
Lenders shall otherwise consent in writing:
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8.1 Use of Proceeds. The Borrowers shall, subject to
the limitations set forth herein, use (i) the proceeds of the
Loans (a) for the repayment of outstanding indebtedness of the
Borrowers under that certain Amended and Restated Credit
Agreement dated as of June 5, 1996, as amended, among the
Borrowers and Fleet; (b) for working capital purposes of the
Borrowers, and (c) to finance Permitted Acquisitions and (ii) the
Letters of Credit for any other business purpose. Without
limiting the foregoing, no part of such proceeds will be used for
the purpose of purchasing or carrying any "margin security" as
such term is defined in Regulation U of the Board of Governors of
the Federal Reserve System.
8.2 Conduct of Business; Maintenance of Existence.
Each of the Borrowers will, and will cause of each of its
Subsidiaries to, continue to engage in the business in which they
are engaged and maintain its existence and comply with all
applicable statutes, rules and regulations and remain duly
qualified as a foreign corporation, licensed and in good standing
in each jurisdiction where such qualification or licensing is
required by the nature of its business, the character and
location of its property, business, or the ownership or leasing
of its property, except where such noncompliance or failure to so
qualify would not have a Material Adverse Effect, and each of the
Borrowers will maintain its properties in good operating condi
tion, and continue to conduct its business as presently
conducted.
8.3 Compliance with Laws. The Borrowers will, and
will cause each of their Subsidiaries to, comply in all material
respects with all applicable laws, ordinances, rules, regulations
and requirements of Governmental Authorities, except where the
necessity of compliance therewith is being contested in good
faith by appropriate proceedings.
8.4 Insurance. Each of the Borrowers will maintain
insurance with financially sound and reputable insurance
companies in such amounts and against such risks as is usually
carried by owners of similar businesses and properties in the
same general areas in which such Borrowers and its Subsidiaries
operate, provided that in any event the Borrowers and their
Subsidiaries shall maintain or cause to be maintained (a)
insurance against casualty, loss or damage covering all property
and improvements of the Borrowers and their Subsidiaries in
amounts and in respect of perils usually carried by owners of
similar businesses and properties in the same general areas in
which Borrowers and their Subsidiaries operate; (b) comprehensive
general liability insurance against claims for bodily injury,
death or property damage; and (c) workers' compensation insurance
to the extent required by applicable law.
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8.5 Financial Statements, Etc. The Borrowers will
furnish to each of the Lenders:
(a) within forty-five (45) days after the end of each
fiscal quarter of the Borrowers (other than the fourth quarter),
the unaudited consolidated and consolidating balance sheet and
income statement and statement of cash flows of the Borrowers and
their Subsidiaries as at and for the three-month period ended on
the last day of such fiscal quarter, accompanied by a certificate
of a Responsible Officer of the Borrowers to the effect that such
financial statements fairly present the consolidated financial
condition of the Borrowers and their Subsidiaries as of the end
of such fiscal quarter, and the consolidated results of their
operations and their consolidated cash flows for such fiscal
quarter, in each case in accordance with GAAP (except for the
absence of footnotes) consistently applied (subject to normal
year-end audit adjustments);
(b) within one hundred twenty (120) days after the
last day of each fiscal year of the Borrowers, the audited
consolidated balance sheet and income statement and statement of
cash flows of the Borrowers and their Subsidiaries as at and for
the fiscal year then ended, certified by the Accountants with an
unqualified opinion, the substance of such report to be
reasonably satisfactory to the Agent, together with the unaudited
consolidating balance sheet and income statement and statement of
cash flows of the Borrowers and their Subsidiaries as at and for
the year then ended and, following any change from the Borrowers'
existing, guaranteed- cost workers compensation insurance
coverage, an actuarial review detailing the calculations of
workers' compensation reserves for claims, accompanied by a
certificate of a Responsible Officer of the Borrowers to the
effect that such financial statements fairly present the
consolidated financial condition of the Borrowers and their
Subsidiaries as of the end of such fiscal year and the
consolidated results of their operations for such fiscal year, in
each case in accordance with GAAP. Said financial statements
shall indicate all guarantees or unusual forward or long-term
commitments made by the Borrowers or any Subsidiaries thereof.
(c) at the time of the delivery of the quarterly and
yearly financial statements required by Sections 8.5(a) and (b)
above, a Compliance Certificate signed by a Responsible Officer
of the Borrowers in the form attached to this Agreement as
Exhibit C, appropriately completed;
(d) copies of any management letter provided by the
Accountants to the Borrowers;
(e) promptly upon becoming aware of any litigation or
other proceeding against the Borrowers or any of their
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Subsidiaries that could reasonably be expected to have a Material
Adverse Effect, notice thereof;
(f) within thirty (30) days prior to the commencement
of each fiscal year of the Borrowers, a copy of the consolidated
operating budget, including, without limitation, projections of
the anticipated cash flow of the Borrowers and their Subsidiaries
for such fiscal year and a statement of the assumptions on which
such budget was prepared;
(g) promptly following the request of the Agent or any
Lender, such further information concerning the business, affairs
and financial condition or operations of the Borrowers and their
Subsidiaries as the Agent or any Lender may reasonably request;
(h) promptly upon the mailing thereof to the
shareholders of the Borrowers generally, copies of all financial
statements, reports, proxy statements and other materials; and
(i) promptly upon the filing thereof by any Borrower
with the SEC (and in any event within ten (10) days of such
filing), copies of any registration statements and reports on
Forms 10-K, 10-Q and 8-K (or their equivalents if such forms no
longer exist).
8.6 Notice of Default. As soon as practicable, and in
any event, within three (3) Banking Days of becoming aware of the
existence of any condition or event which constitutes a Default,
the Borrowers will provide the Agent and each Lender with written
notice, which shall have the caption of "Notice of Default",
specifying the nature and period of existence thereof and what
action the Borrowers are taking or propose to take with respect
thereto.
8.7 Environmental Matters.
(a) The Borrowers and each of their Subsidiaries shall
comply with all terms and conditions of all applicable
Governmental Approvals and all applicable Environmental Laws,
except where failure to comply would not have a Material Adverse
Effect.
(b) The Borrowers shall promptly notify the Agent
should the Borrowers become aware of:
(i) any spill, release, or threat of release of any
Hazardous Substance at or from any Borrower Group Property
or by any Person for whose conduct the Borrowers or any
Subsidiary thereof are responsible, to the extent the
Borrowers are required by Environmental Laws to report such
to any Governmental Authority;
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(ii) any action or notice with respect to a civil,
criminal or administrative action, suit, demand, claim,
hearing, notice of violation, investigation, proceeding,
notice or demand letter pending or threatened against the
Borrowers or any Subsidiary thereof relating in any way to
the Environmental Laws, or any Lien of any Governmental
Authority or any other Person against any Borrower Group
Property relating in any way to the Environmental Laws;
(iii) any claim made or threatened by any Person
against the Borrowers or any of their Subsidiaries or any
property of the Borrowers or any of their Subsidiaries
thereof relating to damage, contribution, cost recovery
compensation, loss or injury resulting from any Hazardous
Substance pertaining to such property or the business or
operations of the Borrowers or such Subsidiary; and
(iv) any occurrence or condition on any real property
adjoining any Borrower Group Property known to the officers
or supervisory personnel of the Borrowers or any of their
Subsidiaries or other employees having responsibility for
the compliance by the Borrowers or any Subsidiary thereof
with Environmental Laws, without any independent investiga
tion, which does cause, or could cause, such Borrower Group
Property, or any part thereof, to contain Hazardous
Substances in violation of any Environmental Laws, or which
does cause, or could cause, such Borrower Group Property to
be subject to any restrictions on the ownership, occupancy,
transferability or use thereof by the Borrowers or any of
their Subsidiaries.
(c) The Borrowers will, and will cause each of their
Subsidiaries to, at their own cost and expense, and within such
period as may be required by applicable law or regulation,
initiate all remedial actions and thereafter diligently prosecute
such action as shall be required by law for the cleanup of such
Borrower Group Property, including all removal, containment and
remedial actions in accordance with all applicable Environmental
Laws and shall further pay or cause to be paid, at no expense to
the Agent or the Lenders, all cleanup, administrative, and
enforcement costs of applicable Government Authorities which may
be asserted against such Borrower Group Property.
8.8 Taxes and Other Liens. Each of the Borrowers
will, and will cause each of its Subsidiaries to, pay when due
all taxes, assessments, governmental charges or levies, or claims
for labor, supplies, rent and other obligations made against it
which, if unpaid, might become a Lien against such Borrower or
such Subsidiary or on its property, except liabilities being
contested in good faith and by proper proceedings, as to which
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adequate reserves are maintained on the books of such Borrower or
its Subsidiaries, in accordance with GAAP.
8.9 ERISA Information. If and when the Borrowers or
any member of the Controlled Group (a) gives or is required to
give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan under Title IV
of ERISA, or knows that the plan administrator of any Plan has
given or is required to give notice of any such reportable event,
(b) receives notice of complete or partial withdrawal liability
under Title IV of ERISA or (c) receives notice from the PBGC
under Title IV of ERISA of an intent to terminate or appoint a
trustee to administer the Plan, the Borrowers shall in each such
instance promptly furnish to the Agent a copy of any such notice.
8.10 Inspection. The Borrowers will permit a
representative of the Agent (including any field examiner or
auditor retained by the Agent) to inspect and make copies of the
Borrowers' books and records, and to discuss their affairs,
finances and accounts with their officers and accountants, at
such reasonable times and places and as often as the Agent may
reasonably request.
8.11 Certain Obligations Respecting Subsidiaries. (a)
The Borrowers will, and will cause each of their Subsidiaries to,
take such action from time to time as shall be necessary to
ensure that the Borrowers at all times own (subject only to the
Lien of the Security Instruments) all of the issued and
outstanding shares of each class of stock of each of their
Subsidiaries. Without limiting the generality of the foregoing,
the Borrowers shall not, and shall not permit any of their
Subsidiaries to, sell, transfer or otherwise dispose of any
shares of stock in any Subsidiary owned by them, or permit any
Subsidiary of the Borrowers to issue any shares of stock of any
class whatsoever to any Person (other than to a Borrower or to
another Wholly-owned Subsidiary). In the event that any such
additional shares of stock shall be issued by any Subsidiary of a
Borrower, such Borrower agrees forthwith to deliver to the Agent
pursuant to the Security Instruments the certificates evidencing
such shares of stock, accompanied by undated stock powers
executed in blank and shall take such other action as the Agent
shall request to perfect the security interest created therein
pursuant to the Security Instruments.
(b) Immediately following the creation of any Subsidiary of
a Borrower following the Closing Date, or the acquisition of any
Person by a Borrower or any Subsidiary thereof pursuant to which
such Person becomes a direct or indirect Subsidiary of a
Borrower, such Borrower (i) shall cause such Subsidiary to become
a party to this Agreement and the other Loan Documents as a
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"Borrower" and to execute and deliver such instruments and other
documents, in form and substance satisfactory to the Agent, as
the Agent shall reasonably require in order to effectuate such
joinder, (ii) shall forthwith deliver to the Agent pursuant to
the Security Instruments the certificates evidencing all of the
issued and outstanding shares of stock of such Subsidiary,
accompanied by undated stock powers executed in blank and take
such other action as the Agent shall request to perfect the
security interest created therein pursuant to the Security
Instruments, and (iii) notify the Agent in writing of the
creation or acquisition of such Subsidiary. The Borrowers shall,
and shall cause the appropriate Subsidiaries of the Borrowers to,
promptly (x) execute and deliver to the Agent such number of
copies as the Agent may specify of documents creating such Liens,
(y) do all other things which may be necessary or which the Agent
may reasonably request in order to confer upon and confirm to the
Agent the benefits of such security, and (z) deliver such legal
opinions, certificates, evidences of corporate action or other
documents as the Agent may reasonably request, all in form and
substance reasonably satisfactory to the Agent, relating to the
satisfaction of the Borrowers' obligations under this Section.
8.12 Intellectual Property. The Company will promptly
inform the Agent of all applications filed by the Company or any
Subsidiary thereof for trademarks, patents and copyrights and of
all trademarks, patents and copyrights granted on or after the
date of this Agreement.
8.13 Further Assurances. The Borrowers will, and will
cause each of their Subsidiaries to, execute and deliver to the
Agent any writings and do all things necessary, effectual or
reasonably requested by the Agent to carry into effect the
provisions and intent of this Agreement or any other Loan
Document.
Section 9 Negative Covenants.
The Borrowers covenant and agree that for so long as this
Agreement is in effect and until the Notes, together with all
interest thereon and all other Obligations of the Borrowers to
the Lenders are paid or satisfied in full, without the prior
written consent of the Majority Lenders:
9.1 Transactions with Affiliates. Except as permitted
by Section 9.8 hereof or as set forth on Schedule A and except
for transactions solely between or among Borrowers, the Borrowers
will not, and will not permit any of their Subsidiaries to,
directly or indirectly, pay any funds to or for the account of,
make any Investment in, lease, sell, transfer or otherwise
dispose of any assets, tangible or intangible, or engage in any
transaction in connection with any joint enterprise or other
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joint arrangement with, any Affiliate of the Borrowers, unless
such transaction is not prohibited by this Agreement, is for
reasonable business or tax purposes, is in the ordinary course of
the Borrowers' or such Subsidiary's business, and is upon fair
and reasonable terms no less favorable to the Borrowers or such
Subsidiary as those that could be obtained in a comparable arm's
length transaction with a Person not an Affiliate.
9.2 Consolidation, Merger or Acquisition. (a) Neither
the Borrowers nor any of their Subsidiaries shall merge or
consolidate with or into any other Person, or make any
acquisition of the business or assets of any other Person except:
(i) any Subsidiary of a Borrower may merge into a Borrower or any
Wholly-owned Subsidiary of a Borrower; (ii) Investments to the
extent permitted by Section 9.8; (iii) the purchase of office
supplies and other consumable assets acquired in the ordinary
course of business; and (iv) Permitted Acquisitions. For
purposes hereof a "Permitted Acquisition" is an acquisition which
satisfies the following requirements: (A) if it involves a merger
or consolidation, upon the consummation of such merger or
consolidation, the surviving party shall be a Borrower or a
Subsidiary of a Borrower; (B) at the time of such acquisition and
after giving effect thereto no Event of Default shall have
occurred and be continuing; and (C) the additional conditions set
forth in Section 9.2(b) shall have been satisfied with respect to
the proposed acquisition.
(b) In addition to the requirements set forth in
Section 9.2(a), the following additional conditions must be
satisfied with respect to each Permitted Acquisition:
(i) Any company, business or Person to be acquired
shall be engaged primarily in the same or a
related line of business to the then current
business conducted by the Borrowers and shall have
Adjusted EBITDA, with adjustments reasonably
acceptable to the Agent for the twelve months
immediately preceding the proposed acquisition
dates, greater than $1.00; provided that in the
case of an asset acquisition such determination of
the Adjusted EBITDA in respect of such assets
shall be made on a proforma basis as if such
assets and related liabilities were assets and
related liabilities belonging to a Person to be
acquired by the Borrowers;
(ii) The Borrowers shall have demonstrated, to the
reasonable satisfaction of the Agent, that on a
pro forma basis and after giving effect to the
proposed acquisition, the Borrowers will be in
compliance with the financial covenants set forth
in Section 10 hereof.
(iii) All necessary consents, approvals, licenses,
permissions, registrations or validations of any
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Governmental Authority or any Person required for
the consummation of the proposed acquisition shall
have been obtained and shall be in full force and
effect;
(iv) Prior written consent of all of the Lenders (any
request for such consent to be acted upon by the
Lenders within five Business Days after their
receipt of such request, together with the other
materials and information referenced herein)shall
have been obtained with respect to: (A) any
individual acquisition involving cash
consideration (including assumption of any
Indebtedness, or the issuance of any Seller Debt)
in excess of $10,000,000 or total consideration in
excess of $25,000,000, and (B) any proposed
acquisition during any fiscal year of the
Borrowers to the extent that the aggregate cash
consideration paid by the Borrowers (including
assumption of any Indebtedness, or the issuance of
any Seller Debt) for acquisitions completed during
such fiscal year exceeds $20,000,000 (taking into
account the proposed acquisition), unless such
proposed acquisition involves less than $1,000,000
in cash consideration (including assumption of any
Indebtedness, or the issuance of any Seller Debt);
(v) Each new Subsidiary of the Borrowers formed to
make such acquisition and each Person to be
acquired which becomes a Subsidiary of the
Borrowers shall agree to become a party to this
Agreement and the other Loan Documents as a
"Borrower" and shall have executed such
instruments in connection therewith as the Agent
and its counsel shall reasonably request; and
(vi) The Agent and its counsel shall have received
copies of the acquisition agreement and such other
documents and information relating to the proposed
acquisition as the Agent or its counsel may
reasonably request.
9.3 Disposition of Assets. The Borrowers shall not
convey, sell, lease, transfer or otherwise dispose of any of
their property, business or assets (including, without
limitation, accounts receivable and leasehold assets), whether
now owned or hereafter acquired, except for (i) obsolete or worn
out property disposed of in the ordinary course of business (with
standard discounts); (ii) the sale of inventory in the ordinary
course of business; (iii) other assets (excluding accounts
receivable which may not be disposed of), provided that the
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aggregate fair value of all assets disposed of pursuant to this
clause (iii) in any year shall not exceed five percent (5%) of
the consolidated total assets of the Borrowers as of the end of
any such year; (iv) the sale of the Excluded Property; and (v)
the sale or other disposition of assets acquired in connection
with any Permitted Acquisition, which assets are not used or
useable in, or are otherwise not related to, the same or related
line of business as the business conducted by the Borrowers.
9.4 Indebtedness. Neither the Borrowers nor any of
their Subsidiaries shall create, incur, assume or suffer to exist
any Indebtedness, except:
(a) the Obligations and any other Indebtedness of the
Borrowers, or any of them, to the Lenders from time to time
relating to this credit facility;
(b) existing Indebtedness, including Subordinated
Debt, if any, listed on Schedule A hereto;
(c) Capital Lease Obligations in an aggregate amount
not to exceed $2,000,000 at any one time outstanding;
provided that after giving effect to the incurrence of any
such Capital Lease Obligations and to the receipt and
application of the proceeds thereof, no Default or Event of
Default shall have occurred and be continuing;
(d) Subordinated Debt incurred by the Borrowers after
the date hereof; provided that, giving effect to the incur
rence of such Subordinated Debt and to the receipt and ap
plication of the proceeds thereof, no Default shall have oc
curred and be continuing;
(e) mortgage Indebtedness on the Excluded Property not
to exceed $500,000 in principal amount at any one time
outstanding in addition to the currently existing mortgage
Indebtedness on such Excluded Property as described on
Schedule A hereto;
(f) reimbursement obligations owing to the Borrowers'
workers' compensation insurance carriers;
(g) purchase money Indebtedness for the purchase price
of equipment and capital assets incurred in the ordinary
course of business, provided that such Indebtedness does not
exceed $500,000 in principal amount in the aggregate at any
time outstanding;
(h) Indebtedness assumed in connection with any
Permitted Acquisition to the extent the same does not exceed
the limits set forth in Section 9.2(b)(iv) provided that
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such Indebtedness was not incurred in contemplation of such
Permitted Acquisition and further provided that the
aggregate amount of all such assumed Indebtedness does not
exceed $10,000,000; and
(i) unsecured Indebtedness of the Borrowers, or any of
them, issued to sellers in connection with Permitted
Acquisitions, provided that at the time of the incurrence of
such Indebtedness and giving effect thereto and to such
acquisition, no Default shall have occurred and be
continuing (the "Seller Debt").
9.5 Guarantees. Neither the Borrowers or any of their
Subsidiaries shall create, incur or suffer to exist any
obligations in respect of Guarantees except for:
(a) existing Guarantees, if any, listed on Schedule A
hereto;
(b) Guarantees entered into after the date hereof in
connection with Capital Lease Obligations and Indebtedness
permitted under Section 9.4.
9.6 Liens. (a) Neither the Borrowers nor any of their
Subsidiaries shall create, incur, assume or suffer to exist any
Lien on any of its properties or assets, except the following
(collectively, "Permitted Liens"):
(i) Liens for taxes, fees, assessments and other
governmental charges not delinquent or being contested in
good faith and by proper proceedings, as to which adequate
reserves are maintained on the books of the Borrowers in
accordance with GAAP;
(ii) carriers', warehousemen's, mechanics',
materialmen's or similar liens imposed by law incurred in
the ordinary course of business in respect of obligations
not overdue, or being contested in good faith and by proper
proceedings and as to which adequate reserves with respect
thereto are maintained on the books of the Borrowers in
accordance with GAAP;
(iii) pledges or deposits in connection with workers'
compensation, unemployment insurance and other types of
social security legislation;
(iv) security deposits made to secure the performance
of leases, licenses and statutory obligations incurred in
the ordinary course of business;
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(v) Liens in favor of the Agent for the benefit of the
Lenders;
(vi) existing Liens, if any, listed on Schedule A
hereto; provided that no such Lien is spread to cover any
additional property after the date hereof, and that the
principal amount of the Indebtedness secured thereby is not
increased, except to the extent permitted by Section 9.4(e)
hereof; and
(vii) Liens securing Indebtedness for the purchase
price of property to the extent permitted by Section 9.4(g)
and Liens securing Indebtedness assumed in connection with
Permitted Acquisitions to the extent permitted in Section
9.4(h), provided that (i) each such Lien is given solely to
secure the purchase price of such property or such assumed
Indebtedness, as the case may be, does not extend to any
other property and (ii) in the case of any such purchase
money Indebtedness (x) each such Lien is given at the time
of acquisition of such property, and (y) the Indebtedness
secured thereby does not exceed the lesser of the cost of
such property or its fair market value at the time of
acquisition.
(b) Neither the Borrowers nor any of their Subsidiaries
shall enter into any contract, agreement, instrument or
understanding, whether oral or written, other than this Agreement
and Loan Documents, which shall restrict the ability of the
Borrowers or any of their Subsidiaries to encumber any of their
assets.
9.7 Restricted Payments. Neither the Borrowers or any
of their Subsidiaries shall declare or make any Restricted
Payment.
9.8 Investments. Neither the Borrowers or any of
their Subsidiaries shall make, maintain or acquire any Investment
in any Person other than:
(a) marketable obligations issued or guaranteed by the
United States of America having a maturity of one year or
less from the date of purchase;
(b) certificates of deposit, Eurodollar time deposits,
commercial paper or any other obligations of any Lender or
of any other bank or trust company organized or licensed to
conduct a banking business under the laws of the United
States or any State thereof and which has (or which is a
Subsidiary of a bank holding company which has) publicly
traded debt securities rated A or higher by Standard &
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Poor's Ratings Services or A-2 or higher by Moody's
Investors Service, Inc.);
(c) commercial paper with maturities of not more than
180 days having the highest rating then given by Moody's
Investors Services, Inc. or Standard & Poor's Ratings
Services;
(d) repurchase obligations with a term of not more than
seven days for underlying securities of the types described
in subparagraph (a) above entered into with any Lender or
any of the banks referred to in subparagraph (b) above;
(e) shares in money market mutual funds substantially
all the assets of which are comprised of securities and
other obligations of the types described in subparagraphs
(a) through (d) above;
(f) (i) depository accounts at any Lender; and (ii)
depository accounts maintained at other banks;
(g) stock or obligations issued to the Borrowers or any
Subsidiary thereof in settlement of claims against others by
reason of an event of bankruptcy or a composition or the
readjustment of debt or a reorganization of any debtor of
the Borrowers or such Subsidiary;
(h) currently existing Investments set forth on
Schedule A; and
(i) Investments by a Borrower (x) in another Borrower
for the purpose of financing the conduct of the business of
such other Borrower, or (y) in a newly formed or acquired
Subsidiary in connection with a Permitted Acquisition.
9.9 Sale and Leaseback. Neither the Borrowers nor any
of their Subsidiaries shall enter into any arrangement, directly
or indirectly, whereby it shall sell or transfer any property
owned by them in order to lease such property or lease other
property that the Borrowers or any such Subsidiary intends to use
for substantially the same purpose as the property being sold or
transferred.
9.10 ERISA. The Borrowers will not permit any pension
plan maintained by the Borrowers or by any member of a
"controlled group" (ERISA Sec.210(c) or ERISA Sec.210(d)) of which any
Borrower is a member to: (a) engage in any "prohibited
transaction" (ERISA Sec.2003(c)); (b) fail to report to the Agent a
"reportable event" (ERISA Sec.4043) within 30 days after its
occurrence or as to any reportable event as to which the 30-day
notice period requirement of Section 4043(b) of Title IV of ERISA
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has been waived by the PBGC, within 30 days of such time as the
Borrowers are requested to notify the PBGC of such reportable
event; (c) incur any "accumulated funding deficiency" (ERISA
Sec.302); (d) terminate its existence at any time in a manner which
could result in the imposition of a Lien on the property of the
Borrowers or any Subsidiary thereof; or (e) fail to report to the
Agent any "complete withdrawal" or "partial withdrawal" by the
Borrowers or an affiliate from a "multiemployer plan" (ERISA
Sec.Sec.4203, 4205, and 4001, respectively). The quoted terms are
defined in the respective sections of ERISA cited above.
9.11 Fiscal Year. The Borrowers and their
Subsidiaries shall not change their fiscal year without the prior
written consent of the Agent.
Section 10 Financial Covenants.
The Borrowers covenant and agree that so long as this
Agreement is in effect and until the Notes, together with all
interest thereon and all other Obligations of the Borrowers to
the Lenders are paid or satisfied in full:
10.1 Debt Coverage. The Borrowers will not permit the
ratio of Total Funded Debt to Adjusted EBITDA to exceed 2.5 to
1.0 during any four consecutive fiscal quarters, as determined at
the end of each fiscal quarter for the four quarters then ended.
10.2 Fixed Charges Coverage. The Borrowers will not
permit the ratio of Adjusted EBITDA to Fixed Charges during any
four consecutive fiscal quarters, as determined at the end of
each fiscal quarter for the four quarters then ended, to be less
than (i) 1.05 to 1.0 at the end of each fiscal quarter through
December 31, 1997, and (ii) 1.25 to 1.0 at the end of each fiscal
quarter thereafter.
10.3 Debt to Capital Ratio. The Borrowers will not
permit the ratio of Total Funded Debt to Capitalization to exceed
0.5 to 1.0 at any fiscal quarter end.
10.4 Current Ratio. The Borrowers will not permit the
ratio of Current Assets to Current Liabilities to be less than
1.35 to 1.0 at any fiscal quarter end.
10.5 Minimum Tangible Net Worth. The Borrowers shall
at all times maintain consolidated Tangible Net Worth of not less
than (i) $25,000,000, plus (ii) seventy-five percent (75%) of all
cumulative consolidated Net Income of the Borrowers following the
Closing Date, provided, that for purposes of this clause (ii)
only positive consolidated Net Income shall be included and any
net losses shall be disregarded, plus (iii) seventy-five percent
(75%) of the net proceeds of any public offering by any of the
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Borrowers of shares of capital stock of any of the Borrowers.
The level of Tangible Net Worth required under this Section 10.5
may be adjusted, for certain non-cash charges to the extent
incurred in connection with Permitted Acquisitions which are
identified to and approved by the Agent in writing.
Section 11 Events of Default.
11.1. Events of Default. The occurrence of any of the
following events shall be an "Event of Default" hereunder:
(a) The Borrowers shall default (i) in the due and
punctual payment of principal of any Loan; or (ii) in the
payment of interest on any Loan or in the payment of any
other amount due under any Loan Document and such Default
shall continue for more than five (5) Banking Days after
such payment was due; or
(b) Any representation, warranty or statement made
herein or any other Loan Document, or in any certificate or
statement furnished pursuant to or in connection herewith or
therewith, shall prove to be incorrect, misleading or
incomplete in any material respect on the date as of which
made or deemed made; or
(c) The Borrowers shall default in the performance or
observance of any term, covenant or agreement on its part to
be performed or observed pursuant to Sections 8.6, 8.10, 9
and 10 hereof; or
(d) The Borrowers shall default in the performance or
observance of any term, covenant or agreement on its part to
be performed or observed pursuant to any of the provisions
of this Agreement or any other Loan Document (other than
those referred to in paragraphs (a) through (c) above) and
such default shall continue unremedied for a period of
thirty (30) days after the earlier of (i) written notice of
such Default by the Agent or any Lender to any Borrower or
(ii) the date on which any of the Borrowers knew or should
have known of the occurrence of such Default; or
(e) Any obligation of the Borrowers or any of their
Subsidiaries in respect of any Indebtedness (other than the
Notes) or any Guarantee which involves an aggregate amount
in excess of $500,000 shall be declared to be or shall
become due and payable prior to the stated maturity thereof,
or such Indebtedness or Guarantee shall not be paid as and
when the same becomes due and payable, or there shall occur
and be continuing any default under any instrument,
agreement or evidence of indebtedness relating to any such
Indebtedness the effect of which is to permit the holder or
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holders of such instrument, agreement or evidence of
indebtedness, or a trustee, agent or other representative on
behalf of such holder or holders, to cause such Indebtedness
to become due prior to its stated maturity; or
(f) Any of the Borrowers or any of their Subsidiaries
thereof shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial
part of its property, (ii) make a general assignment for the
benefit of its creditors, (iii) commence a voluntary case
under the Bankruptcy Code, (iv) file a petition seeking to
take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or
readjustment of debts, (v) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the
Bankruptcy Code, or (vi) take any corporate action for the
purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without
the application or consent of any of the Borrowers or any of
their Subsidiaries in any court of competent jurisdiction,
seeking (i) its liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of its debts,
(ii) the appointment of a trustee, receiver, custodian,
liquidator or the like of any of the Borrowers or any of
their Subsidiaries or of all or any substantial part of its
assets, or (iii) similar relief in respect of any of the
Borrowers or any of their Subsidiaries under any law
relating to bankruptcy, insolvency, reorganization, winding-
up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in
effect, for a period of 60 days; or an order for relief
against any of the Borrowers or any of their Subsidiaries
shall be entered in an involuntary case under the Bankruptcy
Code; or
(h) a judgment or judgments for the payment of money
in excess of $500,000 (net of insurance proceeds) in the ag
gregate shall be rendered against the Borrowers or any of
their Subsidiaries and any such judgment or judgments shall
not have been vacated, discharged, stayed or bonded pending
appeal within thirty (30) days from the entry thereof; or
(i) The Borrowers or any member of the Controlled
Group shall fail to pay when due an amount or amounts
aggregating in excess of $500,000 which it is obligated to
pay to the PBGC or to a Plan under Title IV of ERISA; or a
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notice of intent to terminate a Plan or Plans having
aggregate Unfunded Liabilities in excess of $500,000 shall
be filed under Title IV of ERISA by the Borrowers or any
member of the Controlled Group, any plan administrator or
any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate
or to cause a trustee to be appointed to administer any such
Plan or Plans or a proceeding shall be instituted by a
fiduciary of any such Plan or Plans against the Borrowers or
any member of the Controlled Group to enforce Sections 515
or 4219(c)(5) of ERISA; or a condition shall exist by reason
of which the PBGC would be entitled to obtain a decree
adjudicating that any such Plan or Plans must be terminated;
or there shall occur a complete or partial withdrawal from,
or a default, within the meaning of Section 4219(c)(5) of
ERISA, with respect to, one or more Multiemployer Plans
which could cause the Borrowers or one or more members of
the Controlled Group to incur a current payment obligation
in excess of $500,000; or
(j) Any Security Instrument shall cease for any reason
to be in full force and effect or shall cease to be
effective to grant a perfected security interest in the
collateral described in such Security Instrument with the
priority stated to be granted thereby; or
(k) Either Principal shall cease, for any reason
(including, without limitation, resignation, removal or
death, to be an executive officer and director of the
Company unless a successor reasonably acceptable to the
Majority Lenders replaces such Principal within thirty days
after he shall have ceased to serve, provided, however, the
Event of Default described in this subparagraph (k) shall be
eliminated upon receipt by the Agent of reasonable evidence
that more than fifty percent (50%) of the voting stock of
the Company is not owned of record or beneficially by the
Principals, or any of their Affiliates.
11.2 Remedies Upon an Event of Default. If any Event
of Default shall have occurred and be continuing and all of the
Lenders consent thereto in writing, the Agent shall by notice (a)
declare the Commitments terminated (whereupon the Commitments
shall be terminated) and/or (b) declare the principal amount then
outstanding of, and the accrued interest on, the Loans and
commitment fees and all other amounts payable hereunder and under
the Notes to be forthwith due and payable, whereupon such amounts
shall be and become immediately due and payable, without further
notice (including, without limitation, notice of intent to
accelerate), presentment, demand, protest or other formalities of
any kind, all of which are hereby expressly waived by the
Borrowers; provided that in the case of the occurrence of an
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Event of Default with respect to the Borrowers referred to in
clauses (f) and (g) of Section 11.1, the Commitments shall be
automatically terminated and the principal amount then
outstanding of and the accrued interest on the Loans and
commitment fees and all other amounts payable hereunder and under
the Notes shall be and become automatically and immediately due
and payable, without notice (including, without limitation,
notice of intent to accelerate), presentment, demand, protest or
other formalities of any kind, all of which are hereby expressly
waived by the Borrowers.
Section 12. The Agent.
12.1. Appointment, Powers and Immunities. Each Lender
hereby irrevocably appoints and authorizes the Agent to act as
its agent hereunder and under the other Loan Documents with such
powers as are specifically delegated to the Agent by the terms
hereof and thereof, together with such other powers as are
reasonably incidental thereto. The Agent (which term as used in
this Section 12 shall include reference to its Affiliates and its
own and its Affiliates' officers, directors, employees and
agents): (a) shall have no duties or responsibilities except
those expressly set forth in this Agreement and the other Loan
Documents, and shall not by reason of this Agreement or any other
Loan Document be a trustee for any Lender; (b) shall not be
responsible to the Lenders for any recitals, statements,
representations or warranties contained in this Agreement or any
other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any of them under,
this Agreement or any other Loan Document, or for the value,
validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document or any
other document referred to or provided for herein or therein or
for any failure by the Borrowers or any other Person to perform
any of its obligations hereunder or thereunder; (c) shall not be
required to initiate or conduct any litigation or collection
proceedings hereunder or under any other Loan Document except to
the extent requested by the Majority Lenders, and (d) shall not
be responsible for any action taken or omitted to be taken by it
hereunder or under any other Loan Document or any other document
or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross
negligence or willful misconduct. The Agent may employ agents
and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care.
12.2. Reliance by Agent The Agent shall be entitled
to rely upon any certification, notice or other communication
(including any thereof by telephone, telex, telegram or cable)
believed by it to be genuine and correct and to have been signed
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or sent by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel, independent accountants
and other experts selected by the Agent. As to any matters not
expressly provided for by this Agreement or any other Loan
Document, the Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder and thereunder in
accordance with instructions signed by the Majority Lenders (or
if required by Section 13.1 hereof, by all of the Lenders), and
such instructions of the Majority Lenders and any action taken or
failure to act pursuant thereto shall be binding on all of the
Lenders.
12.3. Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default (other than the non-
payment of principal of or interest on Loans) unless the Agent
has received notice from a Lender or the Borrower specifying such
Default and stating that such notice is a "Notice of Default".
In the event that the Agent receives such a notice of the
occurrence of a Default, the Agent shall give prompt notice
thereof to the Lenders (and shall give each Lender prompt notice
of each such non-payment). The Agent shall (subject to Section
12.7 hereof) take such action with respect to such Default as
shall be directed by the Majority Lenders (or if required by
Section 13.1 hereof, by all of the Lenders), provided that,
unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default
as it shall deem advisable in the best interests of the Lenders.
12.4. Rights as a Lender. With respect to its
Commitments and the Loans made by it, Fleet in its capacity as a
Lender hereunder shall have the same rights and powers hereunder
as any other Lender and may exercise the same as though it were
not acting as the Agent, and the term "Lender" or "Lenders"
shall, unless the context otherwise indicates, include Fleet in
its individual capacity. The Agent may (without having to
account therefor to any Lender) accept deposits from, lend money
to and generally engage in any kind of banking, trust or other
business with the Borrowers (and any of their Affiliates) as if
it were not acting as the Agent, and the Agent may accept fees
and other consideration from the Borrowers (in addition to the
agency fees and arrangement fees heretofore agreed to between the
Borrowers and the Agent) for services in connection with this
Agreement or otherwise without having to account for the same to
the Lenders.
12.5. Events. The Lenders agree to indemnify the
Agent (to the extent not reimbursed under Section 13.5 hereof),
but without limiting the obligations of the Borrowers under said
Section 13.5, ratably in accordance with their respective
Commitments, for any and all liabilities, obligations, losses,
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damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in any way
relating to or arising out of this Agreement or any other Loan
Document or any other documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or
thereby (including, without limitation, the costs and expenses
which the Borrowers are obligated to pay under Section 13.5
hereof but excluding, unless a Default has occurred and is
continuing, normal administrative costs and expenses incident to
the performance of its agency duties hereunder) or the
enforcement of any of the terms hereof or thereof or of any such
other documents, provided that no Lender shall be liable for any
of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the party to be indemnified
and provided further that nothing in this Section 12.5 shall
require any Lender to reimburse the Agent for internal overhead.
12.6. Non-Reliance on Agent and Other Lenders. Each
Lender agrees that it has, independently and without reliance on
the Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit
analysis of the Borrowers and decision to enter into this
Agreement and that it will, independently and without reliance
upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not
taking action under this Agreement or any of the other Loan
Documents. The Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the performance or
observance by the Borrowers of this Agreement or any of the other
Loan Documents or any other document referred to or provided for
herein or therein or to inspect the properties or books of the
Borrowers. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by
the Agent hereunder or the other Loan Documents, the Agent shall
not have any duty or responsibility to provide any Lender with
any credit or other information concerning the affairs, financial
condition or business of the Borrowers (or any of its Affiliates)
which may come into the possession of the Agent.
12.7. Failure to Act. Except for action expressly
required of the Agent hereunder and under the other Loan
Documents, the Agent shall in all cases be fully justified in
failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction by the
Lenders of their indemnification obligations under Section 12.5
hereof against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such
action.
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12.8. Resignation of Agent. Subject to the
appointment and acceptance of a successor Agent as provided
below, the Agent may resign at any time by giving notice thereof
to the Lenders and the Borrowers. Upon any such resignation, the
Majority Lenders shall have the right to appoint a successor
Agent reasonably acceptable to the Borrowers. If no successor
Agent shall have been so appointed by the Majority Lenders and
shall have accepted such appointment within 30 days after the
retiring Agent's giving of notice of resignation (the "Notice
Date"), then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent reasonably acceptable to the Borrowers.
Any successor Agent shall be (i) a Lender or (ii) if no Lender
has accepted such appointment within 30 days after the Notice
Date, a bank which has an office in Boston, Massachusetts with a
combined capital and surplus of at least $200,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from
its duties and obligations hereunder. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Section 12
shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as
the Agent.
Section 13. General.
13.1. Amendments, Etc. No amendment or waiver of any
provision of this Agreement, the Notes or any other Loan
Document, nor consent to any departure by the Borrowers
therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Majority Lenders and the
Borrowers, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for
which given; provided that no amendment, waiver or consent shall,
unless in writing and signed by all the Lenders, do any of the
following: (i) increase any Commitment of any of the Lenders or
subject the Lenders to any additional obligations; (ii) reduce
the principal of, or interest on, any Loan or fees hereunder;
(iii) postpone any date fixed for any payment of principal of, or
interest on, any Loan, or fee hereunder; (iv) change any
provision contained in Sections 2.1, 2.2, 13.5 or this Section
13.1 hereof; (v) release any collateral under the Stock Pledge
Agreements as security for the Obligations of the Borrowers under
this Agreement or any Note;(vi) modify the definition of
"Majority Lenders" as set forth in Section 1.1; (vii) in those
provisions where consent or approval by the Majority Lenders is
required, eliminate the requirement of such consent or approval
or (viii) approve any Permitted Acquisition. Notwithstanding
anything in this Section 13.1 to the contrary, no amendment,
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waiver or consent shall be made with respect to Section 12
without the consent of the Agent.
13.2. Notices, Etc. Unless otherwise specified
herein, all notices hereunder to any party hereto shall be in
writing and shall be deemed to have been given when delivered by
hand, or when sent by electronic facsimile transmission or by
telex, answer back received, or on the first Banking Day after
delivery to any overnight delivery service, freight pre-paid, or
three days after being sent by certified or registered mail,
return receipt requested, postage pre-paid, and addressed to such
party at its address indicated on Schedule 2 hereto; or at any
other address specified by such party in writing except that
notices to the Agent pursuant to Section 4 shall not be effective
until received by the Agent.
13.3. No Waivers; Remedies. No failure on the part of
the Agent or the Lenders to exercise, and no delay in exercising,
any right hereunder or under the Notes or under any other Loan
Documents shall operate as a waiver thereof; nor shall any single
or partial exercise of any right hereunder, under the Notes or
under any other Loan Documents preclude any other or further
exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
13.4. Right of Set-off. (a) Upon the occurrence and
during the continuance of any Event of Default, each Lender is
hereby authorized at any time and from time to time, to the full
est extent permitted by law, to set-off and apply any and all
deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing
by such Lender to or for the credit or the account of the
Borrowers against any and all of the obligations of the Borrowers
now or hereafter existing under this Agreement, the Notes and any
other Loan Documents, irrespective of whether or not such Lender
shall have made any demand hereunder and although such
obligations may be contingent or unmatured.
(b) Each Lender agrees promptly to notify the
Borrowers, the Agent and the other Lenders after any such set-off
and application, provided that the failure to give such notice
shall not affect the validity of such set-off and application.
The rights of the Lenders under this Section 13.4 are in addition
to other rights and remedies (including, without limitation,
other rights of set-off) which the Lenders may have.
13.5. Expenses; Indemnification. (a) The Borrowers
shall pay on demand (i) the reasonable fees and disbursements of
counsel to the Agent in connection with the preparation of this
Agreement and the preparation or review of each agreement,
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opinion, certificate and other document referred to in or
delivered pursuant hereto; (ii) all reasonable out-of-pocket
costs and expenses of the Agent in connection with the
administration of this Agreement and the other Loan Documents,
and any waiver or amendment of any provision hereof or thereof,
including without limitation, the reasonable fees and
disbursements of counsel for the Agent; and (iii) if any Default
or Event of Default occurs, all reasonable costs and expenses
incurred by the Agent and the Lenders, including the reasonable
fees and disbursements of counsel to the Agent and the Lenders,
and of any field examiners, auditors, appraisers, environmental
engineers or consultants, or investment banking firms retained by
the Agent and the Lenders in connection with such Event of
Default or collection, bankruptcy, insolvency and other enforce
ment proceedings related thereto. The Borrowers agree to pay,
indemnify and hold the Agent and the Lenders harmless from, any
and all recording and filing fees, and any and all liabilities
with respect to, or resulting from any delay in paying, stamp,
excise or other taxes, if any, which may be payable or determined
to be payable in connection with the execution and delivery of or
the consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement
or the other Loan Documents, or any documents delivered pursuant
hereto or thereto (other than taxes on or measured by the net
income of the Agent or any Lender).
(b) The Borrowers agree to indemnify the Agent and the
Lenders and their respective officers and directors and hold the
Agent and the Lenders and their respective officers and directors
harmless from and against any and all liabilities, losses, dam
ages, reasonable costs and expenses of any kind (including,
without limitation, the reasonable fees and disbursements of
counsel for the Agent and the Lenders in connection with any
investigative, administrative or judicial proceeding initiated by
a third party, whether or not the Agent or any Lenders shall be
designated a party thereto) which may be incurred by the Agent or
any the Lender, relating to or arising out of this Agreement or
any other Loan Document, or the existence of any Hazardous
Substance on, in, or under any Borrower Group Property, or any
violation of any applicable Environmental Laws for which the
Borrowers or any Subsidiary thereof has any liability or which
occurs upon any Borrower Group Property, or the imposition of any
Lien under any Environmental Laws, provided that neither the
Agent nor any Lender shall have the right to be indemnified
hereunder for its own bad faith, gross negligence or willful
misconduct.
(c) The agreements in this Section 13.5 shall survive
the repayment of the Notes, and all other amounts payable under
this Agreement and the other Loan Documents.
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13.6. Successors and Assigns.
(a) This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and assigns except that the Borrowers may not assign their rights
or obligations hereunder or under the Notes without the prior
written consent of all of the Lenders.
(b) Upon the prior written consent of the Borrowers
and the Agent, which shall not be unreasonably withheld,
conditioned or delayed, and subject to the provisions of
subparagraph (d) below, a Lender may assign a portion of its
rights and obligations under this Agreement and the Notes to
another bank or financial institution. Any such assignee shall
execute an instrument in writing specifying such new Lender's
Commitments (and a reduction in Commitments of the existing
Lenders as a result thereof) in such manner as the Borrowers,
each of the Lenders and the Agent shall have agreed. Upon the
execution of such instrument (and the satisfaction of such
conditions and other terms as therein shall be specified), such
additional Lender or Lenders shall be deemed a "Lender" or
"Lenders" for the purposes of this Agreement and shall enjoy all
rights and assume all obligations on the part of the Lenders set
forth in this Agreement, and the Lenders whose Commitments are
then being reduced shall be released from their Commitments to
the extent of such reduction.
(c) Upon receipt of the prior written consent of the
Borrowers and the Agent, which consent shall not be unreasonably
withheld, conditioned or delayed, and subject to the provisions
of subparagraph (d) below, a Lender may sell participations in
all or any part of the Loans to another bank or financial
institution, in which event the participant shall not have any
rights under this Agreement, or in the case of a Loan, such
Lender's Note (the participant's rights against such Lender in
respect of such participation to be those set forth in the
agreement executed by such Lender in favor of the participants
relating thereto, which agreement shall not give the participant
the right to consent to any modification, amendment or waiver
other than those described in clauses (i), (ii), (iii) or (vi) of
Section 13.1).
(d) Notwithstanding anything to the contrary contained
herein, each assignment and participation shall be in an amount
not less than $5,000,000, and no assignment or sale of
participation shall result in any Lender having a remaining
Commitment of less than $5,000,000. Each Lender assigning its
rights and obligations hereunder shall pay an administrative fee
of $3,500 to the Agent at the time of each assignment. Each
Lender may furnish any information concerning the Borrowers,
their Subsidiaries and any other Loan Party in the possession of
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such Lender from time to time to assignees and participants
(including prospective assignees and participants). The Agent
and the Borrowers may, for all purposes of this Agreement, treat
any Lender as the holder of any Note drawn to its order (and
owner of the Loans evidenced thereby) until written notice of
assignment, participation or other transfer shall have been
received by them from such Lender.
13.7. Severability. Any provision of this Agreement
which is prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition, unenforceability or non-
authorization without invalidating the remaining provisions
hereof or affecting the validity, enforceability or legality of
such provision in any other jurisdiction.
13.8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS (WITHOUT REGARD TO CONFLICTS OF
LAWS RULES).
13.9. WAIVER OF JURY TRIAL. THE AGENT, THE LENDERS
AND THE BORROWERS AGREE THAT NONE OF THEM NOR ANY ASSIGNEE OR
SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING OUT OF,
THIS AGREEMENT, ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE
DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR (B)
SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE
PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE
AGENT, THE LENDERS AND THE BORROWERS, AND THESE PROVISIONS SHALL
BE SUBJECT TO NO EXCEPTIONS. NONE OF THE AGENT, THE LENDERS OR
THE BORROWERS HAS AGREED WITH OR REPRESENTED TO THE OTHERS THAT
THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN
ALL INSTANCES.
13.10. VENUE, CONSENT TO SERVICE OF PROCESS. THE
BORROWERS ACCEPT FOR THEMSELVES AND IN CONNECTION WITH THEIR
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION,
SUIT OR PROCEEDING OF ANY KIND AGAINST THEM WHICH ARISES OUT OF
OR BY REASON OF THIS AGREEMENT, THE NOTES, ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN
ADDITION TO ANY OTHER COURT IN WHICH SUCH ACTION, SUIT OR
PROCEEDING MAY BE BROUGHT, IRREVOCABLY AGREE TO BE BOUND BY ANY
FINAL JUDGMENT RENDERED BY ANY SUCH COURT IN ANY SUCH ACTION,
SUIT OR PROCEEDING IN WHICH THEY SHALL HAVE BEEN SERVED WITH
PROCESS IN THE MANNER HEREINAFTER PROVIDED, SUBJECT TO EXERCISE
AND EXHAUSTION OF ALL RIGHTS OF APPEAL AND TO THE EXTENT THAT
THEY MAY LAWFULLY DO SO, WAIVE AND AGREE NOT TO ASSERT, BY WAY OF
62
<PAGE>
MOTION, AS A DEFENSE OR OTHERWISE, IN SUCH ACTION, SUIT OR
PROCEEDING ANY CLAIMS THAT THEY ARE NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURT, THAT THEIR PROPERTY IS EXEMPT OR
IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE ACTION, SUIT OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE
THEREOF IS IMPROPER, AND AGREE THAT PROCESS MAY BE SERVED UPON
THEM IN ANY SUCH ACTION, SUIT OR PROCEEDING IN THE MANNER
PROVIDED BY CHAPTER 223A OF THE GENERAL LAWS OF MASSACHUSETTS,
RULE 4 OF THE MASSACHUSETTS RULES OF CIVIL PROCEDURE OR RULE 4 OF
THE FEDERAL RULES OF CIVIL PROCEDURE.
13.11. Headings. Section headings in this Agreement
are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
13.12. Counterparts. This Agreement may be signed in
one or more counterparts each of which shall constitute an
original and all of which taken together shall constitute one and
the same instrument.
13.13. Confidentiality. The Agent and each Lender
will keep confidential all Confidential Information (as defined
below) and will not, without the Company's consent, disclose the
same to any person other than to directors, officers, employees,
agents or other representatives (including attorneys, accountants
and financial advisers) of the Agent and each Lender or
prospective Lender who provides to the Borrowers a
confidentiality provision similar to that set forth in this
Section 13.13 or any of their respective Affiliates and other
than to any governmental agency or authority in accordance with
applicable laws, rules or regulations. As used herein, the term
"Confidential Information" shall mean only information prepared
by a Borrower and furnished to the Lenders or obtained by the
Lenders hereunder and which is identified as such (provided that
the Borrowers' proformas, projections and business plans shall be
deemed "Confidential Information" although not specifically
identified as such) and which (i) is not ascertainable or
obtained from public or published information or (ii) is not
known or does not become known to the public (other than through
a breach by the Agent or the Lenders of this Section).
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized as of the date first above
written.
THE VINCAM GROUP, INC.
By:/s/ STEPHEN L. WAECHTER
------------------------
Stephen L. Waechter
Chief Financial Officer
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF SUFFOLK
This 24 day of April, 1997, personally came before me
Stephen L. Waechter who, being by me duly sworn, says that he is
the Chief Financial Officer of THE VINCAM GROUP, INC., and that
the said writing was signed and sealed by him, in behalf of said
company, by its authority duly given. And the said Chief
Financial Officer acknowledged the said writing to be the act and
deed of said corporation.
/s/ NICOLE MARIE BELYTSCHKO
----------------------------
Notary Public
My Commission Expires:
February 14, 2003
- ------------------------
[NOTARIAL SEAL]
64
<PAGE>
VINCAM HUMAN RESOURCES, INC.
VINCAM HUMAN RESOURCES, INC. I
VINCAM HUMAN RESOURCES, INC. II
VINCAM HUMAN RESOURCES, INC. III
VINCAM HUMAN RESOURCES, INC. IV
VINCAM HUMAN RESOURCES, INC. V
VINCAM HUMAN RESOURCES, INC. VI
VINCAM HUMAN RESOURCES, INC. XII
VINCAM HUMAN RESOURCES OF
MICHIGAN, INC.
VINCAM OCCUPATIONAL HEALTH
SYSTEMS, INC.
PERSONNEL RESOURCES, INC.
VINCAM INSURANCE SERVICES, INC.
VINCAM PRACTICE MANAGEMENT, INC.
AMERICAN PEDIATRIC SYSTEMS, INC.
PSYCH/CARE, INC.
VINCAM/STAFF ADMINISTRATORS, INC.
VINCAM/STAFF ADMINISTRATORS OF
WESTERN COLORADO, INC.
STAFF ADMINISTRATORS OF CO, INC.
STAFF ADMINISTRATORS OF CALIFORNIA,
INC.
By:/s/ STEPHEN L. WAECHTER
------------------------
Stephen L. Waechter
Chief Financial Officer
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF SUFFOLK
This 24 day of April, 1997, personally came before me
Stephen L. Waechter who, being by me duly sworn, says that he is
the Chief Financial Officer of each of VINCAM HUMAN RESOURCES,
INC., VINCAM HUMAN RESOURCES, INC. I, VINCAM HUMAN RESOURCES,
INC. II, VINCAM HUMAN RESOURCES, INC. III, VINCAM HUMAN
RESOURCES, INC. IV, VINCAM HUMAN RESOURCES, INC. V, VINCAM HUMAN
RESOURCES, INC. VI, VINCAM HUMAN RESOURCES, INC. XII, VINCAM
HUMAN RESOURCES OF MICHIGAN, INC., VINCAM OCCUPATIONAL HEALTH
SYSTEMS, INC., PERSONNEL RESOURCES, INC., VINCAM INSURANCE
SERVICES, INC., VINCAM PRACTICE MANAGEMENT, INC., AMERICAN
PEDIATRIC SYSTEMS, INC., PSYCH/CARE, INC., VINCAM/STAFF
ADMINISTRATORS, INC., VINCAM/STAFF ADMINISTRATORS OF WESTERN
COLORADO, INC., STAFF ADMINISTRATORS OF CO, INC., STAFF
ADMINISTRATORS OF CALIFORNIA, INC., and that the said writing was
signed and sealed by him, in behalf of said companies, by their
authority duly given. And the said Chief Financial Officer
65
<PAGE>
acknowledged the said writing to be the act and deed of each of
the said corporations.
/s/ NICOLE MARIE BELYTSCHKO
----------------------------
Notary Public
My Commission Expires:
February 14, 2003
- ----------------------
[NOTARIAL SEAL]
FLEET NATIONAL BANK, Individually
and as Agent
By:/s/ GINGER C. STOLZENTHALER
----------------------------
Ginger C. Stolzenthaler
Vice President
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF SUFFOLK
This 24 day of April, 1997, personally came before me
Ginger C. Stolzenthaler who, being by me duly sworn, says that
she is the Vice President of Fleet National Bank, and that the
said writing was signed and sealed by her, in behalf of said
bank, by its authority duly given. And the said Vice President
acknowledged the said writing to be the act and deed of said
bank.
/s/ NICOLE MARIE BELYTSCHKO
----------------------------
Notary Public
My Commission Expires:
February 14, 2003
- ---------------------
[NOTARIAL SEAL]
66
<PAGE>
NATIONSBANK, N.A. (SOUTH)
By:/s/ ALEX J. ABREU
--------------------------
Alex J. Abreu
Senior Vice President
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF SUFFOLK
This 24 day of April, 1997, personally came before me
Alex J. Abreu who, being by me duly sworn, says that he is the
Senior Vice President of NationsBank, N.A. (South), and that the
said writing was signed and sealed by him, in behalf of said
bank, by its authority duly given. And the said Senior Vice
President acknowledged the said writing to be the act and deed of
said bank.
/s/ NICOLE MARIE BELYTSCHKO
----------------------------
Notary Public
My Commission Expires:
February 14, 2003
- ----------------------
[NOTARIAL SEAL]
67
<PAGE>
SUNTRUST BANK, MIAMI, N.A.
By:/s/ JANET P. SAMMONS
-----------------------
Name: Jamet P. Sammons
Title Vice President
State of Geargia
County of Fulton SS.
This 23 day of April, 1997, personally came before me
Janet P. Sammons who, being by me duly sworn, says that he/she is
the Vice President of SunTrust Bank, Miami, N.A., and that
the said writing was signed and sealed by him/her, in behalf of
said bank, by its authority duly given. And the said
Janet P. Sammons acknowledged the said writing to be the act and
deed of said bank.
/s/ Illegible
----------------
Notary Public
My Commission Expires:
Notary Public, Cayton County, Georgia
My Commission Expires November 1, 1998
- --------------------------------------
[NOTARIAL SEAL]
68
<PAGE>
Schedule 1
Applicable Margin
Total Debt/
Adjusted Prime Rate Eurodollar Commitment
EBITDA Ratio Loans Loans Fee
less than 2.5:
1.0 and greater
than or equal to
2.0:1.0 .25% 1.75% 0.35%
less than 2.0:
1.0 and greater
than or equal to
1.5:1.0 0 1.50% 0.30%
less than 1.5:
1.0 and greater
than or equal to
1.0:1.0 0 1.25% 0.25%
less than 1.0:1.0 0 1.00% 0.20%
69
<PAGE>
Schedule 2
Commitments
Lender Commitment
Fleet National Bank $20,000,000
75 State Street
Boston, MA 02109-1810
NationsBank, N.A. (South) $15,000,000
100 Southeast Second Street
15th Floor
Miami, FL 33131
SunTrust Bank, Miami, N.A. $15,000,000
777 Brickell Avenue
Miami, FL 33131
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<PAGE>
Exhibit A
FORM OF NOTE
$_____________ April __, 1997
For value received, the undersigned corporations (each such
corporation is hereafter referred to individually as a "Borrower"
and collectively as the "Borrowers"), jointly and severally
promise to pay to ____________ (the "Lender") at the office of
Fleet National Bank, as Agent, located at 75 State Street,
Boston, Massachusetts 02109-1810, or to its order, the lesser of
___________ ($_________) or the outstanding principal amount of
the Loans (as defined in the Credit Agreement referred to below)
advanced by the Lender to the Borrowers pursuant to the Credit
Agreement, on the Revolver Maturity Date (as defined in the
Credit Agreement), provided that if no Default shall have
occurred and be continuing and all of the conditions set forth in
Section 6 of the Credit Agreement shall have been satisfied on
and as of the Revolver Maturity Date, then the unpaid balance
hereof shall be payable in installments and at the times provided
in the Credit Agreement with the entire unpaid balance hereof
being due and payable in full on May 1, 2002, together with
interest on the principal amount hereof from time to time
outstanding at the rates provided in the Credit Agreement.
This promissory note evidences borrowings of Revolving
Credit Loans under, is subject to the terms and conditions of and
has been issued by the Borrowers pursuant to that certain Credit
Agreement of even date herewith by and among the Borrowers and
certain financial institutions named therein, including the
Lender (as the same may be further amended, modified or
supplemented from time to time, the "Credit Agreement"), and is
subject to optional and mandatory prepayment as provided therein,
and is entitled to the benefits thereof and of the other Loan
Documents referred to therein. This Note is secured by the
Security Instruments referenced in the Credit Agreement.
All capitalized terms used in this Note and not otherwise
defined herein shall have the same meanings herein as in the
Credit Agreement.
Upon the occurrence and during the continuance of any Event
of Default, the principal amount then outstanding of and the
accrued interest on the advances under this Note and all other
amounts payable under this Note shall become immediately due and
payable, in the manner and with the effect provided in the Credit
Agreement.
The Lender shall keep a record of the amount, the Type and
the date of the making of each Loan pursuant to the Credit
Agreement and each payment of principal with respect thereto by
maintaining a computerized or other record of such information,
-1-
<PAGE>
which computerized or other record, and the printouts thereof,
shall constitute prima facie evidence of the accuracy of the
information so maintained.
The undersigned jointly and severally agree to pay all
reasonable costs and expenses of the Lender (including, without
limitation, the reasonable fees and expenses of attorneys) in
connection with the enforcement of this Note and the other Loan
Documents and the preservation of its rights hereunder and
thereunder.
No delay or omission on the part of the Lender in exercising
any right hereunder shall operate as a waiver of such right or of
any other right of the Lender, nor shall any delay, omission or
waiver on any one occasion be deemed a bar to or waiver of the
same or any other right on any future occasion. Each Borrower
and every endorser or guarantor of this Note regardless of the
time, order or place of signing waives presentment, demand,
protest and notices of every kind and assents to any one or more
extensions or postponements of the time of payment or any other
indulgences, to any substitutions, exchanges or releases of
collateral for this Note, and to the additions or releases of any
other parties or persons primarily or secondarily liable.
EACH BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY NOW
OR HEREAFTER HAVE TO A JURY TRIAL IN ANY SUIT, ACTION OR
PROCEEDING WHICH ARISES OUT OF OR BY REASON OF THIS NOTE, ANY
LOAN DOCUMENT (AS DEFINED IN THE CREDIT AGREEMENT), OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
BY ITS EXECUTION AND DELIVERY OF THIS NOTE, EACH BORROWER
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT OR PROCEEDING
OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
NOTE, ANY LOAN DOCUMENT (AS DEFINED IN THE CREDIT AGREEMENT), OR
THE TRANSACTIONS CONTEMPLATED HEREBY, IN ADDITION TO ANY OTHER
COURT IN WHICH SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT,
IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT RENDERED BY
ANY SUCH COURT IN ANY SUCH ACTION, SUIT OR PROCEEDING IN WHICH IT
SHALL HAVE BEEN SERVED WITH PROCESS IN THE MANNER HEREINAFTER
PROVIDED, SUBJECT TO EXERCISE AND EXHAUSTION OF ALL RIGHTS OF
APPEAL AND TO THE EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES AND
AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR
OTHERWISE, IN SUCH ACTION, SUIT OR PROCEEDING ANY CLAIMS THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT
ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION,
THAT THE ACTION, SUIT OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM OR THAT THE VENUE THEREOF IS IMPROPER, AND AGREES THAT
PROCESS MAY BE SERVED UPON IT IN ANY SUCH ACTION, SUIT OR
PROCEEDING IN THE MANNER PROVIDED BY CHAPTER 223A OF THE GENERAL
-2-
<PAGE>
LAWS OF MASSACHUSETTS, RULE 4 OF THE MASSACHUSETTS RULES OF CIVIL
PROCEDURE OR RULE 4 OF THE FEDERAL RULES OF CIVIL PROCEDURE.
ALL RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE GOVERNED BY
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REGARD TO
CONFLICTS OF LAWS RULES) AND THIS NOTE SHALL BE DEEMED TO BE
UNDER SEAL.
THE VINCAM GROUP, INC.
By:________________________________
Name:
Title:
VINCAM HUMAN RESOURCES, INC.
VINCAM HUMAN RESOURCES, INC. I
VINCAM HUMAN RESOURCES, INC. II
VINCAM HUMAN RESOURCES, INC. III
VINCAM HUMAN RESOURCES, INC. IV
VINCAM HUMAN RESOURCES, INC. V
VINCAM HUMAN RESOURCES, INC. VI
VINCAM HUMAN RESOURCES, INC. XII
VINCAM HUMAN RESOURCES OF
MICHIGAN, INC.
VINCAM OCCUPATIONAL HEALTH
SYSTEMS, INC.
PERSONNEL RESOURCES, INC.
VINCAM INSURANCE SERVICES, INC.
VINCAM PRACTICE MANAGEMENT, INC.
AMERICAN PEDIATRIC SYSTEMS, INC.
PSYCH/CARE, INC.
VINCAM/STAFF ADMINISTRATORS, INC.
VINCAM/STAFF ADMINISTRATORS OF
WESTERN COLORADO, INC.
STAFF ADMINISTRATORS OF CO, INC.
STAFF ADMINISTRATORS OF CALIFORNIA,
INC.
By:___________________________
Name:
Title:
F:\AYU\FLEET\NOTE.:4/4/97
-3-
<PAGE>
Exhibit B
STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT dated as of April __, 1997, between
_____________, a ___________ corporation (the "Company") and FLEET
NATIONAL BANK, a national banking association with its head office
at Fleet Center, 75 State Street, Boston, Massachusetts 02109-1810,
as agent (in such capacity, the "Agent") for the Lenders under (and
as defined in) the Credit Agreement referred to and defined below.
W I T N E S S E T H :
WHEREAS, the Company has entered into that certain Credit
Agreement, dated the date hereof, among the Company, each of the
subsidiaries of the Company party thereto (together with the
Company, the "Borrowers"), the Agent and the Lenders (as the same
may be amended, modified, supplemented, extended or restated from
time to time, the "Credit Agreement"), pursuant to and subject to
the terms and conditions of which the Lenders have agreed to make
advances to the Borrowers and/or issue letters of credit for the
account of the Borrowers;
WHEREAS, the Company is the legal and beneficial owner of the
shares of Pledged Stock (as hereinafter defined) issued by the
Issuers (as hereinafter defined); and
WHEREAS, it is a condition precedent to the obligations of the
Lenders to make advances to the Borrowers and to issue letters of
credit for the account of the Borrowers under the Credit Agreement
that, among other things, the Company shall have granted to the
Agent a continuing security interest in and to the Collateral (as
hereafter defined) to secure its obligations under the Credit
Agreement, including, without limitation, its obligations under the
Notes (as defined by reference below);
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Definitions. Terms defined in the Credit Agreement
and not otherwise defined herein have, as used herein, the
respective meanings provided for therein. The following additional
terms, as used herein, have the following respective meanings:
"Collateral" means the Pledged Stock and all Proceeds.
"Issuers" means each of the Subsidiaries of the Company
listed on Schedule I hereto and each other Subsidiary of any
Borrower formed or acquired subsequent to the date hereof.
"Pledge Agreement" means this Stock Pledge Agreement, as
amended, supplemented or otherwise modified from time to time.
-1-
<PAGE>
"Pledged Stock" means the shares of capital stock of the
Issuers listed on Schedule I hereto and all other shares of
capital stock of any other Issuer pledged to the Agent
subsequent to the date hereof, together with all stock
certificates, options or rights of any nature whatsoever which
may be issued or granted by the Issuers in respect of the
Pledged Stock while this Pledge Agreement is in effect.
"Proceeds" means all "proceeds" as such term is defined
in Section 9-306 of the UCC and, in any event, shall include,
without limitation, all dividends or other income from the
Pledged Stock, collections thereon or distributions with
respect thereto.
"Secured Obligations" means all obligations of the
Borrowers to the Agent and the Lenders, whether such
obligations are now existing or hereafter incurred or created,
joint or several, direct or indirect, absolute or contingent,
due or to become due, matured or unmatured, liquidated or
unliquidated, arising by contract, operation of law or
otherwise, in respect of (a) all Obligations (as defined in
the Credit Agreement), (b) all principal of and interest
(including, without limitation, any interest which accrues
after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of
any Borrower) on any advance to the Borrowers under, or the
Notes issued by the Borrowers pursuant to, the Credit
Agreement; (c) all other amounts (including, without
limitation, any fees or expenses) payable by Borrowers under
the Loan Documents; (d) all amounts payable to the Agent in
connection with the issuance of any letter of credit by the
Agent for the account of any Borrower or any drawing
thereunder, including, without limitation, any reimbursement
obligation and letter of credit fees payable under any letter
of credit application or reimbursement agreement executed by
any Borrower in connection with any such letter of credit;
(e) all other amounts payable by the Company hereunder; and
(f) any renewals, refinancings or extensions of any of the
foregoing.
"UCC" means the Uniform Commercial Code as in effect on
the date hereof in The Commonwealth of Massachusetts.
2. Pledge; Grant of Security Interest. The Company
hereby delivers to the Agent all the Pledged Stock listed on
Schedule I, and hereby agrees to deliver all other shares of
Pledged Stock which the Company or any other Borrower acquires
subsequent to the date hereof, and hereby grants to the Agent a
first security interest in the Collateral, as collateral security
for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of
the Secured Obligations.
-2-
<PAGE>
3. Stock Powers. Concurrently with the delivery to the
Agent of each certificate representing one or more shares of the
Pledged Stock, the Company shall deliver an undated stock power
covering such certificate, duly executed in blank with, if the
Agent so requests, signature guaranteed.
4. Representations and Warranties. The Company
represents and warrants that:
(a) the shares of Pledged Stock constitute all the
issued and outstanding shares of all classes of the capital
stock of each of the Issuers;
(b) all the shares of the Pledged Stock have been duly
and validly issued and are fully paid and nonassessable;
(c) the Company is the record and beneficial owner of,
and has good and marketable title to, the Pledged Stock, free
of any and all Liens or options in favor of, or claims of, any
other Person, except the Lien created by this Pledge
Agreement; and
(d) upon delivery to the Agent of the stock certificates
evidencing the Pledged Stock, the Lien granted pursuant to
this Pledge Agreement will constitute a valid, perfected first
priority Lien on the Collateral, enforceable as such against
all creditors of the Company and any Persons purporting to
purchase any Collateral from the Company.
5. Covenants. The Company covenants and agrees with
the Agent that, from and after the date of this Pledge Agreement
until the Secured Obligations are paid in full and the Commitment
is terminated:
(a) If any Borrower shall, as a result of its ownership
of the Pledged Stock, become entitled to receive or shall
receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or a distribu
tion in connection with any reclassification, increase or
reduction of capital or any certificate issued in connection
with any reorganization), option or rights, whether in addi
tion to, in substitution of, as a conversion of, or in
exchange for any shares of the Pledged Stock, or otherwise in
respect thereof, such Borrower shall accept the same as the
Agent's agent, hold the same in trust for the Agent and
deliver the same forthwith to the Agent in the exact form
received, duly indorsed by such Borrower to the Agent, if
required, together with an undated stock power covering such
certificate duly executed in blank and with, if the Agent so
requests, signature guaranteed, to be held by the Agent
hereunder as additional collateral security for the Secured
Obligations. Any sums paid upon or in respect of the Pledged
Stock upon the liquidation or dissolution of any Issuer shall
be paid over to the Agent to be held by it hereunder as ad
ditional collateral security for the Secured Obligations, and
in case any distribution of capital shall be made on or in
respect of the Pledged Stock or any property shall be
distributed upon or with respect to the Pledged Stock pursuant
to the recapitalization or reclassification of the capital of
any Issuer or pursuant to the reorganization thereof, the
property so distributed shall be delivered to the Agent to be
held by it, subject to the terms hereof, as additional
collateral security for the Secured Obligations. If any sums
of money or property so paid or distributed in respect of the
Pledged Stock shall be received by the Company, the Company
shall, until such money or property is paid or delivered to
the Agent, hold such money or property in trust for the Agent,
segregated from other funds of the Company, as additional
collateral security for the Secured Obligations.
(b) Without the prior written consent of the Agent, the
Company will not (i) vote to enable, or take any other action
to permit, any Issuer to issue any stock or other equity
securities of any nature or to issue any other securities
convertible into or granting the right to purchase or exchange
for any stock or other equity securities of such Issuer, or
(ii) sell, assign, transfer, exchange or otherwise dispose of,
or grant any option with respect to, the Collateral, or
(iii) create, incur or permit to exist any Lien or option in
favor of, or any claim of any Person with respect to, any of
the Collateral, or any interest therein, except for the Lien
provided for by this Pledge Agreement. The Company will
defend the right, title and interest of the Agent in and to
the Collateral against the claims and demands of all Persons
whomsoever.
(c) At any time and from time to time, upon the written
request of the Agent, and at the sole expense of the Company,
the Company will promptly and duly execute and deliver such
further instruments and documents and take such further ac
tions as the Agent may reasonably request for the purposes of
obtaining or preserving the full benefits of this Pledge
Agreement and of the rights and powers herein granted. If any
amount payable under or in connection with any of the
Collateral shall be or become evidenced by any promissory
note, other instrument or chattel paper, such note, instrument
or chattel paper shall be immediately delivered to the Agent,
duly endorsed in a manner satisfactory to the Agent, to be
held as Collateral pursuant to this Pledge Agreement.
(d) The Company agrees to pay, and to save the Agent and
the Lenders harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all
stamp, excise, sales or other taxes (other than taxes on or
measured by the net income of the Agent ) which may be payable
or determined to be payable with respect to any of the Col
lateral or in connection with any of the transactions
contemplated by this Pledge Agreement.
-3-
<PAGE>
6. Record Ownership of Pledged Stock. If an Event of
Default shall have occurred and be continuing, the Agent shall have
the right to cause any or all of the Pledged Stock to be
transferred of record into the name of the Agent or its nominee, by
written notice to the Company, subject to obtaining any required
Governmental Approvals. The Company will promptly give to the
Agent copies of any notices or other communications received by it
with respect to Pledged Stock registered in the name of the Company
and the Agent will promptly give to the Company copies of any
notices and communications received by the Agent with respect to
Pledged Stock registered in the name of the Agent or its nominee.
7. Right to Receive Distributions on Collateral. The
Agent shall have the right to receive and, during the continuance
of any Event of Default, to retain as Collateral hereunder all
dividends, interest and other payments and distributions made upon
or with respect to the Collateral and the Company shall take all
such action as the Agent may deem necessary or appropriate to give
effect to such right. All such dividends, interest and other
payments and distributions which are received by the Company shall
be received in trust for the benefit of the Agent and, if the Agent
so directs during the continuance of an Event of Default, shall be
segregated from other funds of the Company and shall, forthwith
upon demand by the Agent during the continuance of an Event of
Default, be paid over to the Agent as Collateral in the same form
as received (with any necessary endorsement).
8. Right to Vote Pledged Stock. Unless an Event of
Default shall have occurred and be continuing, the Company shall
have the right, from time to time, to vote and to give consents,
ratifications and waivers with respect to the Pledged Stock, and
the Agent shall, upon receiving a written request from the Company
accompanied by a certificate signed by its principal financial
officer stating that no Event of Default has occurred and is
continuing, deliver to the Company, or as specified in such
request, such proxies, powers of attorney, consents, ratifications
and waivers in respect of any of the Pledged Stock which is
registered in the name of the Agent or its nominee as shall be
specified in such request and be in the form and substance
satisfactory to the Agent.
If an Event of Default shall have occurred and be
continuing, the Agent shall have the right (to the extent permitted
by law), upon written notice to the Company, to vote and to give
consents, ratifications and waivers, and take any other action with
respect to any or all of the Pledged Stock with the same force and
effect as if the Agent were the absolute and sole owner thereof,
and the Company shall take all such action as may be necessary or
appropriate to give effect to such right.
9. Remedies. If an Event of Default shall occur and be
continuing, the Agent may exercise, in addition to all other rights
and remedies granted in this Pledge Agreement and in any other
instrument or agreement securing, evidencing or relating to the
-4-
<PAGE>
Secured Obligations, all rights and remedies of a secured party
under the UCC. Without limiting the generality of the foregoing,
the Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except
any notice required by law referred to below) to or upon the
Company, any Issuer or any other Person (all and each of which
demands, defenses, advertisements and notices are hereby waived),
may in such circumstances forthwith collect, receive, appropriate
and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, give option or options to purchase or
otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, in the over-the-counter market, at
any exchange, broker's board or office of the Agent or elsewhere
upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. The Agent shall
have the right upon any such public sale or sales, and to the
extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Company, which right or
equity is hereby waived or released. The Agent shall apply any
Proceeds from time to time held by it and the net proceeds of any
such collection, recovery, receipt, appropriation, realization or
sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the care or safekeeping of
any of the Collateral or in any way relating to the Collateral or
the rights of the Agent hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment in
whole or in part of the Secured Obligations, in such order as the
Agent may elect, and only after such application and after the
payment by the Agent of any other amount required by any provision
of law, including, without limitation, Section 9-504(1)(c) of the
UCC, need the Agent account for the surplus, if any, to the
Company. To the extent permitted by applicable law, the Company
waives all claims, damages and demands it may acquire against the
Agent arising out of the exercise by the Agent of any of its rights
hereunder. If any notice of a proposed sale or other disposition
of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or
other disposition. The Company shall remain liable for any
deficiency if the proceeds of any sale or other disposition of
Collateral are insufficient to pay the Secured Obligations and the
fees and disbursements of any attorneys employed by the Agent to
collect such deficiency. The Company further waives and agrees not
to assert any rights or privileges which it may acquire under
Section 9-112 of the UCC. The rights of the Agent under this
paragraph 9 are subject, in each case, to compliance with
applicable laws.
10. Private Sales. (a) The Company recognizes that the
Agent may be unable to effect a public sale of any or all of the
Pledged Stock, by reason of certain prohibitions contained in the
Securities Act of 1933, as amended, and applicable state securities
-5-
<PAGE>
laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which
will be obliged to agree, among other things, to acquire such
securities for their own account for investment and not with a view
to the distribution or resale thereof. The Company acknowledges
and agrees that any such private sale may result in prices and
other terms less favorable to the Agent than if such sale were a
public sale and, notwithstanding such circumstances, agrees that
any such private sale shall be deemed to have been made in a
commercially reasonable manner. The Agent shall be under no
obligation to delay a sale of any of the Pledged Stock for the
period of time necessary to permit the Issuers to register such
securities for public sale under the Securities Act, or under
applicable state securities laws, even if the Issuers would agree
to do so.
(b) The Company further agrees to use its best efforts
to do or cause to be done all such other acts as may be necessary
to make any sale or sales of all or any portion of the Pledged
Stock pursuant to this paragraph 10 valid and binding and in
compliance with any and all other applicable requirements of law.
The Company further agrees that a breach of any of the covenants
contained in this paragraph 10 will cause irreparable injury to the
Agent, that the Agent has no adequate remedy at law in respect of
such breach and, as a consequence, that each and every covenant
contained in this paragraph 10 shall be specifically enforceable
against the Company, and the Company hereby waives and agrees not
to assert any defenses against an action for specific performance
of such covenants except for a defense that no Event of Default has
occurred under the Credit Agreement.
11. No Subrogation. Notwithstanding any payment or
payments made by the Company hereunder, or any setoff or applica
tion of funds of the Company by the Agent, or the receipt of any
amounts by the Agent with respect to any of the Collateral, the
Company shall not be entitled to be subrogated to any of the rights
of the Agent against the Issuers or against any other collateral
security held by the Agent for the payment of the Secured
Obligations, nor shall the Company seek any reimbursement from the
Issuers in respect of payments made by the Company in connection
with the Collateral, or amounts realized by the Agent in connection
with the Collateral, until all amounts owing to the Agent by the
Borrowers on account of the Secured Obligations are paid in full
and the Commitment is terminated. If any amount shall be paid to
the Company on account of such subrogation rights at any time when
all of the Secured Obligations shall not have been paid in full,
such amount shall be held by the Company in trust for the Agent,
segregated from other funds of the Company, and shall, forthwith
upon receipt by the Company, be turned over to the Agent in the
exact form received by the Company (duly indorsed by the Company to
the Agent, if required), to be applied against the Secured
Obligations, whether matured or unmatured, in such order as the
Agent may determine.
-6-
<PAGE>
12. Amendments, etc. with respect to the Secured
Obligations. The Company shall remain obligated hereunder, and the
Collateral shall remain subject to the Lien granted hereby,
notwithstanding that, without any reservation of rights against the
Company, and without notice to or further assent by the Company,
any demand for payment of any of the Secured Obligations made by
the Agent may be rescinded by the Agent, and any of the Secured
Obligations continued, and the Secured Obligations, or the
liability of the Issuers or any other Person upon or for any part
thereof, or any collateral security or guarantee therefor or right
of offset with respect thereto, may, from time to time, in whole or
in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the Agent, and the
Credit Agreement, the Notes and any other Loan Document may be
amended, modified, supplemented or terminated, in whole or in part,
as the Agent may deem advisable from time to time, and any
guarantee, right of offset or other collateral at any time held by
the Agent for the payment of the Secured Obligations may be sold,
exchanged, waived, surrendered or released. The Agent shall have
no obligation to protect, secure, perfect or insure any other Lien
at any time held by it as security for the Secured Obligations or
any property subject thereto. The Company waives any and all
notice of the creation, renewal, extension or accrual of any of the
Secured Obligations and notice of or proof of reliance by the Agent
upon this Pledge Agreement; the Secured Obligations, and any of
them, shall conclusively be deemed to have been created, contracted
or incurred in reliance upon this Pledge Agreement; and all
dealings between the Issuers, the Company and the Agent shall
likewise be conclusively presumed to have been had or consummated
in reliance upon this Pledge Agreement. The Company waives
diligence, presentment, protest, demand for payment and notice of
default or nonpayment to or upon the Issuers or the Company with
respect to the Secured Obligations.
13. Limitation on Duties Regarding Collateral. The
Agent's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under
Section 9-207 of the UCC or otherwise, shall be to deal with it in
the same manner as the Agent deals with similar securities and
property for its own account. Neither the Agent nor any of its
directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon any of the Collateral or
for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the
Company or otherwise.
14. Powers Coupled with an Interest. All authorizations
and agencies herein contained with respect to the Collateral are
irrevocable and powers coupled with an interest.
15. Severability. Any provision of this Pledge Agree
ment which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the
-7-
<PAGE>
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
16. Paragraph Headings. The paragraph headings used in
this Pledge Agreement are for convenience of reference only and are
not to affect the construction hereof or be taken into
consideration in the interpretation hereof.
17. No Waiver; Cumulative Remedies. The Agent shall not
by any act (except by a written instrument pursuant to paragraph 18
hereof), delay, indulgence, omission or otherwise be deemed to have
waived any right or remedy hereunder or to have acquiesced in any
Default or in any breach of any of the terms and conditions hereof.
No failure to exercise, nor any delay in exercising, on the part of
the Agent, any right, power or privilege hereunder shall operate as
a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Agent of any right or remedy hereunder
on any one occasion shall not be construed as a bar to any right or
remedy which the Agent would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any
rights or remedies provided by law.
18. Waivers and Amendments; Successors and Assigns;
Governing Law. None of the terms or provisions of this Pledge
Agreement may be waived, amended, supplemented or otherwise
modified except by a written instrument executed by the Company and
the Agent, provided that any provision of this Pledge Agreement may
be waived by the Agent in a letter or agreement executed by the
Agent or by facsimile transmission from the Agent. This Pledge
Agreement shall be binding upon the successors and assigns of the
Company and shall inure to the benefit of the Agent and its
successors and assigns. This Pledge Agreement shall be governed
by, and construed and interpreted in accordance with, the laws of
The Commonwealth of Massachusetts.
19. Notices. All notices, approvals, requests, demands,
and other communications hereunder shall be given in accordance
with the Credit Agreement.
20. Irrevocable Authorization and Instruction to Issuer.
The Company hereby authorizes and instructs each Issuer to comply
with any instruction received by it from the Agent in writing that
(a) states that an Event of Default has occurred and (b) is
otherwise in accordance with the terms of this Pledge Agreement,
without any other or further instructions from the Company, and the
Company agrees that each Issuer shall be fully protected in so
complying.
21. MASSACHUSETTS LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF
-8-
<PAGE>
MASSACHUSETTS (WITHOUT REGARD TO CONFLICTS OF LAWS RULES), EXCEPT
AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO
THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION
OTHER THAN THE COMMONWEALTH OF MASSACHUSETTS ARE GOVERNED BY THE
LAWS OF SUCH JURISDICTION.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
_____________________________
By:__________________________
Name:
Title:
FLEET NATIONAL BANK, as Agent
By:__________________________
Ginger C. Stolzenthaler
Vice President
-9-
<PAGE>
ACKNOWLEDGMENT AND CONSENT
Each Issuer referred to in the foregoing Pledge Agreement
hereby acknowledges receipt of a copy thereof and agrees to be
bound thereby and to comply with the terms thereof insofar as such
terms are applicable to it. Each Issuer agrees to notify the Agent
promptly in writing of the occurrence of any of the events
described in paragraph 5(a) of the Pledge Agreement.
_____________________________
By:__________________________
Name:
Title:
<PAGE>
SCHEDULE I
To Stock Pledge
Agreement
DESCRIPTION OF PLEDGED STOCK
Class of Stock*/
Issuer No. of Shares Stock Certificate No.
*/ Common unless otherwise indicated
F:\DJW\FBMA14\PLEGEXHI.BIT:3/28/97
<PAGE>
Exhibit C
COMPLIANCE CERTIFICATE
TO: Fleet National Bank, as Agent
75 State Street
Boston, Massachusetts 02109
The undersigned Responsible Officer of The Vincam Group,
Inc., a Florida corporation (the "Company"), and each of the
subsidiaries of the Company (together with the Company, the
"Borrowers"), hereby certifies, with respect to the Credit
Agreement dated as of April __, 1997, among Fleet National Bank
(the "Agent"), certain financial institutions named therein and
the Borrowers, as amended through the date hereof (the "Credit
Agreement"), that (a) the Borrower has been in complete
compliance for the period from __/__/____ to __/__/____ (the
"Applicable Financial Statements Date") with the covenants of the
Borrowers contained therein, as demonstrated below, and (b) no
Default has occurred and is continuing as of the date hereof,
except, in either case, as noted below. All capitalized terms
used herein and not otherwise defined shall have the meanings
prescribed therefor in the Credit Agreement.
COVENANT REQUIRED ACTUAL AS OF
________ __, ___
Financial Statements Quarterly w/in 45
days; and annually
w/in 120 days
All documents filed Within 10 days after
with SEC filing
Maximum Ratio of 2.5:1 at the end of __.__:1
Total Funded Debt to any fiscal quarter ($__________ to
Adjusted EBITDA for the prior four $__________)
consecutive fiscal
quarters
-1-
<PAGE>
Minimum Ratio of 1.05:1 at the end of __.__:1
Adjusted EBITDA to each fiscal quarter ($__________ to
Fixed Charges through 12/31/97 and $__________)
then 1.25:1, at the
end of each fiscal
quarter thereafter,
in each case, for
the prior four
consecutive fiscal
quarters
Maximum Ratio of 0.5:1 at the end of __.__:1
Total Funded Debt to any fiscal quarter ($__________ to
Capitalization $__________)
Minimum Ratio of 1.35:1 at the end of __.__:1
Current Assets to any fiscal quarter ($__________ to
Current Liabilities $__________)
Minimum Tangible Net Required pursuant to $____________
Worth Section 10.5 of the
Credit Agreement:
$__________1
Comments Regarding Exceptions:
Attached hereto are financial statements as of and for the
fiscal [quarter] [year] ended on the Applicable Financial
Statements Date, which have been certified by the [undersigned]
[and Accountants] as required by Section [6.1(g)] [8.5] of the
Credit Agreement.
Submitted by:
_________________________
Name:____________________
Title:___________________
Date:____________________
- --------
1 Insert amount equal to sum of (i) $25,000,000, plus (ii)
seventy-five percent (75%) of all cumulative consolidated
Net Income of the Borrowers following the Closing Date,
provided, that for purposes of this clause (ii), only
positive consolidated Net Income shall be included and any
net losses shall be disregarded, plus (iii) seventy-five
percent (75%) of the net proceeds of any public offering by
any of the Borrowers of shares of capital stock of any of
the Borrowers. Such amount may be adjusted pursuant to
terms of the Credit Agreement with the written approval of
the Agent.
-2-
F:\AYU\FLEET\CREDIT9.AGM:12/13/95
<PAGE>
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
THE VINCAM GROUP, INC.
CALCULATION OF NET INCOME PER COMMON
AND COMMON EQUIVALENT SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net income $ 1,317,059 $ 339,689
============ ============
Weighted average number of common shares
outstanding during the period 8,525,776 6,458,089
Assumed exercise of stock options, net of
treasury shares acquired 528,048 462,208
Issuance of mandatorily redeemable preferred
stock deemed a common stock equivalent -- 1,043,933
------------ ------------
Weighted average number of shares used in
earnings per share calculation 9,053,823 6,982,207
============ ============
Net income per common and common
equivalent share $ 0.15 $ 0.05
============ ============
Fully diluted net income per common
and common equivalent share * $ 0.15 $ 0.05
============ ============
</TABLE>
- ------------------------------
* In accordance with the provisions of the Accounting Principles Board
Opinion No. 15, Earnings per Share, fully diluted net income per common and
common equivalent share is not presented in the Company's consolidated
statements of income due to the fact that the aggregated dilution from the
Company's common stock equivalents outstanding during each of the periods
presented is less than 3%.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE VINCAM GROUP, INC. FOR THE THREE MONTHS
ENDED MARCH 31, 1997 INCLUDED IN FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 14,426,709
<SECURITIES> 318,764
<RECEIVABLES> 26,927,518
<ALLOWANCES> 287,945
<INVENTORY> 0
<CURRENT-ASSETS> 52,031,995
<PP&E> 7,180,980
<DEPRECIATION> 1,726,042
<TOTAL-ASSETS> 66,788,580
<CURRENT-LIABILITIES> 30,498,831
<BONDS> 0
0
0
<COMMON> 8,574
<OTHER-SE> 32,570,398
<TOTAL-LIABILITY-AND-EQUITY> 66,788,580
<SALES> 170,075,503
<TOTAL-REVENUES> 170,075,503
<CGS> 0
<TOTAL-COSTS> 159,317,476
<OTHER-EXPENSES> 8,893,869
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,055,059
<INCOME-TAX> 738,000
<INCOME-CONTINUING> 1,317,059
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,317,059
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
</TABLE>
