SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] 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 000-23147
OUTSOURCE INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
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FLORIDA 65-0675628
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(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
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1144 East Newport Center Drive, Deerfield Beach, Florida 33442
--------------------------------------------------------------
(Address of Principal Executive Offices, Zip Code)
Registrant's Telephone Number, Including Area Code: (954) 418-6200
Indicate 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
-- --
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes_____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Outstanding at August 12, 1998
----- ------------------------------
Common Stock, par value $.001 per share 8,657,913
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OUTSOURCE INTERNATIONAL, INC.
INDEX
PART I - FINANCIAL INFORMATION
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Page
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Item 1 - Financial Statements
Consolidated Balance Sheets as of June 30, 1998 and
December 31, 1997....................................................................... 2
Consolidated Statements of Income for the three and six months
ended June 30, 1998 and 1997............................................................ 3
Consolidated Statements of Shareholders' Equity (Deficit) for
the six months ended June 30, 1998 and 1997 ............................................ 4
Consolidated Statements of Cash Flows for the six months
ended June 30, 1998 and 1997............................................................ 5
Notes to Consolidated Financial Statements.............................................. 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................................................. 13
PART II - OTHER INFORMATION
Item 2 - Changes in Securities and Use of Proceeds........................................................ 24
Item 4 - Submission of Matters to a Vote of Security Holders.............................................. 24
Item 5 - Other Information ............................................................................... 25
Item 6 - Exhibits and Reports on Form 8-K................................................................. 25
Signatures................................................................................................ 27
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1
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
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OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
1998 1997
------------ -----------
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ASSETS
CURRENT ASSETS:
Cash ................................................................... $ 2,007,089 $ 1,685,474
Trade accounts receivable, net of allowance for doubtful accounts of
$1,666,686 and $1,639,767............................................. 52,770,989 47,297,608
Funding advances to franchises.......................................... 1,194,561 2,186,150
Deferred income taxes and other current assets.......................... 5,538,001 5,909,960
------------- ------------
Total current assets................................................. 61,510,640 57,079,192
PROPERTY AND EQUIPMENT, net............................................. 16,422,289 14,953,118
GOODWILL AND OTHER INTANGIBLE ASSETS, net............................... 65,337,953 30,426,731
OTHER ASSETS............................................................ 4,136,758 3,283,817
------------- ------------
Total assets......................................................... $147,407,640 $105,742,858
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable........................................................ $ 4,009,543 $ 1,498,275
Accrued expenses:
Payroll............................................................ 9,660,886 5,382,295
Payroll taxes...................................................... 4,229,023 2,181,722
Workers' compensation and insurance................................ 9,976,261 9,086,007
Other.............................................................. 1,441,761 1,863,666
Other current liabilities............................................... 1,314,016 907,975
Current maturities of long-term debt to related parties................. 517,665 100,000
Current maturities of other long-term debt.............................. 6,040,237 2,408,060
------------- ------------
Total current liabilities............................................ 37,189,392 23,428,000
NON-CURRENT LIABILITIES:
Revolving credit facility............................................... 54,502,265 33,800,000
Long-term debt to related parties, less current maturities.............. 1,021,066 -
Other long-term debt, less current maturities........................... 11,371,475 7,736,981
------------- ------------
Total liabilities.................................................... 104,084,198 64,964,981
------------- ------------
COMMITMENTS AND CONTINGENCIES (NOTES 2, 4 AND 8)
SHAREHOLDERS' EQUITY:
Preferred stock, $.001 par value; 10,000,000 shares authorized, none
issued................................................................ - -
Common stock, $.001 par value; 100,000,000 shares authorized;
8,657,913 and 8,448,788 issued and outstanding at June 30, 1998
and December 31, 1997................................................. 8,658 8,449
Additional paid-in capital ............................................. 53,978,107 53,200,988
Retained earnings (deficit)............................................. (10,663,323) (12,431,560)
------------- ------------
Total shareholders' equity........................................... 43,323,442 40,777,877
------------- ------------
Total liabilities and shareholders' equity........................... $147,407,640 $105,742,858
============= ============
</TABLE>
See notes to consolidated financial statements.
2
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<TABLE>
<CAPTION>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the three months ended For the six months ended
--------------------------------------------------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues......................................... $ 134,795,907 $ 107,823,178 $ 255,782,294 $ 193,197,372
Cost of revenues..................................... 113,519,631 91,599,151 216,467,878 165,838,360
--------------- -------------- ---------------- --------------
Gross profit......................................... 21,276,276 16,224,027 39,314,416 27,359,012
--------------- -------------- ---------------- --------------
Selling, general and administrative expenses:
Shareholders' compensation..................... - - - 292,001
Amortization of intangible assets ............. 976,528 562,467 1,721,842 892,573
Other selling, general and administrative...... 17,388,562 13,439,262 32,764,479 23,376,689
--------------- ------------- ------------- ------------
Total selling, general and administrative
expenses ................................ 18,365,090 14,001,729 34,486,321 24,561,263
--------------- -------------- ---------------- --------------
Operating income .................................... 2,911,186 2,222,298 4,828,095 2,797,749
--------------- -------------- ---------------- --------------
Other expense:
Interest expense (net)......................... 1,437,758 2,186,055 2,517,276 3,512,885
Put warrants valuation adjustment.............. - 3,127,234 - 1,243,952
Other expense (income)......................... (33,042) 43,570 (38,568) (24,979)
-------------- -------------- ---------------- --------------
Total other expense........................ 1,404,716 5,356,859 2,478,708 4,731,858
--------------- -------------- ---------------- --------------
Income (loss) before provision (benefit) for
income taxes ...................................... 1,506,470 (3,134,561) 2,349,387 (1,934,109)
Provision (benefit) for income taxes................. 411,389 (387,375) 581,150 (793,584)
--------------- -------------- ---------------- --------------
Net income (loss)................................... $ 1,095,081 $ (2,747,186) $ 1,768,237 $ (1,140,525)
=============== =============== ================ ==============
Pro forma data:
Income (loss) before provision (benefit)
for income taxes................................... $ 1,506,470 $ (3,134,561) $ 2,349,387 $ (1,934,109)
Provision (benefit) for income taxes................. 411,389 (434,000) 581,150 (467,000)
--------------- -------------- ---------------- --------------
Net income (loss).................................... $ 1,095,081 $ (2,700,561) $ 1,768,237 $ (1,467,109)
=============== ============== ================ ==============
Weighted average common shares:
Basic............................................ 8,609,155 5,448,788 8,546,856 5,543,583
=============== ============== ================ ==============
Diluted.......................................... 10,120,871 5,448,788 10,077,485 5,543,583
=============== ============== ================ ==============
Earnings (loss) per share:
Basic............................................ $ 0.13 $ (0.50) $ 0.21 $ (0.26)
=============== ============== ================ ==============
Diluted.......................................... $ 0.11 $ (0.50) $ 0.18 $ (0.26)
=============== ============== ================ ==============
</TABLE>
See notes to consolidated financial statements.
3
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OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
Additional Retained
Common Paid-In Earnings
Stock Capital (Deficit) Total
----- ------- --------- -----
<S> <C> <C> <C> <C>
Balance, December 31, 1997................................. $ 8,449 $53,200,988 $ (12,431,560) $40,777,877
Issuance of common stock................................... 58 774,942 - 775,000
Exercise of Warrants....................................... 151 2,177 - 2,328
Net income for the six months ended June 30, 1998.......... - - 1,768,237 1,768,237
-------- ------------ -------------- -------------
Balance, June 30, 1998 .................................... $ 8,658 $53,978,107 $(10,663,323) $43,323,442
======== ============ ============== =============
Balance, December 31, 1996................................. $ 5,785 $ 95,315 $ 4,394,125 $ 4,495,225
Net loss for the period from January 1, 1997
through February 21, 1997................................ - - (172,497) (172,497)
Distributions and other payments in connection with the
Reorganization........................................... (336) (11,879,636) (4,221,628) (16,101,600)
Contribution of notes payable by shareholders.............. - 4,300,000 - 4,300,000
Net loss for the period from February 22, 1997
through June 30, 1997..................................... - - (968,028) (968,028)
-------- ------------ -------------- --------------
Balance, June 30, 1997 .................................... $ 5,449 $ (7,484,321) $ (968,028) $ (8,446,900)
======== ============ ============== ==============
</TABLE>
See notes to consolidated financial statements.
4
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OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the six months ended
---------------------------------
June 30, June 30,
1998 1997
---------------------------------
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................. $ 1,768,237 $ (1,140,525)
Adjustments to reconcile net income (loss) to net cash............
provided by (used in) operating activities:
Depreciation and amortization................................... 3,149,977 1,877,072
Amortization of debt discount & issuance costs.................. - 430,050
Put warrants valuation adjustment............................... - 1,243,952
Deferred income taxes........................................... 595,324 (1,525,978)
Loss on disposal of property and equipment...................... - 2,686
Changes in assets and liabilities (excluding effects of acquisitions):
(Increase) decrease in:
Trade accounts receivable.................................. (3,081,292) (14,317,696)
Prepaid expenses and other current assets.................. (66,453) (137,862)
Other assets............................................... 852 (1,509,066)
Increase (decrease) in:
Accounts payable........................................... (416,808) 333,720
Accrued expenses:
Payroll.................................................. 4,031,591 1,062,198
Payroll taxes............................................ 1,846,778 956,820
Workers' compensation and insurance...................... 811,254 1,950,814
Other.................................................... (421,905) 2,303,691
Other current liabilities.................................. (395,842) (1,113,974)
--------------- -------------
Net cash provided by (used in) operating activities..... 7,821,713 (9,584,098)
--------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Funding repayments from franchises, net.......................... 991,589 547,134
Property and equipment expenditures.............................. (2,494,946) (1,804,708)
Expenditures for acquisitions.................................... (26,891,603) (21,385,000)
--------------- -------------
Net cash used in investing activities.................... (28,394,960) (22,642,574)
--------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in excess of outstanding checks over
bank balance, included in accounts payable..................... 2,888,839 973,227
Net proceeds from line of credit and
revolving credit facility...................................... 20,702,265 25,225,078
Related party borrowings (repayments)............................ (229,315) 1,844,179
Proceeds of senior notes and put warrants, net of
issuance costs................................................. - 22,614,984
Repayment of long-term debt...................................... (2,469,255) (2,940,371)
Repayments in connection with the Reorganization................. - (14,356,600)
Exercise of warrants............................................. 2,328 -
---------------- -------------
Net cash provided by financing activities................ 20,894,862 33,360,497
---------------- -------------
Net increase in cash............................................. 321,615 1,133,825
Cash, beginning of period........................................ 1,685,474 44,790
---------------- -------------
Cash, end of period.............................................. $ 2,007,089 $ 1,178,615
================ =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid.................................................... $ 2,391,339 $ 1,973,998
================ =============
</TABLE>
See notes to consolidated financial statements.
5
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OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
The interim consolidated financial statements and the related
information in these notes as of June 30, 1998 and for the three and six months
ended June 30, 1998 and 1997 are unaudited. Such interim consolidated financial
statements have been prepared on the same basis as the audited consolidated
financial statements and, in the opinion of management, reflect all adjustments
(including normal accruals) necessary for a fair presentation of the financial
position, results of operations and cash flows for the interim periods
presented. The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the full year. The
interim financial statements should be read in conjunction with the audited
financial statements for the year ended December 31, 1997, included in the
Company's Form 10-K/A filed with the Securities and Exchange Commission on April
2, 1998.
In June 1997, Statement of Financial Accounting Standards ("SFAS") No.
131, "Disclosures about Segments of an Enterprise and Related Information," was
issued. SFAS No. 131 establishes standards for the way that public companies
report selected information about operating segments in annual financial
statements and requires that those companies report selected information about
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. SFAS No. 131 is effective for financial
statements for periods beginning after December 15, 1997, although interim
period application is not required. The Company has not determined the effects,
if any, that SFAS No. 131 will have on the disclosures in its consolidated
financial statements.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued. SFAS No. 133 defines derivatives and establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS No. 133 also requires that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting. SFAS No.
133 is effective for all fiscal quarters of fiscal years beginning after June
15, 1999, and cannot be applied retroactively. The Company intends to first
implement SFAS No. 133 in its consolidated financial statements as of and for
the three months ended March 31, 2000, although it has not determined the
effects, if any, that implementation will have. However, SFAS No. 133 could
increase volatility in earnings and other comprehensive income.
NOTE 2. ACQUISITIONS
During the first quarter of 1998, the Company purchased the franchise
rights for a total of six flexible staffing locations from Freuhling and
Jackson, Inc., F.J.R. Enterprises, Inc., EJ Services, Inc. and EAZY Temporary,
Inc., and converted these locations to Company-owned locations. The total
purchase price was $5,531,050, with $3,365,525 paid at closing and notes issued
for $2,165,525, payable over two years plus interest at 6.0% per annum (imputed
at 8.75% for financial statement purposes). The principal amount due under one
of these notes may increase or decrease by an amount not to exceed $250,000,
based on the gross profit from the acquired locations for the year following the
acquisition.
During the first quarter of 1998, the Company purchased flexible
staffing operations with a total of 18 locations from Tempus, Inc. and Grafton,
Inc. (none previously affiliated with the Company). The total purchase price was
$4,835,000, with $3,335,000 paid at closing plus a $1,500,000 note payable over
two years plus interest at 6.5% per annum (imputed at 8.75% for financial
statement purposes). The principal amount due under the note may decrease by up
to $300,000, based on the 1997 gross profit of the acquired locations.
Immediately following the acquisition from Tempus, Inc., the Company sold four
of the acquired locations to Cruel Dave Enterprises, LLC (a franchisee of the
Company) in exchange for the issuance of a $780,000 note, payable over five
years plus interest at 8.0% per annum.
6
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OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
NOTE 2. ACQUISITIONS (CONTINUED)
During the first quarter of 1998, the Company purchased 100% of the
common stock of Employment Consultants, Inc., X-Tra Help, Inc. and Co-Staff,
Inc. (none previously affiliated with the Company), which were flexible staffing
operations with a total of four locations. The total purchase price (which
includes $2,100,000 for the excess of net tangible assets over liabilities
assumed) was $11,259,500, with $7,509,500 in cash and $775,000 in the Company's
common stock (57,809 shares) delivered at closing. The remainder of the purchase
price was satisfied by the issuance of notes totaling $2,975,000 and payable
over two years plus interest at 6.0% per annum (imputed at 8.75% for financial
statement purposes). However, one of the notes may increase without limit or
decrease by up to $875,000 based on the gross profit from the acquired locations
for the two years following the acquisition. For example, in the event gross
profit for those two years was equal to 1997 gross profit, the note would
decrease by approximately $125,000 or, in the event gross profit increased by
25% in each of those two years as compared to the prior year, the note would
increase by approximately $150,000. Certain sellers received options to purchase
a total of 6,000 shares of the Company's common stock at fair market value on
the date of issuance. Such options were issued January 31, 1998 and were still
outstanding at June 30, 1998.
Effective February 16, 1998, the Company purchased the franchise rights
for four flexible staffing locations from LM Investors, Inc. and converted these
locations to Company-owned locations. The shareholders of the franchises are
shareholders of the Company but do not hold a controlling interest in the
Company. The purchase price was $6,800,000, with $5,000,000 paid in cash at
closing plus the issuance of a note for $1,700,000 bearing interest at 7.25% per
annum (imputed at 8.75% for financial statement purposes) and payable quarterly
over three years. The remaining $100,000 of purchase price represents the
Company's assumption of the seller's liabilities under certain employment
contracts. In addition in the event the sellers wish to terminate their
remaining franchise agreements (representing four flexible staffing locations)
with the Company, the Company has agreed to concessions amounting to
approximately $60,000 and agreements not to compete (except by acquisition) of
up to six months after the applicable franchise termination date. See Note 4
regarding options for certain franchise territories granted in connection with
this transaction.
During the second quarter of 1998 the Company purchased the franchise
rights for a total of five flexible staffing locations from Deb-Lar, Inc., BLM
Enterprises, Inc. and Century Investors, Inc., and converted these locations to
Company-owned locations. The total purchase price was $1,634,904, with
$1,040,000 paid at closing and notes issued for $594,904, payable over two years
plus interest at 6.0% per annum (imputed at 8.75% for financial statement
purposes).
During the second quarter of 1998 the Company purchased flexible
staffing operations with a total of five locations from Pro Select, Inc., Ready
Help, Inc., Mid-West Temps, Inc. and Resource Dimensions, Inc. (none previously
affiliated with the Company). The total purchase price was $9,406,800, with
$7,096,800 paid in cash at closing (which included $946,800 placed in escrow)
plus notes issued for $2,110,000, payable over a nineteen and one half month
period plus interest at 6.0% per annum (imputed at 8.75% for financial statement
purposes). Payment of the remaining $200,000 is contingent primarily upon the
gross profit of one of the acquired locations for the twelve months following
the acquisition. The escrowed portion is payable to one of the sellers
approximately fourteen months after closing, less any portion paid to the
Company as compensation for any losses resulting from certain breaches of one of
the asset purchase agreements. The Company is obligated for an additional
payment to one of the sellers equivalent to any increase in the amount of gross
profit of the locations acquired from such seller for the twelve months ending
May 31, 1999, as compared to the greater of a contractually defined amount or
the gross profit of those locations for the twelve months ended March 31, 1998.
The above acquisitions have been accounted for as purchases. The
results of operations of the acquired businesses are included in the Company's
consolidated statements of income from the effective date of acquisition. The
additional payments based on future gross profit of certain acquired businesses
are not contingent on the continued employment of the sellers. Such additional
amounts, if paid, will be recorded as additional purchase price and increase
goodwill. The above purchase prices are stated before adjustments to reflect
imputed interest on acquisition financing and do not include acquisition related
professional fees and other costs capitalized as additional purchase price.
7
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OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
NOTE 2. ACQUISITIONS (CONTINUED)
The costs of each acquisition have been allocated to the assets
acquired and liabilities assumed based on their fair values on the date of
acquisition as determined by management with the assistance of an independent
valuation consultant. The costs of the acquisitions in 1998 have been allocated
on a preliminary basis while the Company obtains final information regarding the
fair value of assets acquired and liabilities assumed Although the allocation
and amortization periods are subject to adjustment, the Company does not expect
that such adjustments will have a material effect on its consolidated financial
statements.
The following unaudited pro forma results of operations have been
prepared assuming the acquisitions described above as well as the acquisitions
completed by the Company during 1997 (and described in the Company's audited
consolidated financial statements for that year), had occurred as of the
beginning of the periods presented, including adjustments to the historical
financial statements for additional amortization of intangible assets, increased
interest on borrowings to finance the acquisitions and discontinuance of certain
compensation previously paid by the acquired businesses to their shareholders.
The unaudited pro forma operating results are not necessarily indicative of
operating results that would have occurred had these acquisitions been
consummated as of the beginning of the periods presented, or of future operating
results. In certain cases, the operating results for periods prior to the
acquisition are based on (a) unaudited financial statements provided by the
seller or (b) an estimate of revenues, cost of revenues and/or selling, general
and administrative expenses based on information provided by the seller or
otherwise available to the Company. In these cases, the Company has made a
reasonable attempt to obtain the most complete and reliable financial
information and believes that the financial information it used is reasonably
accurate, although the Company has not independently verified such information.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Unaudited pro forma:
Net revenues............................... $137,795,242 $128,509,139 $ 272,194,010 $ 242,471,436
Operating income........................... 3,344,739 3,295,597 5,963,388 4,870,660
Income (loss) before provision (benefit)
for income taxes......................... 1,807,843 (3,114,408) 2,855,259 (2,429,055)
Net income (loss).......................... 1,282,746 (2,857,588) 2,051,165 (1,635,471)
</TABLE>
The following unaudited pro forma information, as adjusted, has been
prepared on the same basis as the preceding data and also reflects the pro forma
adjustment for income taxes and weighted average shares outstanding as discussed
in Note 7, except that the number of weighted average shares has been increased
by 57,809 basic and diluted shares for the three and six months ended June 30,
1997, and 9,901 basic and 10,088 diluted shares for the three and six months
ended June 30, 1998, in order to reflect adjustments for (i) the calculation of
proceeds from the exercise of warrants associated with certain debt utilized to
finance the above acquisitions as well as the acquisitions completed by the
Company during 1997 (and described in the Company's audited consolidated
financial statements for that year) and (ii) the timing of the issuance of
common stock and options in connection with those acquisitions:
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Unaudited pro forma, as adjusted:
Income (loss) before provision (benefit) for
income taxes............................. $ 1,807,843 $(3,114,408) $2,855,259 $(2,429,055)
Pro forma provision (benefit) for income taxes 525,097 (379,063) 804,095 (542,618)
------------- ----------- --------- -----------
Pro forma net income (loss)................ $ 1,282,746 $(2,735,345) $2,051,164 $(1,886,437)
============= =========== ========== ===========
Weighted average common shares outstanding:
Basic.................................. 8,609,155 5,506,597 8,556,757 5,601,392
============= ============ ========== ===========
Diluted................................ 10,120,871 5,506,597 10,087,573 5,601,392
============= ============ ========== ===========
Earnings (loss) per share:
Basic.................................. $ 0.15 $ (0.50) $ 0.24 $ (0.34)
============= =========== =========== ===========
Diluted................................ $ 0.13 $ (0.50) $ 0.20 $ (0.34)
============= =========== =========== ===========
</TABLE>
8
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OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
NOTE 2. ACQUISITIONS (CONTINUED)
Goodwill and other intangible assets consist of the following:
<TABLE>
<CAPTION>
As of As of
June 30, 1998 December 31, 1997
---------------------- -----------------
<S> <C> <C>
Goodwill.................................................... $30,809,451 $11,940,120
Territory rights............................................ 26,119,026 14,729,752
Customer lists.............................................. 9,899,827 4,672,178
Covenants not to compete.................................... 2,141,151 1,204,841
Employee lists.............................................. 406,979 196,479
------------ -------------
Goodwill and other intangible assets........................ 69,376,434 32,743,370
Less accumulated amortization............................... 4,038,481 2,316,639
------------ -------------
Goodwill and other intangible assets, net $65,337,953 $30,426,731
============ =============
</TABLE>
NOTE 3. INCOME TAXES
The Company's effective tax rate for the three and six months ended
June 30, 1998 differed from the statutory federal rate of 35%, as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, 1998 Six Months Ended June 30, 1998
-------------------------------- ------------------------------
Amount Rate Amount Rate
------ ---- ------ ----
<S> <C> <C> <C> <C>
Statutory rate applied to income before income taxes $ 527,265 35.0% $ 822,286 35.0%
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal benefit........ 77,991 5.2 127,505 5.4
Employment tax credits............................ (246,658) (16.4) (450,251) (19.2)
Other............................................. 52,791 3.5 81,610 3.4
--------- ------- ---------- ----
Total............................................. $ 411,389 27.3% $ 581,150 24.6%
========= ======= ========== ====
</TABLE>
NOTE 4. COMMITMENTS AND CONTINGENCIES
The Company is involved in litigation with regards to one of the
service marks used in its operations. Although this matter is in very
preliminary stages, the Company believes that an adverse decision in the case
would not have a material adverse effect on its financial condition or results
of operations.
Pursuant to the terms of a now inactive 401(k) plan (containing
previous contributions still managed by the Company), highly compensated
employees were not eligible to participate. However, as a result of
administrative errors in 1996 and prior years, some highly compensated employees
were permitted to make elective salary deferral contributions. The Company has
sought IRS approval regarding the proposed correction under the Voluntary
Closing Agreement Program ("VCAP"). There will be a penalty payable by the
Company, associated with a correction under the VCAP, although the Company
believes this penalty will be insignificant.
During the first quarter of 1998 and in connection with the Company's
acquisition of certain franchise rights from LM Investors, Inc. (see Note 2),
the Company granted one of the principals of the sellers (and a minority
shareholder in the Company) the exclusive option to purchase franchise rights in
five specifically identified geographic areas. These options pire at various
times from 12 to 42 months after the February 1998 acquisition date.
9
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
NOTE 4. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In February 1998, the Company entered into an interest rate collar
agreement with BankBoston, N.A., which involves the exchange of fixed and
floating rate interest payments periodically over the life of the agreement
without the exchange of the underlying principal amounts. The differential to be
paid or received is accrued as interest rates change and is recognized over the
life of the agreement as an adjustment to interest expense. The agreement is a
five year notional $42.5 million interest rate collar, whereby the Company
receives interest on that notional amount to the extent 30 day LIBOR exceeds
6.25% per annum, and pays interest on that amount to the extent 30 day LIBOR is
less than 5.43% per annum. This derivative financial instrument is being used by
the Company to reduce interest rate volatility and the associated risks arising
from the floating rate structure of its revolving credit facility, and is not
held or issued for trading purposes. The Company believes that unrealized gains
or losses related to the instrument are immaterial.
During April 1998, the Company entered into an employment agreement
with its new Chief Financial Officer, in addition to the employment agreements
already existing with the Chief Executive Officer ("CEO") and five other
officers. Under the terms of those agreements, in the event that the Company
terminates any of those officers without cause or the officer resigns for good
reason, the terminated officer will receive, among other things, severance
compensation, including a multiple of the officer's annual base salary and
bonus. In addition, all incentive stock options become immediately exercisable.
Similar severance provisions apply if any of those officers is terminated within
two years (three years for the CEO) after the occurrence of a "change of
control", as defined in the employment agreements.
During January 1998, the Company granted options to purchase 265,646
shares of the Company's common stock, with an exercise price of $13.88 per
share, equal to the public market price of the shares at the grant date. 89,896
of those options vested immediately upon grant. During March 1998, the Company
granted options to purchase 71,700 shares of the Company's common stock, with an
exercise price of $18.88 per share, equal to the public market price of the
shares at the grant date. During May 1998, the Company granted options to
purchase 93,375 shares of the Company's common stock, with the exercise prices
ranging from $19.50 to $20.13 per share, equal to the public market price of the
shares at the grant date. In August 1998, the Company cancelled and reissued
75,000 of these options with exercise prices ranging from $10.38 to $13.88 per
share, all such exercise prices in excess of the public market price of the
shares at the new grant date. During June 1998 the Company granted options to
purchase 4,432 shares of the Company's common stock, with an exercise price of
$16.75 per share, equal to the public market price of the shares at the grant
date. During August 1998, the Company granted options to purchase 43,500 shares
of the Company's common stock with an exercise price of $7.25 per share, equal
to the public market price of the shares at the grant date. All options vest
over a four year period, unless otherwise indicated.
Effective February 21, 1997, the Company acquired all of the
outstanding capital stock of nine companies under common ownership and
management, in exchange for shares of the Company's common stock and
distribution of previously undistributed taxable earnings of those nine
companies (the "Reorganization"). That distribution is subject to adjustment
based upon the final determination of taxable income through February 21, 1997.
10
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
NOTE 5. SUPPLEMENTAL INFORMATION ON NONCASH INVESTING AND FINANCING ACTIVITIES
The consolidated statements of cash flows do not include the following
noncash investing and financing transactions, except for the net cash paid for
acquisitions:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1998 1997
---- ----
<S> <C> <C>
Acquisitions:
Tangible and intangible assets acquired......... $ 40,438,218 $ 25,067,375
Liabilities assumed............................. (1,367,643) ( 54,455)
Debt issued..................................... (11,403,972) (3,627,920)
Common stock issued............................. (775,000) -
--------------- --------------
Net cash paid for acquisitions.................... $ 26,891,603 $ 21,385,000
=============== ==============
Increase in property and equipment and long-term
debt, primarily capitalized leases............. $ - $ 720,815
=============== ==============
Debt to shareholders for distributions
and amounts in connection with the
Reorganization................................. $ - $ 1,745,000
=============== ==============
Shareholders' contribution to
additional paid-in capital in
connection with the Reorganization............. $ - $ 4,300,000
=============== ==============
</TABLE>
NOTE 6. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) includes all changes in equity during a
period, except those changes in equity resulting from investment by owners and
distribution to owners. Comprehensive income (loss) totaled $1,095,081 and
$(2,747,186) for the three months ended June 30, 1998 and 1997, respectively,
and $1,768,237 and $(1,140,525) for the six months ended June 30, 1998 and 1997,
respectively, and consists solely of the Company's net income (loss) for the
respective periods.
NOTE 7. PRO FORMA DATA
Pro forma net income includes adjustments made to historical net income
for pro forma income taxes computed as if the Company had been fully subject to
federal and applicable state income taxes. The Company calculates pro forma
earnings per share in accordance with the requirements of SFAS No. 128,
"Earnings Per Share".
The pro forma weighted average shares outstanding (8,609,155 and
8,546,856, respectively, for the three and six months ended June 30, 1998 and
5,448,788 and 5,543,583, respectively, for the three and six months ended June
30, 1997) used to calculate pro forma basic earnings per share includes (a) the
5,448,788 shares of common stock issued in connection with the Reorganization
and (b) for the periods prior to the Reorganization, the equivalent number of
shares (-0- for the three months ended June 30, 1997 and 94,795 for the six
months ended June 30, 1997) of common stock represented by the shares of common
stock of nine companies purchased from certain shareholders for cash and notes
in the Reorganization. For the three and six months ended June 30, 1998, the
calculation also includes (c) the 3,000,000 shares sold by the Company in
October 1997, (d) the weighted portion of warrants exercised in May 1998
(102,558 and 50,160, respectively, for the three and six months ended June 30,
1998) and (e) the weighted portion of shares issued in connection with a
February 1998 acquisition (57,809 and 47,908, respectively, for the three and
six months ended June 30, 1998) (see Note 2).
The pro forma weighted average shares outstanding (10,120,871 and
10,077,485, respectively, for the three and six months ended June 30, 1998 and
5,448,788 and 5,543,583, respectively, for the three and six months ended June
30, 1997) used to calculate pro forma diluted earnings per share includes the
above items plus all outstanding options and warrants to purchase common stock
calculated using the treasury stock method (1,511,715 and 1,530,628,
respectively, for the three and six months ended June 30, 1998). These common
stock equivalents were not dilutive for the three and six months ended June 30,
1997.
11
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
NOTE 8. SUBSEQUENT EVENTS
During the third quarter of 1998 the Company (i) purchased the
franchise rights for one flexible staffing location from ALPAP, Inc. and
converted this location to a Company-owned location and (ii) purchased certain
PEO operations from Hamilton-Ryker Co., Inc, which were immediately transferred
to existing Company locations. The total purchase price was $820,000, with
$730,000 paid in cash at closing and assumption by the Company of $90,000 of
liabilities. The Company is obligated for additional payments to one of the
sellers of (i) up to $50,000 of any increase in the amount of gross profit of
the location acquired from such seller for the twelve months after the closing,
as compared to a contractually defined amount and (ii) $75,000 in the event the
Company obtains certain favorable workers' compensation rates with relation to
the acquired location by January 1, 1999.
The Company had a contingent liability as an actual or implied
guarantor of mortgages having an outstanding principal balance of approximately
$1.6 million at March 31, 1998. These mortgages were secured by a building and
land previously leased by the Company from SMSB Associates ("SMSB"), a Florida
limited partnership comprised of Company shareholders, including the CEO. In
June 1998, SMSB sold this property to an unrelated third party at which time one
of these mortgages was repaid and a portion of the sales proceeds, approximately
equal to the outstanding balance of the remaining mortgage, was placed in
escrow. These funds were released from escrow and applied to pay this
outstanding mortgage in August 1998.
Effective July 27, 1998, the Company entered into a financing
arrangement pursuant to which it can sell up to a $50,000,000 secured interest
in its eligible accounts receivable to EagleFunding Capital Corporation
("Eagle"), which uses the receivables to secure A-1/P-1 rated commercial paper
(the "Securitization Facility"). In connection with the Securitization Facility,
the Company's revolving credit facility with a syndicate of commercial banks led
by BankBoston N.A. ("Revolving Credit Facility") was amended, primarily to
reduce the maximum amount available for borrowing from $85,000,000 to
$34,000,000 and to extend the remaining term of the Revolving Facility to five
years from the date of that amendment. Eagle is an affiliate of BankBoston, N.A.
Under the Securitization Facility, the Company receives cash equivalent
to the gross outstanding balance of the accounts receivable being sold, less
reserves which are adjusted on a monthly basis based on collection experience
and other defined factors. There is no recourse to the Company for the initial
funds received and amounts collected in excess of the reserves are retained by
the Company. The Company's interest rate, payable on the balance of the
outstanding commercial paper, is determined by prevailing interest rates in the
commercial paper market and approximated the Eurodollar rate at the commencement
of the Securitization Facility.
The Securitization Facility contains certain minimum default,
delinquency and dilution ratios with respect to the Company's receivables and
requires bank liquidity commitments ("Liquidity Facility") totaling no less than
$51,000,000. A default under the Securitization Facility constitutes a default
under the Revolving Credit Facility. The Liquidity Facility has been provided by
the syndicate of commercial banks that participate in the Revolving Credit
Facility for a one year term expiring July 26, 1999 at 0.375% per annum. Eagle
may draw against the Liquidity Facility to fund cash shortfalls caused by an
inability for any reason to issue commercial paper based on the Company's
receivables. There is no recourse to the Company for amounts drawn under the
Liquidity Facility, although such amounts would be repaid from and to the extent
receivables sold by the Company were collected. Amounts drawn under the
Liquidity Facility bear interest at the same rates incurred under the Revolving
Credit Facility.
12
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a rapidly growing national provider of human resource
services focusing on the flexible industrial staffing market through its Tandem
division and on the professional employer organization ("PEO") market through
its Synadyne division. To implement its growth strategies, the Company completed
35 acquisitions, primarily industrial staffing companies, from January 1, 1995
through August 12, 1998, with 87 offices and approximately $185.0 million in
annual historical revenue, including 30 offices in 1997 (the "1997
Acquisitions") and 39 offices in 1998 (the "1998 Acquisitions"). See
"-Acquisitions". Due to these acquisitions as well as new offices opened by the
Company during this period, the number of Company-owned flexible staffing and
PEO offices increased from 10 to 124, the number of metropolitan markets
(measured by Metropolitan Statistical Areas, or MSAs) served by Company-owned
locations increased from one to 45, and the Company implemented new information
systems, further developed back office capabilities and invested in other
infrastructure enhancements necessary to support its future growth.
The Company's revenues are derived from the salaries and wages of
worksite employees. Flexible staffing and PEO revenues, and related costs of
wages, salaries, employment taxes and benefits related to worksite employees,
are recognized in the period in which those employees perform the flexible
staffing and PEO services. Because the Company is at risk for all of its direct
costs, independent of whether payment is received from its clients, and
consistent with industry practice, all amounts billed to clients for gross
salaries and wages, related employment taxes, health benefits and workers'
compensation coverage are recognized as revenue by the Company, net of credits
and allowances. The Company's primary direct costs are (i) the salaries and
wages of worksite employees (payroll cost), (ii) employment related taxes, (iii)
health benefits and (iv) workers' compensation benefits and insurance.
RESULTS OF OPERATIONS
Effective February 21, 1997, the Company acquired all of the
outstanding capital stock of nine companies under common ownership and
management (the "Reorganization"). The historical operating results of the
Company presented and discussed herein also include the historical operating
results of those acquired companies for the periods noted.
The following tables set forth the amounts and percentage of net
revenues of certain items in the Company's consolidated statements of income for
the indicated periods.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
(In thousands, except employees and offices)
<S> <C> <C> <C> <C>
Net revenues:
Flexible industrial staffing......................... $ 72,699 $ 50,835 $ 133,331 $ 83,298
PEO.................................................. 58,050 53,529 115,363 103,520
Franchise royalties and other........................ 4,047 3,459 7,088 6,379
------------- ------------- ------------- ------------
Total net revenues................................... $ 134,796 $ 107,823 $ 255,782 $ 193,197
============= ============= ============= ============
Gross profit......................................... $ 21,276 $ 16,224 $ 39,314 $ 27,359
Selling, general and administrative expenses (1) 18,365 14,001 34,486 24,561
------------- ------------- ------------- ------------
Operating income..................................... 2,911 2,223 4,828 2,798
Net interest and other expenses (1).................. 1,405 5,357 2,479 4,732
------------- ------------- ------------- ------------
Income (loss) before provision (benefit) for
income taxes....................................... 1,506 (3,134) 2,349 (1,934)
Pro forma income taxes (benefit) (1)................. 411 (434) 581 (467)
------------- ------------- ------------- -------------
Pro forma net income (loss) (1)...................... $ 1,095 $ (2,700) $ 1,768 $ (1,467)
============= ============= ============= =============
System Operating Data:
System Revenues (2).................................. $ 156,920 $ 137,858 $ 296,981 $ 248,572
============= ============= ============= =============
Number of employees (end of period).................. 34,000 28,000 34,000 28,000
============= ============= ============= =============
Number of offices (end of period).................... 178 163 178 163
============= ============= ============= =============
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues:
Flexible industrial staffing....................... 53.9% 47.2% 52.1% 43.1%
PEO................................................ 43.1 49.6 45.1 53.6
Franchise royalties and other...................... 3.0 3.2 2.8 3.3
---------- -------- --------- -------
Total net revenues................................. 100.0% 100.0% 100.0% 100.0%
========== ======== ========= =======
Gross profit....................................... 15.8% 15.1% 15.4% 14.2%
Selling, general and administrative expenses (1)... 13.6 13.0 13.5 12.7
---------- -------- --------- -------
Operating income................................... 2.2 2.1 1.9 1.5
Net interest and other expense (income) (1)........ 1.1 5.0 1.0 2.5
---------- -------- --------- -------
Income (loss) before provision (benefit) for
income taxes..................................... 1.1 (2.9) 0.9 (1.0)
Pro forma income taxes (benefit) (1)............... 0.3 (0.4) 0.2 0.2
---------- -------- --------- -------
Pro forma net income (loss) (1).................... 0.8% (2.5)% 0.7% (0.8)%
========== ======== ========= =======
</TABLE>
- --------------
(1) For the eight week period ended February 21, 1997, the Company elected to be
treated as a subchapter S corporation and, accordingly, the Company's income was
taxed at the shareholder level. In addition, during that period, the Company
paid compensation to the Company's founding shareholders and to the Company's
President, Chief Executive Officer, and Chairman of the Board, who is also a
shareholder of the Company ("Shareholder Compensation"). All of the compensation
for the founding shareholders and a portion of the compensation for the
Company's President was discontinued after the Reorganization. The discontinued
Shareholder Compensation was $262,000 for the six months ended June 30, 1997.
During the three and six months ended June 30, 1997, the Company recorded
non-operating expense of approximately $3.1 million and $1.2 million,
respectively, related to a put warrants valuation adjustment. The following
table sets forth the amounts and the percentage of certain items in the
Company's consolidated statements of income, with 1997 amounts and percentages
adjusted for the above items as follows: (i) selling, general and administrative
expenses excludes discontinued Shareholder Compensation; (ii) operating income
excludes discontinued Shareholder Compensation and (iii) net income and earnings
per share excludes discontinued Shareholder Compensation and the put warrants
valuation adjustment and is calculated assuming the Company had been subject to
federal and state income taxes and taxed as a C corporation during the period.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- ---- ---
1998 1997 1998 1997
---- ---- ---- ----
(In thousands, except for percentages and per share data)
<S> <C> <C> <C> <C>
Selling general and administrative expenses, as adjusted... $18,365 $14,001 $34,486 $24,299
As a percentage of net revenues............................ 13.6% 13.0% 13.5% 12.6%
Operating income, as adjusted............................. $ 2,911 $2,223 $4,828 $3,060
As a percentage of net revenues............................ 2.2% 2.1% 1.9% 1.6%
Net income (loss), as adjusted............................. $ 1,095 $ (5) $ 1,768 $(276)
As a percentage of net revenues............................ 0.8% 0.0% 0.7% (0.1)%
Earnings (loss) per diluted share, as adjusted............. $ 0.11 $ 0.00 $ 0.18 $(0.05)
EBITDA, as adjusted........................................ $ 4,677 $3,271 $ 8,017 $5,007
</TABLE>
EBITDA is income before the effect of interest income and expense,
income tax benefit and expense, depreciation expense and amortization expense.
EBITDA as adjusted excludes discontinued shareholder compensation and the 1997
put warrants valuation adjustment. EBITDA is presented because it is a widely
accepted financial indicator used by many investors and analysts to analyze and
compare companies on the basis of operating performance. EBITDA is not intended
to represent cash flows for the period, nor has it been presented as an
alternative to operating income or as an indicator of operating performance and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles.
14
<PAGE>
- ----------------
(2) System revenues represent the sum of the Company's net revenues (excluding
revenues from franchise royalties and services performed for franchisees)
and the net revenues of the franchisees. System revenues provide
information regarding the Company's penetration of the market for its
services, as well as the scope and size of the Company's operations, but
are not an alternative to revenues determined in accordance with generally
accepted accounting principles as an indicator of operating performance.
The net revenues of franchisees, which are not earned by or available to
the Company, are derived from reports that are unaudited. System revenues
consist of the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Company's net revenues............................$134,796 $ 107,823 $255,782 $193,197
Less Company revenues from:.......................
Franchise royalties............................. (1,829) (1,619) (2,924) (2,905)
Services to franchisees......................... (6,010) (8,046) (13,075) (17,003)
Add franchisees' net revenues..................... 29,963 39,700 57,198 75,283
-------- ---------- ---------- --------
System revenues...................................$156,920 $137,858 $296,981 $248,572
======== ========== ========== ========
</TABLE>
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
NET REVENUES. Net revenues increased $27.0 million, or 25.0%, to $134.8
million in the three months ended June 30, 1998 from $107.8 million in the three
months ended June 30, 1997. This increase resulted from growth in flexible
industrial staffing revenues in the three months ended June 30, 1998 of $21.9
million, or 43.0%, and PEO revenues growth of $4.5 million, or 8.4%, compared to
the three months ended June 30, 1997. Flexible industrial staffing revenues
increased due to (i) internal growth due to development of existing
Company-owned locations and an increase in the number of Company-owned offices
and (ii) the 1998 Acquisitions. The Company-owned flexible industrial staffing
offices increased to 112 locations as of June 30, 1998 from 80 locations as of
June 30, 1997, with 28 (net of 10 acquired locations combined with pre-existing
Company-owned locations) of the 32 additional locations resulting from the 1998
Acquisitions. The increase in PEO revenues was primarily due to a broadening of
the Company's PEO client base.
System revenues, which include franchise revenues which are not earned
by or available to the Company, increased $19.0 million, or 13.8%, to $156.9
million in the three months ended June 30, 1998 from $137.9 million in the three
months ended June 30, 1997. The increase in system revenues was attributable to
the $27.0 million increase in the Company's net revenues discussed above. The
increase in franchise revenues of franchisees operating as of June 30, 1998 of
$5.6 million, or 24.3%, in the 1998 period as compared to the 1997 period, was
offset by a $15.3 million decrease in the same period resulting from other
franchisees no longer operating, resulting in a net decrease of franchise
revenues of $9.7 million. Franchisees discontinued operations as a result of the
Company's acquisition and conversion of 13 franchise locations to Company-owned
locations during the first quarter of 1997, the Company's acquisition and
conversion of 15 franchise locations to Company-owned locations during the first
half of 1998 and the Company's early termination of franchise agreements (in
order to allow the Company's development of the related territories) related to
another 21 locations in 1997, primarily during the second and third quarters,
and two locations in 1998. At the time the Company terminates a franchise
agreement, it receives an initial buyout payment from the former franchisee. The
Company continues to receive payments from the former franchisees based on the
gross revenues of the formerly franchised locations for up to three years after
the termination dates. Although those gross revenues are not included in the
Company's franchisee or system revenues totals, the initial buyout payment, as
well as subsequent payments from the former franchisees, are reflected in total
royalties reported by the Company.
GROSS PROFIT. Gross profit increased $5.1 million, or 31.1%, to $21.3
million in the three months ended June 30, 1998, from $16.2 million in the three
months ended June 30, 1997. Gross profit as a percentage of net revenues
increased to 15.8% in the three months ended June 30, 1998 from 15.0% in the
three months ended June 30, 1997. This increase was primarily due to the
significantly higher growth rate for flexible industrial staffing revenues as
compared to the growth rate for PEO revenues, which generate lower gross profit
margins. In the three months ended June 30, 1998, PEO net revenues generated
gross profit margins of 4.0% as compared to gross profit margins of 22.5%
generated by flexible industrial staffing revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $4.4 million, or 31.2%, to $18.4 million in
the three months ended June 30, 1998 from $14.0 million in the three months
ended June 30, 1997. This increase was primarily a result of operating costs
associated with increased flexible industrial staffing volume at existing
locations, the 1997 Acquisitions and the 1998 Acquisitions. Selling, general and
administrative expenses, expressed as a percentage of gross profit, was 86.3%
for the three months ended June 30, 1998, equivalent to the comparable 1997
period. This represents a decline from 89.4% for the first three months of 1998,
which the Company attributes to increased efficiency of its operations as well
as improved leverage of its fixed costs over an increased revenue and gross
profit base arising from internal growth as well as the 1997 and 1998
Acquisitions. As a percentage of net revenues, selling, general and
administrative expenses increased to 13.6% in the three months ended June 30,
1998 from 13.0% in the three months ended June 30, 1997. In addition to the
items previously discussed, this percentage increase was also due to the
significant increase in 1998 of the flexible industrial staffing revenues in
proportion to total
15
<PAGE>
Company revenues. The flexible industrial staffing operations have higher
associated selling, general and administrative expenses (as a percentage of
revenues) than PEO operations.
NET INTEREST AND OTHER EXPENSE . Net interest and other expense
decreased by $4.0 million, to $1.4 million in the three months ended June 30,
1998 from $5.4 million in the three months ended June 30, 1997. This decrease
was primarily due to non-operating expense in 1997 of $3.1 million attributable
to a put warrants valuation adjustment, with no corresponding item in 1998. In
addition, interest expense for the three months ended June 30, 1998 was $0.7
million less than the corresponding period in 1997, due to a decrease in total
debt outstanding as well as a decrease in the average interest rate.
NET INCOME (LOSS). Net income (loss) increased by $3.8 million, to $1.1
million in the three months ended June 30, 1998 from a $2.7 million loss in the
three months ended June 30, 1997. This increase was primarily due to the $3.1
million decrease in non-operating expense and the $0.7 million decrease in
interest expense discussed above. In addition, operating income increased by
$0.7 million as a result of increases in net revenues and gross profit discussed
above.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
NET REVENUES. Net revenues increased $62.6 million, or 32.4%, to $255.8
million in the six months ended June 30, 1998 from $193.2 million in the six
months ended June 30, 1997. This increase resulted from growth in flexible
industrial staffing revenues in the six months ended June 30, 1998 of $50.0
million, or 60.1%, and PEO revenues growth of $11.9 million, or 11.4%, compared
to the six months ended June 30, 1997. Flexible industrial staffing revenues
increased due to (i) internal growth due to development of existing
Company-owned locations and an increase in the number of Company-owned offices
and (ii) the 1997 Acquisitions (which were primarily consummated in late
February and March) and the 1998 Acquisitions. The Company-owned flexible
industrial staffing offices increased to 112 locations as of June 30, 1998 from
80 locations as of June 30, 1997, with 28 of the 32 additional locations
resulting from the 1998 Acquisitions. The increase in PEO revenues was primarily
due to a broadening of the Company's PEO client base.
System revenues, which include franchise revenues which are not earned
by or available to the Company, increased $48.4 million, or 19.5%, to $297.0
million in the six months ended June 30, 1998 from $248.6 million in the six
months ended June 30, 1997. The increase in system revenues was attributable to
the $62.6 million increase in the Company's net revenues discussed above. The
increase in franchise revenues of franchisees operating as of June 30, 1998 of
$9.3 million, or 22.3%, in the 1998 period as compared to the 1997 period, was
offset by a $27.4 million decrease in the same period resulting from other
franchisees no longer operating, resulting in a net decrease of franchise
revenues of $18.1 million. Franchisees discontinued operations as a result of
the Company's acquisition and conversion of 13 franchise locations to
Company-owned locations during the first quarter of 1997, the Company's
acquisition and conversion of 15 franchise locations to Company-owned locations
during the first half of 1998 and the Company's early termination of franchise
agreements (in order to allow the Company's development of the related
territories) related to another 21 locations in 1997, primarily during the
second and third quarters, and two locations in 1998.
GROSS PROFIT. Gross profit increased $11.9 million, or 43.7%, to $39.3
million in the six months ended June 30, 1998, from $27.4 million in the six
months ended June 30, 1997. Gross profit as a percentage of net revenues
increased to 15.4% in the six months ended June 30, 1998 from 14.2% in the six
months ended June 30, 1997. This increase was primarily due to the significantly
higher growth rate for flexible industrial staffing revenues as compared to the
growth rate for PEO revenues, which generate lower gross profit margins. In the
six months ended June 30, 1998, PEO net revenues generated gross profit margins
of 4.0% as compared to gross profit margins of 22.8% generated by flexible
industrial staffing revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $9.9 million, or 40.4%, to $34.5 million in
the six months ended June 30, 1998 from $24.6 million in the six months ended
June 30, 1997. This increase was primarily a result of operating costs
associated with increased flexible industrial staffing volume at existing
locations, the 1997 Acquisitions and the 1998 Acquisitions. Selling, general and
administrative expenses, expressed as a percentage of gross profit, decreased to
87.7% for the first six months of 1998 from 89.8% for the comparable 1997
period. The Company attributes this decline to increased efficiency of its
operations as well as improved leverage of its existing fixed costs over an
increased revenue and gross profit base arising from internal growth as well as
the 1997 and 1998 Acquisitions. As a percentage of net revenues, selling,
general and administrative expenses increased to 13.5% in the six months ended
June 30, 1998 from 12.7% in the six months ended June 30, 1997. In addition to
the items previously discussed, this percentage increase was also due to the
significant increase in 1998 of the flexible industrial staffing revenues in
proportion to total Company revenues. The flexible industrial staffing
operations have higher associated selling, general and administrative expenses
(as a percentage of revenues) than PEO operations.
16
<PAGE>
NET INTEREST AND OTHER EXPENSE. Net interest and other expense
decreased by $2.3 million, to $2.5 million in the six months ended June 30, 1998
from $4.7 million in the six months ended June 30, 1997. This decrease was
primarily due to non-operating income in 1997 of $1.2 million attributable to a
put warrants valuation adjustment, with no corresponding item in 1998. In
addition, interest expense for the six months ended June 30, 1998 was $1.0
million less than the corresponding period in 1997, due to a decrease in total
debt outstanding as well as a decrease in the average interest rate.
NET INCOME (LOSS). Net income (loss) increased by $3.3 million, to $1.8
million in the six months ended June 30, 1998 from a $1.5 million loss in the
six months ended June 30, 1997. This increase was primarily due to the $1.2
million decrease in non-operating expense and the $1.0 million decrease in
interest expense discussed above. In addition, operating income increased by
$2.0 million as a result of increases in sales and gross profit discussed above.
ADDITIONAL OPERATING INFORMATION
The following table sets forth the gross profit margins for the
Company's two primary areas of operations for the indicated periods.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Flexible industrial staffing.......................... 22.5% 24.1% 22.8% 23.8%
PEO................................................... 4.0 3.3 4.0 3.3
</TABLE>
The Company's flexible industrial staffing division generates
significantly higher gross profit margins than its PEO division. The higher
flexible industrial staffing division margin reflects compensation for
recruiting, training and other services not required as part of many PEO
relationships, where the employees have already been recruited by the client and
are trained and in place at the beginning of the relationship.
The decrease in the gross profit margin for the Company's flexible
industrial staffing operations for the three and six month periods ended June
30, 1998 compared to the same periods in 1997 is primarily due to the impact of
(i) larger contracts obtained by the Company which have lower gross profit
margin percentages (but the impact on net income is mitigated by correspondingly
lower selling, general and administrative expenses due to the economies of scale
in servicing a larger contract), (ii) the increased wages necessary to recruit
flexible industrial staffing employees in areas of historically low
unemployment, (iii) adjusted pricing in the second quarter of 1998 to
stimulate sales and (iv) an increase in the minimum wage on September 1, 1997,
for which the Company recovered much of the increased payroll costs via
increased billing rates but without a related profit increase. The Company
anticipates these factors will continue to affect gross margins from flexible
industrial staffing operations, although in many cases the Company expects the
impact to be offset by lower selling, general and administrative expenses
(measured as a percentage of gross profit) as mentioned above.
The increase in the gross profit margin for the Company's PEO
operations for the three and six month periods ended June 30, 1998 compared to
the same periods in 1997 is primarily due to an increase in the percentage of
total PEO revenues related to PEO services provided to industrial staffing
clients. The gross profit margin percentage for PEO services provided to
industrial staffing clients is higher than the gross profit margin from most
other PEO clients although the gross profit amount per employee is relatively
consistent. An industrial staffing employee generally receives lower wages and
benefits than other PEO employees and the Company receives correspondingly lower
revenue. See "-General" for a discussion of the effect of these costs on the
Company's revenue calculation.
Flexible Industrial Staffing:
Net revenues from the Company's flexible industrial staffing services
increased $50.0 million, or 60.1%, to $133.3 million for the six months ended
June 30, 1998 from $83.3 million for the six months ended June 30, 1997. This
increase represented an increasing share of the Company's total net revenues, to
52.1% in the 1998 period from 43.1% in the 1997 period, reflecting the Company's
focus on growth of these flexible industrial staffing operations through
acquisitions as well as new office openings.
The Company expects this focus to continue for the foreseeable future.
Gross profit from the Company's flexible industrial staffing services
increased $10.6 million, or 53.3%, to $30.4 million for the six months ended
June 30, 1998 from $19.8 million for the six months ended June 30, 1997. This
represented an increasing share of the Company's total gross profit, to 77.3%
for the six months ended June 30, 1998, from 72.4% for the six months ended June
30, 1997.
17
<PAGE>
PEO:
Net revenues from the Company's PEO services increased $11.9 million,
or 11.4%, to $115.4 million for the six months ended June 30, 1998 from $103.5
million for the six months ended June 30, 1997. Because of the lower growth rate
in PEO revenues as compared to flexible industrial staffing, this represented a
decreasing share of the Company's total net revenues, to 45.1% in the 1998
period from 53.6% in the 1997 period, reflecting the Company's greater focus on
growth of its flexible industrial staffing operations during this period as well
as the effect of changes made in the PEO management structure and marketing
approach, beginning in 1997. The Company expects that PEO sales growth will be
modest during 1998 while these two conditions continue.
Gross profit from the Company's PEO services increased $1.2 million, or
35.0%, to $4.7 million for the six months ended June 30, 1998 from $3.5 million
for the six months ended June 30, 1997. Because of the lower gross profit
percentage from PEO as compared to flexible industrial staffing, as well as the
lower growth rate in PEO revenues as compared to flexible industrial staffing,
this represented a decreasing share of the Company's total gross profit, to
11.8% for the six months ended June 30, 1998 from 12.5% for the six months ended
June 30, 1997.
Franchise and Other:
Net revenues from the Company's franchise and other services increased
$0.7 million, or 11.3%, to $7.1 million for the six months ended June 30, 1998
from $6.4 million for the six months ended June 30, 1997. This increase
represented a decreasing share of the Company's total net revenues, to 2.8% in
the 1998 period from 3.3% in the 1997 period, reflecting the Company's greater
focus on growth of its Company-owned flexible industrial staffing operations
during this period, including the Company's conversion of 28 franchise locations
to Company-owned locations and the termination of franchise agreements related
to another 23 locations. The Company expects to continue to convert franchise
locations to Company-owned locations in strategic markets, subject to the
Company's ability to negotiate these acquisitions at acceptable prices. However,
the Company also expects to continue to sell new franchises in smaller, less
populated geographic areas, subject to the success of the Company's marketing
efforts in this regard.
Gross profit from the Company's franchise and other services increased
$0.2 million, or 4.2%, to $4.3 million for the six months ended June 30, 1998,
from $4.1 million for the six months ended June 30, 1997. This increase
represented a decreasing share of the Company's total gross profit, to 10.9% for
the six months ended June 30, 1998 from 15.1% for the six months ended June 30,
1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds for working capital and other
needs have been an $85.0 million credit line with a syndicate of lenders led by
BankBoston, N.A. (the "Revolving Facility"), senior notes and borrowings from
related parties. On October 24, 1997, the Company sold 3,000,000 shares of its
common stock in an initial public offering for net proceeds, after deducting all
expenses, of approximately $40.3 million, which proceeds were used to repay the
senior notes and borrowings from related parties, as well as a portion of the
Revolving Facility.
Effective July 27, 1998, the Company entered into a financing
arrangement under which it can sell up to a $50,000,000 secured interest in its
eligible accounts receivable to EagleFunding Capital Corporation ("Eagle"),
which uses the receivables to secure A-1/P-1 rated commercial paper (the
"Securitization Facility"). Under this arrangement, the Company receives cash
equivalent to the gross outstanding balance of the accounts receivable being
sold, less reserves which are adjusted on a monthly basis based on collection
experience and other defined factors. There is no recourse to the Company for
the initial funds received and amounts collected in excess of the reserves are
retained by the Company. The Company's interest rate, payable on the balance of
the outstanding commercial paper, is determined by prevailing interest rates in
the commercial paper market and approximated the Eurodollar rate at the
commencement of the Securitization Facility.
The Securitization Facility contains certain minimum default,
delinquency and dilution ratios with respect to the Company's receivables and
requires bank liquidity commitments ("Liquidity Facility") totaling no less than
$51,000,000. A default under the Securitization Facility constitutes a default
under the Revolving Credit Facility. The Liquidity Facility has been provided by
the syndicate of commercial banks that participate in the Revolving Credit
Facility for a one year term expiring July 26, 1999 at 0.375% per annum. Eagle
may draw against the Liquidity Facility to fund cash shortfalls caused by an
inability for any reason to issue commercial paper based on the Company's
receivables. There is no recourse to the Company for amounts drawn under the
Liquidity Facility, although such amounts would be repaid from and to the extent
receivables sold by the Company were collected. Amounts drawn under the
Liquidity Facility bear interest at the same rates incurred under the Revolving
Credit Facility.
18
<PAGE>
In connection with the Securitization Facility, the Revolving Facility
was amended, primarily to reduce the maximum amount available for borrowing from
$85,000,000 to $34,000,000 and to extend the remaining term of the Revolving
Facility to five years from the date of that amendment. Outstanding amounts
under the Revolving Facility are secured by substantially all of the Company's
assets and the pledge of all of the outstanding shares of common stock of each
of its subsidiaries. Amounts borrowed under the Revolving Facility bear interest
at BankBoston's base rate or Eurodollar rate (at the Company's option) plus a
margin based upon the ratio of the Company's total indebtedness to the Company's
earnings (as defined in the Revolving Facility). As of June 30, 1998, the
Company had outstanding borrowings under the Revolving Facility of $54.5
million, bearing interest at an annualized rate of 7.5%. The Revolving Facility
contains certain affirmative and negative covenants relating to the Company's
operations.
On February 21, 1997, the Company issued senior notes in the principal
amount of $25.0 million, which were repaid in full from the proceeds of the
Company's October 1997 initial public offering. The Company used the proceeds of
the senior notes primarily to fund flexible industrial staffing acquisitions and
to pay shareholder distributions and other amounts in connection with the
Reorganization. In connection with the issuance of the senior notes, the Company
issued 786,517 warrants to the holders of the senior notes and placed an
additional 573,787 warrants in escrow. The warrants are exercisable at a price
of $.015 per share. 180,891 warrants were released from escrow in 1997 and
151,316 of those warrants were exercised in May 1998.
As of June 30, 1998, the Company had (i) bank standby letters of credit
outstanding, in the aggregate amount of $8.4 million under a $15.0 million
letter of credit facility (which is part of the Revolving Facility) to secure
certain workers' compensation obligations; (ii) $12.1 million of promissory
notes outstanding in connection with certain acquisitions, bearing interest at
rates ranging from 4.0% to 10.0%, which are payable primarily during the next
two years, and are subordinated to the repayment of the Revolving Facility;
(iii) obligations under capital leases for property and equipment in the
aggregate amount of $2.6 million; and (iv) obligations under mortgages totaling
$4.3 million.
The Company's principal uses of cash are for wages and related payments
to temporary and PEO employees, operating costs, acquisitions, capital
expenditures, advances made to certain Tandem franchise associates to fund their
payroll obligations and repayment of debt and interest thereon. During the six
months ended June 30, 1998, cash provided by operations was approximately $7.8
million, compared with $9.6 million used in the first six months of 1997. Cash
used in investing activities during the six months ended June 30, 1998 was
approximately $28.4 million, principally expenditures of $26.9 million for
acquisitions (primarily intangible assets), compared with $22.6 million in the
first six months of 1997 (which included expenditures of $21.4 million for
acquisitions). Cash provided by financing activities during the six months ended
June 30, 1998 was approximately $20.9 million, comprised primarily of $20.7
million from borrowings under the Revolving Facility and an increase in
outstanding checks over bank balance of $2.9 million, offset by $2.5 million of
repayments of long term debt. Cash provided by financing activities during the
six months ended June 30, 1997 was approximately $33.4 million, comprised
primarily of $22.6 million net proceeds from senior notes and warrants and $25.2
million from borrowings under the Revolving Facility, offset by payments of
$14.4 million in connection with the Reorganization and $1.1 million of
repayments of long-term debt (net of note repayments from related parties).
One of the key elements of the Company's strategy is expansion through
acquisitions, which will require significant sources of financing. These
financing sources include cash from operations, seller financing, bank financing
and issuances of the Company's common stock. In May 1998, the Company announced
that it intended to sell shares of its common stock in a public offering,
although in June 1998, the Company determined that equity market conditions were
no longer favorable and it would not attempt to sell additional shares of its
common stock. The Company will monitor equity market conditions in order to
determine when the sale of additional shares of its common stock is appropriate.
Until then, the Company expects to continue to fund its acquisition strategy
primarily with the Revolving Facility, as well as an increase in the limit of
that facility which would be negotiated as needed. The Company's previous
acquisitions have been primarily in the flexible industrial staffing area, and
the Company expects this trend to continue due to the more favorable pricing for
those businesses (as a multiple of EBITDA) as compared to PEO businesses. See
Note 2 to the Company's Consolidated Financial Statements.
The Company is a service business and therefore a majority of its
tangible assets are customer accounts receivable. Flexible industrial staffing
employees are paid by the Company on a daily or weekly basis. The Company,
however, receives payment from customers for these services, on average, 45 to
50 days from the presentation date of the invoice. As new flexible staffing
offices are established or acquired, or as existing offices expand, there will
be increasing requirements for cash to fund operations. The Company pays its PEO
employees on a weekly, bi-weekly, semi-monthly or monthly basis for their
services, and currently receives payments on a simultaneous basis from
approximately 90% of its existing customers.
19
<PAGE>
The Company anticipates spending up to approximately $6.0 million
during the next twelve months for new flexible staffing locations, improvements
to its management information and operating systems, upgrades of existing and
acquired locations, and other capital expenditures. This amount does not include
expenditures for potential industrial staffing and PEO acquisitions, which the
Company believes could be at a similar magnitude equivalent to the recent
historical rate over the next twelve months and will primarily be for goodwill
and other intangible assets.
The Company believes that funds provided by operations, borrowings
under the Revolving Facility and current cash balances will be sufficient to
meet its presently anticipated needs for working capital and capital
expenditures, not including acquisitions for the next twelve months. Depending
on the amount and timing of future acquisitions and their financial structure,
the Company also believes that sufficient liquidity for such acquisitions as
well as its long-term operating requirements will be provided by funds from
operations, expanded or new borrowing facilities, issuance of common stock
and/or additional debt or equity offerings. However, the ability of the Company
to make acquisitions consistent with the recent historical rate is subject to
the Company's ability to successfully negotiate more flexible leverage (e.g.,
debt to EBITDA) covenants and increased borrowing limits compared to those
presently contained in the Revolving Facility and/or the Company's ability to
finance future acquisitions by issuance of its common stock rather than the debt
financing primarily used by the Company for previous acquisitions.
ACQUISITIONS
During 1995, the Company made four flexible industrial staffing
acquisitions with five offices and approximately $7.0 million in annual
historical revenue. During 1996, the Company made five flexible industrial
staffing acquisitions with 13 offices and approximately $16.0 million in annual
historical revenue. During 1997, the Company made eight flexible industrial
staffing acquisitions with 30 offices and approximately $61.0 million in annual
historical revenue. From January 1, 1998 through June 30, 1998, the Company made
16 flexible industrial staffing acquisitions with 38 offices and approximately
$91.0 million in annual historical revenue. These acquisitions have resulted in
a significant increase in goodwill and other intangible assets which has
resulted and will continue to result in increased amortization expense. In
addition, the amount of these intangible assets as a percentage of the Company's
total assets and shareholders' equity has increased significantly and while the
net unamortized balance of intangible assets as of June 30, 1998 is not
considered to be impaired, any future determination requiring the write off of a
significant portion of unamortized intangible assets could have a material
adverse effect on the Company's financial condition and results of operations.
See Note 2 to the Company's Consolidated Financial Statements.
SEASONALITY
The Company's quarterly results of operations reflect the seasonality
of higher customer demand for flexible industrial staffing services in the last
two quarters of the year, as compared to the first two quarters. Even though
there is a seasonal reduction of flexible industrial staffing revenues in the
first quarter of a year as compared to the fourth quarter of the prior year, the
Company does not reduce the related core personnel and other operating expenses
since that infrastructure is needed to support anticipated increased revenues in
subsequent quarters. PEO revenues are generally not subject to seasonality to
the same degree as flexible industrial staffing revenues although the net income
contribution of PEO revenues expressed as a percentage of sales is significantly
lower than the net income contribution of flexible industrial staffing revenues.
As a result of the above factors, the Company traditionally experiences
operating income in the first quarter of a year that is significantly less than
(i) the fourth quarter of the preceding year and (ii) the subsequent three
quarters of the same year.
INFLATION
The effects of inflation on the Company's operations were not
significant during the periods presented in the financial statements. Throughout
the periods discussed above, the increases in revenues have resulted primarily
from higher volumes, rather than price increases.
20
<PAGE>
YEAR 2000 ISSUE
Many computer programs ("software") now being used in business were
written using two digits rather than four to define the applicable year. Such
software may be unable to properly interpret dates beyond the year 1999, which
could lead to business disruptions including but not limited to an inability to
process payroll, cash and invoicing transactions using that software (the "Year
2000" issue). The Year 2000 issue concerns not only software used solely within
a company but also concerns third parties, such as customers, vendors and
creditors, using software that may interact with or affect a company's
operations.
In 1996, the Company initiated a conversion of the primary software
being used in its flexible staffing and PEO operations, as well as its
corporate-wide accounting and billing software. Although this conversion was
undertaken for the primary purposes of achieving a common data structure for all
significant Company applications as well as enhancing processing capacity and
efficiency, it also will result in software that properly interprets dates
beyond the year 1999 ("Year 2000 Compliant"). As of June 30, 1998, this
conversion had been completed, except for (i) the installation of currently
existing and Year 2000 Compliant software in Company-owned and franchised
flexible staffing locations, which the Company has initiated in the second
quarter of 1998 and expects to complete within one year from that date, but no
later than December 31, 1999 and (ii) programming modifications to its corporate
accounting and billing software, which the Company expects to complete by
December 31, 1998, but no later than December 31, 1999.
The Company is in the process of initiating formal communications with
all of its significant customers, vendors and creditors to determine the extent
to which the Company's interface with software provided by or utilized by those
third parties could be adversely affected by the Year 2000 issue and what
actions those third parties are taking to address that issue on a timely basis.
The Company will take appropriate action based on those responses, but there can
be no assurance that the software provided by or utilized by other companies
which affect the Company's operations will be timely converted and would not
have an adverse effect on the Company.
The Company has already begun internal testing of the adequacy of its
Year 2000 compliance activities to date, and will utilize both internal and
external resources to further test the adequacy of those activities during 1998.
The Company expects to complete the majority of its effort in this area by early
1999 leaving adequate time to assess and correct any significant issues that may
materialize.
The total cost to the Company of these Year 2000 compliance activities
has not been and is not anticipated to be material to the Company's business,
results of operations or financial condition. The costs and time necessary to
complete the Year 2000 modification and testing processes are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events including the continued availability of certain resources,
third party modification plans and other factors. However, there can be no
assurance that these estimates will be achieved and actual results could differ
from the estimates.
The Company has capitalized and will continue to capitalize the costs
of purchasing and developing new Year 2000 Compliant software, most of which had
been incurred as of June 30, 1998, but will expense the costs of the
modifications to existing software made solely for purposes of Year 2000
compliance, most of which will be incurred during 1998. Any remaining
capitalized balance for software no longer utilized because of replacement by
Year 2000 Compliant software will be expensed at the time such software is
replaced.
21
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," was issued. SFAS No. 131 establishes
standards for the way that public companies report selected information about
operating segments in annual financial statements and requires that those
companies report selected information about segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
SFAS No. 131, which supersedes SFAS No. 14, "Financial Reporting for Segments of
a Business Enterprise", but retains the requirement to report information about
major customers, requires that a public company report financial and descriptive
information about its reportable operating segments. Operating segments are
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. Generally,
financial information is required to be reported on the basis that it is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. SFAS No. 131 requires that a public company report a
measure of segment profit or loss, certain specific revenue and expense items,
and segment assets. However, SFAS No. 131 does not require the reporting of
information that is not prepared for internal use if reporting it would be
impracticable. SFAS No. 131 also requires that a public company report
descriptive information about the way that the operating segments were
determined, the products and services provided by the operating segments,
differences between the measurements used in reporting segment information and
those used in the enterprise's general-purpose financial statements, and changes
in the measurement of segment amounts from period to period. SFAS No. 131 is
effective for financial statements for periods beginning after December 15,
1997. The Company intends to first implement SFAS No. 131 in its Consolidated
Financial Statements as of and for the year ended December 31, 1998, although it
has not determined the effects, if any, that implementation will have.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued. SFAS No. 133 defines derivatives and establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS No. 133 also requires that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting. SFAS No.
133 effective for all fiscal quarters of fiscal years beginning after June 15,
1999, and cannot be applied retroactively. The Company intends to first
implement SFAS No. 133 in its Consolidated Financial Statements as of and for
the three months ended March 31, 2000, although it has not determined the
effects, if any, that implementation will have. However, SFAS No. 133 could
increase volatility in earnings and other comprehensive income.
22
<PAGE>
FORWARD-LOOKING INFORMATION: CERTAIN CAUTIONARY STATEMENTS
Certain statements contained in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in this
Form 10-Q are forward looking statements, including but not limited to,
statements regarding the Company's expectations or beliefs concerning the
Company's strategy and objectives, expected sales and other operating results,
the effect of changes in the Company's gross margin, the Company's liquidity,
anticipated capital spending, the availability of financing, equity and working
capital to meet the Company's future needs, economic conditions in the Company's
market areas, the potential for and effect of future acquisitions, the Company's
ability to resolve the Year 2000 issue and the related costs and the
tax-qualified status of the Company's 401(k) and 413(c) plans. The words "aim,"
"believe," "expect," "anticipate," "intend," "estimate," "will," "should,"
"could" and other expressions which indicate future events and trends identify
forward looking statements. Such forward looking statements involve known and
unknown risks and are also based upon assumptions of future events, which may
not prove to be accurate. Therefore, actual results may differ materially from
any future results expressed or implied in the forward looking statements. These
known and unknown risks and uncertainties, include, but are not limited to the
Company's dependence on regulatory approvals, its future cash flows, sales,
gross margins and operating costs, the effect of changing market and other
conditions in the staffing industry, the ability of the Company to continue to
grow at its historical levels, legal proceedings, including those related to the
actions of the Company's temporary or leased employees, the availability and
cost of credit, the Company's ability to raise capital in the public equity
markets, the Company's ability to successfully identify suitable acquisition
candidates and to complete those acquisitions on favorable terms, the ability to
successfully integrate past and future acquisitions into the Company's
operations, the recoverability of the recorded value of goodwill and other
intangible assets arising from past and future acquisitions, the general level
of economic activity and unemployment in the Company's markets, specifically
within the construction and light industrial trades, increased price
competition, changes in government regulations or interpretations thereof,
particularly those related to employment, the continued availability of
qualified temporary personnel, the financial condition of the Company's clients
and their demand for the Company's services (which in turn may be affected by
the effects of, and changes in, worldwide economic conditions, particularly in
Japan and the Asia region), collection of accounts receivable, the Company's
ability to retain large clients, the Company's ability to recruit, motivate and
retain key management personnel, the costs of complying with government
regulations (including occupational safety and health provisions, wage and hour
and minimum wage laws and workers' compensation and unemployment insurance laws)
and the ability of the Company to increase fees charged to its clients to offset
increased costs relating to these laws and regulations, inclement weather,
interruption, impairment or loss of data integrity or malfunction of information
processing systems, uncertainties regarding government regulation of PEOs,
including the possible adoption by the IRS of an unfavorable position as to the
tax-qualified status of employee benefit plans maintained by PEOs and other
risks detailed from time to time by the Company or in its press releases or in
its filings with the Securities and Exchange Commission.
In addition, the market price of the Company's stock may from time to
time be significantly volatile as a result of, among other things, the Company's
operating results, the operating results of other temporary staffing and PEO
companies, economic conditions and the performance of the stock market in
general.
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.
Subsequent written and oral forward looking statements attributable to
the Company or persons acting on its behalf are expressly qualified in their
entirety by cautionary statements in this paragraph and elsewhere in this Form
10-Q, and in other reports filed by the Company with the Securities and Exchange
Commission, including, but not limited to, (i) the Company's Registration
Statement on Form S-1 (File No. 333-33443) filed with the Securities and
Exchange Commission on August 12, 1997, as amended by Amendments No. 1 through 3
thereto, and declared effective on October 23, 1997 and (ii) the Company's Form
10-K/A filed with the Securities and Exchange Commission on April 2, 1998.
23
<PAGE>
PART II - OTHER INFORMATION
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
During the three months ended June 30, 1998, the Company issued the
following securities without registration under the Securities Act:
On April 15, 1998, the Company issued an aggregate of 5,716 shares of
its common stock to Mr. Robert A. Lefcort and the Robert A. Lefcort Trust, in
connection with the exercise of warrants entitling those parties to purchase
shares of the Company's common stock at $0.015 per share. The aggregate exercise
price of $87.94 was received by the Company in cash at the time of exercise. The
securities were issued pursuant to Section 4(2) of the Securities Act. No
underwriting commissions were paid in connection with the foregoing issuances of
stock.
On May 12, 1998, the Company issued 20,929 shares of its common stock
to Paul M. Burrell, in connection with the exercise of warrants entitling him to
purchase shares of the Company's common stock at $0.015 per share. The exercise
price of $321.99 was received by the Company in cash at the time of exercise.
The securities were issued pursuant to Section 4(2) of the Securities Act. No
underwriting commissions were paid in connection with the foregoing issuances of
stock.
On May 12, 1998, the Company issued an aggregate of 124,671 shares of
its common stock to the Lawrence H. Schubert Trust, the Nadya Schubert Trust,
Alan E. Schubert, Mindi Wagner, the Matthew Schubert Trust, the Jason D.
Schubert Trust and Louis A. Morelli., in connection with the exercise of
warrants entitling those parties to purchase shares of the Company's common
stock at $0.015 per share. The aggregate exercise price of $1,918.01 was
received by the Company in cash at the time of exercise. The securities were
issued pursuant to Section 4(2) of the Securities Act. No underwriting
commissions were paid in connection with the foregoing issuances of stock.
Immediately subsequent to issuance, these shares were deposited in a voting
trust, of which Paul M. Burrell, the Company's CEO and a director, and Richard
J. Williams, a director of the Company, are the trustees. The voting trust
expires on February 20, 2007 and the trustees have the sole and exclusive right
to vote the shares of common stock deposited in the voting trust. For a complete
discussion of this voting trust and the related shareholders' agreement, see
Amendment No. 3 to the Company's Registration Statement on Form S-1
(Registration Statement No. 333-33443) as filed with the Securities and Exchange
Commission on October 21, 1997.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the shareholders of the Company (the "Meeting")
was held on May 8, 1998. The Company solicited proxies for the Meeting and there
was no solicitation in opposition to management's nominees for directors.
However, Robert E. Tomlinson, one of management's nominees, withdrew his name
from consideration for re-election immediately prior to the Meeting. David S.
Hershberg, the other management nominee, was re-elected. At the Meeting,
shareholders voted:
(1) To elect director David S. Hershberg for a three-year term:
Votes For 5,898,577
Votes Against 118,232
Votes Abstained --
Votes Withheld 2,489,788
The names of the directors whose term of office continued after the
Meeting are Paul M. Burrell, Robert A. Lefcort, Richard J. Williams and Samuel
H. Schwartz. At a meeting of the board of directors immediately following the
Meeting, the board of directors elected Scott R. Francis to a three-year term on
the board of directors to fill the vacancy created by the withdrawal by Mr.
Tomlinson from consideration for re-election.
(2) To ratify the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending December
31, 1998:
Votes For 6,012,529
Votes Against 1,700
Votes Abstained 2,580
Votes Withheld 2,489,788
24
<PAGE>
(3) To approve an amendment to the Company's Stock Option Plan, which
amendment provides for grants of non qualified options to
non-employee directors in accordance with a prescribed formula.
Votes For 5,476,629
Votes Against 535,900
Votes Abstained 4,280
Votes Withheld 2,489,788
At a meeting of the board of directors immediately following the
Meeting, the board of directors approved an amendment to the Stock Option Plan
approved by the shareholders that clarified the definition of owned shares
eligible for consideration in the above formula to include warrants.
ITEM 5 - OTHER INFORMATION
In April 1998, Scott R. Francis joined the Company as Chief Financial
Officer. Mr. Francis succeeded Robert E. Tomlinson, who remained with the
Company as Chief Accounting Officer.
In July 1998, Robert A. Lefcort, formerly the Company's Executive Vice
President, was appointed President of the Company's Synadyne division. Mr.
Lefcort replaced Benjamin J. Cueto, who resigned as President of Synadyne to
pursue other interests.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
3.1 Amended and Restated Articles of Incorporation of the Company(2)
3.2 Amended and Restated Bylaws of the Company(3)
4.3 Shareholder Protection Rights Agreement(3)
4.6 Warrant Dated February 21, 1997 Issued to Triumph-Connecticut Limited
Partnership(1)
4.7 Warrant Dated February 21, 1997 Issued to Bachow Investment
Partners III, L.P.(1)
4.8 Warrant Dated February 21, 1997 Issued to State Street Bank and Trust
Company of Connecticut, N.A., as Escrow Agent(1)
10.17 Employment Agreement between Scott R. Francis and the Company dated as of
April 1, 1998*
10.18 Stock Option Plan, As Amended Effective May 8, 1998*
10.19 Third Amended and Restated Credit Agreement among OutSource
International, Inc., the banks from time to time parties hereto and
BankBoston, N.A., successor by merger to Bank of Boston, Connecticut,
as agent - Revolving Credit Facility dated as of July 27, 1998.
10.34 Receivables Purchase and Sale Agreement dated July 27, 1998 among
Outsource International, Inc., Outsource Franchising, Inc., Capital
Staffing Fund, Inc., Synadyne I, Inc., Synadyne II, Inc., Synadyne III,
Inc., Synadyne IV, Inc., Synadyne V, Inc., and Outsource International of
America, Inc., each as an originator, and Outsource Funding Corporation,
as the buyer, and Outsource International, Inc., as the servicer.
10.35 Receivables Purchase Agreement dated July 27, 1998 among Outsource
Funding Corporation, as the seller, and EagleFunding Capital Corporation,
as the purchaser, and BancBoston Securities, Inc., as the deal agent and
Outsource International, Inc., as the servicer
10.36 Intercreditor Agreement dated July 27, 1998 by and among BankBoston,
N.A., as lender agent; Outsource Funding Corporation, OutSource
International, Inc., OutSource Franchising, Inc., Capital Staffing Fund,
Inc., Synadyne I, Inc., Synadyne II, Inc., Synadyne III, Inc., Synadyne
IV, Inc., Synadyne V, Inc. and Outsource International of America, Inc.,
as originators; OutSource International, in its separate capacity as
servicer; EagleFunding Capital Corporation, as purchaser; and BancBoston
Securities Inc., individually and as purchaser agent.
10.51 Asset Purchase Agreement, dated May 14, 1998, by and among OutSource
International of America, Inc., Mid-West Temps, Inc., Teresa Usher and
Deborah Weiss. (4)
25
<PAGE>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
10.52 Asset Purchase Agreement, dated May 15, 1998, by and among OutSource
International of America, Inc., Resource Dimensions, Inc., and Earl M.
Pick.(4)
27 Financial Data Schedule
- ------------------------
* Compensatory plan or arrangement.
(1) Incorporated by reference to the Exhibits to the Company's Registration
Statement on Form S-1 (Registration Statement No. 333-33443) as filed
with the Securities and Exchange Commission on August 12, 1997.
(2) Incorporated by reference to the Exhibits to Amendment No. 3 to the
Company's Registration Statement on Form S-1 (Registration Statement No.
333-33443) as filed with the Securities and Exchange Commission on
October 21, 1997.
(3) Incorporated by reference to the Exhibits to Amendment No. 1 to the
Company's Registration Statement on Form S-1 (Registration Statement No.
333-33443) as filed with the Securities and Exchange Commission on
September 23, 1997.
(4) Incorporated by reference to Exhibits 2.1 and 2.2 to the Company's Form
8-K as filed with the Securities and Exchange Commission on May 29,
1998.
- ------------------------
(b) Reports on Form 8 - K:
The following reports were filed on Form 8-K during the quarter ended
June 30, 1998:
A Form 8-K/A dated May 4, 1998 related to the Company's acquisition of
LM Investors, Inc. The related Form 8-K was filed on March 5, 1998.
A Form 8-K dated May 29, 1998 related to the Company's acquisition of
Mid-West Temps, Inc. and Resource Dimensions, Inc. The related Form 8-K/A was
filed on July 28, 1998.
26
<PAGE>
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.
OUTSOURCE INTERNATIONAL, INC.
Date: August 14, 1998 By: /s/Paul M. Burrell
----------------------------------------
Paul M. Burrell
President, Chief Executive Officer
and Chairman of the Board of Directors
Date: August 14, 1998 By: /s/Scott R. Francis
----------------------------------------
Scott R. Francis
Chief Financial Officer
(Principal Financial Officer)
Date: August 14, 1998 By: /s/Robert E. Tomlinson
----------------------------------------
Robert E. Tomlinson
Chief Accounting Officer
(Principal Accounting Officer)
27
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
10.17 Employment Agreement between Scott R. Francis and the Company dated
as of April 1, 1998.
10.18 Stock Option Plan, As Amended Effective May 8, 1998.
10.19 Third Amended and Restated Credit Agreement among OutSource
International, Inc., the banks from time to time parties hereto and
BankBoston, N.A., successor by merger to Bank of Boston, Connecticut,
as agent - Revolving Credit Facility dated as of July 27, 1998.
10.34 Receivables Purchase and Sale Agreement dated July 27, 1998 among
Outsource International, Inc., Outsource Franchising, Inc., Capital
Staffing Fund, Inc., Synadyne I, Inc., Synadyne II, Inc., Synadyne
III, Inc., Synadyne IV, Inc., Synadyne V, Inc., and Outsource
International of America, Inc., each as an originator, and Outsource
Funding Corporation, as the buyer, and Outsource International, Inc.,
as the servicer.
10.35 Receivables Purchase Agreement dated July 27, 1998 among Outsource
Funding Corporation, as the seller, and EagleFunding Capital
Corporation, as the purchaser, and BancBoston Securities, Inc., as the
deal agent and Outsource International, Inc., as the servicer.
10.36 Intercreditor Agreement dated July 27, 1998 by and among BankBoston,
N.A., as lender agent; Outsource Funding Corporation, Outsource
International, Inc., OutSource Franchising, Inc., Capital Staffing
Fund, Inc., Synadyne I, Inc., Synadyne II, Inc., Synadyne III, Inc.,
Synadyne IV, Inc., Synadyne V, Inc. and Outsource International of
America, Inc., as originators; OutSource International, in its
separate capacity as servicer; EagleFunding Capital Corporation, as
purchaser; and BancBoston Securities Inc., individually and as
purchaser agent.
27 Financial Data Schedule
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
April 8, 1998, by and between OutSource International, Inc., a Florida
corporation (the "Company"), and Scott Francis ("Employee").
WHEREAS, the Company, through its Board of Directors, desires to retain the
services of Employee, and Employee desires to be retained by the Company, on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Employment. The Company hereby employs Employee, and Employee hereby
accepts employment, as Chief Financial Officer of Outsource International, Inc.
upon the terms subject to this Agreement.
2. Term. The term ("Term") of this Agreement shall commence on April 1,
1998, and shall continue until terminated in accordance with the terms hereof.
3. Duties. During his employment hereunder, Employee will serve as the
Chief Financial Officer of Outsource International, Inc. Employee shall report
directly to the President of the Company and shall serve at his direction.
Employee shall perform services as assigned by the President of the Company
consistent with the title of Chief Financial Officer. Employee shall diligently
perform such duties and shall devote his entire business skill, time and effort
to his employment and his duties hereunder and shall not during the Term,
directly or indirectly, alone or as a member of a partnership, or as an officer,
director, employee or agent of any other person, firm or business organization
engage in any other business activities or pursuits requiring his personal
service that materially conflict with his duties here-under or the diligent
performance of such duties. This shall not, however, preclude Employee from
serving on boards of directors of other corporations; provided that such service
does not conflict with the duties of Employee hereunder or result in a conflict
of interest. In addition, THE President of the Company will nominate Employee to
serve on the Board of Directors of Outsource International, Inc. for an initial
term of one year.
4. Compensation.
a. Salary. During his employment hereunder, Employee shall be paid an
initial salary of $200,000.00 per year, payable in equal installments not
less than monthly ("Base Salary"). The Employee's Base Salary shall be
reviewed at least annually by the Board of Directors or any Committee of
the Board delegated the authority to review executive compensation.
<PAGE>
b. Bonus. In addition to Base Salary, Employee shall be entitled to
participate in the Company's Stock Option Plan, as amended and restated
(the "Stock Option Plan") and, in addition, to participate in a Management
Bonus Program, beginning in calendar year 1998, to be established by the
Company with an initial targeted bonus for calendar year 1998 of $56,250
for Employee, based upon the achievement of mutually agreed upon goals and
objectives (hereafter the "Management Bonus Program"). The bonus shall be
based on the following:
(1) 50% Division results
(2) 30% OSI achieving budget
(3) 12.5% achieving your individual goals as mutually agreed upon
with the President
The bonus, for year one only, shall be guaranteed to Employee.
c. Insurance. During his employment hereunder, Employee shall be
entitled to participate in such health, life, disability and other
insurance programs, if any, that the Company may offer to other key
executive employees of the Company from time to time. You will be eligible
for such benefits as of May 1, 1998.
d. Other Benefits. During his employment here-under, Employee shall be
entitled to such other benefits, if any, that the Company may offer to
other key executive employees of the Company from time to time.
e. Vacation. Employee shall be entitled to three weeks of vacation
leave (in addition to holidays) in each calendar year during the Term, or
such additional amount as may be set forth in the vacation policy that the
Company shall establish from time to time. Except with respect to vacation
time unused as the result of a written request by the Company to postpone a
vacation, any unused vacation from one calendar year shall not carry-over
to any subsequent calendar year.
f. Expense Reimbursement. Employee shall, upon submission of
appropriate supporting documentation, be entitled to reimbursement of
reasonable out-of-pocket expenses incurred in the perfor-mance of his
duties hereunder in accordance with policies established by the Company.
Such expenses shall include, without limitation, reasonable travel and
entertainment expenses, gasoline and toll expenses and cellular phone use
charges, if such charges are directly related to the business of the
Company.
5. Grounds for Termination.
The Board of Directors of the Company may terminate this Agreement for
any reason at any time including, without limitation, for "Cause." As used
herein, "Cause" shall mean any of the following: (i) failure on the part of
Employee to disclose to Company in writing on or before the date hereof
Employee's breach of or default under any employment, non-compete,
confidentiality or other agreement between Employee and any prior employer
of Employee (including without
2
<PAGE>
limitation any breach or default that might result from Employee's entering
into or performing his duties and obligations under this Agreement); (ii)
an act of willful misconduct or gross negligence by Employee in the
performance of his material duties or obligations to the Company; (iii)
indictment of Employee for a felony involving moral turpitude, whether
relating to his employment or otherwise; (iv) an act of dishonesty or
breach of trust on the part of Employee resulting or intended to result
directly or indirectly in personal gain or enrichment at the expense of the
Company; (v) conduct on the part of Employee intended to injure the
business of the Company; (vi) Employee's addiction to any drug or chemical;
(vii) Employee's insubordination unless resulting from Employee's refusal
to do an illegal act; (viii) a material failure of Employee to perform or
observe the provisions of this Agreement (other than by reason of
disability as defined herein). The existence of any of the foregoing events
or conditions, except under clause (iii), shall be determined by the Board
of Directors (excluding the Employee) in the exercise of its reasonable
judgment provided that if such occurrence relates to section (i), (vi) or
(viii) above, it must persist more than (a) five (5) days after notice is
given to Employee by personal delivery or (b) ten (10) days after a notice
is given to Employee by any other means, each notice which details the
occurrence. Notwithstanding the foregoing, if occurrence under sections
(ii), (v), (vii) or (viii) cannot reasonably be remedied within the time
periods set forth, the Board of Directors shall not exercise its right to
terminate under this section if Employee begins to remedy the occurrence
within the time period and continues actively and diligently in good faith
to completely remedy such occurrence. As used herein "insubordination"
means Employee failing to use his best efforts to comply with a written
directive made by the Company's Board of Directors for any action or
inaction not inconsistent with the duties set forth here.
6. Termination by Employee.
Employee may terminate this Agreement with Good Reason. "Good Reason"
means:
a. Without Employee's express written consent, the assignment to
Employee of duties inconsistent with Employee's position with the
Company as set forth in this Agreement (including status, offices,
titles, and reporting requirements), authority, duties, or
responsibilities contemplated by paragraph 3.
b. The Company causes a material change in the nature or scope of the
authorities, powers, functions, duties or responsibilities
attached tot he Employee's position as described in paragraph 3.
c. At any time the Employee is required, without his written consent,
to relocate his office more than seventy-five miles from the
location of the Company's current corporate headquarters;
d. The Company decreases the Employee's compensation below the levels
provided for by the terms of Section 4(a) (taking into account
increases made from time to time in accordance with Section 4);
3
<PAGE>
e. A material breach of the provisions of this Agreement by the
Company (except those set forth in Paragraph 4(a)) and Employee
provides at least 15 days prior written notice to at least two
members of the Company's Board of Directors (other than Employee)
of the existence of such breach and his intention to terminate
this Agreement (no such termination shall be effective if such
breach is cured during such period or if the Company is in good
faith attempting to cure such breach);
f. The failure of the Company to comply with the provisions of
Paragraph 4(a)for an uninterrupted 10 day period; or
g. The Company materially reduces the Employee's benefits under any
employee benefit plan, program or arrangement of the Company
(other than a change that affects all employees similarly
situated) from the level in effect upon the Employee's
commencement or participation.
h. Notwithstanding anything to the contrary herein, in the event
Employee notifies Employer of an intent to terminate his
employment pursuant to paragraph 6(a) or (b), Employee shall be
entitled to, upon such termination to receive the benefits
provided in paragraph 7(b) herein; provided however, that if: (i)
Employee continues his employment for a period of one year from
the date on which he provided notice under paragraph 6(a) or (b)
herein to the Company, or (ii) the Company terminates Employee
during such one year period other than for Cause, as defined
herein, or other than for unsatisfactory performance, as described
in paragraph 7(c) herein, upon such termination, employee shall
then be entitled to receive the benefits provided under paragraphs
7(b) and 7(c)(i) herein. If during such one year period, there is
a "Change of Control", as defined herein,, and (x) Employee is
terminated other than for Cause, as defined herein,, or (y) if
there is Good Reason (as defined in paragraph 6(a)-(g) hereof for
Employee to terminate employment hereunder, Employee shall be
entitled to receive the benefits provided in paragraph 8 herein.
The provisions of this paragraph 6(h) shall not affecft Employee's
rights under paragraph 6(c)-(g) or 8 hereof, and shall be
independent of these provisions. The parties agree that the intent
of this paragraph 6(h) is to encourage Employee to remain as an
Employee notwithstanding an intent to terminate his employment
hereunder pursuant to paragraph 6(a) or (b).
7. Payment and Other Provisions Upon Termination.
a. In the event that: Employee's employment with the Company (including
its subsidiaries) is terminated by the Company for Cause as provided in
Paragraph 5; or Employee terminates his employment without Good Reason as
described in Paragraph 6; then, on or before Employee's last day of
employment with the Company:
i. Salary and Bonus Payments: The Company shall pay in a lump sum
to Employee such amount of compensation due to Employee hereunder for
services rendered to the Company, as well as compensation for unused
vacation time, as has accrued but remains
4
<PAGE>
unpaid. Any and all other rights granted to Employee under this
Agreement shall terminate as of the date of termination.
ii. Noncompetition/Nonsolicitation Period. The provisions of
Paragraph 14 shall continue to apply with respect to Employee for a
period of one year following the date of termination.
b. In the event that: Employee's employment with the Company (including
its subsidiaries) is terminated by the Company for any reason other than
for Cause as provided in Paragraph 5, and other than as a consequence of
Employee's death, disability, or normal retirement under the Company's
retirement plans and practices; or Employee terminates his employment with
Good Reason as described in Paragraph 6; then:
i. Salary and Bonus Payments:
(A) On or before Employee's last day of employment with the
Company, the Company shall pay to Employee, as compensation
for services rendered to the Company, a cash amount equal to
the sum of (x) one-half (1/2) of the amount of Employee's
Base Salary and (y) ninety percent of one-half (1/2) of the
amount of the estimated target bonus under the Management
Bonus Program as in effect immediately prior to his date of
termination (the "Cash Amount").
(B) The final calculation of Employee's target bonus shall be
made, and any remaining bonus amount due to Employee paid, in
the manner set forth in Section 7.a.i. At the election of the
Company, the Cash Amount may be paid to Employee in periodic
installments in accordance with the regular salary payment
practices of the Company, with the first such installment to
be paid on or before Employee's last day of employment with
the Company. Notwithstanding the foregoing sentence, the
entire Cash Amount shall be paid to Employee during the
period not to exceed one year following Employee's last day
of employment with the Company. No interest shall be paid
with respect to any of the Cash Amount not paid on the
Employee's date of termination.
(C) For purposes of paragraph 7.b.i., the "Cash Amount" shall
mean: (1) if the date of termination is on or before October
1, 1998, the sum of Employee's annual base salary plus the
Employee's current estimated target bonus under the
Management Bonus Program; or (2) if the date of termination
is on is after October 1, 1998, but prior to March 1, 1999,
the product of one and one-half times the base salary in
effect as of the effective date of the termination plus the
Employee's current estimated target bonus under the
Management Bonus Program; or (3) if the termination is after
March 1, 1999, the product of two times the base salary in
effect as of the effective date of the termination plus the
Employee's current estimated target bonus under the
Management Bonus Program
5
<PAGE>
ii. Benefit Plan Coverage: The Company shall maintain in full
force and effect for Employee and his dependents for one year after the
date of termination, all life, health, accident, and disability benefit
plans and other similar employee benefit plans, programs and
arrangements in which Employee or his dependents were entitled to
participate immediately prior to the date of termination, in such
amounts as were in effect immediately prior to the date of termination,
provided that such continued participation is possible under the
general terms and provisions of such benefit plans, programs and
arrangements. In the event that participation in any benefit plan,
program or arrangement described above is barred, or any such benefit
plan, program or arrangement is discontinued or the benefits thereunder
materially reduced, the Company shall arrange to provide Employee and
his dependents for one year after the date of termination with benefits
substantially similar to those that they were entitled to receive under
such benefit plans, programs and arrangements immediately prior to the
date of termination, or, at the Company's option, a lump sum payment to
Employee equal to the Company's cost immediately prior to termination
to provide such benefits. If immediately prior to the date of
termination the Company provided Employee with any club memberships,
Employee will be entitled to continue such memberships at his sole
expense. Notwithstanding any time period for continued benefits stated
in this Paragraph 7.b.ii, all benefits in this Paragraph 7.b.ii will
terminate on the date that Employee becomes an employee of another
employer and eligible to participate in the employee benefit plans of
such other employer. To the extent that Employee was required to
contribute amounts for the benefits described in this Paragraph 7.b.ii
prior to his termination, he shall continue to contribute such amounts
for such time as these benefits continue in effect after termination.
iii.[INTENTIONALLY OMITTED]
iv. Savings and Other Plans: Except as otherwise more specifically
provided herein or under the terms of the respective plans relating to
termination of employment, Employee's active participation in any
applicable savings, retirement, profit sharing or supplemental employee
retirement plans or any deferred compensation or similar plan of the
Company or any of its subsidiaries shall continue only through the last
day of his employment. All other provisions, including any distribution
and/or vested rights under such plans, shall be governed by the terms
of those respective plans.
v. Noncompetition/Nonsolicitation Period. The provisions of
Paragraph 14 shall continue, beyond the time periods set forth in such
paragraph, to apply with respect to Employee for the shorter of (x)
twelve months following the date of termination or (y) until such time
as the Company has failed to comply with the provisions of Paragraph
7.b.i for a an uninterrupted 10-day period and such failure is not
cured within 5 days after written notice of such failure is delivered
to at least two directors of the Company (other than Employee).
c. In the event Employee's employment with the Company (including its
subsidiaries) is terminated by the Company other than for Cause as provided
in Paragraph 5 and other than as a consequence of Employee's death,
disability, or normal retirement under the Company's
6
<PAGE>
retirement plans and practices, and the reason for such termination is not
based upon unsatisfactory performance by Employee of his duties hereunder
as stated in written performance evaluations or other written documents
prepared by the Company, then the following provision shall apply. This
same provision shall also apply if Employee terminates his employment with
Good Reason as described in Paragraph 6.
i. Exercisability of Stock Options. Notwithstanding the vesting
period provided for in the Stock Option Plan and any related stock
option agreements between the Company and Employee for stock options
("options") and stock appreciation rights ("rights") granted Employee
by the Company, all options and stock appreciation rights shall be
immediately exercisable upon termination of employment. In addition,
Employee will have the right to exercise all options and rights for the
shorter of (x) one year following his termination of employment or (y)
with respect to each option, the remainder of the period of
exercisability under the terms of the appropriate documents that grant
such options.
d. The provisions of this Paragraph 7 shall apply if Employee's
employment is terminated prior to or more than three years after the
occurrence of a Change of Control (as defined in Paragraph 8.c). From the
occurrence of any Change of Control until the second anniversary of such
Change of Control, the provisions of Paragraph 8 shall apply in place of
this Paragraph 7, except that in the event that after a Change of Control
Employee's employment is terminated by Employee without Good Reason or
Company terminates Employee for Cause, then the provisions of Paragraph 8
shall not apply and the provisions of Paragraph 7.a shall apply.
Termination upon death, disability and retirement are covered by Paragraphs
9, 10, and 11, respectively.
8. Payment and Other Provisions after Change of Control.
a. Salary, Performance Award, and Bonus Payments: In the event
Employee's employment with the Company is terminated within three years
following the occurrence of a Change of Control (other than as a
consequence of his death or disability, or of his normal retirement under
the Company's retirement plans and practices) either (x) by the Company for
any reason other than for Cause or (z) by Employee with Good Reason as
provided in Paragraph 6, then Employee shall be entitled to receive from
the Company, the following:
i. Base Salary. Two times the Employee's Base Salary as in effect
at the date of termination shall be paid on the date of termination;
ii. Target Bonus. Two times ninety percent of the amount of the
Employee's estimated target bonus under the Management Bonus Program
for the fiscal year in which the date of termination occurs shall be
paid on the date of termination; the final calculation of Employee's
target bonus shall be made, and any remaining bonus amount due to
Employee paid, in the manner set forth in Section 7.a.i.; and
iii.[OMITTED INTENTIONALLY]
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iv. Other Benefits. All benefits under Paragraphs 7.b.ii, 7.b.iv
and 7.c.i shall be extended to Employee as described in such
paragraphs.
b. Noncompetition/Nonsolicitation Period. In the event of a termination
under Paragraph 8.a within one year after a Change of Control the
provisions of Paragraph 14 shall continue to apply as stated in paragraph
7.b.v.
c. For purposes of this Agreement, the term "Change of Control" shall
mean:
i. The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of "13(d)(3)" or
"14(d)(2)" of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) (any of the foregoing
described in this Paragraph 8.c.i hereafter a "Person") of 33% or more
of either (a) the then outstanding shares of Capital Stock of the
Company (the "Outstanding Capital Stock") or (b) the combined voting
power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the "Voting
Securities"), provided, however, that any acquisition by (x) the
Company or any of its subsidiaries, or any employee benefit plan (or
related trust) sponsored or maintained by the Company or any of its
subsidiaries or (y) any Person that is eligible, pursuant to Rule
13d-1(b) under the Exchange Act, to file a statement on Schedule 13G
with respect to its beneficial ownership of Voting Securities, whether
or not such Person shall have filed a statement on Schedule 13G, unless
such Person shall have filed a statement on Schedule 13D with respect
to beneficial ownership of 33% or more of the Voting Securities or (z)
any corporation with respect to which, following such acquisition, more
than 60% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Capital Stock and Voting Securities immediately prior to
such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the Outstanding
Capital Stock and Voting Securities, as the case may be, shall not
constitute a Change of Control; or
ii. Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a director
subsequent to the date hereof whose election or nomination for election
by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Directors
of the Company (as such terms are used in Rule 14a-11 of Regulation
14A, or any successor section, promulgated under the Exchange Act); or
8
<PAGE>
iii.Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination"), in
each case, with respect to which all or substantially all holders of
the Outstanding Capital Stock and Voting Securities immediately prior
to such Business Combination do not, following such Business
Combination, beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from Business Combination; or
iv. (a) a complete liquidation or dissolution of the Company or
(b) a sale or other disposition of all or substantially all of the
assets of the Company other than to a corporation with respect to
which, following such sale or disposition, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors is then owned
beneficially, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Capital Stock and Voting Securities
immediately prior to such sale or disposition in substantially the same
proportion as their ownership of the Outstanding Capital Stock and
Voting Securities, as the case may be, immediately prior to such sale
or disposition.
9. Termination by Reason of Death. If Employee shall die while employed by
the Company both prior to termination of employment and during the effective
term of this Agreement, all Employee's rights under this Agreement shall
terminate with the payment of that portion of Base Salary as has accrued but
remains unpaid and a prorated amount of targeted bonus under the Company's
Management Bonus Program through the month in which his death occurs, plus three
additional months of the fixed salary and targeted bonus. The calculation of
Employee's target bonus shall be made, and any bonus amount due to Employee
paid, in the manner set forth in Section 7.a.i. All benefits under Paragraphs
7.b.ii, 7.b.iv and 7.c.i shall be extended to Employee's estate as described in
such paragraphs. In addition, Employee's eligible dependents shall receive
continued benefit plan coverage under Paragraph 7.b.ii for three months from the
date of Employee's death.
10. Termination by Disability. Employee's employment hereunder may be
terminated by the Company for disability. In such event, all Employee's rights
under this Agreement shall terminate with the payment of that portion of Base
Salary as has accrued but remains unpaid as of the thirtieth (30th) day after
such notice is given except that all benefits under Paragraphs 7.b.ii, 7.b.iv
and 7.c.i shall be extended to Employee as described in such paragraphs,
provided, however, that, with respect to Paragraph 7.b.ii, the period for
continued benefit plan coverage shall be limited to six months from the date of
termination. In addition, the noncompetition and nonsolicitation provisions of
Paragraph 14 shall continue to apply to Employee for a period of six months from
the date of termination. For purposes of this Agreement, "disability" is defined
to mean that, as a result of Employee's incapacity due to physical or mental
illness:
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<PAGE>
a. Employee shall have been absent from his duties as an officer of the
Company on a substantially full-time basis for six (6) consecutive months;
and
b. Within thirty (30) days after the Company notifies Employee in
writing that it intends to replace him, Employee shall not have returned to
the performance of his duties as an officer of the Company on a full-time
basis.
11. Retirement. It is expected that the Compensation Committee of the
Company's Board of Directors will develop a benefit plan for retirement. It is
expected that Employee's rights upon retirement will be specifically described
in such retirement benefit plan. If retirement benefits for Employee are not
specifically described in such plan, the Company shall provide Employee upon
retirement benefits no lesser than the highest level of benefits accorded any
other retiring executive officer during the five year period immediately
preceding Employee's retirement.
12. Indemnification. If litigation shall be brought to enforce or interpret
any provision contained herein, the non-prevailing party shall indemnify the
prevailing party for reasonable attorney's fees (including those for
negotiations, trial and appeals) and disbursements incurred by the prevailing
party in such litigation, and hereby agrees to pay prejudgment interest on any
money judgment obtained by the prevailing party calculated at the generally
prevailing NationsBank of Florida, N.A. base rate of interest charged to its
commercial customers in effect from time to time from the date that payment(s)
to him should have been made under this Agreement.
13. [Intentionally Omitted]
14. Noncompetition and Nonsolicitation.
a. The nature of the system and methods employed in the Company's
business is such that Employee will be placed in a close business and
personal relationship with the customers of the Company and be privy to
confidential customer usage and rate information. Accordingly, at all times
during the term of this Agreement and for a period of one (1) year
immediately following the termination of Employee's employment hereunder
(the "Noncompetition and Nonsolicitation Period") for any reason
whatsoever, and for such additional periods as may otherwise be set forth
in this Agreement in reference to this Paragraph 14, so long as the Company
continues to carry on the same business, Employee shall not, for any reason
whatsoever, directly or indirectly, for himself or on behalf of, or in
conjunction with, any other person, persons, company, partnership,
corporation or business entity:
i. Call upon, divert, influence or solicit or attempt to call
upon, divert, influence or solicit any customer or customers of
the Company nationwide;
ii. Divulge the names and addresses or any information concerning
any customer of the Company;
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<PAGE>
iii. Disclose any information or knowledge relating to the
Company, including but not limited to, the Company's system or
method of conducting business to any person, persons, firms,
corporations or other entities unaffiliated with the Company, for
any reason or purpose whatsoever;
iv. Own, manage, operate, control, be employed by, participate in
or be connected in any manner with the ownership, management,
operation or control of the same, similar or related line of
business as that carried on by the Company ("Competition") within
a radius of fifty (50) miles from Employee's principal office.
b. The time period covered by the covenants contained in this Paragraph
14 shall not include any period(s) of violation of any covenant or any period(s)
of time required for litigation to enforce any covenant.
c. The covenants set forth in this Paragraph 14 shall be construed as
an agreement independent of any other provision in this Agreement and existence
of any potential or alleged claim or cause of action of Employee against the
Company, whether predicted on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of the covenants contained herein.
An alleged or actual breach of the Agreement by the Company shall not be a
defense to enforcement of the provisions of this Paragraph 14.
d. Employee acknowledges that he has read the foregoing and agrees that
the nature of the geographical restrictions are reasonable given the
international nature of the Company's business. In the event that these
geographical or temporal restrictions are judicially determined to be
unreasonable, the parties agree that these restrictions shall be judicially
reformed to the maximum restrictions which are reasonable.
e. Notwithstanding anything to the contrary contained herein, in the
event that Employee engages in Competition, or any conduct expressly prohibited
by this Paragraph 14 at any time during the Noncompetition and Nonsolicitation
Period for any reason whatsoever, Employee shall not receive any of the
termination benefits he otherwise would be entitled to receive pursuant to
Paragraphs 7.b., 7.c., 8.a. and 10 hereof.
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<PAGE>
15. Confidentiality.
a. Nondisclosure. Employee acknowledges and agrees that the
Confidential Information (as defined below) is a valuable, special and
unique asset of the Company's business. Accordingly, except in connection
with the performance of his duties hereunder, Employee shall not at any
time during or subsequent to the term of his employment hereunder disclose,
directly or indirectly, to any person, firm, corporation, partnership,
association or other entity any proprietary or confidential information
relating to the Company or any information concerning the Company's
financial condition or prospects, the Company's customers, the design,
development, manufacture, marketing or sale of the Company's products or
the Company's methods of operating its business (collectively "Confidential
Information"). Confidential Information shall not include information
which, at the time of disclosure, is known or available to the general
public by publica-tion or otherwise through no act or failure to act on the
part of Employee.
b. Return of Confidential Information. Upon termina-tion of Employee's
employ-ment, for whatever reason and whether voluntary or involuntary, or
at any time at the request of the Company, Employee shall promptly return
all Confi-dential Information in the possession or under the control of
Employee to the Company and shall not retain any copies or other
reproductions or extracts thereof. Employee shall at any time at the
request of the Company destroy or have destroyed all memoranda, notes,
reports, and documents, whether in "hard copy" form or as stored on
magnetic or other media, and all copies and other reproductions and
extracts thereof, prepared by Employee and shall provide the Company with a
certificate that the foregoing materials have in fact been returned or
destroyed.
c. Books and Records. All books, records and accounts whether prepared
by Employee or otherwise coming into Employee's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company upon termination of Employee's employment hereunder or upon the
Company's request at any time.
16. Injunction/Specific Performance Setoff. Employee acknowledges that a
breach of any of the provisions of Paragraphs 14 or 15 hereof would result in
immediate and irreparable injury to the Company which cannot be adequately or
reasonably compensated at law. Therefore, Employee agrees that the Company shall
be entitled, if any such breach shall occur or be threatened or attempted, to a
decree of specific performance and to a temporary and permanent injunc-tion,
without the posting of a bond, enjoining and restraining such breach by Employee
or his agents, either directly or indirectly, and that such right to injunction
shall be cumulative to whatever other remedies for actual damages to which the
Company is entitled. Employee further agrees that, except as otherwise provided
in Paragraph 13 hereof, the Company may set off against or recoup from any
amounts due under this Agreement to the extent of any losses incurred by the
Company as a result of any breach by Employee of the provisions of Paragraphs 14
or 15 hereof.
17. Severability: Any provision in this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or
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<PAGE>
unenforceability without invalidating or affecting the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
18. Successors: This Agreement shall be binding upon Employee and inure to
his and his estate's benefit, and shall be binding upon and inure to the benefit
of the Company and any permitted successor of the Company. Neither this
Agreement nor any rights arising hereunder may be assigned or pledged by:
Employee or anyone claiming through Employee; or by the Company, except to any
corporation which is the successor in interest to the Company by reason of a
merger, consolidation or sale of substantially all of the assets of the Company.
The foregoing sentence shall not be deemed to have any effect upon the rights of
Employee upon a Change of Control.
19. Controlling Law: This Agreement shall in all respects be governed by,
and construed in accordance with, the laws of the State of Florida.
20. Notices. Any notice required or permitted to be given hereunder shall
be written and sent by registered or certified mail, telecommunicated or hand
delivered at the address set forth herein or to any other address of which
notice is given:
To the Company: OutSource International, Inc.
1144 East Newport Center Drive
Deerfield Beach, Florida 33442
Attention: General Counsel
To Employee: Scott Francis
21. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto on the subject matter hereof and may not be modified
without the written agreement of both parties hereto.
22. Waiver. A waiver by any party of any of the terms and conditions hereof
shall not be construed as a general waiver by such party.
23. Counterparts. This Agreement may be executed in counter-parts, each of
which shall be deemed an original and both of which together shall constitute a
single agreement.
24. Interpretation. In the event of a conflict between the provisions of
this Agreement and any other agreement or document defining rights and duties of
Employee or the Company upon Employee's termination, the rights and duties set
forth in this Agreement shall control.
25. Certain Limitations on Remedies. Paragraph 7.b provides that certain
payments and other benefits shall be received by Employee upon the termination
of Employee by the Company other
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than for Cause and states that these same provisions shall apply if Employee
terminates his employment for Good Reason. It is the intention of this Agreement
that if the Company terminates Employee other than for Cause (and other than as
a consequence of Employee's death, disability or normal retirement) or if
Employee terminates his employment with Good Reason, then the payments and other
benefits set forth in Paragraph 7.b shall constitute the sole and exclusive
remedies of Employee. This Paragraph 25 shall have no effect upon the provisions
of Paragraph 8 of this Agreement.
IN WITNESS WHEREOF, this Employment Agreement has been executed by the
parties as of the date first above written.
COMPANY:
OUTSOURCE INTERNATIONAL, INC.
By:/s/ Paul Burrell
-------------------------
Its: President
EMPLOYEE:
/s/ Scott R. Francis
----------------------------
Name: Scott Francis
14
OUTSOURCE INTERNATIONAL, INC.
STOCK OPTION PLAN
As Amended and Restated Effective September 2, 1997
1. Purpose. The purpose of this Plan is to further the interests of
OutSource International, Inc., a Florida corporation, its subsidiaries
and its shareholders by providing incentives in the form of grants of
stock options to key Employees, Non-Employee Directors and other
persons who contribute materially to the success and profitability of
the Company. The grants will recognize and reward outstanding
individual performances and contributions and will give such persons a
proprietary interest in the Company, thus enhancing their personal
interest in the Company's continued success and progress. This program
will also assist the Company and its subsidiaries in attracting and
retaining key persons. This Plan is a continuation, in the form of an
amendment and restatement, of an existing plan.
2. Definitions. The following definitions shall apply to this Plan:
a. "Board" means the board of directors of the Company.
b. "Change of Control" occurs when (i) any person, including a
"group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, becomes the beneficial owner
of thirty percent or more of the total number of shares
entitled to vote in the election of directors of the Board,
(ii) the Company is merged into any other company or
substantially all of its assets are acquired by any other
company, or (iii) three or more directors nominated by the
Board to serve as a director, each having agreed to serve in
such capacity, fail to be elected in a contested election of
directors; provided, however, that a Change of Control shall
not occur as a result of the financing provided by Triumph
-Connecticut Limited Partnership and Bachow Investment
Partners III, L.P.
c. "Code" means the Internal Revenue Code of 1986, as amended.
d. "Committee" means the Stock Option Committee consisting solely
of two or more Non-Employee Directors appointed by the Board.
In the event that the Board does not appoint a Stock Option
Committee, "Committee" means the Board.
e. "Common Stock" means the Common Stock of the Company, or such
other class of shares or securities as to which the Plan may
be applicable pursuant to Section 15 herein.
f. "Company" means OutSource International, Inc., and any
wholly-owned subsidiary of OutSource International, Inc.
g. "Date of Grant" means the date specified in the resolution of
the Committee authorizing the grant of the Option.
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h. "Eligible Person" means any person who performs or has in the
past performed services for the Company or any direct or
indirect partially or wholly owned subsidiary thereof, whether
as a director, officer, Employee, consultant or other
independent contractor, and any person who performs services
relating to the Company in his or her capacity as an employee
or independent contractor of a corporation or other entity
that provides services for the Company.
i. "Employee" means any person employed as a core employee of the
Company, excluding (i) any fee-for-service employee of the
Company and (ii) any leased or temporary employee of the
Company who would be cost of sales for financial reporting
purposes.
j. "Fair Market Value" means the fair market value of the
Common Stock. If the Common Stock is not publicly traded on
the date as of which fair market value is being determined,
the Board shall determine the fair market value of the Shares,
using such factors as the Board considers relevant, such as
the price at which recent sales have been made, the book value
of the Common Stock, and the Company's current and projected
earnings. If the Common Stock is publicly traded on the date
as of which fair market value is being determined, the fair
market value is the mean between the high and low sales prices
of the Common Stock as reported by The Nasdaq Stock Market on
that date or, if the Common Stock is listed on a stock
exchange, the mean between the high and low sales prices of
the stock on that date, as reported in The Wall Street
Journal. If trading in the stock or a price quotation does not
occur on the date as of which fair market value is being
determined, the next preceding date on which the stock was
traded or a price was quoted will determine the fair market
value.
k. "Incentive Stock Option" means a stock option granted pursuant
to either this Plan or any other plan of the Company that
satisfies the requirements of Section 422 of the Code and that
entitles the Recipient to purchase stock of the Company or in
a corporation that at the time of grant of the option was a
parent or subsidiary of the Company or a predecessor
corporation of any such corporation.
l. "Non-Employee Director" means a member of the Board who is not
employed on an hourly or salaried full-time basis by the
Company or any parent or Subsidiary of the Company that now
exists or hereafter is organized or acquires the Company.
m. "Nonqualified Stock Option" means a stock option granted
pursuant to the Plan that is not an Incentive Stock Option and
that entitles the Recipient to purchase stock of the Company
or in a corporation that at the time of grant of the option
was a parent or subsidiary of the Company or a predecessor
corporation of any such corporation.
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<PAGE>
n. "Open Market Share" shall mean (i) each Share acquired on
the open market or through any method other than the exercise
of an Option, and (ii) each warrant, issued in connection with
the Company's issuance of senior subordinated promissory notes
on February 21, 1997, to purchase Shares. For purposes of
Sections 5.b., 5.c., and 5.d. of the Plan, a Non-Employee
Director shall be deemed to own any Open Market Shares either
acquired and held by such Non-Employee Director, or by any
Corporation which employs such Non-Employee Director, or by
any Partnership in which such Non-Employee Director is a
partner, or by any investment fund managed by any Corporation
that employs such Non-Employee Director, or by any investment
fund managed by any Partnership in which such Non-Employee
Director is a partner.
o. "Option" means an Incentive Stock Option or a Nonqualified
Stock Option granted pursuant to the Plan.
p. "Option Agreement" means a written agreement entered into
between the Company and a Recipient which sets out the terms
and restrictions of an Option granted to the Recipient.
q. "Option Shareholder" shall mean an Employee who has exercised
his or her Option.
r. "Option Shares" means Shares issued upon exercise of an
Option.
s. "Plan" means this OutSource International, Inc. Stock
Incentive Plan, as amended and restated.
t. "Recipient" means an individual who receives an Option.
u. "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
v. "Subsidiary" means any corporation 50 percent or more of the
voting securities of which are owned directly or indirectly by
the Company at any time during the existence of this Plan.
3. Administration. This Plan will be administered by the Committee. The
Committee has the exclusive power to select the Recipients of Options
pursuant to this Plan, to establish the terms of the Options granted to
each Recipient, and to make all other determinations necessary or
advisable under the Plan. The Committee has the sole and absolute
discretion to determine whether the performance of an Eligible Person
warrants an Option
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<PAGE>
under this Plan, and to determine the size and type of the Option. The
Committee has full and exclusive power to construe and interpret this
Plan, to prescribe, amend, and rescind rules and regulations relating
to this Plan, and to take all actions necessary or advisable for the
Plan's administration. The Committee, in the exercise of its powers,
may correct any defect or supply any omission, or reconcile any
inconsistency in the Plan, or in any Option Agreement, in the manner
and to the extent it shall deem necessary or expedient to make the Plan
fully effective. In exercising this power, the Committee may retain
counsel at the expense of the Company. The Committee shall also have
the power to determine the duration and purposes of leaves of absence
which may be granted to a Recipient without constituting a termination
of the Recipient's employment for purposes of the Plan. Any
determinations made by the Committee will be final and binding on all
persons. A member of the Committee will not be liable for performing
any act or making any determination in good faith. Notwithstanding the
foregoing, the Committee shall have no discretion with respect to the
Options granted to Non-Employee Directors pursuant to Section 5 of the
Plan. 3
4. Shares Subject to Plan. Subject to the provisions of Section 15 of the
Plan, the maximum aggregate number of Shares that may be subject to
Options under the Plan shall be 1,040,000. If an Option should expire
or become unexercisable for any reason without having been exercised,
the unpurchased Shares that were subject to such Option shall, unless
the Plan has then terminated, be available for other Options under the
Plan.
5. Non-Employee Directors' Grants. Each Non-Employee Director shall
receive Options as determined under this Section 5 without further
action by the Board.
a. Initial Options. Effective on the Date of Grant described
below for each category of Non-Employee Director, the Company
shall grant to each Non-Employee Director an Option to
purchase 9,818 Shares ("Initial Option"):
i. for a Non-Employee Director serving on the Board on
September 2, 1997, the Date of Grant of the Initial
Option shall be September 2, 1997.
ii. for a Non-Employee Director elected by the
shareholders of the Company subsequent to September
2, 1997, the Date of Grant of the Initial Option
shall be the earlier of the date of such Non-Employee
Director's election to the Board or the date on which
such Non-Employee Director executes a written
commitment to become a member of the Board;
iii. for a Non-Employee Director appointed by the Board
subsequent to September 2, 1997, the Date of Grant of
the Initial Option shall be the earlier of the date
such Non-Employee Director's appointment to the Board
becomes effective or the date on which such
Non-Employee Director executes a written commitment
to become a member of the Board.
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<PAGE>
The exercise price of each Initial Option shall be 100 percent
of the Fair Market Value of the Common Stock on the Date of
Grant of the Initial Option; provided, however, that if the
Date of Grant of an Initial Option occurs prior to the
completion of an initial public offering of the Common Stock,
the exercise price of such Initial Option shall be the Fair
Market Value of the Common Stock on the date the initial
public offering begins.
b. First Anniversary Options. Effective on the first anniversary
of the Date of Grant of the Initial Option received by a
Non-Employee Director, the Company shall automatically grant
to such Non-Employee Director an Option to purchase 3,273
Shares ("First Anniversary Option") if such Non-Employee
Director owns at least 3,273 Option Shares or Open Market
Shares on the first anniversary of the Date of Grant of the
Initial Option. The exercise price of each First Anniversary
Option shall be 100 percent of the Fair Market Value of the
Common Stock on the Date of Grant of the First Anniversary
Option.
c. Second Anniversary Options. Effective on the first
anniversary of the Date of Grant of the First Anniversary
Option received by a Non-Employee Director, the Company shall
automatically grant to such Non-Employee Director an Option to
purchase 3,273 Shares ("Second Anniversary Option") if such
Non-Employee Director has owned at least 3,273 Option Shares
or Open Market Shares during the entire 12-month period ending
on the first anniversary of the Date of Grant of the First
Anniversary Option. The exercise price of each Second
Anniversary Option shall be 100 percent of the Fair Market
Value of the Common Stock on the Date of Grant of the Second
Anniversary Option.
d. Third Anniversary Options. Effective on the first
anniversary of the Date of Grant of the Second Anniversary
Option received by a Non-Employee Director, the Company shall
automatically grant to such Non-Employee Director an Option to
purchase 3,272 Shares ("Third Anniversary Option") if such
Non-Employee Director has owned at least 3,272 Option Shares
or Open Market Shares during the entire 12-month period ending
on the first anniversary of the Date of Grant of the Second
Anniversary Option. The exercise price of each Third
Anniversary Option shall be 100 percent of the Fair Market
Value of the Common Stock on the Date of Grant of the Third
Anniversary Option.
e. Option Requirements. Each Option granted to a Non-Employee
Director pursuant to this Section 5 will satisfy the following
requirements:
i. Written Agreement. Each Option will be evidenced by
an Option Agreement. The Option Agreement shall
include a description of the
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substance of each of the requirements in this Section
5 and shall state that the Option is a Nonqualified
Stock Option.
ii. Duration of Option. One-third of each Initial
Option shall expire on each of the first three
anniversaries of the Date of Grant of the Initial
Option. Each First Anniversary Option, Second
Anniversary Option and Third Anniversary Option shall
expire on the third anniversary of its Date of Grant.
If the Recipient's services as a director of the
Company terminate before the third anniversary of the
Date of Grant of an Initial Option granted to such
Recipient, the unexpired and unexercised portion of
the Initial Option granted to such Recipient shall
expire on the earlier of the date stated in this
Section 5.e.ii. or the date stated in the applicable
Section 5.e.iv, 5.e.v., or 5.e.vi of the Plan. If the
Recipient's services as a director of the Company
terminate for any reason before the third anniversary
of the Date of Grant of a First Anniversary Option,
Second Anniversary Option or Third Anniversary Option
granted to such Recipient, the unexercised portion of
such First Anniversary Option, Second Anniversary
Option or Third Anniversary Option granted to such
Recipient shall expire on the earlier of the date
stated in this Section 5.e.ii. or the date stated in
the applicable Section 5.e.iv., 5.e.v., or 5.e.vi. of
the Plan.
iii. Vesting of Option. Each Option shall be 100
percent vested on the Date of Grant of the Option.
iv. Death. In the case of the death of a Recipient prior
to the termination of the Recipient's services as a
director of the Company, the unexpired and
unexercised portion of an Option granted to the
Recipient shall expire on the one-year anniversary of
the Recipient's death, or if earlier, the date
specified in Section 5.e.ii. above.
v. Disability. In the case of the total and permanent
disability of a Recipient and a resulting termination
of the Recipient's services as a director of the
Company, the unexpired and unexercised portion of an
Option granted to the Recipient shall expire on the
one-year anniversary of the Recipient's last day of
service as a director of the Company, or, if earlier,
the date specified in Section 5.e.ii. above.
vi. Termination of Service as a Director. If a
Recipient's services as a director of the Company are
terminated for any reason other than death or
disability, the unexpired and unexercised portion of
an Option granted to the Recipient shall expire 90
days after termination of the Recipient's services as
a director of the Company, or, if earlier, the date
specified in Section 5.e.ii. above.
6
<PAGE>
6. Discretionary Grants. Any Eligible Person that the Committee in its
sole discretion designates is eligible to receive an Option under this
Plan. The Committee's grant of an Option to a Recipient in any year
does not require the Committee to grant an Option such Recipient in any
other year. Furthermore, the Committee may grant different Options to
different Recipients and has full discretion to choose whether to grant
Options to any Eligible Person. The Committee may consider such factors
as it deems pertinent in selecting Recipients and in determining the
types and sizes of their Options. Recipients may include persons to
whom stock, stock options, stock appreciation rights, or other benefits
previously were granted under this or another plan of the Company or
any Subsidiary, whether or not the previously granted benefits have
been fully exercised or vested. Each Option granted to a Recipient
under the Plan shall contain such provisions as the Committee at the
Date of Grant shall deem appropriate. A Recipient's right, if any, to
continue to serve the Company and its Subsidiaries as an officer,
Employee, or otherwise will not be enlarged or otherwise affected by
his designation as a Recipient under this Plan, and such designation
will not in any way restrict the right of the Company or any
Subsidiary, as the case may be, to terminate at any time the employment
of any Recipient. Each Option granted to a Recipient pursuant to this
Section 6 will satisfy the following requirements:
a. Written Agreement. Each Option will be evidenced by an Option
Agreement. The terms of the Option Agreement need not be
identical for different Recipients. The Option Agreement shall
include a description of the substance of each of the
requirements in this Section 6 with respect to that particular
Option.
b. Number of Shares. Each Option Agreement shall specify the
number of Shares that may be purchased by exercise of the
Option.
c. Exercise Price. Except as provided in Section 6.j., the
exercise price of each Share subject to an Incentive Stock
Option shall equal the exercise price designated by the
Committee on the Date of Grant, but shall not be less than the
Fair Market Value of the Share on the Incentive Stock Option's
Date of Grant. The exercise price of each Share subject to a
Nonqualified Stock Option shall equal the exercise price
designated by the Committee on the Date of Grant.
d. Duration of Option. Except as provided in Section 6.j., an
Incentive Stock Option granted to an Employee shall expire on
the tenth anniversary of its Date of Grant or, at such earlier
date as is set by the Committee in establishing the terms of
the Incentive Stock Option at grant. Except as provided in
Section 6.j., a Nonqualified Stock Option granted to an
Employee shall expire on the tenth anniversary of its Date of
Grant or, at such earlier or later date as is set by the
Committee in establishing the terms of the Nonqualified Stock
Option at grant.
7
<PAGE>
If the Recipient's employment with the Company terminates
before the expiration date of an Option granted to the
Recipient, the Option shall expire on the earlier of the date
stated in this subsection or the date stated in following
subsections of this Section 6.
e. Vesting of Option. Each Option Agreement shall specify the
vesting schedule applicable to the Option. The Committee, in
its sole and absolute discretion, may accelerate the vesting
of any Option at any time.
f. Death. In the case of the death of a Recipient, an
Incentive Stock Option granted to the Recipient shall expire
on the one-year anniversary of the Recipient's death, or if
earlier, the date specified in Section 6.d. above. During the
one-year period following the Recipient's death, the Incentive
Stock Option may be exercised to the extent it could have been
exercised at the time the Recipient died, subject to any
adjustment under Section 15 herein. In the case of the death
of a Recipient, a Nonqualified Stock Option granted to the
Recipient shall expire on the one-year anniversary of the
Recipient's death, or if earlier, the date specified in
Section 6.d. above, unless the Committee sets an earlier or
later expiration date in establishing the terms of the
Nonqualified Stock Option at grant or a later expiration date
subsequent to the Date of Grant but prior to the one-year
anniversary of the Recipient's death. During the period
beginning on the date of the Recipient's death and ending on
the date the Nonqualified Stock Option expires, the
Nonqualified Stock Option may be exercised to the extent it
could have been exercised at the time the Recipient died,
subject to any adjustment under Section 15 herein.
g. Disability. In the case of the total and permanent
disability of a Recipient and a resulting termination of
employment or affiliation with the Company, an Incentive Stock
Option granted to the Recipient shall expire on the one-year
anniversary of the Recipient's last day of employment, or, if
earlier, the date specified in Section 6.d. above. During the
one-year period following the Recipient's termination of
employment or affiliation by reason of disability, the
Incentive Stock Option may be exercised as to the number of
Shares for which it could have been exercised at the time the
Recipient became disabled, subject to any adjustments under
Section 15 herein.
In the case of the total and permanent disability of a
Recipient and a resulting termination of employment or
affiliation with the Company, a Nonqualified Stock Option
granted to the Recipient shall expire on the one-year
anniversary of the Recipient's last day of employment, or, if
earlier, the date specified in Section 6.d. above, unless the
Committee sets an earlier or later expiration date in
establishing the terms of the Nonqualified Stock Option at
grant or a later expiration date subsequent to the Date of
Grant but prior to the one-year
8
<PAGE>
anniversary of the Recipient's last day of employment or
affiliation with the Company. During the period beginning on
the date of the Recipient's termination of employment or
affiliation by reason of disability and ending on the date the
Nonqualified Stock Option expires, the Nonqualified Stock
Option may be exercised as to the number of Shares for which
it could have been exercised at the time the Recipient became
disabled, subject to any adjustments under Section 15 herein.
h. Retirement. If the Recipient's employment with the Company
terminates by reason of normal retirement under the Company's
normal retirement policies, an Incentive Stock Option granted
to the Recipient shall expire 90 days after the last day of
employment, or, if earlier, on the date specified in Section
6.d. above. During the 90-day period following the Recipient's
normal retirement, the Incentive Stock Option may be exercised
as to the number of Shares for which it could have been
exercised on the retirement date, subject to any adjustment
under Section 15 herein.
If the Recipient's employment with the Company terminates by
reason of normal retirement under the Company's normal
retirement policies, a Nonqualified Stock Option granted to
the Recipient shall expire 90 days after the last day of
employment, or, if earlier, on the date specified in Section
6.d. above, unless the Committee sets an earlier or later
expiration date in establishing the terms of the Nonqualified
Stock Option at grant or a later expiration date subsequent to
the Date of Grant but prior to the end of the 90-day period
following the Recipient's normal retirement. During the period
beginning on the date of the Recipient's normal retirement and
ending on the date the Nonqualified Stock Option expires, the
Nonqualified Stock Option may be exercised as to the number of
Shares for which it could have been exercised on the
retirement date, subject to any adjustment under Section 15
herein.
i. Termination of Service. If the Recipient ceases employment
or affiliation with the Company for any reason other than
death, disability, or retirement (as described above), an
Incentive Stock Option granted to the Recipient shall expire
90 days after the Recipient's last day of employment or
affiliation with the Company, or, if earlier, on the date
specified in Section 6.d. above, unless the Committee sets an
earlier expiration date in establishing the terms of the
Incentive Stock Option at grant. During the 90-day period
following the termination of the Recipient's employment or
affiliation with the Company, the Incentive Stock Option may
be exercised as to the number of Shares for which it could
have been exercised on the date of termination, subject to any
adjustment under Section 15 herein.
9
<PAGE>
If the Recipient ceases employment or affiliation with the
Company for any reason other than death, disability, or
retirement (as described above), a Nonqualified Stock Option
granted to the Recipient shall expire 90 days after the
Recipient's last day of employment or affiliation with the
Company, or, if earlier, on the date specified in Section 6.d.
above, unless the Committee sets an earlier or later
expiration date in establishing the terms of the Nonqualified
Stock Option at grant or a later expiration date subsequent to
the Date of Grant but prior to the end of the 90-day period
following the Recipient's last day of employment or
affiliation with the Company. During the period following the
termination of the Recipient's employment or affiliation with
the Company, the Nonqualified Stock Option may be exercised as
to the number of Shares for which it could have been exercised
on the date of termination, subject to any adjustment under
Section 15 herein.
Notwithstanding any provisions set forth herein or in the
Plan, if the Recipient shall (i) commit any act of malfeasance
or wrongdoing affecting the Company or any parent or
subsidiary, (ii) breach any covenant not to compete or
employment agreement with the Company or any parent or
Subsidiary, or (iii) engage in conduct that would warrant the
Recipient's discharge for cause, any unexercised part of the
Option shall lapse immediately upon the earlier of the
occurrence of such event or the last day the Recipient is
employed by the Company.
j. Ten Percent Shareholders. An Incentive Stock Option granted
to an individual who, on the Date of Grant, owns stock
possessing more than 10 percent of the total combined voting
power of all classes of stock of either the Company or any
parent or Subsidiary, shall be granted at an exercise price of
110 percent of Fair Market Value on the Date of Grant and
shall be exercisable only during the five-year period
immediately following the Date of Grant. In calculating stock
ownership of any person, the attribution rules of Code Section
424(d) will apply. Furthermore, in calculating stock
ownership, any stock that the individual may purchase under
outstanding options will not be considered.
k. Maximum Option Grants. The aggregate Fair Market Value,
determined on the Date of Grant, of stock in the Company with
respect to which any Incentive Stock Options under the Plan
and all other plans of the Company or its Subsidiaries (within
the meaning of Section 422(b) of the Code) may become
exercisable by any individual for the first time in any
calendar year shall not exceed $100,000.
7. [Reserved]
8. Change of Control. If a Change of Control occurs, the Board may vote to
immediately terminate all Options outstanding under the Plan as of the
date of the Change of Control or may vote to accelerate the expiration
of the Options to the tenth day after the effective date of the Change
of Control. If the Board votes to immediately terminate the Options, it
shall make a cash payment to the Recipient equal to the difference
between the Exercise Price and the Fair Market Value of the Shares that
would have been subject to the terminated Option on the date of the
Change of Control.
10
<PAGE>
9. Conditions Required for Exercise. Options granted to Recipients under
the Plan shall be exercisable only to the extent they are vested
according to the terms of the Option Agreement. Furthermore, Options
granted to Employees under the Plan shall be exercisable only if the
issuance of Shares pursuant to the exercise would be in compliance with
applicable securities laws, as contemplated by Section 14 of the Plan.
Each Option Agreement shall specify any additional conditions required
for the exercise of the Option.
10. Method of Exercise. An Option granted under this Plan shall be
deemed exercised when the person entitled to exercise the Option (i)
delivers written notice to the President of the Company (or his
delegate, in his absence) of the decision to exercise, (ii)
concurrently tenders to the Company full payment for the Shares to be
purchased pursuant to the exercise, and (iii) complies with such other
reasonable requirements as the Committee establishes pursuant to
Section 14 of the Plan. Payment for Shares with respect to which an
Option is exercised may be made in cash, or by certified check, or
wholly or partially in the form of Common Stock having a Fair Market
Value equal to the exercise price, or by delivery of a notice
instructing the Company to deliver the shares being purchased to a
broker subject to the broker's delivery of cash to the Company equal to
the purchase price. No person will have the rights of a shareholder
with respect to Shares subject to an Option granted under this Plan
until a certificate or certificates for the Shares have been delivered
to him. A partial exercise of an Option will not affect the holder's
right to exercise the Option from time to time in accordance with this
Plan as to the remaining Shares subject to the Option.
11. Loan from Company to Exercise Option. The Committee may, in its
discretion and subject to the requirements of applicable law, recommend
to the Company that it lend the Recipient the funds needed by the
Recipient to exercise an Option. The Recipient shall make application
to the Company for the loan, completing the forms and providing the
information required by the Company. The loan shall be secured by such
collateral and be subject to such repayment terms and interest rate as
the Company may require, subject to its underwriting requirements and
the requirements of applicable law. The Recipient shall execute a
Promissory Note and any other documents deemed necessary by the
Committee.
12. Designation of Beneficiary. Each Recipient shall designate, in the
Option Agreement he executes, a beneficiary to receive Options awarded
hereunder in the event of his death prior to full exercise of such
Options; provided, that if no such beneficiary is designated or if the
beneficiary so designated does not survive the Recipient, the estate of
such Recipient shall be deemed to be his beneficiary. Recipients may,
by written notice to the Committee, change the beneficiary designated
in any outstanding Option Agreements.
11
<PAGE>
13. Transferability of Option.
a. Nonqualified Stock Option. To the extent permitted by tax,
securities or other applicable laws to which the Company, the
Plan, Recipients or Eligible Persons are subject, a Recipient
of a Nonqualified Stock Option may transfer such Option to (i)
the Recipient's spouse, child, grandchild or parent, (ii) a
trust for the benefit of the Recipient's spouse, child,
grandchild or parent, or (iii) a partnership whose partners
consist solely of the Recipient's spouse, child, grandchild or
parent, unless provided otherwise by the Committee in
establishing the terms of such Option at the Date of Grant.
b. Incentive Stock Option. An Incentive Stock Option granted
under this Plan is not transferable except by will or the laws
of descent and distribution. During the lifetime of the
Recipient, all rights of the Incentive Stock Option are
exercisable only by the Recipient. This Section 13.b. shall
apply to an Incentive Stock Option granted under the Plan only
so long as Code Section 422 (or a successor Code provision)
requires application of this restriction on transferability.
In the event that this Section 13.b. no longer applies to an
Incentive Stock Option granted under this Plan, such Option
shall be subject to Section 13.a. of the Plan.
14. Taxes; Compliance with Law; Approval of Regulatory Bodies; Legends. The
Company shall have the right to withhold from payments otherwise due
and owing to the Recipient (or his beneficiary) or to require the
Recipient (or his beneficiary) to remit to the Company in cash upon
demand an amount sufficient to satisfy any federal (including FICA and
FUTA amounts), state, and/or local withholding tax requirements at the
time the Recipient (or his beneficiary) recognizes income for federal,
state, and/or local tax purposes with respect to any Option under this
Plan.
Options can be granted, and Shares can be delivered under this Plan,
only in compliance with all applicable federal and state laws and
regulations and the rules of all stock exchanges on which the Company's
stock is listed at any time. An Option is exercisable only if either
(i) a registration statement pertaining to the Shares to be issued upon
exercise of the Option has been filed with and declared effective by
the Securities and Exchange Commission and remains effective on the
date of exercise, or (ii) an exemption from the registration
requirements of applicable securities laws is available. This Plan does
not require the Company, however, to file such a registration statement
or to assure the availability of such exemptions. Any certificate
issued to evidence Shares issued under the Plan may bear such legends
and statements, and shall be subject to such transfer restrictions, as
the Committee deems advisable to assure compliance with federal and
state laws and regulations and with the requirements of this Section.
No Option may be exercised, and Shares may not be issued under this
Plan, until the Company has obtained the consent or approval of every
regulatory body, federal or state, having jurisdiction over such
matters as the Committee deems advisable.
12
<PAGE>
Each person who acquires the right to exercise an Option may be
required by the Committee to furnish reasonable evidence of ownership
of the Option as a condition to his exercise of the Option. In
addition, the Committee may require such consents and releases of
taxing authorities as the Committee deems advisable.
With respect to persons subject to Section 16 of the Securities
Exchange Act of 1934 ("1934 Act"), transactions under this Plan are
intended to comply with all applicable conditions of Rule 16b-3 under
the 1934 Act, as such Rule may be amended from time to time, or its
successor under the 1934 Act. To the extent any provision of the Plan
or action by the Plan administrators fails to so comply, it shall be
deemed null and void, to the extent permitted by law and deemed
advisable by the Plan administrators.
15. Adjustment Upon Change of Shares. If a reorganization, merger,
consolidation, reclassification, recapitalization, combination or
exchange of shares, stock split, stock dividend, rights offering, or
other expansion or contraction of the Common Stock of the Company
occurs, the number and class of Shares for which Options are authorized
to be granted under this Plan, the number and class of Shares then
subject to Options previously granted to Employees under this Plan, and
the price per Share payable upon exercise of each Option outstanding
under this Plan shall be equitably adjusted by the Committee to reflect
such changes. To the extent deemed equitable and appropriate by the
Board, subject to any required action by shareholders, in any merger,
consolidation, reorganization, liquidation or dissolution, any Option
granted under the Plan shall pertain to the securities and other
property to which a holder of the number of Shares of stock covered by
the Option would have been entitled to receive in connection with such
event.
16. Liability of the Company. The Company, its parent and any Subsidiary
that is in existence or hereafter comes into existence shall not be
liable to any person for any tax consequences incurred by a Recipient
or other person with respect to an Option.
17. Amendment and Termination of Plan. The Board may alter, amend, or
terminate this Plan from time to time without approval of the
shareholders of the Company. The Board may, however, condition any
amendment on the approval of the shareholders of the Company if such
approval is necessary or advisable with respect to tax, securities or
other applicable laws to which the Company, the Plan, Recipients or
Eligible Persons are subject. Any amendment, whether with or without
the approval of shareholders of the Company, that alters the terms or
provisions of an Option granted before the amendment (unless the
alteration is expressly permitted under this Plan) will be effective
only with the consent of the Recipient to whom the Option was granted
or the holder currently entitled to exercise it.
18. Expenses of Plan. The Company shall bear the expenses of administering
the Plan.
13
<PAGE>
19. Duration of Plan. Options may be granted under this Plan only during
the 10-year period ending December 22, 2005.
20. Applicable Law. The validity, interpretation, and enforcement of this
Plan are governed in all respects by the laws of Florida and the United
States of America.
21. Effective Date. Except as otherwise provided in this Section 21, the
effective date of this Plan, as amended and restated, shall be
September 2, 1997. Section 7 of this Plan, as amended and restated,
shall be effective October 24, 1997, and the corresponding prior
provision of the Plan shall apply before October 24, 1997.
Adopted by the Board on January 23, 1998 (original Plan adopted by the Board on
December 22, 1995; amendment adopted by the Board on February 18, 1997).
Approved by the Shareholders on May 8, 1998 (original Plan approved by the
Shareholders on December 22, 1995; amendment approved by the Shareholders on
April 15, 1997).
14
================================================================================
THIRD AMENDED AND
RESTATED CREDIT AGREEMENT
AMONG
OUTSOURCE INTERNATIONAL, INC.
THE BANKS
FROM TIME TO TIME PARTIES HERETO
AND
BANKBOSTON, N.A., SUCCESSOR BY MERGER
TO BANK OF BOSTON CONNECTICUT,
AS AGENT
REVOLVING CREDIT FACILITY
DATED AS OF JULY 27, 1998
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
<S> <C> <C>
SECTION 1. DEFINITIONS...........................................................................................1
1.1 Defined Terms...................................................................................1
1.2 Other Definitional Provisions..................................................................19
1.3 Change in Accounting Principles................................................................20
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS......................................................................20
2.1 Revolving Credit Commitments...................................................................20
2.1A. Swingline Loans................................................................................20
2.2 Designation of Interest Rates; Eurodollar Interest Periods.....................................23
2.3 Interest Rates and Payment Dates...............................................................23
2.4 Procedure for Borrowing........................................................................24
2.5 Conversion and Continuation Options............................................................25
2.6 Minimum Amounts and Maximum Number of Tranches.................................................25
2.7 Revolving Credit Notes.........................................................................26
2.8 Fees...........................................................................................26
2.9 Termination or Reduction of Revolving Credit Commitments.......................................26
2.10 Optional Prepayments...........................................................................27
2.11 Computation of Interest and Fees...............................................................27
2.12 Inability to Determine Interest Rate...........................................................27
2.13 Pro Rata Treatment and Payments................................................................28
2.14 Illegality.....................................................................................29
2.15 Requirements of Law............................................................................29
2.16 Taxes..........................................................................................30
2.17 Indemnity......................................................................................32
SECTION 3. LETTERS OF CREDIT....................................................................................32
3.1 L/C Commitment.................................................................................32
3.2 Procedure for Issuance of Letters of Credit....................................................33
3.3 Fees, Commissions and Other Charges............................................................34
3.4 Reimbursement Obligation of the Borrower.......................................................34
3.5 L/C Draws and Reimbursements...................................................................35
3.6 Obligations Absolute...........................................................................36
3.7 Letter of Credit Payments......................................................................36
3.8 Application....................................................................................36
SECTION 4. REPRESENTATIONS AND WARRANTIES.......................................................................36
4.1 Financial Condition............................................................................37
4.2 No Change......................................................................................38
4.3 Corporate Existence; Compliance with Law.......................................................38
4.4 Corporate Power, Authorization; Enforceable Obligations........................................38
-i-
<PAGE>
4.5 No Legal Bar...................................................................................39
4.6 No Material Litigation.........................................................................39
4.7 No Default.....................................................................................39
4.8 Ownership of Property; Liens...................................................................39
4.9 Intellectual Property..........................................................................39
4.10 No Burdensome Restrictions.....................................................................40
4.11 Taxes..........................................................................................40
4.12 Federal Regulations............................................................................40
4.13 ERISA..........................................................................................40
4.14 Investment Company Act; Other Regulations......................................................41
4.15 Subsidiaries...................................................................................41
4.16 Purpose of Loans...............................................................................41
4.17 Environmental Matters..........................................................................41
4.18 Security Documents.............................................................................42
4.19 [Intentionally Reserved].......................................................................43
4.20 Solvency.......................................................................................43
4.21 Certain Stockholders...........................................................................43
4.22 Year 2000 Compatability........................................................................43
SECTION 5. CONDITIONS PRECEDENT.................................................................................44
5.1 Amendment Effective Date.......................................................................44
5.2 Conditions to Each Extension of Credit.........................................................46
SECTION 6. AFFIRMATIVE COVENANTS................................................................................47
6.1 Financial Statements...........................................................................47
6.2 Certificates; Other Information................................................................48
6.3 Payment of Obligations.........................................................................49
6.4 Conduct of Business and Maintenance of Existence...............................................49
6.5 Maintenance of Property; Insurance.............................................................50
6.6 Inspection of Property; Books and Records; Discussions.........................................50
6.7 Notices........................................................................................50
6.8 Environmental Laws.............................................................................51
6.9 Use of Proceeds................................................................................52
6.10 Further Assurances.............................................................................52
[6.11 Interest Rate Protection.......................................................................52
6.12 Year 2000 Compatibility........................................................................52
SECTION 7. NEGATIVE COVENANTS...................................................................................52
7.1 Financial Condition Covenants..................................................................53
7.2 Limitation on Indebtedness.....................................................................53
7.3 Limitation on Liens............................................................................54
7.4 Limitation on Guarantee Obligations............................................................55
7.5 Limitations on Fundamental Changes.............................................................55
-ii-
<PAGE>
7.6 Limitation on Sale of Assets...................................................................56
7.7 Limitation on Restricted Payments..............................................................56
7.8 Limitation on Investments, Loans and Advances..................................................56
7.9 Limitation on Optional Payments and Modifications of Debt Instruments..........................58
7.10 Transactions with Affiliates...................................................................58
7.11 Sale and Leaseback.............................................................................58
7.12 Corporate Documents; Name/Location of Assets...................................................58
7.13 Fiscal Year....................................................................................59
7.14 Limitation on Negative Pledge Clauses..........................................................59
7.15 No Limit on Upstream Payments by Subsidiaries..................................................59
7.16 AASI and Voting Trust Agreement................................................................59
SECTION 8. EVENTS OF DEFAULT....................................................................................60
SECTION 9. THE AGENT............................................................................................63
9.1 Appointment....................................................................................63
9.2 Delegation of Duties...........................................................................64
9.3 Exculpatory Provisions.........................................................................64
9.4 Reliance by Agent..............................................................................64
9.5 Notice of Default..............................................................................64
9.6 Non-Reliance on Agent and Other Banks..........................................................65
9.7 Indemnification................................................................................65
9.8 Agent in Its Individual Capacity...............................................................66
9.9 Successor Agent................................................................................66
SECTION 10. MISCELLANEOUS.......................................................................................66
10.1 Amendments and Waivers.........................................................................66
10.2 Notices........................................................................................67
10.3 No Waiver; Cumulative Remedies.................................................................68
10.4 Survival of Representations and Warranties.....................................................68
10.5 Payment of Expenses and Taxes..................................................................68
10.6 Successors and Assigns; Participations; Purchasing Banks.......................................69
10.7 Adjustments; Set-off...........................................................................72
10.8 Counterparts...................................................................................73
10.9 Severability...................................................................................73
10.10 Integration....................................................................................73
10.11 Governing Law..................................................................................73
10.12 Submission To Jurisdiction; Waivers............................................................73
10.13 Acknowledgments................................................................................74
10.14 WAIVERS OF JURY TRIAL; COMMERCIAL TRANSACTIONS.................................................74
</TABLE>
-iii-
<PAGE>
SCHEDULES
- ---------
Schedule A Commitments; Addresses
Schedule 4.1(b) Long-Term Commitments
Schedule 4.1(c) Recent Dispositions
Schedule 4.2 Changes/Recent Distributions
Schedule 4.6 Litigation
Schedule 4.11 Tax Returns
Schedule 4.13 ERISA Matters
Schedule 4.15 Subsidiaries
Schedule 4.17 Environmental Matters
Schedule 4.18 UCC Filing Locations
Schedule 4.21 Relationships of Certain Stockholders to the Borrower
Schedule 7.2 Indebtedness Outstanding After the Execution Date
Schedule 7.3 Liens
Schedule 7.8 Management Loans and Advances
EXHIBITS
- --------
EXHIBIT A-1 Form of Borrowing Notice EXHIBIT A-2 Form of Revolving Credit Note
EXHIBIT A-3 Form of Swingline Note EXHIBIT B Form of Subsidiary Guarantee
EXHIBIT C Form of OI Pledge Agreement EXHIBIT D Form of Assignment and
Acceptance
EXHIBIT E Form of Opinion of Counsel to the Borrower and its
Subsidiaries
EXHIBIT F Form of OI Security Agreement
EXHIBIT G Form of Subsidiary Security Agreement
EXHIBIT H Form of Trademark Security Agreement
iv
<PAGE>
CREDIT AGREEMENT
THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of July 27, 1998,
by and among OUTSOURCE INTERNATIONAL, INC., a Florida corporation ("the
Borrower" or "OI"), the banks and other financial institutions listed on
SCHEDULE A to this Agreement (collectively, together with any banks or financial
institutions from time to time parties to this Agreement, the "Banks"), and
BANKBOSTON, N.A., a national banking association and successor by merger to BANK
OF BOSTON CONNECTICUT, as agent for the Banks hereunder (in such capacity, the
"Agent").
BankBoston, N.A., Comerica Bank and LaSalle National Bank, the Borrower
and the Agent entered into the Credit Agreement dated as of February 21, 1997,
which Agreement was (i) amended and restated as of March 18, 1997, (ii) further
amended as of September 4, 1997, (iii) amended and restated as of November 26,
1997 to provide for, among other things, the addition of State Street Bank and
Trust Company, SunTrust Bank, South Florida, National Association, and The
Sumitomo Bank, Limited (together with BankBoston, N.A., Comerica Bank and
LaSalle National Bank, the "Existing Banks"), (iv) further amended as of
December 30, 1997, (v) further amended as of January 30, 1998, and (vi) further
amended as of March 18, 1998 (such Credit Agreement, as so amended and in effect
immediately prior to the Amendment Effective Date defined below, the "Existing
Credit Agreement").
The Borrower has requested that the Existing Banks and the Agent, and
the Banks parties hereto and the Agent are willing to, amend and restate the
Existing Credit Agreement to (i) take into account the Borrower's desire to
securitize certain of the accounts receivable of the Borrower and its
Subsidiaries, thereby reducing the need for the Revolving Credit Commitment
hereunder to a maximum of $34,000,000, and (ii) provide for the addition of
Fleet National Bank as a Bank to replace State Street Bank and Trust Company and
The Sumitomo Bank, Limited.
Accordingly, the parties hereto agree to amend and restate the Existing
Credit Agreement so that, as amended and restated, it provides in its entirety
as herein provided.
SECTION 1. DEFINITIONS
----------------------
1.1 Defined Terms: As used in this Agreement, the following terms shall
have the following meanings:
"AASI": the Agreement among Shareholders and Investors, dated as of
February 21, 1997, among the Borrower, certain shareholders of the Borrower,
Triumph/Bachow, the trustees of the Voting Trust Agreement (as defined herein)
and an escrow agent, as amended, supplemented or otherwise modified from time to
time with the prior written consent of the Banks.
<PAGE>
"Affiliate": of a Person (the "Primary Person"), (a) any other Person
(other than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with, the Primary Person or (b) any
Person who is a director or officer (i) of the Primary Person, (ii) of any
Subsidiary of the Primary Person or (iii) of any Person described in clause (a)
above. For purposes of this definition, control of a Person shall mean the
power, directly or indirectly, (a) to vote 10% or more of the securities having
ordinary voting power for the election of directors of such Person or (b) to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Aggregate Outstanding Extensions of Credit": as to any Bank at any
time and without duplication, an amount equal to the sum of (a) the aggregate
principal amount of all Revolving Credit Loans made by such Bank then
outstanding and (b) the product of such Bank's Commitment Percentage times the
undrawn and unexpired L/C Obligations then outstanding.
"Agreement": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"All-Temps, Inc.": a corporation organized and existing under the laws
of the State of Illinois.
"Alternate Base Rate": the higher of (a) the rate of interest per annum
publicly announced from time to time by the Agent as its "base rate" in effect
at its principal office (the Alternate Base Rate not being intended to be the
best or lowest rate of interest charged by the Agent in connection with
extensions of credit to debtors) or (b) the Federal Funds Effective Rate plus
1/2 of 1% per annum (rounded upwards, if necessary, to the next 1/100 of 1%).
Any change in the Alternate Base Rate shall be effective as of the opening of
business on the effective day of such change in the Alternate Base Rate.
"Alternate Base Rate Loans": Loans for which the applicable rate of
interest is based upon the Alternate Base Rate.
"Amendment Effective Date": the date on which all of the conditions set
forth in Section 5.1 shall have been satisfied or waived by the Banks and the
Agent.
"Applicable Margin": at any time, for Alternate Base Rate Loans or
Eurodollar Loans, a rate per annum equal to the rate set forth opposite the
applicable Consolidated Indebtedness to Consolidated EBITDA Ratio in the Pricing
Grid.
"Application": an application in such form as the Issuing Bank may
specify from time to time, requesting the Issuing Bank to issue a Letter of
Credit.
"Arranger": BancBoston Securities, Inc., in its capacity as arranger
and syndication agent.
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<PAGE>
"Assignment and Acceptance": an Assignment and Acceptance,
substantially in the form of Exhibit D.
"Available Revolving Credit Commitment": as to any Bank at any time, an
amount equal to the excess, if any, of (a) the amount of such Bank's Revolving
Credit Commitment over (b) such Bank's Aggregate Outstanding Extensions of
Credit.
"Borrowing Date": any Business Day specified in a notice pursuant to
subsections 2.1A(b) or 2.4 as a date on which the Borrower requests the Banks to
make Loans hereunder.
"Business Day": a day other than Saturday, Sunday or other day on which
commercial banks in Hartford, Connecticut are authorized or required by law to
close and, in the case of Eurodollar Loans, also a day on which commercial banks
are open for international business (including dealings in Dollar deposits) in
London or such other eurodollar interbank market as may be selected by the Agent
in its sole discretion acting in good faith.
"Capital Expenditures": any payment made directly or indirectly for the
purpose of acquiring, constructing or improving fixed assets, real property or
equipment which in accordance with GAAP would be added as a net debit (after
giving effect to any credits) to the fixed asset account of the Person making
such expenditure, including, without limitation, amounts paid or payable under
any conditional sale or other title retention agreement.
"Capital Lease": any lease which has been or should be capitalized on
the books of the lessee in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants or options to purchase any of the foregoing.
"Cash Equivalents": (a) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof, (b) certificates of deposit and Eurodollar time
deposits with maturities of six (6) months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six (6) months and overnight
bank deposits, in each case, with any Bank or with any domestic commercial bank
having capital and surplus in excess of $100,000,000, (c) repurchase obligations
with a term of not more than seven (7) days for underlying securities of the
types described in clauses (a) and (b) entered into with any financial
institution meeting the qualifications specified in clause (b) above, and (d)
commercial paper issued by any Bank or the parent corporation of any Bank and
commercial paper of any other issuer rated at least A-1 or the equivalent
thereof by Standard & Poor's Corporation or at least P-1 or the equivalent
thereof by Moody's Investors Service, Inc. and in each case maturing within six
(6) months after the date of acquisition.
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<PAGE>
"Cash Collateral Account": as defined in Section 8.
"Change of Control": except as contemplated by the AASI or the Voting
Trust Agreement, the occurrence of any of the following events: (a) any "person"
or "group" (as such terms are used in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended, and the rules promulgated thereunder) is or
becomes the beneficial owner, directly or indirectly, of more than 50% of the
total voting power of the Voting Stock of the Borrower; (b) during any period of
two (2) consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Borrower (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Borrower was approved by the directors then
still in office who either were directors at the beginning of such period or
whose election or nomination for director was previously so approved) cease for
any reason to constitute a majority of the Board of Directors of the Borrower
then in office; (c) the direct or indirect, sale, lease, exchange or other
transfer of all or substantially all of the assets of the Borrower to any
"person" or "group" (as such terms are used in Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder); provided that the foregoing shall not include the granting of Liens
permitted by this Agreement; or (d) the Borrower consolidates with or merges
into another corporation or any Person consolidates with or merges into the
Borrower, in either event pursuant to a transaction in which either (i) the
outstanding Voting Stock of the Borrower is changed into or exchanged for cash,
securities or other property (other than any such transaction where the
outstanding Voting Stock of the Borrower is changed into or exchanged for Voting
Stock of the surviving corporation) or (ii) the holders of a majority of the
voting power of the Voting Stock of the Borrower immediately prior to such
transaction own, directly or indirectly, less than a majority of voting power of
the Voting Stock of the surviving corporation immediately after such
transaction.
"Closing Date": July 27, 1998.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": the collective reference to the Collateral, as such term
is defined in each of the OI Security Agreement, the OI Pledge Agreement, each
Subsidiary Security Agreement and the Trademark Security Agreement.
"Commitment Fee": as defined in Section 2.8(a).
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<PAGE>
"Commitment Percentage": as to any Bank (a) at any time at which the
Revolving Credit Commitments remain outstanding, the percentage equivalent
(expressed as a decimal, rounded to the ninth decimal place) at such time of
such Bank's Revolving Credit Commitment divided by the aggregate combined
Revolving Credit Commitments of all Banks, and (b) after the termination of the
Revolving Credit Commitments, the percentage equivalent (expressed as a decimal,
rounded to the ninth decimal place) at such time of the principal amount of such
Bank's outstanding Loans divided by the aggregate principal amount of the
outstanding Loans of all the Banks.
"Commitment Period": the period from and including the date hereof to
but not including the Termination Date or such earlier date on which the
Commitments shall terminate as provided herein.
"Commitments": the collective reference to the Revolving Credit
Commitments and the L/C Commitments.
"Commonly Controlled Entity": an entity, whether incorporated or not,
which is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group which includes the Borrower and which is
treated as a single employer under Section 414 of the Code.
"Consolidated Current Assets": the amount of the current assets of the
Borrower and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP, provided, however, that irrespective of whether GAAP or any other
applicable accounting standard should require the consolidation of the current
assets of the Subsidiaries with those of the Borrower, the current assets of the
Subsidiaries shall be consolidated with those of the Borrower for purposes of
this definition, and provided further that, notwithstanding any applicable
accounting convention or compliance with GAAP, for purposes of this definition
the amount of current assets attributable to OutSource Funding Corporation will
in no event be less than the face amount of the Receivables (as such term is
defined in the Receivables Purchase and Sale Agreement) sold by the Originators
(as such term is defined in the Receivables Purchase and Sale Agreement) to
OutSource Funding Corporation pursuant to the Receivables Purchase and Sale
Agreement.
"Consolidated Current Liabilities": the amount of the current
liabilities of the Borrower and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP; provided, however, there shall be excluded
therefrom the amount of any principal obligation due on Indebtedness of the
Borrower or its Subsidiaries after the Termination Date and provided further
that irrespective of whether GAAP or any other applicable accounting standard
should require the consolidation of the current liabilities of the Subsidiaries
with those of the Borrower, the current liabilities of the Subsidiaries shall be
consolidated with those of the Borrower for purposes of this definition.
"Consolidated EBITDA": for any period, Consolidated Net Income for such
period plus the aggregate amounts deducted in determining such Consolidated Net
Income in respect of (a) income taxes, (b) Consolidated Interest Expense (to the
extent deducted in determining Consolidated Net Income), (c) depreciation
expense and (d) the expense associated with amortization of intangible and other
assets.
5
<PAGE>
"Consolidated EBITDA to Consolidated Interest Expense Ratio": at the
end of any month, the ratio of (a) Consolidated EBITDA for the immediately
preceding twelve (12) months (ending on such date) to (b) Consolidated Interest
Expense for the immediately preceding twelve (12) months (ending on such date).
For purposes of (b) above, non-cash interest shall be excluded.
"Consolidated Indebtedness": at any particular date, with respect to
the Borrower and its Subsidiaries, all liabilities less trade accounts payable
and accrued liabilities ("Debt"), determined on a consolidated basis in
accordance with GAAP, provided, however, that irrespective of whether GAAP or
any other applicable accounting standard should require the consolidation of the
Debt of the Subsidiaries with that of the Borrower, the Debt of the Subsidiaries
shall be consolidated with that of the Borrower for purposes of this definition,
and provided further that for purposes of this definition the Debt reported for
OutSource Funding Corporation shall in no event be less than the sum of the
aggregate Face Amount (as such term is defined in the Liquidity Agreement) of
all outstanding EagleFunding CP Notes (as such term is defined in the Liquidity
Agreement) and the Liquidity Advance Balance (as such term is defined in the
Liquidity Agreement).
"Consolidated Indebtedness to Consolidated EBITDA Ratio": at the end of
any month, the ratio of (a) Consolidated Indebtedness on such date to (b)
Consolidated EBITDA for the immediately preceding twelve (12) months (ending on
such date). Note: For purposes of Section 7.1(a) only (i.e. not for pricing
under the Pricing Grid), the Borrower may add for such twelve (12) months (i)
Consolidated EBITDA of any entity acquired in a Permitted Acquisition or
identified in Note 1 to the Unaudited Pro Forma Consolidated Financial
Information contained in the Prospectus, plus any compensation paid by such
entity to any shareholder of such entity during such period to the extent such
shareholder is not continuing to receive compensation or consulting or similar
fees from the Borrower or any of its Subsidiaries subsequent to the acquisition
and (ii) any verifiable non-recurring expenses approved by the Required Banks.
"Consolidated Interest Expense": for any period, the interest expense
for the Borrower and its Subsidiaries, including the interest portion of rental
payments under Capital Leases plus all fees, expenses, and yields incurred under
the Receivable Securitization Transaction but excluding non-cash interest,
determined on a consolidated basis in accordance with GAAP, provided, however,
that irrespective of whether GAAP or any other applicable accounting standard
should require the consolidation of the interest expense of the Subsidiaries
with that of the Borrower, the interest expense of the Subsidiaries shall
nevertheless be consolidated with that of the Borrower for purposes of this
definition.
6
<PAGE>
"Consolidated Net Income": for any period, the net income (or loss) of
the Borrower and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP; provided that there shall be excluded from the
calculation thereof (a) any non-operating gains or losses (including without
limitation, extraordinary or unusual gains or losses, gains or losses from
discontinuance of operations, gains or losses arising from the sale or
disposition by the Borrower or any Subsidiary of any asset, or the issuance of
any debt or equity securities, and other non-recurring gains or losses) and (b)
distributions and compensation not exceeding $1,000,000 in the aggregate paid by
the Borrower and its Subsidiaries to Larry Schubert, Alan Schubert and Louis
Morelli for the period from October 1, 1996 to February 21, 1997, and provided
further, that irrespective of whether GAAP or any other applicable accounting
standard should require the consolidation of the net income (or loss) of the
Subsidiaries with that of the Borrower, the net income (or loss) of the
Subsidiaries shall nevertheless be consolidated with that of the Borrower for
purposes of this definition.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"CSF": Capital Staffing Fund, Inc., a Florida corporation.
"Current Ratio": at the end of any month, the ratio of Consolidated
Current Assets to Consolidated Current Liabilities.
"date hereof": July 27, 1998.
"Default": any of the events specified in Section 8, regardless of
whether any requirement for the giving of notice, the lapse of time, or both, or
any other conditions, has been satisfied.
"Default Rate": as defined in subsection 2.3(d).
"Dollars" and "$": dollars in lawful currency of the United States of
America.
"Environmental Laws": any and all Federal, state, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes, decrees or
requirements of any Governmental Authority regulating, relating to or imposing
liability or standards of conduct concerning environmental protection matters,
including without limitation, Hazardous Materials, as now or may at any time
hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
7
<PAGE>
"Eurodollar Base Rate": with respect to each day during each Eurodollar
Interest Period, the rate per annum equal to the rate at which the Agent is
offered Dollar deposits at or about 10:00 A.M., Eastern time, two (2) Business
Days prior to the beginning of such Eurodollar Interest Period in the interbank
eurodollar market where the eurodollar and foreign currency and exchange
operations in respect of its Eurodollar Loans are then being conducted for
delivery on the first day of such Eurodollar Interest Period for the number of
days comprised therein and in an amount comparable to the amount of its
Eurodollar Loan to be outstanding during such Eurodollar Interest Period.
"Eurodollar Interest Period": any one (1), two (2), three (3) or six
(6) month period, subject to availability (which availability shall be
determined in good faith by the Agent), selected by the Borrower in respect to
any Eurodollar Loan pursuant to subsections 2.2, 2.4 or 2.5 of this Agreement.
"Eurodollar Loans": Loans for which the applicable rate of interest is
based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Eurodollar
Interest Period, a rate per annum determined for such day in accordance with the
following formula (rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
--------------------
1.00 - Eurodollar Reserve Requirements
"Eurodollar Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto) dealing with
reserve requirements prescribed for eurocurrency funding maintained by a member
bank of such System.
"Event of Default": any of the events specified in Section 8, provided
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Existing Banks": as defined in the recitals.
"Existing Credit Agreement": as defined in the recitals.
"Existing Loans": the loans outstanding under the Existing Credit
Agreement on the Amendment Effective Date.
"Federal Funds Effective Rate": at any time shall mean 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
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Agent from three (3) Federal Funds brokers of recognized
standing selected by the Agent.
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<PAGE>
"Field Examinations": as defined in subsection 6.6.
"FQED": the end date of any fiscal quarter in any fiscal year of the
Borrower.
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
any obligation of (a) the guaranteeing Person or (b) another Person (including,
without limitation, any bank under any letter of credit), to induce the creation
of which obligation the guaranteeing person has issued a reimbursement, counter
indemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any indebtedness, leases, dividends or other obligations (the
"primary obligations") of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether contingent or not, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (A) for the purchase
or payment of any such primary obligation or (B) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligations of the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless the owner of any
such primary obligation against loss in respect thereof; provided, however, that
the term "Guarantee Obligation" shall not include endorsements of instruments
for deposit or collection in the ordinary course of business. The amount of any
Guarantee Obligation of any guaranteeing person shall be deemed to be the lower
of (x) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is made and (y) the
maximum amount for which such guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guarantee obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may be
liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Borrower in good
faith.
"Hazardous Materials": any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances, petroleum products
(including crude oil or any fraction thereof), defined or regulated as such in
or under any Environmental Law.
9
<PAGE>
"Indebtedness": of any Person at any date, without duplication, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices) or which is evidenced by a note, bond, debenture or similar
instrument, (b) all obligations of such Person under Capital Leases, (c) all
obligations of such person in respect of acceptances issued or created for the
account of such Person, (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, (e) the face amount of any outstanding letters
of credit issued for the account of such Person, (f) obligations in respect of
interest rate hedge agreements entered into in the ordinary course of business,
and (g) all Guarantee Obligations of such Person in respect of obligations
referred to in clauses (a) through (f) above.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intercreditor Agreement": the Intercreditor Agreement dated as of July
27, 1998 among the Agent, OutSource Funding Corporation, the Borrower, OutSource
Franchising, Inc., CSF, Synadyne I, Inc., Synadyne II, Inc., Synadyne III, Inc.,
Synadyne IV, Inc., Synadyne V, Inc., OutSource International of America, Inc.,
EagleFunding Capital Corporation and the Arranger, as the same may be amended,
supplemented, restated or otherwise modified and in effect from time to time.
"Interest Payment Date": (a) as to any Alternate Base Rate Loan, the
first day of each month to occur while such Loan is outstanding, (b) as to any
Eurodollar Loan having a Eurodollar Interest Period of one (1) month, the last
day of such Eurodollar Interest Period, (c) as to any Eurodollar Loan having a
Eurodollar Interest Period longer than one (1) month, the first day of each
month to occur during such Eurodollar Interest Period and the last day of such
Eurodollar Interest Period and (d) as to any Swingline Loan, the Swingline Loan
Maturity Date.
"Issuing Bank": BankBoston, N.A., successor by merger to Bank of Boston
Connecticut, in its capacity as issuer of any Letter of Credit.
"Labor World": a trademark of OutSource Franchising, Inc. registered
with the United States Patent and Trademark Office and used by OutSource
Franchising, Inc. and its franchisees in marketing temporary industrial
personnel.
"L/C Commitment": the lesser of (a) $15,000,000, minus the sum of (i)
the aggregate then undrawn and unexpired amount of the then outstanding letters
of credit issued by The First National Bank of Boston or any affiliate for the
account of the Borrower or any Subsidiary and (ii) the aggregate amount of
unreimbursed drawings under such letters of credit and (b) the Revolving Credit
Commitment then in effect.
"L/C Fee": as defined in subsection 3.3(a).
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<PAGE>
"L/C Obligations": at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to subsection 3.5.
"L/C Participants": the collective reference to all the Banks other
than the Issuing Bank.
"Letter of Credit Rate": for each Letter of Credit, at any time, a rate
per annum equal to the rate set forth opposite the applicable ratio of
Consolidated Indebtedness to Consolidated EBITDA in the Pricing Grid.
"Letters of Credit": as defined in subsection 3.1(a).
"Lien": any mortgage, pledge, hypothecation, assignment, security
interest, deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any Capital Lease having substantially
the same economic effect as any of the foregoing, and the filing of any
financing statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing).
"Liquidity Agreement": the Liquidity Agreement dated as of July 27,
1998 among EagleFunding Capital Corporation, as the borrower, the financial
institutions from time to time party thereto, as liquidity providers,
BankBoston, N.A., as the liquidity agent, and Bankers Trust Company, as
collateral agent, as the same may be amended, supplemented, restated or
otherwise modified and in effect from time to time.
"Loan": any loan made by any Bank pursuant to this Agreement.
"Loan Documents": this Agreement, the Notes, the Applications, the OI
Pledge Agreement, the OI Security Agreement, each Subsidiary Guarantee, each
Subsidiary Security Agreement, each Trademark Security Agreement and the
Subordination Agreements, together with any and all other instruments, documents
and agreements executed and delivered by the Borrower or the Subsidiaries from
time to time in connection with the indebtedness evidenced by this Agreement and
the Notes, as the same may hereafter be amended, supplemented, restated or
otherwise modified and in effect from time to time.
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<PAGE>
"Material Adverse Effect": a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole, (b) the ability of the
Borrower or any Subsidiary to perform its obligations under the Loan Documents
to which it is a party or (c) the validity or enforceability of this Agreement,
the Notes or any of the other Loan Documents or the rights or remedies of the
Agent or the Banks hereunder or thereunder.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Notes": the collective reference to the Revolving Credit Notes and the
Swingline Note, and any promissory note delivered as a replacement, in
substitution or in exchange therefor, as each may be amended, supplemented,
restated or otherwise modified and in effect from time to time.
"Obligations": means all Indebtedness, obligations and liabilities of
the Borrower and its Subsidiaries, to the Agent and the Banks under this
Agreement, the Revolving Credit Notes, the Swingline Note or any other Loan
Document, as each of the foregoing may be amended, supplemented, restated or
otherwise modified and in effect from time to time (including amendments or
supplements increasing such Indebtedness, obligations and liabilities of the
Borrower and its Subsidiaries).
"Office Ours": a trademark of OutSource Franchising, Inc. registered
with the United States Patent and Trademark Office and used by OutSource
Franchising, Inc. and its franchisees in marketing temporary office and clerical
personnel.
"OI Pledge Agreement": the OI Pledge Agreement, substantially in the
form of Exhibit C, made by the Borrower in favor of the Agent for the benefit of
the Agent and the ratable benefit of the Banks, as the same may be amended,
supplemented, restated or otherwise modified and in effect from time to time.
"OI Security Agreement": the OI Security Agreement, substantially in
the form of Exhibit F, executed and delivered by the Borrower to the Agent for
the benefit of the Agent and the ratable benefit of the Banks, as the same may
be amended, supplemented, restated or otherwise modified and in effect from time
to time.
"Operating Cash Flow": for any period, an amount equal to (a)
Consolidated EBITDA for such period, minus (b) income taxes paid in cash by the
Borrower on a consolidated basis during such period, minus (c) all dividends,
distributions and other payments by the Borrower to its shareholders during such
period but (excluding the following payments in respect of Indebtedness to such
shareholders: (i) distribution of up to $9,200,000 in shareholder's equity
pursuant to notes issued at the time of the February 21, 1997 reorganization;
(ii) payment of up to $7,600,000 to shareholders for Subsidiaries' stock at the
time of the February 21, 1997 reorganization; (iii) payment of up to $1,000,000
to shareholders with respect to the acquisition of the All-Temps, Inc.
franchise, recorded as a 1996 shareholder distribution; and (iv) payment of up
to $1,000,000 to shareholders with respect to the acquisition of the WAD, Inc.
franchise), minus (d) Capital Expenditures paid out of cash flow during such
period.
12
<PAGE>
"Operating Cash Flow Ratio": at the end of any month, the ratio of (a)
Operating Cash Flow for the immediately preceding twelve (12) months (ending on
such date) to (b) Total Debt Service for the immediately preceding twelve (12)
months (ending on such date).
"OSIA Pledge Agreement": the OSIA Pledge Agreement dated as of March
18, 1998 by OutSource International of America, Inc. in favor of the Agent for
the benefit of the Agent and the ratable benefit of the Banks, as the same may
be amended, supplemented, restated or otherwise modified and in effect from time
to time.
"OutSource Franchising, Inc.": a Florida corporation and a wholly-owned
Subsidiary of the Borrower.
"OutSource Funding Corporation": a Delaware corporation and a
wholly-owned Subsidiary of the Borrower.
"Participants": as defined in subsection 10.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
13
<PAGE>
"Permitted Acquisition": (a) the acquisition by the Borrower or any
Subsidiary of the Capital Stock or assets of any Person provided that (i) such
Person conducts the same general type of business as currently conducted by the
Borrower and its Subsidiaries, (ii) such Person conducts all of its business in
the United States of America, (iii) none of the shareholders of the Borrower or
its Affiliates have or will have any direct or indirect beneficial ownership of
any stock or other interest in the acquired company, (iv) the net income of such
Person (excluding any non-operating gains or losses and adjusted for the factors
identified in the second sentence of the definition of Consolidated Indebtedness
to Consolidated EBITDA Ratio) is positive for the twelve (12) month period
ending as of the end of the month immediately preceding such acquisition, (v)
the total aggregate consideration in any single transaction or series of related
transactions, including any transactions with Affiliates of such Person, does
not exceed $750,000, (vi) the Borrower is in compliance with all provisions of
this Agreement both immediately before and after (pro-forma) giving effect to
the acquisition, (vii) there will be, in the Agent's sole discretion, adequate
Available Revolving Credit Commitments (in no event less than $7,500,000) to
fund the working capital requirements of the Borrower and its Subsidiaries,
including the acquired Person, for at least nine (9) months following the
acquisition, (viii) any Indebtedness incurred in connection with an acquisition
and owed to third parties must be (A) incurred payable to the seller in such
acquisition and must be Subordinated Indebtedness or (B) Indebtedness otherwise
permitted under Section 7.2 hereof, or (b) any other acquisition or series of
related acquisitions, including any transactions with Affiliates of such Person,
which the Agent and the Required Banks may approve in their sole discretion. If
the total aggregate consideration for a single transaction or a series of
related transactions exceeds $750,000, the prior written consent of the Agent
and the Required Banks shall be required, which consent may be given or withheld
in their sole discretion.
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreement-Deposit Account": the Pledge and Security
Agreement-Deposit Account, dated as of March 18, 1997, made by the Borrower in
favor of the Agent for the benefit of the Agent and the ratable benefit of the
Banks, as the same may be amended, restated, supplemented or otherwise modified
from time to time.
"Pricing Grid": the Applicable Margin, the Commitment Fee and the
Letter of Credit Rate will be determined quarterly for the period of four (4)
consecutive fiscal quarters ending on each FQED and will be as set forth in the
following Pricing Grid:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Consolidated Applicable Applicable
Indebtedness to Margin for Margin for Commitment Fee Letter of Credit
Consolidated Alternate Base Eurodollar Loans Rate
EBITDA Ratio Rate Loans
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Level 1 greater than 3.00 to 1 0.25% 2.250% 0.375% 1.500%
-------
-----------------------------------------------------------------------------------------------------------------
Level 2 2.25-3.00 to 1 0.00% 1.875% 0.375% 1.125%
-------
-----------------------------------------------------------------------------------------------------------------
Level 3 1.50-2.24 to 1 0.00% 1.500% 0.250% 1.000%
-------
-----------------------------------------------------------------------------------------------------------------
Level 4 less than 1.50 to 1 0.00% 1.250% 0.250% 0.750%
-------
-----------------------------------------------------------------------------------------------------------------
</TABLE>
The pricing at the Closing Date shall be at Level 2. Pricing will be adjusted
thereafter based on the Borrower's performance relative to the above grid,
effective on the first day of the immediately following fiscal quarter. The
Borrower's Consolidated Indebtedness to Consolidated EBITDA Ratio must have
changed from a given Level for at least two (2) consecutive quarters before
pricing will be adjusted up or down (other than an adjustment arising from the
issuance by the Borrower of publicly traded common stock). In the event that the
Borrower's Consolidated Indebtedness to Consolidated EBITDA Ratio changes Levels
twice in two consecutive quarters (e.g., from Level 2 to Level 3 in one quarter,
and from Level 3 to Level 4 in the next quarter), pricing shall adjust to the
less beneficial (from the Borrower's point of view) of the two Levels attained
during such two consecutive quarters.
14
<PAGE>
"Properties": as defined in subsection 4.17.
"Prospectus": the Prospectus of the Borrower dated October 24, 1997
relating to the offering of 3,700,00 shares of common stock of the Borrower.
"Purchasing Banks": as defined in subsection 10.6(c).
"Receivables": means and includes accounts receivable and notes,
drafts, acceptances, and other instruments representing or evidencing a right to
payment for goods sold or leased or for services rendered, whether or not earned
by performance, of the Borrower and its Subsidiaries, whether secured or
unsecured, whether now existing or hereafter created or arising, and including
all of the receivables resulting from funding advances to franchisees of
OutSource Franchising, Inc..
"Receivables Purchase Agreement": the Receivables Purchase Agreement
dated as of July 27, 1998 among OutSource Funding Corporation, as the seller,
EagleFunding Capital Corporation, as the purchaser, the Arranger, as the deal
agent, and the Borrower, as the servicer, as the same may be amended,
supplemented, restated or otherwise modified and in effect from time to time.
"Receivables Purchase and Sale Agreement": the Receivables Purchase and
Sale Agreement dated as of July 27, 1998 among the Borrower, OutSource
Franchising, Inc., CSF, Synadyne I, Inc., Synadyne II, Inc., Synadyne III, Inc.,
Synadyne IV, Inc., Synadyne V, Inc., and OutSource International of America,
Inc., each as an originator, and OutSource Funding Corporation, as the buyer,
and the Borrower, as the servicer, as the same may be amended, supplemented,
restated or otherwise modified and in effect from time to time.
"Receivables Securitization Transaction": the securitization
transaction contemplated by the Receivables Purchase Agreement, the Receivables
Purchase and Sale Agreement, the Liquidity Agreement, the Securitization
Security Agreement and the Intercreditor Agreement.
"Register": as defined in subsection 10.6(d).
"Regulation U": Regulation U of the Board of Governors of the Federal
Reserve System.
"Reimbursement Obligation": the obligation of the Borrower to reimburse
the Issuing Bank pursuant to subsection 3.4 for amounts drawn under Letters of
Credit.
"Reimbursing Bank": as defined in subsection 2.13(a).
"Reorganization": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
15
<PAGE>
"Reportable Event": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived in accordance with subsections .13, .14, .16, .18, .19 or .20 of PBGC
Reg. '2615.
"Required Banks": at any time, Banks having Commitment Percentages
representing at least 66 2/3% of the aggregate Revolving Credit Commitments, or
if the Revolving Credit Commitments are terminated, Banks representing at least
66 2/3% of the aggregate principal amount of all Loans outstanding (taking into
account each Bank's participation in any Swingline Loans and L/C Obligations).
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organization or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Responsible Officer": the chief executive officer or the president or
other executive officer of the Borrower or, with respect to financing matters,
the chief financial officer or other executive officer of the Borrower.
"Restricted Payment": as defined in subsection 7.7.
"Revolving Credit Commitment": as to any Bank, the obligation of such
Bank to make Revolving Credit Loans to the Borrower hereunder in an aggregate
principal amount at any one time outstanding not to exceed the amount set forth
opposite such Bank's name on SCHEDULE A under the caption, "Commitment Amount".
"Revolving Credit Loans": any loans, advances or other disbursements by
Agent, or any or all of the Banks to or for the account of the Borrower under
the Revolving Credit Commitments (including without limitation, amounts paid in
respect of any draft under any Letter of Credit) or in respect of any amounts
due and not paid by the Borrower in accordance with subsection 10.5.
"Revolving Credit Note": as defined in subsection 2.7.
"Sale/Leaseback Transaction": as defined in subsection 7.11.
"Securities Purchase Agreement": the Securities Purchase Agreement
dated as of February 21, 1997 between the Borrower and Triumph/Bachow, pursuant
to which the Borrower issued its Senior Subordinated Notes -- as such Securities
Purchase Agreement may, with the prior written consent of the Agent and the
Banks, be amended, supplemented or otherwise modified from time to time.
16
<PAGE>
"Securitization Security Agreement": the Security Agreement dated as of
July 27, 1998 between EagleFunding Capital Corporation, as the borrower, and
Bankers Trust Company, as the collateral agent, as the same may be amended,
supplemented, restated or otherwise modified and in effect from time to time.
"Security Documents": the OI Security Agreement, OI Pledge Agreement,
each Subsidiary Security Agreement, the Trademark Security Agreement, the Pledge
Agreement-Deposit Account and the OSIA Pledge Agreement.
"Senior Subordinated Notes": the $25,000,000 Senior Subordinated Notes
due February 20, 2002 issued pursuant to the Securities Purchase Agreement.
"Single Employer Plan": any Plan which is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as of any
date of determination, (a) the amount of the "present fair saleable value" of
the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise", as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (c) such Person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they mature.
For purposes of this definition, (i) "debt" means liability on a "claim", and
(ii) "claim" means any (A) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (B)
right to an equitable remedy for breach of performance if such breach gives rise
to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
"Subordinated Indebtedness": means Indebtedness of the Borrower or its
Subsidiaries identified as subordinated on Schedule 7.2 and other unsecured
Indebtedness which contains in the instrument evidencing such Indebtedness or in
the agreement under which it is issued (which agreement shall be binding on all
holders of such Indebtedness) subordination provisions acceptable to the Agent
and the Required Banks in their sole discretion, which unsecured Indebtedness
must be approved in writing by the Agent and the Required Banks prior to
incurring such Indebtedness.
17
<PAGE>
"Subordination Agreements": the subordination agreements and notes
executed and delivered to the Borrower or any Subsidiary prior to or on the
Closing Date by the holders of the Subordinated Indebtedness identified on
Schedule 7.2.
"Subsidiary": as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership, limited liability company or other entity are at the
time owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person. Unless
otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in
this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.
"Subsidiary Guarantee": a Guarantee, substantially in the form of
Exhibit B, made by each Subsidiary (except for OutSource Funding Corporation) in
favor of the Agent for the benefit of the Agent and the ratable benefit of the
Banks, as the same may be amended, supplemented, restated or otherwise modified
and in effect from time to time.
"Subsidiary Security Agreement": a Subsidiary Security Agreement,
substantially in the form of Exhibit G, executed and delivered by each
Subsidiary (except for OutSource Funding Corporation) to the Agent for the
benefit of the Agent and the ratable benefit of the Banks, as the same may be
amended, supplemented, restated or otherwise modified and in effect from time to
time.
"Successor Agent": any Bank or any bank, depository or financial
institution, trust company, bank and trust company having capital and surplus in
excess of $100,000,000 and acceptable to the remaining Bank or Banks and to the
Borrower, the Borrower's consent not to be unreasonably withheld or delayed.
"Swingline Bank": BankBoston, N.A., successor by merger to Bank of
Boston Connecticut, acting in such capacity under subsection 2.1A, or any
successor in such capacity.
"Swingline Commitment": the obligation of the Swingline Bank to make
Swingline Loans in an aggregate amount not to exceed at any one time outstanding
the lesser of (a) $5,000,000 and (b) the aggregate amount of the Commitments.
"Swingline Loan Maturity Date": as defined in subsection 2.1A.
"Swingline Loans": the loans provided for by subsection 2.1A.
18
<PAGE>
"Swingline Note": the promissory note provided for by subsection 2.1A
and any promissory note delivered as a replacement, in substitution or in
exchange therefor, as the same shall be amended, supplemented, restated or
otherwise modified and in effect from time to time.
"Swingline Rate": for any day, a rate per annum equal to the rate for
Alternate Base Rate Loans plus the Applicable Margin. A change in the Swingline
Rate shall take effect at the time of each change in the Alternate Base Rate or
the Applicable Margin, as the case may be.
"Tandem": a trademark of OutSource Franchising, Inc. registered with
the United States Patent and Trademark Office and used by OutSource Franchising,
Inc. and its franchisees in marketing temporary flexible industrial staffing
personnel.
"Tax Return": as defined in subsection 4.11.
"Termination Date": July 27, 2003.
"Total Debt Service": at any particular date, the sum of (a)
Consolidated Indebtedness, including the principal portion of Capital Leases,
scheduled and permitted to be paid during the applicable period (reduced by
increases during such period in Subordinated Indebtedness or shareholder's
equity in an amount not exceeding, and incurred to replace, such scheduled
payments) and excluding (i) a one time payment of $1,325,000 made by the
Borrower in connection with the Borrower's purchase of the Borrower's
headquarters building, payments in respect of Indebtedness to shareholders to
the extent permitted hereunder (including the items listed in (c) of the
definition of Operating Cash Flow) and payments in respect of previous term
Indebtedness to Bank of Boston, LaSalle National Bank and Comerica Bank paid
from the proceeds of the original February 21, 1997 loan and (ii) an amount not
exceeding in any year $1,500,000 of regularly scheduled principal payments due
on Subordinated Indebtedness incurred by the Borrower or any Subsidiary to
finance Permitted Acquisitions or acquisitions identified in Note 1 to the
Unaudited Pro Forma Consolidated Financial Information contained in the
Prospectus, provided that such Subordinated Indebtedness matures at least one
(1) year after the date of its incurrence and bears interest not exceeding ten
percent (10%) per annum, plus (b) Consolidated Interest Expense, it being
understood that principal payments with respect to any Indebtedness that has
been refinanced shall be determined on and after the refinancing on the basis of
the payment schedule in such refinancing.
"Trademark Security Agreement": the Trademark Security Agreement,
substantially in the form of Exhibit H, executed and delivered by the Borrower
and OutSource Franchising, Inc. in favor of the Agent for the benefit of the
Agent and the ratable benefit of the Banks, as the same may be amended,
supplemented or otherwise modified from time to time.
19
<PAGE>
"Tranche": the collective reference to Eurodollar Loans having
Eurodollar Interest Periods which begin on the same date and end on the same
later date (whether such Loans shall originally have been made on the same day
or not).
"Transferee": as defined in subsection 10.6(f).
"Triumph/Bachow": Triumph-Connecticut Limited Partnership and Bachow
Investment Partners III, L.P. or an entity controlled by them which is a party
to the Securities Purchase Agreement.
"Type": as to any Loan, its nature as an Alternate Base Rate Loan or a
Eurodollar Loan.
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
as the same may be amended from time to time.
"Voting Stock": with respect to a corporation, all classes of Capital
Stock then outstanding of such corporation normally entitled to vote in
elections of directors.
"Voting Trust Agreement": the Voting Trust Agreement, dated as of
February 21, 1997, among the Borrower, Paul M. Burrell and Richard J. Williams,
as trustees, and certain shareholders of the Borrower, as the same may, with the
prior written consent of the Banks, be amended, supplemented or otherwise
modified from time to time.
"WAD, Inc.": a corporation organized and existing under the laws of the
State of Delaware.
1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in the Notes or any
certificate or other document made or delivered pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms
partly defined in subsection 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
SCHEDULE and Exhibit references are to this Agreement unless otherwise
specified.
20
<PAGE>
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
1.3 Change in Accounting Principles. Except as otherwise provided
herein, any changes in GAAP which are hereafter made and adopted by the Borrower
with the agreement of its independent certified public accountants shall not
affect the method of calculation of any of the financial covenants, standards or
terms found in subsection 1.1 or Section 7.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
------------------------------------------
2.1 Revolving Credit Commitments. Subject to the terms and conditions
hereof, and provided that no Default or Event of Default shall have occurred and
be continuing, each Bank severally agrees to make Revolving Credit Loans to the
Borrower from time to time on or after the Amendment Effective Date and
continuing throughout the Commitment Period in an aggregate principal amount at
any one time outstanding not to exceed the amount of such Bank's Available
Revolving Credit Commitment; provided, however, that (i) the aggregate
borrowings hereunder at any one time (giving effect to all Revolving Credit
Loans, Swingline Loans and L/C Obligations at such time) to the Borrower shall
not exceed $34,000,000 and (ii) the aggregate amount of all borrowings available
to the Borrower to be advanced to CSF shall not exceed $7,500,000 outstanding at
one time. From and after the Amendment Effective Date and continuing throughout
the Commitment Period, the Borrower may use the Revolving Credit Commitments by
borrowing, prepaying the Revolving Credit Loans or Swingline Loans, in whole or
in part, and reborrowing in accordance with the terms and conditions hereof. On
the Termination Date, the Borrower hereby unconditionally promises to pay to the
Agent for the account of each Bank the then unpaid principal amount of each
Loan.
2.1A. Swingline Loans.
21
<PAGE>
(a) Subject to the terms and conditions hereinafter set forth, upon
notice by the Borrower made to the Swingline Bank in accordance with paragraph
(b) of this subsection 2.1A , the Swingline Bank agrees to make Swingline Loans
to the Borrower on any Business Day during the Commitment Period in an aggregate
principal amount not to exceed the Swingline Commitment. Unless the Borrower has
entered into an arrangement with the Swingline Bank for automated borrowings as
described in subsection 2.1A(b) below, each Swingline Loan shall be in the
minimum amount of $250,000 or a multiple of $100,000 in excess thereof.
Notwithstanding any other provisions of this Agreement and in addition to the
limit set forth above, at no time shall the aggregate principal amount of all
outstanding Swingline Loans exceed the total Commitments of the Banks then in
effect minus the Aggregate Outstanding Extensions of Credit. Each Swingline Loan
shall mature on the earlier of (i) the date on which a Default or Event of
Default has occurred or (ii) a date mutually agreed upon by the Borrower and the
Swingline Bank, which date may be up to seven days after the Borrowing Date
thereof (the "Swingline Loan Maturity Date"). Subject to the terms of this
Agreement, the Borrower may borrow, repay and reborrow up to the amount of the
Swingline Commitment, except that the Borrower shall not use the proceeds of a
Swingline Loan to repay any other Swingline Loan.
(b) When the Borrower desires the Swingline Bank to make a Swingline
Loan (except in the case of automated borrowings as described below), it shall
send to the Agent (which shall promptly notify the Swingline Bank) a notice in
the form of Exhibit A-1, which shall set forth the principal amount of the
proposed Swingline Loan and the proposed Borrowing Date. Each such Loan request
must be received by the Swingline Bank not later than 12:00 p.m. (Eastern time)
on the date of the proposed borrowing. Each such Loan request shall be
irrevocable and binding on the Borrower and shall obligate the Borrower to
borrow the Swingline Loan on the Borrowing Date thereof. Upon satisfaction of
the applicable conditions set forth in this Agreement, on the proposed Borrowing
Date the Swingline Bank shall make the Swingline Loan available to the Agent, at
an account designated by the Agent, in Dollars and immediately available funds,
for the account of the Borrower. The amount so received by the Agent, shall,
subject to the terms and conditions of this Agreement, be made available by the
Agent to the Borrower by depositing the same, in immediately available funds, in
an account of the Borrower designated by the Borrower by 5:00 p.m. (Eastern
time) on the proposed Borrowing Date by crediting the amount of the Swingline
Loan to the Borrower's account maintained with the Agent; provided that the
Swingline Bank shall not advance any Swingline Loans after it has received
notice from the Borrower, the Agent or any Bank that a Default or Event of
Default has occurred and is continuing. No new Swingline Loan shall be made
until such Default or Event of Default has been cured or waived in accordance
with the provisions of this Agreement.
It is understood that the Borrower and the Swingline Bank may
administer Swingline Loans on an automated basis pursuant to which Swingline
Loans will be made (up to the Swingline Commitment) or repaid automatically on a
daily basis in an amount equal to the net of the Borrower's receipts and
disbursements at the Swingline Bank. If such an automated system is used, the
provisions dealing with notice and minimum borrowing amount set forth in
subsection 2.1A(b) above shall not be applicable.
22
<PAGE>
(c) The Borrower shall repay each outstanding Swingline Loan on or
prior to the Swingline Loan Maturity Date. Upon notice by 11:00 a.m. (Eastern
time) on any Business Day by the Swingline Bank to the Agent, which notice is
hereby authorized by the Borrower, the Borrower shall be deemed irrevocably to
have requested, and each of the Banks hereby agrees to make, a Revolving Credit
Loan to the Borrower by 2:00 p.m. (Eastern time) on such Business Day, in an
amount equal to such Bank's Commitment Percentage of the aggregate amount of the
outstanding Swingline Loans. Such Revolving Credit Loan shall bear interest at
the Alternate Base Rate plus the Applicable Margin. The proceeds thereof shall
be applied by the Agent directly to repay the Swingline Bank for such
outstanding Swingline Loans. In the event that it is impracticable for such
Revolving Credit Loan to be made for any reason on the date otherwise required
above, then each Bank hereby agrees that it shall forthwith purchase (as of the
date such Revolving Credit Loan would have been made, but adjusted for any
payments received from the Borrower on or after such date and prior to such
purchase) from the Swingline Bank, and the Swingline Bank shall sell to each
Bank, such participations in the Swingline Loans (including all accrued and
unpaid interest thereon) outstanding as shall be necessary to cause the Banks to
share in such Swingline Loans pro rata based on their respective Commitment
Percentages by making available to the Swingline Bank an amount equal to such
Bank's participation in the Swingline Loans; provided that all interest payable
on the Swingline Loans shall be for the account of the Swingline Bank as a
funding and administrative fee until the date as of which the respective
participation is purchased. The obligation of each Bank to make such Revolving
Credit Loan, or as the case may be, to purchase such participation in a
Swingline Loan, upon notice as set forth above, is absolute, unconditional and
irrevocable under any and all circumstances whatsoever and shall not be subject
to set-off, counterclaim or defense to payment that such Bank may have or may
have had against the Borrower, the Agent, the Swingline Bank or any other Bank
and, without limiting any of the foregoing, shall be unconditional
notwithstanding (i) that the amount of such Loan may not comply with the
applicable minimum set forth in subsection 2.1 hereof, (ii) the failure of the
Borrower to meet the conditions set forth in Section 5 hereof, (iii) the
occurrence or continuance of a Default or an Event of Default hereunder, (iv)
the date of such Revolving Credit Loan or participation or (v) the financial
condition of the Borrower or any Subsidiary; provided, however, a Bank shall not
be obligated to make any such Revolving Credit Loan (or to purchase such
participation) if before the making of such Swingline Loan, such Bank had
notified the Swingline Bank that a Default or Event of Default had occurred and
was continuing and that such Bank would not refinance such Swingline Loan.
(d) The obligation of the Borrower to repay the Swingline Loans made
pursuant to this Agreement and to pay interest thereon as set forth in this
Agreement shall be evidenced by a promissory note of the Borrower with
appropriate insertions substantially in the form of Exhibit A-3 (the "Swingline
Note"), and any promissory note delivered as a replacement, in substitution or
in exchange therefor, as the same may be amended, modified or otherwise
supplemented and in effect from time to time, payable to the order of the
Swingline Bank. The Borrower irrevocably authorizes the Swingline Bank to make
or cause to be made, at or about the time of the Borrowing Date of any Swingline
Loan or at the time of receipt of any payment of principal on the Swingline
Note, an appropriate notation on the books of the Swingline Bank reflecting the
making of such Swingline Loan or (as the case may be) the receipt of such
payment. The outstanding amount of the Swingline Loans set forth on such books
shall be prima facie evidence of the principal amount thereof owing and unpaid
to the Swingline Bank, but the failure to record, or any error in so recording,
any such amount on such books shall not limit or otherwise affect the actual
amount of the obligations of the Borrower hereunder or under the Swingline Note
to make payments of principal of or interest on the Swingline Note when due.
23
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2.2 Designation of Interest Rates; Eurodollar Interest Periods.
(a) The Revolving Credit Loans may from time to time be (i) Eurodollar
Loans, (ii) Alternate Base Rate Loans or (iii) a combination thereof, as the
Borrower may determine and notify to the Agent in accordance with subsections
2.4 and 2.5. In the event the Borrower fails to designate the Type of all or any
portion of a Loan (whether initially or upon expiration of a Eurodollar Interest
Period), the per annum rate of interest applicable thereto shall be or become
the rate of interest applicable to Alternate Base Rate Loans.
(b) The Borrower may not select a Eurodollar Interest Period pursuant
to subsections 2.2(a), 2.5 or otherwise, if (i) an Event of Default has occurred
and is continuing, or (ii) such Eurodollar Interest Period would expire on a day
after the Termination Date. If any Eurodollar Interest Period would otherwise
end on a day that is not a Business Day, such Eurodollar Interest Period shall
be extended to the next succeeding Business Day unless the result of such
extension would be to carry such Eurodollar Interest Period into another
calendar month in which event such Eurodollar Interest Period shall end on the
immediately preceding Business Day. If any Eurodollar Interest Period begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Eurodollar Interest Period), such Eurodollar Interest Period shall end on the
last Business Day of a calendar month.
2.3 Interest Rates and Payment Dates.
(a) Each Eurodollar Loan shall bear interest, during the applicable
Eurodollar Interest Period, at a rate per annum equal to the applicable
Eurodollar Rate plus the Applicable Margin, and each Alternate Base Rate Loan
shall bear interest for so long as it is outstanding and unpaid at a rate per
annum equal to the Alternate Base Rate plus the Applicable Margin.
(b) The Applicable Margin for Eurodollar Loans and Alternate Base Rate
Loans shall be determined based upon the calculations submitted to the Banks
pursuant to subsection 6.2(b) and, except as otherwise provided in the
definition of Pricing Grid, shall be effective as of the first day of the fiscal
quarter next following the date such calculations are submitted to the Banks. In
the event the Applicable Margin cannot be determined at any time because the
Borrower's financial statements for the immediately preceding fiscal quarter are
not available at such time, the Applicable Margin shall be presumed to be the
same as the Applicable Margin as of the last FQED for which the Borrower's
financial statements were available.
(c) Each Swingline Loan shall bear interest for so long as it is
outstanding and unpaid at a rate per annum equal to the Swingline Rate.
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(d) If all or a portion of the principal amount of any Loan or any
interest payable thereon shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear interest
at a rate per annum (the "Default Rate") which is equal to the rate that would
otherwise be applicable thereto pursuant to the foregoing provisions of this
subsection plus two percent (2%) from the date of such non-payment until such
amount is paid in full (after, as well as before, judgment).
(e) Interest shall be payable in arrears on each Interest Payment Date
and be identified for each Type of Loan; provided, that interest accruing at the
Default Rate pursuant to subsection 2.3(d) shall be payable on receipt of
written demand. In the event the rate of interest applicable to any Eurodollar
Loan increases or decreases as a consequence of an increase or decrease in the
Applicable Margin with respect thereto, the amount of interest due shall be
adjusted on the next Interest Payment Date to reflect such increase or decrease,
as the case may be.
(f) In the event the total amount of any payment of principal or
interest or amounts due in respect of any Reimbursement Obligation or of any fee
required to be paid under this Agreement is not received by the Agent or the
Issuing Bank, as the case may be, within ten (10) days following the due date of
such payment, the Borrower shall, in addition to and together with such payment,
pay to the Agent or the Issuing Bank, as the case may be, a late charge equal to
five percent (5%) of the total amount of such payment or amount due; provided,
such late charge shall not be payable in respect of any overdue payment in the
event the Borrower was entitled to an advance in the amount of such payment
under the provisions of subsection 2.1 at the time such payment became due, the
Borrower duly requested such advance in compliance with the requirements of this
Agreement, and the Banks failed to provide such advance without cause. The
Borrower authorizes the Agent to debit any of the accounts of the Borrower or
its Subsidiaries at or assigned to the Agent on or after the due date of any
such payment and a late charge shall not be payable to the extent the balances
in such accounts are sufficient on the due date to meet such payment.
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2.4 Procedure for Borrowing. The Borrower may borrow under the
Revolving Credit Commitments on or after the Amendment Effective Date during the
Commitment Period on any Business Day by giving the Agent irrevocable notice in
the form of Exhibit A-1 (which notice must be received by the Agent prior to (x)
12:00 p.m., Eastern time, at least three (3) Business Days prior to the
requested Borrowing Date, if all or any part of the requested Revolving Credit
Loans are to be initially Eurodollar Loans, or (y) 12:00 p.m., Eastern time, on
the requested Borrowing Date, otherwise), specifying (i) the amount to be
borrowed, (ii) the requested Borrowing Date, (iii) the Type of the requested
borrowing, (iv) if the borrowing is to be entirely or partly of Eurodollar
Loans, the amounts and Eurodollar Interest Periods thereof and (v) the purpose
of such borrowing: e.g. whether the proceeds are to be used for working capital,
to make a Permitted Acquisition, to make advances or contributions to CSF, etc.
Each borrowing under the Revolving Credit Commitments shall be in an amount
equal to (A) in the case of Alternate Base Rate Loans, $250,000 or a whole
multiple of $100,000 in excess thereof (or, if the then Available Revolving
Credit Commitments are less than $250,000, such lesser amount) or (B) in the
case of Eurodollar Loans, $250,000 or a whole multiple of $100,000 in excess
thereof. Upon receipt of any such notice from the Borrower, the Agent shall
promptly notify each Bank thereof. Each Bank will make the amount of its pro
rata share (based on its Commitment Percentage) of each borrowing available to
the Agent for the account of the Borrower at the office of the Agent specified
in subsection 10.2 prior to 2:00 p.m., Eastern time, on the Borrowing Date
requested by the Borrower in funds immediately available to the Agent. Such
borrowing will then be made available to the Borrower by the Agent crediting the
account of the Borrower on the books of such office with the aggregate of the
amounts made available to the Agent by the Banks and in like funds as received
by the Agent.
2.5 Conversion and Continuation Options.
(a) The Borrower may elect from time to time to convert Eurodollar
Loans to Alternate Base Rate Loans by giving the Agent at least two (2) Business
Days' prior irrevocable notice of such election; provided that any such
conversion of Eurodollar Loans may only be made as of the last day of a
Eurodollar Interest Period with respect thereto. The Borrower may elect from
time to time to convert Alternate Base Rate Loans to Eurodollar Loans by giving
the Agent at least three (3) Business Days' prior irrevocable notice of such
election, which notice shall specify the length of the initial Eurodollar
Interest Period or Eurodollar Interest Periods therefor. Upon receipt of any
such notice the Agent shall promptly notify each Bank thereof. All or any part
of outstanding Eurodollar Loans and Alternate Base Rate Loans may be converted
as provided herein, provided that no Loan may be converted into a Eurodollar
Loan when any Event of Default has occurred and is continuing or the Agent has
or the Required Banks have determined pursuant to subsection 2.12 that such a
conversion is not appropriate.
(b) The Borrower may elect to continue all or any portion of any
Eurodollar Loan upon the expiration of the designated Eurodollar Interest Period
in respect of such Eurodollar Loan by giving the Agent at least three (3)
Business Days' prior irrevocable notice of such election; provided that no
Eurodollar Loan may be continued as such when any Event of Default has occurred
and is continuing or the Agent has or the Required Banks have determined
pursuant to subsection 2.12 that such a continuation as a Eurodollar Loan is not
appropriate. The Borrower shall specify in the aforesaid notice the amount to be
continued as a Eurodollar Loan and the Eurodollar Interest Period with respect
thereto in accordance with subsection 2.2.
2.6 Minimum Amounts and Maximum Number of Tranches. All borrowings,
conversions and continuations of Loans hereunder and all selections of
Eurodollar Interest Periods hereunder shall be in such amounts and be made
pursuant to such elections so that, after giving effect thereto, the aggregate
principal amount of the Eurodollar Loans comprising each Tranche shall be equal
to $250,000 or a whole multiple of $100,000 in excess thereof and so that there
shall not be more than seven (7) Tranches at any one time outstanding.
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2.7 Revolving Credit Notes. The Revolving Credit Loans made by each
Bank shall be evidenced by a promissory note of the Borrower, substantially in
the form of Exhibit A-2 with appropriate insertions as to payee, date and
principal amount (a "Revolving Credit Note"), and any promissory note delivered
as a replacement, in substitution or in exchange therefor, as the same may be
amended, modified or otherwise supplemented and in effect from time to time,,
payable to the order of such Bank and in a principal amount equal to the amount
of the initial Revolving Credit Commitment of such Bank. Each Bank is hereby
authorized to record the date, Type and amount of each Revolving Credit Loan
made by such Bank, each continuation thereof, each conversion of all or a
portion thereof to another Type, the date and amount of each payment or
prepayment of principal thereof and, in the case of Eurodollar Loans, the length
of each Eurodollar Interest Period and Eurodollar Rate with respect thereof, on
the SCHEDULE annexed to and constituting a part of its Revolving Credit Note,
and any such recordation shall constitute prima facie evidence of the accuracy
of the information so recorded. Each Revolving Credit Note shall (x) be dated
the Closing Date, (y) be stated to mature on the Termination Date and (z)
provide for the payment of interest in accordance with subsection 2.3.
2.8 Fees.
(a) The Borrower agrees to pay to the Agent for the benefit of the
Banks a commitment fee (the "Commitment Fee") on the unborrowed portion of the
aggregate Available Revolving Credit Commitment, as in effect from time to time,
for each day from the Closing Date through the Termination Date, at the
percentage rate per annum set forth opposite the applicable Consolidated
Indebtedness to Consolidated EBITDA Ratio in the Pricing Grid.
Such Commitment Fee shall be computed on the basis of a 360-day year
for the actual number of days elapsed, shall be payable in arrears on the last
day of each quarter during the term of this Agreement and on the Termination
Date, and shall be fully earned when due and non-refundable when paid.
(b) On or about February 28, of each year, on an annual basis, the
Borrower shall pay to the Agent administrative fees in the amounts set forth in
a letter agreement between the Agent and the Borrower. These administrative fees
are fully earned as of the date when due, are solely for the account of Agent
and are non-refundable.
(c) On the Closing Date, the Borrower shall pay to the Agent a
non-refundable closing fee in the amount set forth in a letter agreement between
the Agent and the Borrower.
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2.9 Termination or Reduction of Revolving Credit Commitments. The
Borrower shall have the right, upon not less than three (3) Business Days'
notice to the Agent, to terminate the Commitments or, from time to time, to
reduce the amount of the Revolving Credit Commitments provided that no such
termination or reduction shall be permitted if, after giving effect thereto and
to any prepayments of the Revolving Credit Loans made on the effective date
thereof, the aggregate principal amount of the Revolving Credit Loans and
Swingline Loans then outstanding, when added to such Bank's Commitment
Percentage (as computed immediately prior to said termination or reduction) of
the L/C Obligations, would exceed the Revolving Credit Commitments then in
effect. Any such reduction shall be in an amount not less than $250,000, and
shall reduce permanently the Revolving Credit Commitments then in effect.
2.10 Optional Prepayments. The Borrower may at any time and from time
to time, prepay the Revolving Credit Loans, in whole or in part, upon at least
three (3) Business Days' irrevocable notice, in the case of prepayment of any
Revolving Credit Loans which are Eurodollar Loans, or upon irrevocable notice
(which notice must be received by 1:00 P.M., Eastern time, on or before the
proposed date of prepayment), in the case of prepayments of any Revolving Credit
Loans which are Alternate Base Rate Loans, to the Agent, specifying the date and
amount of prepayment and whether the prepayment is of Eurodollar Loans,
Alternate Base Rate Loans or a combination thereof, and, in each case if a
combination thereof, the amount allocable to each; provided that, if a
Eurodollar Loan is prepaid other than at the end of the Eurodollar Interest
Period applicable thereto, the Borrower shall also pay any amounts required to
be paid pursuant to subsection 2.17. Upon receipt of any such notice the Agent
shall promptly give notice thereof to each Bank. If any such notice is given by
the Borrower, the amount specified in such notice shall be due and payable on
the date specified therein. Partial prepayments of the Revolving Credit Loans
shall be in an aggregate principal amount of $250,000 or a whole $100,000
multiple in excess thereof.
2.11 Computation of Interest and Fees. Interest on the Loans, Letter of
Credit commissions and Commitment Fees shall be calculated on the basis of a
360-day year for the actual days elapsed. The Agent shall as soon as practicable
notify the Borrower and the Banks of each determination of a Eurodollar Rate.
Any change in the interest rate on a Loan resulting from a change in the
Alternate Base Rate or the Eurodollar Reserve Requirements shall become
effective as of the opening of business on the day on which such change becomes
effective. The Agent shall as soon as practicable notify the Borrower and the
Banks of the effective date and the amount of each such change in interest rate.
Each determination of an interest rate by the Agent pursuant to any provision of
this Agreement shall be conclusive and binding on the Borrower and the Banks in
the absence of manifest error.
2.12 Inability to Determine Interest Rate. If prior to the first day of
any Eurodollar Interest Period:
(a) the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Eurodollar Interest Period, or
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(b) the Agent shall have received notice from the Required Banks that
the Eurodollar Rate determined or to be determined for such Eurodollar Interest
Period will not adequately and fairly reflect the cost to such Banks (as
conclusively certified by such Banks) of making or maintaining their affected
Loans during such Eurodollar Interest Period,
the Agent shall give telecopy or telephonic notice thereof to the Borrower and
the Banks as soon as practicable thereafter. If such notice is given (x) any
Eurodollar Loans requested to be made on the first day of such Eurodollar
Interest Period shall be made as Alternate Base Rate Loans, (y) any Loans that
were to have been converted on the first day of such Eurodollar Interest Period
to Eurodollar Loans shall be converted to or continued as Alternate Base Rate
Loans, and (z) any outstanding Eurodollar Loans shall be converted, on the first
day of such Eurodollar Interest Period, to Alternate Base Rate Loans. Until such
notice has been withdrawn by the Agent, no further Eurodollar Loans shall be
made or continued as such, nor shall the Borrower have the right to convert
Loans to Eurodollar Loans.
2.13 Pro Rata Treatment and Payments.
(a) Unless the Agent shall have been notified in writing by any Bank
prior to 2:00 p.m., Eastern time, on the Borrowing Date that such Bank will not
make the amount that would constitute its Commitment Percentage of the borrowing
on such date available to the Agent, the Agent may assume that such Bank (a
"Reimbursing Bank") has made such amount available to the Agent on such
Borrowing Date, and the Agent or any Bank may (but shall not be obligated), in
reliance upon such assumption, make available to the Borrower a corresponding
amount. If such amount is made available to the Agent on a date after such
Borrowing Date, the Reimbursing Bank shall pay to the Agent on demand an amount
equal to the product of (i) the daily average Federal Funds Effective Rate
during such period as quoted by the Agent, times (ii) the amount of such
Reimbursing Bank's Commitment Percentage of such borrowing, times (iii) a
fraction the numerator of which is the number of days that elapse from and
including such Borrowing Date to the date on which such Reimbursing Bank's
Commitment Percentage of such borrowing shall have become immediately available
to the Agent and the denominator of which is 365. A certificate of the Agent
submitted to any Reimbursing Bank with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest error. If a
Reimbursing Bank's Commitment Percentage of such borrowing is not in fact made
available to the Agent by such Reimbursing Bank within one (1) Business Day of
such Borrowing Date, the Agent shall be entitled to recover such amount, with
interest thereon at the rate per annum applicable to Alternate Base Rate Loans
hereunder, on demand, from such Reimbursing Bank or the Borrower in such order
and manner as Agent may determine in its discretion.
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(b) Each borrowing of Revolving Credit Loans by the Borrower from the
Banks hereunder shall be made by the Banks pro rata in accordance with the
respective Commitment Percentage of such Banks. Each payment by the Borrower on
account of the principal of and interest on the Revolving Credit Loans, and any
reduction of the Commitments of the Banks shall be payable to the Banks pro rata
in accordance with the respective Commitment Percentages of the Banks; provided
that in the event the Agent or any Bank pursuant to subsection 2.13(a) makes
available to the Borrower a Reimbursing Bank's Commitment Percentage of a
requested borrowing, the Agent or such Bank providing such funding shall be
entitled to receive all payments that would otherwise be payable to such
Reimbursing Bank until such time as the Agent or such Bank, as the case may be,
shall have received an amount equal to the amount so funded on behalf of such
Reimbursing Bank, together with interest thereon as provided in subsection
2.13(a). All payments (including prepayments) to be made by the Borrower
hereunder and under the Notes, whether on account of principal, interest, fees
or otherwise, shall be made without set off or counterclaim and shall be made
prior to 1:00 p.m., Eastern time, on the due date thereof to the Agent, for the
account of the Banks, at the Agent's office specified in subsection 10.2, in
Dollars and in immediately available funds. The Agent shall distribute such
payments to the Banks promptly upon receipt in like funds as received. If such
payment is not made available by the Agent to any Bank within one (1) Business
Day of the Agent's receipt of payment from the Borrower, such Bank shall be
entitled to recover such amount from the Agent with interest thereon at a rate
per annum equal to the Alternate Base Rate. If any payment hereunder becomes due
and payable on a day other than a Business Day, such payment shall be extended
to the next succeeding Business Day, and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension.
2.14 Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Bank to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Bank hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert Alternate Base Rate Loans to Eurodollar Loans shall forthwith be
canceled and (b) such Bank's Loans then outstanding as Eurodollar Loans, if any,
shall be converted automatically to Alternate Base Rate Loans on the respective
last days of the then current Eurodollar Interest Periods with respect to such
Loans or within such earlier period as required by law. If any such conversion
of a Eurodollar Loan occurs on a day which is not the last day of the then
current Eurodollar Interest Period with respect thereto, the Borrower shall pay
to such Bank such amounts, if any, as may be required pursuant to subsection
2.17.
2.15 Requirements of Law.
(a) If the adoption of or any change in any Requirement of Law or in
the interpretation or application thereof or compliance by any Bank with any
request or directive (whether having the force of law or not) from any central
bank or other Governmental Authority made subsequent to the date hereof:
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(i) shall subject any Bank to any tax of any kind whatsoever
with respect to this Agreement, any Note or any Eurodollar Loan made by
it, or change the basis of taxation of payments to such Bank in respect
thereof (except for Non-Excluded Taxes covered by subsection 2.16 and
changes in the rate of tax on the overall net income of such Bank);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Bank which is not otherwise
included in the determination of the Eurodollar Rate hereunder; or
(iii) shall impose on such Bank any other condition;
and the result of any of the foregoing is to increase the cost to such Bank, by
an amount which such Bank deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the Borrower shall
promptly pay such Bank, upon its demand, any additional amounts necessary to
compensate such Bank for such increased cost or reduced amount receivable. If
any Bank becomes entitled to claim any additional amounts pursuant to this
subsection, it shall promptly notify the Borrower through the Agent, of the
event by reason of which it has become so entitled. A certificate as to any
additional amounts payable pursuant to this subsection submitted by such Bank,
through the Agent, to the Borrower shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and the payment of the Notes and all other amounts payable hereunder.
(b) If any Bank shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Bank or any
corporation controlling such Bank with any request or directive regarding
capital adequacy (whether having the force of law or not) from any Governmental
Authority made subsequent to the date hereof does or shall have the effect or
reducing the rate of return on such Bank's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such Bank
or such corporation could have achieved but for such change or compliance
(taking into consideration such Bank's or such corporation's policies with
respect to capital adequacy) by an amount deemed by such Bank to be material,
then from time to time, after submission by such Bank to the Borrower (with a
copy to the Agent) of a written request therefore, the Borrower shall pay to
such Bank such additional amount or amounts as will compensate such Bank for
such reduction.
2.16 Taxes.
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(a) All payments made by the Borrower under this Agreement and the
Notes shall be made free and clear of, and without deduction or withholding for
or on account of any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental Authority,
excluding net income taxes and franchise taxes (imposed in lieu of net income
taxes) imposed on the Agent or any Bank as a result of a present or former
connection between the Agent or such Bank and the jurisdiction of the
Governmental Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising solely from
the Agent or such Bank having executed, delivered or performed its obligations
or received a payment under, or enforced, this Agreement or the Notes). If any
such non-excluded taxes, levies, imposts, duties, charges, fees deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts
payable to the Agent or any Bank hereunder or under the Notes, the amounts so
payable to the Agent or such Bank shall be increased to the extent necessary to
yield to the Agent or such Bank (after payment of all Non-Excluded Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement and the Notes, provided, however, that the
Borrower shall not be required to increase any such amounts payable to any Bank
that is not organized under the laws of the United States of America or a state
thereof if such Bank fails to comply with the requirements of paragraph (b) of
this subsection. Whenever any Non-Excluded Taxes are payable by the Borrower, as
promptly as possible thereafter the Borrower shall send to the Agent for its own
account or for the account of such Bank, as the case may be, a certified copy of
an original official receipt received by the Borrower showing payment thereof.
If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate
taxing authority or fails to remit to the Agent the required receipts or other
required documentary evidence, the Borrower shall indemnify the Agent and the
Banks for any incremental taxes, interest or penalties that may become payable
by the Agent or any Bank as a result of any such failure. The agreements in this
subsection shall survive the termination of this Agreement and the payment of
the Notes and all other amounts payable hereunder.
(b) Each Bank that is not incorporated under the laws of the United
States of America or a state thereof shall:
(i) deliver to the Borrower and the Agent (A) two (2) duly
completed copies of United States Internal Revenue Service Form 1001 or
4224, or successor applicable form, as the case may be, and (B) an
Internal Revenue Service Form W-8 or W-9, or successor applicable form,
as the case may be;
(ii) deliver to the Borrower and the Agent two (2) further
copies of any such form or certification on or before the date that any
such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the
Borrower or the Agent.
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unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Bank from duly completing and delivering any such
form with respect to it and such Bank so advises the Borrower and the Agent.
Such Bank shall certify (i) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and (ii) in the case of a
Form W-8 or W-9, that it is entitled to an exemption from United States backup
withholding tax. Each Person that shall become a Bank or a Participant pursuant
to subsection 10.6 shall, upon the effectiveness of the related transfer, be
required to provide all of the forms and statements required pursuant to this
subsection, provided that in the case of a Participant such Participant shall
furnish all such required forms and statements to the Bank from which the
related participation shall have been purchased.
2.17 Indemnity. The Borrower agrees to indemnify each Bank and to hold
each Bank harmless from any loss or expense which such Bank may sustain or incur
as a consequence of (a) failure by the Borrower to borrow, convert into or
continue Eurodollar Loans after the Borrower has given a notice requesting the
same in accordance with the provisions of this Agreement, (b) failure by the
Borrower to make any prepayment after the Borrower has given a notice thereof in
accordance with the provisions of this Agreement or (c) the making of a
prepayment of Eurodollar Loans on a day which is not the last day of an
Eurodollar Interest Period with respect thereto. Such indemnification may
include, without limitation, any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds obtained to fund or
maintain a Eurodollar Loan during any Eurodollar Interest Period, which any Bank
may incur as a consequence of such failure to borrow, convert or continue, as
the case may be. A certificate by Agent as to the amount of such loss, expense
or increased costs shall, when submitted to the Borrower, be conclusive, in the
absence of manifest error, unless the Borrower shall have provided the Agent
with written notice of the Borrower's objection to all or any portion of such
certificate not later than ten (10) days after the date on which such
certificate is submitted to the Borrower. Any such Eurodollar Loan shall not be
deemed paid or satisfied until all such additional amounts are paid. Agent
agrees to provide the Borrower with such information as the Borrower may
reasonably request with respect to the calculation of any such losses or
expenses. The covenant contained in this subsection 2.17 shall survive the
termination of this Agreement and the payment of the Notes and all other amounts
payable hereunder.
SECTION 3. LETTERS OF CREDIT
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3.1 L/C Commitment.
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(a) Subject to the terms and conditions hereof, the Issuing Bank, in
reliance on the agreements of the other Banks set forth in subsection 3.5(a),
agrees to issue irrevocable standby letters of credit for the account of the
Borrower on any Business Day on or after the Amendment Effective Date until the
date which is thirty-five (35) Business Days prior to the end of the Commitment
Period in such form as may be approved from time to time by the Issuing Bank
(all such letters of credit outstanding on the date hereof and all letters of
credit to be issued hereunder, together with all extensions, renewals and
replacements thereof, are herein collectively referred to as the "Letters of
Credit"); provided that the Issuing Bank shall have no obligation to issue any
Letter of Credit if at the time of such issuance a Default exists or an Event of
Default has occurred and is continuing or if, after giving effect to such
issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the
aggregate Available Revolving Credit Commitments would be less than zero. Each
Letter of Credit shall (i) be denominated in Dollars, (ii) expire no later than
thirty (30) days prior to the Termination Date and (iii) expire no later than a
date one (1) year after its issuance, provided that any Letter of Credit with a
one-year term may provide for the renewal thereof for additional one-year
periods (which shall in no event extend beyond the date referred to in clause
(ii) above).
(b) Each Letter of Credit shall be subject to the Uniform Customs and,
to the extent not inconsistent therewith, the laws of the State of the Issuing
Bank's principal place of business.
(c) The Issuing Bank shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause the
Issuing Bank or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
(d) The Issuing Bank shall not be liable to any L/C Participant for any
action taken or omitted by the Issuing Bank except for acts or omissions caused
by the Issuing Bank's gross negligence or willful misconduct.
3.2 Procedure for Issuance of Letters of Credit. The Borrower may from
time to time request that the Issuing Bank issue a Letter of Credit by
delivering to the Issuing Bank at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Bank, and
such other certificates, documents and other papers and information as the
Issuing Bank may request. Upon receipt of any Application, the Issuing Bank will
process such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Bank be required to issue any Letter
of Credit earlier than three (3) Business Days after its receipt of the
Application therefor and all such other certificates, documents and other papers
and information relating thereof) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing
Bank and the Borrower. The Issuing Bank shall furnish a copy of such Letter of
Credit to the Borrower and the other Banks promptly following the issuance
thereof.
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3.3 Fees, Commissions and Other Charges.
(a) After issuance of a Letter of Credit, the Borrower shall pay to the
Agent a letter of credit facility fee (the "L/C Fee") at the end of each
quarter, in arrears, in an amount equal to the product of (i) the face amount of
such Letter of Credit times (ii) the Letter of Credit Rate set forth opposite
the applicable Consolidated Indebtedness to Consolidated EBITDA Ratio in the
Pricing Grid, times (iii) the term of such Letter of Credit, expressed as a
fraction equal to the number of days of such term divided by three hundred sixty
(360).
In addition, as long as any letter of credit issued by The First National Bank
of Boston or any affiliate (the "FNBB Letters of Credit") for the account of the
Borrower or any Subsidiary is outstanding, the Borrower shall pay to the Issuing
Bank an additional fee, based on the face amount of all such letters of credit,
equal to the difference between the Letter of Credit Rate that would have
applied had such letters of credit been issued hereunder and the letter of
credit fee payable on the FNBB Letters of Credit. The applicable Letter of
Credit Rate shall be determined based upon the calculations submitted to the
Banks pursuant to subsection 6.2(b). In the event that the Letter of Credit Rate
cannot be determined at any time because the Borrower's financial statements for
the immediately preceding fiscal quarter are not available at such time, the L/C
Fee shall be presumed to be the same as the L/C Fee as of the last FQED for
which the Borrower's financial statements were available. Any change in the L/C
Fee as a consequence of a change in the Letter of Credit Rate shall be effective
as of the date of such change in the Letter of Credit Rate. Each L/C Fee payable
under this subsection 3.3 shall be shared ratably among the Banks in accordance
with their respective Commitment Percentages.
(b) The Agent shall, promptly following its receipt thereof, distribute
to the Issuing Bank and the L/C Participants all fees and commissions received
by the Agent for their respective accounts pursuant to this subsection.
3.4 Reimbursement Obligation of the Borrower. The Borrower agrees to
reimburse the Issuing Bank on each date on which the Issuing Bank notifies the
Borrower in writing of the date and amount of a draft presented under any Letter
of Credit and paid by the Issuing Bank for the amount of (a) such draft so paid
and (b) any taxes (other than income taxes), fees, charges or other costs or
expenses incurred by the Issuing Bank in connection with such payment. Each such
payment shall be made to the Issuing Bank at its address for notices specified
herein in Dollars and in immediately available funds. Interest shall be payable
on any and all amounts remaining unpaid by the Borrower under this subsection
from the date such amounts become outstanding until payment in full at the rate
which would be payable on any outstanding Loans which were then overdue under
subsection 2.3. Each drawing under any Letter of Credit shall constitute a
request by the Borrower to the Agent for the borrowing pursuant to subsection
2.1 of Revolving Credit Loans in the amount of such drawing and any
reimbursement made by an L/C Participant pursuant to subsection 3.5 shall
constitute a Revolving Credit Loan pursuant to subsection 2.3.
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3.5 L/C Draws and Reimbursements.
(a) Each L/C Participant unconditionally and irrevocably agrees with
the Issuing Bank that, if a draft is paid under any Letter of Credit for which
the Issuing Bank is not reimbursed in full by the Borrower in accordance with
the terms of this Agreement, such L/C Participant shall pay to the Issuing Bank
upon demand at the Issuing Bank's address for notices specified herein an amount
equal to such L/C Participant's Commitment Percentage of the amount of such
draft, or any part thereof, which is not so reimbursed through participation or
otherwise. In furtherance of the foregoing, the Issuing Bank irrevocably agrees
to grant and hereby grants to each L/C Participant, and, to induce the Issuing
Bank to issue Letters of Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and purchases from the Issuing
Bank, on the terms and conditions hereinafter stated, for such L/C Participant's
own account and risk an undivided interest equal to such L/C Participant's
Commitment Percentage in the Issuing Bank's obligations and rights under each
Letter of Credit issued hereunder and the amount of each draft paid by the
Issuing Bank thereunder.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Bank pursuant to subsection 3.5(a) in respect of any unreimbursed
portion of any payment made by the Issuing Bank under any Letter of Credit is
paid to the Issuing Bank within three (3) Business Days after the date such
payment is due, such L/C Participant shall pay to the Issuing Bank on demand an
amount equal to the product of (1) such amount, times (2) the daily average
Federal Funds Effective Rate, as quoted by the Issuing Bank, during the period
from and including the date such payment is required to the date on which such
payment is immediately available to the Issuing Bank, times (3) a fraction the
numerator of which is the number of days that elapse during such period and the
denominator of which is 365. If any such amount required to be paid by any L/C
Participant pursuant to subsection 3.5(a) is not in fact made available to the
Issuing Bank by such L/C Participant within three (3) Business Days after the
date such payment is due, the Issuing Bank shall be entitled to recover from
such L/C Participant, on demand, such amount with interest thereon calculated
from such due date at the rate per annum equal to the Alternate Base Rate. A
certificate of the Issuing Bank submitted to any L/C Participant with respect to
any amounts owing under this subsection shall be conclusive in the absence of
manifest error.
(c) Whenever, at any time after the Issuing Bank has made payment under
any Letter of Credit and has received from any L/C Participant its share of such
payment in accordance with subsection 3.5(a), the Issuing Bank receives any
payment related to such Letter of Credit (whether directly from the Borrower or
otherwise, including proceeds of collateral applied thereto by the Issuing
Bank), or any payment of interest on account thereof, the Issuing Bank will
distribute to such L/C Participant its share thereof; provided, however, that in
the event that any such payment received by the Issuing Bank shall be required
to be returned by the Issuing Bank, such L/C Participant shall return to the
Issuing Bank the portion thereof previously distributed by the Issuing Bank to
it.
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3.6 Obligations Absolute. The Borrower's obligations under this Section
3 shall be absolute and unconditional under any and all circumstances and
irrespective of any set-off, counterclaim or defense to payment which the
Borrower may have or have had against the Issuing Bank or any beneficiary of a
Letter of Credit. The Borrower also agrees with the Issuing Bank that, subject
to its responsibilities under the Uniform Customs, the Issuing Bank shall not be
responsible for, and the Borrower's Reimbursement Obligations under Subsection
3.4 shall not be affected by, among other things, the validity or genuineness of
documents or of any endorsements thereon, even though such documents shall in
fact prove to be invalid, fraudulent or forged, or any dispute between or among
the Borrower and any beneficiary of any Letter of Credit or any other party to
which such Letter of Credit may be transferred or any claims whatsoever of the
Borrower against any beneficiary of such Letter of Credit or any such
transferee. The Issuing Bank shall not be liable to the Borrower or any Bank 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, except for errors or omissions caused by the Issuing Bank's gross
negligence or willful misconduct. The Borrower agrees that any action taken or
omitted by the Issuing Bank under or in connection with any Letter of Credit or
the related drafts or documents, if done in the absence of gross negligence or
willful misconduct and in accordance with the standards of care specified in the
Uniform Commercial Code of the State of Connecticut, shall be binding on the
Borrower and shall not result in any liability of the Issuing Bank to the
Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented for
payment under any Letter of Credit, the Issuing Bank shall promptly notify the
Borrower and the Banks of the date and amount thereof. The responsibility of the
Issuing Bank to the Borrower in connection with any draft presented for payment
under any Letter of Credit shall, in addition to any payment obligation
expressly provided for in such Letter of Credit, be limited to determining that
the documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are in conformity with such Letter of Credit.
3.8 Application. To the extent that any provision of any Application
related to any Letter of Credit is inconsistent with the provisions of this
Section 3, the provisions of this Section 3 shall apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
-----------------------------------------
To induce the Banks to enter into this Agreement and to make the Loans
and issue or participate in the Letters of Credit the Borrower hereby represents
and warrants to the Agent and each Bank that:
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4.1 Financial Condition.
(a) The combined balance sheet of the Borrower and its Affiliates as at
December 31, 1997 and December 31, 1996 and the related combined statements of
income and retained earnings and of cash flows for the fiscal years ended on
such dates, reported on by Deloitte & Touche LLP, copies of which have
heretofore been furnished to each Bank, are complete and correct and present
fairly the consolidated financial condition of The Borrower and its Affiliates
as at such dates, and the results of their operations and their cash flows for
the fiscal years then ended. The unaudited combined balance sheet of the
Borrower and its Affiliates as at March 31, 1998, and the related unaudited
statement of income and retained earnings for the three-month period ended on
such date, certified by a Responsible Officer, copies of which have heretofore
been furnished to each Bank, are complete and correct and present fairly the
financial condition of the Borrower and its Affiliates as at such date, and the
results of their operations for the three-month period then ended (subject to
normal year-end audit adjustments). All such financial statements, including the
related schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as approved by such
accountants or Responsible Officer, as the case may be, and as disclosed
therein).
(b) Except as set forth on SCHEDULE 4.1(b), neither the Borrower nor
any of its combined Affiliates had, at the date of the most recent balance sheet
referred to in subsection 4.1(a), any material Guarantee Obligation, contingent
liability or liability for taxes, or any long-term lease or unusual forward or
long-term commitment, including, without limitation, any interest rate or
foreign currency swap or exchange transaction, which is not reflected in the
financial statements referred to in subsection 4.1(a) or in the notes thereto.
(c) Except as set forth on SCHEDULE 4.1(c), during the period from
December 31, 1997 to and including the date hereof there has been no sale,
transfer or other disposition by the Borrower or any of its combined Affiliates
of any material part of its business or property and no purchase or other
acquisition of any business or property (including any capital stock of any
other Person) material in relation to the financial condition of the Borrower
and its combined Affiliates at December 31, 1997.
(d) Substantially all of the books and records of the Borrower and its
Subsidiaries are located at the Borrower's headquarters at 1144 East Newport
Center Drive, Deerfield Beach, Florida.
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4.2 No Change. Since December 31, 1997, (a) except as set forth on
SCHEDULE 4.2, there has been no development or event nor, to the best of our
knowledge, any prospective development or event which has had or could have a
Material Adverse Effect and (b) except as set forth on SCHEDULE 4.2 or as
permitted by this Agreement, no dividends or other distributions have been
declared, paid or made upon the Capital Stock of the Borrower or any of its
combined Affiliates nor has any of the Capital Stock of the Borrower been
redeemed, retired, purchased or otherwise acquired for value by the Borrower or
any of its combined Affiliates.
4.3 Corporate Existence; Compliance with Law. The Borrower and each
Subsidiary (a) is duly organized as a "C corporation", as defined in Section
1361(a)(2) of the Code, validly existing and in good standing under the laws of
the jurisdiction of its organization, (b) has the power and authority, and the
legal right, to own and operate its property, to lease the property it operates
as lessee and to conduct the business in which it is currently engaged in each
jurisdiction where the failure to have such power, authority or right would have
a Material Adverse Effect, (c) is duly qualified as a foreign corporation and in
good standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
except where the failure so to qualify could not have a Material Adverse Effect
and (d) is in compliance with all Requirements of Law except to the extent that
the failure to comply therewith could not, in the aggregate, have a Material
Adverse Effect.
4.4 Corporate Power, Authorization; Enforceable Obligations. The
Borrower and each Subsidiary has the corporate power and authority, and the
legal right, to make, deliver and perform this Agreement, the Notes, each
Application and the other Loan Documents to which it is a party, to borrow
hereunder and to grant the Liens pursuant to the Security Documents to which it
is a party and has taken all necessary corporate action to authorize the
borrowings on the terms and conditions of this Agreement and the Notes, the
grant of the Liens pursuant to the Security Documents to which it is a party and
the execution, delivery and performance of this Agreement, the Notes, each
Application and each other Loan Document to which it is a party. No consent or
authorization of, filing with or other action by or in respect of, any
Governmental Authority or any other Person is required in connection with the
borrowings hereunder, the grant of the Liens pursuant to the Security Documents
or the execution, delivery, performance, validity or enforceability of this
Agreement, the Notes, each Application or any other Loan Document. This
Agreement and each other Loan Document to which the Borrower or a Subsidiary is
a party (except the Notes) has been, and each Note will be, duly executed and
delivered on behalf of the Borrower. This Agreement and each other Loan Document
to which the Borrower or a Subsidiary is a party (except the Notes) constitutes,
and each Note when executed and delivered will constitute, a legal, valid and
binding obligation of the Borrower or such Subsidiary, as the case may be,
enforceable against such Borrower or such Subsidiary in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
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4.5 No Legal Bar. The execution, delivery and performance of this
Agreement, the Notes, each Application and each other Loan Document, the grant
of the Liens pursuant to the Security Documents, the borrowings hereunder and
the use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation of the Borrower or of any Subsidiary and will not result
in, or require, the creation or imposition of any Lien on any of its or their
respective properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation.
4.6 No Material Litigation. No litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened by or against the Borrower or any
Subsidiary or against any of its or their respective properties or revenues (a)
with respect to this Agreement, the Notes, any Application or any other Loan
Document or any of the transactions contemplated hereby or thereby or (b) which
could have a Material Adverse Effect. SCHEDULE 4.6 sets forth certain litigation
and proceedings presently pending against the Borrower or its Subsidiaries.
4.7 No Default. Neither the Borrower nor any Subsidiary is in default
under or with respect to any of its Contractual Obligations or Capital Stock in
any respect which could have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.
4.8 Ownership of Property; Liens. Each of the Borrower and each
Subsidiary has good record and marketable title in fee simple to, or a valid
leasehold interest in, all its real property, and good title to all its other
property except for any defect in title thereto or leasehold interest therein
which could not in the aggregate have a Material Adverse Effect, and none of the
property owned or leased by the Borrower or any Subsidiary is subject to any
Lien except as permitted by subsection 7.3 or which could not in the aggregate
have a Material Adverse Effect.
4.9 Intellectual Property. The Borrower and each Subsidiary owns, or is
licensed to use, all trademarks, trade names, copyrights, technology, know-how
and processes necessary for the conduct of its business as currently conducted
except for those the failure to own or license which could not have a Material
Adverse Effect (the "Intellectual Property"). Except as provided in SCHEDULE
4.6, no claim has been asserted and is pending by any Person challenging or
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property; nor does the Borrower know of
any valid basis for any such claim which could or might have a Material Adverse
Effect. To the best of the Borrower's knowledge, the use of such Intellectual
Property by the Borrower and each Subsidiary does not infringe on the rights of
any Person, except for such claims and infringements that, in the aggregate,
could not have a Material Adverse Effect.
4.10 No Burdensome Restrictions. Neither the Borrower nor any
Subsidiary is a party to any Contractual Obligation or Requirement of Law,
compliance with the terms of which could have a Material Adverse Effect.
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4.11 Taxes. Each of the Borrower and its Subsidiaries has filed or
caused to be filed all tax returns which, to the knowledge of the Borrower, are
required to be filed (the "Tax Returns") and has paid all taxes shown to be due
and payable on said returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority (other than any the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of the Borrower or its Subsidiaries, as the case may be) where the failure
to so file such Tax Returns or to pay such taxes could or might have a Material
Adverse Effect; no tax Lien has been filed, and, to the knowledge of the
Borrower, no claim is being asserted, with respect to any such tax, fee or other
charge. SCHEDULE 4.11 sets forth a complete and correct list of all audits
concerning any Tax Return that are being conducted by any Governmental Authority
or are otherwise in progress on the Closing Date.
4.12 Federal Regulations. No part of the proceeds of any Loans will be
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect or for any purpose which violates the provisions of the Regulations of
such Board of Governors. If requested by any Bank or the Agent, the Borrower
will furnish to the Agent and each Bank a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 referred to in said Regulation
U.
4.13 ERISA. Neither the Borrower nor any Commonly Controlled Entity
participates currently or has during the five-year period prior to the date on
which this representation is made participated in or is required currently or
has during the five-year period ending on the date on which this representation
is made been required to contribute to or otherwise participate in any plan,
program or arrangement subject to Title IV of ERISA. Except as set forth in
SCHEDULE 4.13, each Plan has complied in all material respects with the
applicable provisions of ERISA and the Code. The present value of all accrued
benefits under each Single Employer Plan maintained by the Borrower or any
Commonly Controlled Entity (based on those assumptions used to fund the Plans)
did not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits. Neither the Borrower nor any Commonly
Controlled Entity participates currently or has during the five-year period
prior to the date on which this representation is made participated in or is
required currently or has during the five-year period ending on the date on
which this representation is made been required to contribute to or otherwise
participate in any Multiemployer Plan. Neither the Borrower nor any Commonly
Controlled Entity participates currently or has during the five-year period
prior to the date on which this representation is made participated in or is
required currently or has during the five-year period ending on the date on
which this representation is made been required to contribute to or otherwise
participate in any welfare benefit plans (as defined in Section 3(1) of ERISA)
that provide post-retirement benefits to their current or former employees.
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4.14 Investment Company Act; Other Regulations. Neither the Borrower
nor any Subsidiary is an "investment company", or, to the best of the Borrower's
knowledge, a company "controlled" by an "investment company", within the meaning
of the Investment Company Act of 1940, as amended (the "1940 Act"). Neither the
Borrower nor any Subsidiary is subject to regulation under the 1940 Act or any
Federal or State statute or regulation which limits its ability to incur
Indebtedness.
4.15 Subsidiaries. All the Subsidiaries of the Borrower are listed on
SCHEDULE 4.15. Neither Labor World, Inc. nor Labor World USA, Inc., which are
not Subsidiaries but are corporations whose shares are owned by certain
shareholders of the Borrower, has assets exceeding $10,000 or has or will have
any business activity of any kind.
4.16 Purpose of Loans. The Borrower shall use the Loans in the
following manner: (i) for the working capital needs and for the general
corporate purposes of itself and its Subsidiaries (other than CSF), including
for Capital Expenditures; (ii) to make Permitted Acquisitions; (iii) to make
advances to CSF, not exceeding an aggregate amount of $7,500,000 outstanding at
any one time, to fund the working capital needs of Labor World, Tandem and
Office Ours franchisees and (iv) with regard to the proceeds of Swingline Loans,
to fund the working capital needs of the Borrower and its Subsidiaries (other
than CSF).
4.17 Environmental Matters. To the best knowledge of any Responsible
Officer of the Borrower, each of the representations and warranties set forth in
paragraphs (a) through (e) of this subsection is true and correct with respect
to each parcel of real property heretofore or now owned or operated by the
Borrower or any Subsidiary (the "Properties"), except as set forth on SCHEDULE
4.17 and except to the extent that the facts and circumstances giving rise to
any such failure to be so true and correct could not have a Material Adverse
Effect:
(a) The Properties do not contain, and have not previously contained,
in, on, or under, including, without limitation, the soil and groundwater
thereunder, any Hazardous Materials.
(b) The Properties and all operations and facilities at the Properties
are in compliance with all Environmental Laws, and there is no Hazardous
Materials contamination or violation of any Environmental Law which could
interfere with the continued operation of any of the Properties or impair the
fair saleable value of any thereof.
(c) Neither the Borrower nor any of its Subsidiaries has received any
complaint, notice of violation, alleged violation, investigation or advisory
action or of potential liability or of potential responsibility regarding
environmental protection matters or permit compliance with regard to the
Properties, nor is the Borrower aware that any Governmental Authority is
contemplating delivering to the Borrower or any of its Subsidiaries any such
notice.
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(d) Hazardous Materials have not been generated, treated, stored,
disposed of, at, on or under any of the Properties, nor have any Hazardous
Materials been transferred from the Properties to any other location.
(e) There are no governmental, administrative or judicial proceedings
pending or contemplated under any Environmental Laws to which the Borrower or
any of its Subsidiaries is or will be named as a party with respect to the
Properties, nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to any of the
Properties.
4.18 Security Documents.
(a) The provisions of the OI Pledge Agreement and the OSIA Pledge
Agreement are effective to create in favor of the Agent for the ratable benefit
of the Banks a legal, valid and enforceable security interest in all right,
title and interest of the pledgor in the Collateral as described therein. The OI
Pledge Agreement and the OSIA Pledge Agreement each constitutes a fully
perfected first lien on, and security interest in, all right, title and interest
of the pledgor in the Collateral described therein.
(b) The provisions of the OI Security Agreement are effective to create
in favor of the Agent for the ratable benefit of the Banks a legal, valid and
enforceable security interest in all right, title and interest of the Borrower
in the Collateral as described therein. Except where failure to file would not
have a material effect on Agent's ability to realize effectively on the
Collateral, and except as otherwise provided in the Intercreditor Agreement, as
a whole, the OI Security Agreement constitutes a fully perfected first lien on,
and security interest in, all right, title and interest of the Borrower in the
Collateral described therein, and no Uniform Commercial Code financing
statements have been filed by any other Person with respect to such Collateral
other than as may be filed in connection with this Agreement or with the
Receivables Securitization Transaction and except as described on SCHEDULE 4.18
hereto.
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(c) The provisions of each Subsidiary Security Agreement are effective
to create in favor of the Agent for the ratable benefit of the Banks a legal,
valid and enforceable security interest in all right, title and interest of such
Subsidiary (other than OutSource Funding Corporation) in the Collateral as
described therein. Except where failure to file would not have a material effect
on the Agent's ability to effectively realize on the Collateral, and except as
otherwise provided in the Intercreditor Agreement, as a whole, each Subsidiary
Security Agreement constitutes a fully perfected first lien on, and security
interest in, all right, title and interest of such Subsidiary (other than
OutSource Funding Corporation) in the Collateral described therein, and no
Uniform Commercial Code financing statements have been filed by any other Person
with respect to such Collateral other than as may be filed in connection with
this Agreement or with the Receivables Securitization Transaction and except as
described on SCHEDULE 4.18 hereto.
(d) The provisions of the Trademark Security Agreement are effective to
create in favor of the Agent for the ratable benefit of the Banks a legal, valid
and enforceable security interest in all right, title and interest of the
Borrower and its Subsidiaries in the Collateral as described therein. Except
where failure to file would not have a material effect on the Agent's ability to
effectively realize on the Collateral, as a whole, the Trademark Security
Agreement constitutes a fully perfected first lien on, and security interest in,
all right, title and interest of such Subsidiary in the Collateral described
therein, and no Uniform Commercial Code financing statements or filings with the
United States Patent and Trademark Office have been filed by any other Person
with respect to such Collateral other than as may be filed in connection with
this Agreement and except as described on SCHEDULE 4.18 hereto.
4.19 [Intentionally Reserved].
4.20 Solvency. The Borrower and each Subsidiary is, and after giving
effect to the incurrence of all Indebtedness, including Subordinated
Indebtedness, and obligations being incurred in connection herewith will be and
will continue to be, Solvent.
4.21 Certain Stockholders. To the best of the Borrower's knowledge,
none of Lawrence H. Schubert, Alan E. Schubert or Louis A. Morelli is a
beneficial owner, directly or indirectly, including without limitation through a
family member or trust, of any Voting Stock of the Borrower or its Subsidiaries
except such Voting Stock as is subject to the provisions of the Voting Trust
Agreement. As of the Closing Date, none of said individuals or any of his family
members has any direct or indirect affiliation with or business relationship
with the Borrower or its Subsidiaries except as is described in detail on
SCHEDULE 4.21.
4.22 Year 2000 Compatability. All of the Borrower's and each
Subsidiary's computer-based systems are able to operate and effectively process
data including dates on or after January 1, 2000, except for the Master Pack
System, as to which the Borrower is currently taking action to ensure compliance
with the coverage contained in Section 6.11 hereof.
SECTION 5. CONDITIONS PRECEDENT
-------------------------------
5.1 Amendment Effective Date. The effectiveness of the amendment and
restatement of the Existing Credit Agreement provided for hereby is subject to
the receipt by the Agent of the following documents, each of which shall be
satisfactory to the Agent and each Bank in form and substance:
(a) Agreement. The Agent shall have received, with a counterpart for
each Bank, this Agreement, executed and delivered by a duly authorized officer
of the Borrower.
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(b) Revolving Credit Notes. The Revolving Credit Notes, duly completed
and executed and, in the case of the Existing Banks parties hereto, in exchange
for the promissory notes issued under the Existing Credit Agreement.
(c) Swingline Note. The Swingline Note, duly completed and executed in
exchange (in the case of the Swingline Bank) for the promissory note issued
under the Existing Credit Agreement.
(d) Reaffirmation, Amendment and Execution of Loan Documents. The Agent
shall have received, with a counterpart for each Bank and in each case executed
and delivered by a duly authorized officer of the Borrower or its Subsidiaries,
as the case may be, (i) a reaffirmation and, to the extent required by the
Agent, amendment, of the Security Documents, and (ii) a Subsidiary Security
Agreement and a Subsidiary Guarantee executed and delivered by each of MASS
STAFF, INC. and STAFF ALL, INC.
(e) Legal Opinion. The Agent and each Bank shall have received the
executed legal opinion of Shutts & Bowen LLP, counsel to the Borrower and its
Subsidiaries, satisfactory to the Agent and special counsel to the Agent and
substantially in the form of Exhibit E hereto.
(f) Corporate Proceedings. The Agent shall have received, with a copy
for each Bank, a copy of the resolutions, in form and substance satisfactory to
the Agent, of the Board of Directors of the Borrower and each Subsidiary
authorizing (i) in the case of the Borrower, the execution, delivery and
performance of this Agreement and the Notes and (ii) with respect to the
Borrower and each Subsidiary, the reaffirmation and, to the extent applicable,
amendment of the Security Documents to which each is a party.
(g) Incumbency Certificates. The Agent shall have received, with a copy
for each Bank, a certificate, dated the Closing Date, of the Secretary or an
Assistant Secretary of the Borrower and each Subsidiary as to the incumbency and
signature of the officer or officers signing this Agreement and the
reaffirmations of each Security Document, together with evidence of the
incumbency of such Secretary or Assistant Secretary.
(h) Corporate Documents. The Agent shall have received, with a
counterpart for each Bank, true and complete copies of the certificate of
incorporation and by-laws of the Borrower and each Subsidiary, certified at the
Closing Date as complete and correct copies thereof, by the Secretary or
Assistant Secretary of the Borrower or such Subsidiary.
(i) Good Standing Certificates. The Agent shall have received, with a
copy for each Bank, certificates dated as of a recent date from the Secretary of
State or other appropriate authority of such jurisdiction, evidencing the good
standing of the Borrower and each Subsidiary in its state of incorporation and
in each state where failure to obtain authority to do business as a foreign
corporation would have a Material Adverse Effect.
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(j) Litigation. No suit, action, investigation, inquiry or other
proceeding (including, without limitation, the enactment or promulgation of a
statute or rule) by or before any arbitrator or any Governmental Authority shall
be formally instituted or threatened and no preliminary or permanent injunction
or restraining order by a state or federal court shall have been entered or
threatened (i) in connection with any Loan Document or any of the transactions
contemplated hereby or thereby or (ii) which, in the reasonable opinion of the
Banks, could have a Material Adverse Effect.
(k) No Violation. The consummation of the transactions contemplated by
this Agreement, the Notes, each Application and the other Loan Documents shall
not contravene, violate or conflict with, nor involve the Agent or any Bank in
any violation of, any Requirement of Law.
(l) Fees. The Agent and each Bank shall have received the fees to be
received by it on the Closing Date referred to in subsection 2.8 and the fees
and disbursements of Day, Berry & Howard, special counsel for the Agent, shall
have been paid in full on the Closing Date.
(m) Consents, Licenses and Approvals. The Agent shall have received,
with a counterpart for each Bank, a certificate, dated the Closing Date,
executed by a duly authorized officer of the Borrower stating that all consents,
authorizations, notices and filings necessary or advisable in connection with
the financings contemplated by this Agreement and the continuing operations of
the Borrower have been obtained and are in full force and effect, except where
the failure to obtain such consents, authorizations, notices or filings could
not have a Material Adverse Effect.
(n) Representations and Warranties, Etc. The Agent shall have received,
with a counterpart for each Bank, a certificate of a Responsible Officer of the
Borrower, dated the Closing Date, certifying on behalf of the Borrower that (i)
the representations and warranties in Section 4 are true, complete and correct
in all material respects on such date as though made on and as of such date,
(ii) no event has occurred and is continuing which constitutes a Default or
Event of Default, (iii) the Borrower has performed and complied with all
agreements and conditions contained in this Agreement which are required to be
performed or complied with by the Borrower at or before the Closing Date, and
(iv) there has been no material adverse change in the financial condition,
operations, properties, business or prospects of the Borrower and its
Subsidiaries, taken as a whole, since December 31, 1997.
(o) Consummation of Receivables Securitization Transaction. The Agent
shall have entered into the Intercreditor Agreement and shall received evidence
satisfactory to the Agent that the Receivables Securitization Transaction shall
have been consummated on terms and conditions acceptable to the Agent.
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(p) Reduction of Outstanding Revolving Credit Loans. The Borrower shall
have repaid all outstanding Revolving Credit Loans to the extent necessary to
reduce the Aggregate Outstanding Extensions of Credit to a level not exceeding
the Revolving Credit Commitment.
(q) Payment in Full of Outstanding Revolving Credit Loans of State
Street Bank and Trust Company and The Sumitomo Bank, Limited. The outstanding
Revolving Credit Loans of State Street Bank and Trust Company and The Sumitomo
Bank, Limited, together with accrued interest thereon, shall have been paid in
full.
(r) Other Documents. Such other documents as the Agent or any Bank or
special counsel to the Agent may reasonably request.
5.2 Conditions to Each Extension of Credit. The agreement of each Bank
to make any extension of credit requested to be made by it on any date
(including, without limitation, its initial extension of credit) is subject to
the satisfaction on such borrowing date of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Borrower and each Subsidiary in or pursuant to the Loan
Documents shall be true and correct in all material respects on and as of such
date as if made on and as of such date; provided that, with respect to
extensions of credit made after the Closing Date, Guarantee Obligations incurred
after the Closing Date and in accordance with the terms of this Agreement shall
not be deemed a breach of the representation and warranty set forth in
subsection 4.1(b) to the extent that such Guarantee Obligations are not
described in the financial statements described in subsection 4.1(a).
(b) No Default. No Default or Event of Default shall have occurred and
be continuing on such date or after giving effect to the extension of credit
requested to be made on such date.
(c) Additional Documents. The Agent shall have received each additional
document, instrument, legal opinion or item of information reasonably requested
by it, including, without limitation, a copy of any debt instrument, security
agreement or other material contract to which the Borrower or any Subsidiary may
be a party.
(d) Additional Matters. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be satisfactory in form and substance to the Agent, and the Agent shall have
received such other documents and legal opinions in respect of any aspect or
consequence of the transactions contemplated hereby or thereby as it shall
reasonably request.
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Each borrowing by and Letter of Credit issued on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date of such Loan or Letter of Credit that the conditions contained in this
subsection 5.2 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
--------------------------------
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Note or any Letter of Credit remains outstanding and unpaid or any
other amount is owing to any Bank or the Agent hereunder, the Borrower shall and
(except in the case of delivery of financial information, reports and notices)
shall cause each of its Subsidiaries to:
6.1 Financial Statements. Furnish to each Bank:
(a) as soon as available, but in any event within ninety (90) days
after the end of each fiscal year of the Borrower, a copy of the consolidated
and consolidating balance sheets of the Borrower and its consolidated
Subsidiaries as at the end of such year and the related consolidated and
consolidating statements of income and retained earnings and of cash flows for
such year, setting forth in each case in comparative form the figures for the
previous year, and, with respect to the consolidated financial statements,
reported on without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit by Deloitte & Touche LLP or
other independent certified public accountants of nationally recognized standing
not unacceptable to the Required Banks;
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(b) as soon as available, but in any event not later than forty-five
(45) days after the end of each of the first three (3) fiscal quarters of each
fiscal year of the Borrower, the unaudited consolidated and consolidating
balance sheets of the Borrower and its consolidated Subsidiaries as at the end
of such quarter, (i) the related unaudited consolidated and consolidating
statements of income and retained earnings of the Borrower and its consolidated
Subsidiaries for such quarter and the portion of the fiscal year through the end
of such quarter, and the related unaudited consolidated and consolidating
statements of cash flows of the Borrower and its consolidated Subsidiaries for
the portion of the fiscal year through the end of such quarter, setting forth in
each case in comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects when
considered in relation to the consolidated and consolidating financial
statements of the Borrower and its consolidated Subsidiaries (subject to normal
year-end audit adjustments) and (ii) a statement setting forth the aggregate
amount of Capital Expenditures made by the Borrower and its consolidated
Subsidiaries during such fiscal period (which aggregate amount shall separately
specify the total amount of Capital Expenditures consisting of cash and the
total amount of Capital Expenditures consisting of Capital Leases and other
non-cash financings), in each case, certified by a Responsible Officer as being
fairly stated in all material respects when, in the case of the financial
statements delivered pursuant to clause (i) above, considered in relation to the
consolidated and consolidating financial statements of the Borrower and its
consolidated Subsidiaries(subject to normal year-end audit adjustments); and
(c) as soon as available, but in any event not later than thirty (30)
days after the last day of each month of each fiscal year of the Borrower, the
unaudited consolidated and consolidating balance sheets of the Borrower and its
consolidated Subsidiaries as at the end of such fiscal period and the related
unaudited consolidated and consolidating statements of income and retained
earnings of the Borrower and its consolidated Subsidiaries for such fiscal
period and the portion of the fiscal year of the Borrower through the end of
such fiscal period, setting forth in each case in comparative form the figures
for the previous year;
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
6.2 Certificates; Other Information. Furnish to each Bank:
(a) concurrently with the delivery of the financial statements referred
to in subsection 6.1(a), a certificate of the independent certified public
accountants reporting on such financial statements stating that in making the
examination necessary therefor no knowledge was obtained of any Default or Event
of Default, except as specified in such certificate;
(b) concurrently with the delivery of each of the financial statements
referred to in subsections 6.1(a) and 6.1(b), a certificate of a Responsible
Officer (which certificate shall set forth, in detail, all interim and
preparatory figures and calculations used in determining the Borrower's
satisfaction of its covenants and agreements contained in subsection 7.1)
stating that, to the best of such Officer's knowledge, each of the Borrower and
its Subsidiaries during such period has observed or performed all of its
covenants and other agreements, and satisfied every condition, contained in this
Agreement, the Notes and the other Loan Documents to which it is a party to be
observed, performed or satisfied by it, and that such Officer has obtained no
knowledge of any Default or Event of Default except as specified in such
certificate;
(c) if delivered, as soon thereafter as practicable but in no event
later than fifteen (15) days after receipt, a copy of the letter, if any,
addressed to the Borrower, of the certified public accountants who prepared the
financial statements referred to in subsection 6.1(a) for such fiscal year and
otherwise referred to as a "management letter";
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(d) as soon as available, but in any event within thirty (30) days
after the end of each fiscal year of the Borrower a copy of (i) the projections
by the Borrower of the operating budget and cash flow budget of the Borrower and
its Subsidiaries for the succeeding three (3) fiscal years and (ii) the
projected consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the last day of each of such three (3) succeeding fiscal
years. Such projections and projected balance sheet to be accompanied by a
certificate of a Responsible Officer to the effect that such projections and
projected balance sheet have been prepared on the basis of sound financial
planning practice and that such Officer has no reason to believe they are
incorrect or misleading in any material respect;
(e) within five (5) days after the same are sent, copies of all
financial statements and reports which the Borrower sends to its stockholders
and within five (5) days after the same are filed, copies of all applications,
financial statements and reports which the Borrower may make to, or file with,
the Securities and Exchange Commission or any successor or analogous
Governmental Authority;
(f) promptly following the release by the Borrower or any of its
Subsidiaries to the press of any material statement or other written
communication, a copy thereof; and
(g) promptly, such additional financial and other information as any
Bank may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, including without limitation all payroll and
other tax obligations, except where the amount or validity thereof is currently
being contested in good faith by appropriate proceedings and reserves in
conformity with GAAP with respect thereto have been provided on the books of the
Borrower or its Subsidiaries, as the case may be or except where the failure to
pay, discharge or otherwise satisfy could not have a Material Adverse Effect.
6.4 Conduct of Business and Maintenance of Existence. Continue to
engage in business of the same general type as now conducted by it and preserve,
renew and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business except as otherwise permitted
pursuant to subsection 7.5 and comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, in the aggregate, have a Material Adverse Effect.
6.5 Maintenance of Property; Insurance.
(a) Keep all property useful and necessary in its business in good
working order and condition except where the failure to do so could not have a
Material Adverse Effect; and
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(b) maintain with financially sound and reputable insurance companies
insurance on all its property in at least such amounts and against at least such
risks (but including in any event public liability and business interruption) as
are usually insured against in the same general area by companies engaged in the
same or a similar business and furnish to each Bank upon written request, full
information as to the insurance carried.
6.6 Inspection of Property; Books and Records; Discussions. Keep proper
books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of any Bank, upon reasonable notice to the Borrower, to visit
and inspect any of its properties and examine and make abstracts from any of its
books and records at any reasonable time and as often as may be reasonably
desired ("Field Examinations") and to discuss the business, operations,
properties and financial and other condition of the Borrower and its
Subsidiaries with officers and employees of the Borrower and its Subsidiaries
and with its independent certified public accountants. Up to two (2) Field
Examinations each year shall be at the Borrower's expense, which expense shall
not exceed $20,000 in the aggregate.
6.7 Notices. Promptly give notice to the Agent and each Bank of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries, or (ii) litigation,
investigation or proceeding which may exist at any time between the Borrower or
any of its Subsidiaries and any Governmental Authority; which in either case, if
not cured or if adversely determined, as the case may be, would have a Material
Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any of its
Subsidiaries in which the amount involved is $250,000 or more and not covered by
insurance or in which injunctive or similar relief is sought which individually
or in the aggregate could or might have a Material Adverse Effect; provided that
the Borrower shall not be required to give notice of any such litigation or
proceeding if the Borrower has reasonably determined, after consultation with
counsel, that the possibility is remote that such litigation or proceeding will
result in a judgment of $250,000 or more or in injunctive or similar relief
against the Borrower or its Subsidiaries;
(d) the following events, as soon as possible and in any event within
thirty (30) days after the Borrower knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to any
Plan, or any withdrawal from, or the termination, Reorganization or Insolvency
of any Multiemployer Plan or (ii) the institution of proceedings or the taking
of any other action by the PBGC or the Borrower or any Commonly Controlled
Entity or any Multiemployer Plan with respect to the withdrawal from, or the
terminating, Reorganization or Insolvency of, any Plan;
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(e) as soon as the Borrower knows or has reason to know that it or any
Subsidiary has become liable for remediation and/or environmental compliance
expenses and/or fines, penalties or other charges which, in the aggregate, are
in excess of $250,000 at any one time outstanding (net of all reimbursements in
respect of such amounts from any state trust funds which have been or are
reasonably expected to be made to the Borrower or its Subsidiaries and have been
recognized as a receivable or may properly be set off as a credit against such
liabilities in accordance with GAAP); and
(f) a material adverse change in the business, operations, property,
condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
6.8 Environmental Laws.
(a) Comply with, and insure compliance by all tenants and subtenants,
if any, with, all Environmental Laws and obtain and comply with and maintain,
and ensure that all tenants and subtenants obtain and comply with and maintain,
any and all licenses, approvals, registrations or permits required by
Environmental Laws, except to the extent that failure to do so could not have a
Material Adverse Effect;
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all lawful orders and directives of
all Governmental Authorities respecting Environmental Laws, except to the extent
that the same are being contested in good faith by appropriate proceedings and
the pendency of such proceedings could not have a Material Adverse Effect;
(c) Defend, indemnify and hold harmless the Agent and the Banks, and
their respective employees, agents, officers and directors, from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature known or unknown, contingent or otherwise,
arising out of, or in any way relating to the violation of or noncompliance with
any Environmental Laws by the Borrower or any of its Subsidiaries, or any
orders, requirements or demands of Governmental Authorities related thereto,
including, without limitation, reasonable attorneys' and consultants' fees,
investigation and laboratory fees, court costs and litigation expenses, except
to the extent that any of the foregoing arise out of the gross negligence or
willful misconduct of the party seeking indemnification therefor.
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(d) Prepare and deliver to the Agent and to each other Bank, at least
as frequently as once each fiscal quarter after any accrual (as described below)
exists, a report setting forth a summary, as of the end of such fiscal quarter,
of (i) the gross amount of all sums accrued in respect of any remediation
required by applicable Environmental Laws, (ii) all reimbursements in respect of
such amounts from any state trust funds which have been or are reasonably
expected to be made to the Borrower or its Subsidiaries and have been recognized
as a receivable or may properly be set off as a credit against the cost of such
remediation under GAAP and (iii) the net amount of all sums accrued in respect
of such remediation costs.
6.9 Use of Proceeds. Use the proceeds of the Loans only for the
purposes described in Section 4.16.
6.10 Further Assurances. Execute and deliver such additional financing
statements, continuations of financing statements and other documents as Agent
shall reasonably request to perfect and maintain perfected the Agent's security
interest in the Collateral.
6.11 Year 2000 Compatibility. On or before December 31, 1998, take all
action necessary to ensure that the Borrower's and each Subsidiary's
computer-based systems are able to operate and effectively process data
including dates on or after January 1, 2000. At the request of the Agent, the
Borrower and its Subsidiaries shall provide the Agent reasonable assurance of
such "Year 2000 Compatibility."
SECTION 7. NEGATIVE COVENANTS
-----------------------------
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Note or any Letter of Credit remains outstanding and unpaid or any
other amount is owing to any Bank or the Agent hereunder, the Borrower shall
not, and (except with respect to subsection 7.1) shall not permit any of its
Subsidiaries to, directly or indirectly:
7.1 Financial Condition Covenants.
(a) Maximum Consolidated Indebtedness to Consolidated EBITDA Ratio.
Permit, as of the end of any month, the Consolidated Indebtedness to
Consolidated EBITDA Ratio to be greater than 3.75 to 1.
(b) Minimum Consolidated EBITDA to Consolidated Interest Expense Ratio.
Permit, as of the end of any month during each of the periods set forth below,
the Consolidated EBITDA to Consolidated Interest Expense Ratio to be less than
the amount set forth below opposite such period:
53
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Consolidated EBITDA to Consolidated
Period Interest Expense Ratio
-------------------------------------------------------------------------------------------
<S> <C> <C>
During the period beginning on April 1, 1998 2.5 to 1
and ending on June 30, 1998
-------------------------------------------------------------------------------------------
During the period beginning on July 1, 1998
and ending on September 30, 1998 3.5 to 1
-------------------------------------------------------------------------------------------
During the period beginning on October 1, 4.0 to 1
1998 and thereafter
-------------------------------------------------------------------------------------------
</TABLE>
(c) Minimum Operating Cash Flow Ratio. Permit the Operating Cash Flow
Ratio of Borrower to be less than 1.50 to 1.00 as of the end of any month.
(d) Minimum Current Ratio. As of the end of any month, permit the
Current Ratio to be less than 1.50 to 1.00.
7.2 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness in respect of the Loans, the Notes and the Letters of
Credit and other obligations of the Borrower and its Subsidiaries under the Loan
Documents;
(b) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary;
(c) Indebtedness outstanding on the Closing Date and listed on Schedule
7.2 and any refinancings, refundings, renewals or extensions thereof (without
any increase in principal amount thereof);
(d) Subordinated Indebtedness of the Borrower and its Subsidiaries;
(e) Indebtedness secured by Liens permitted by Section 7.3(h) and under
Capital Leases incurred in an aggregate principal amount not exceeding (i)
$6,000,000 incurred in each of 1997 and 1998, $8,500,000 incurred in 1999,
$11,000,000 incurred in 2000 and $15,000,000 incurred in 2001 and each year
thereafter or (ii) $46,000,000 incurred during the term of this Agreement;
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(f) Other unsecured (except as described in Section 7.3(h))
Indebtedness of the Borrower and its Subsidiaries not exceeding $250,000 in the
aggregate outstanding at any time; and
(g) Indebtedness created in connection with the Receivables
Securitization Transaction.
7.3 Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings; provided that adequate reserves with respect
thereto are maintained on the books of the Borrower or its Subsidiaries, as the
case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are not
overdue for a period of more than sixty (60) days or which are being contested
in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance arrangements;
(d) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case materially
detract from the value of the property subject thereto or materially interfere
with the ordinary conduct of the business of the Borrower or such Subsidiary;
and
(f) Liens in existence on the Closing Date listed on SCHEDULE 7.2,
securing Indebtedness permitted by subsection 7.2(c); provided that no such Lien
is expanded to cover any additional property after the Closing Date and that the
amount of Indebtedness secured thereby is not increased;
(g) Liens created under the Security Documents;
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(h) Liens securing Indebtedness of the Borrower or any Subsidiary
permitted by subsection 7.2(e); provided that (i) such Liens shall be created
promptly upon the acquisition, improvement or completion of the construction of
such fixed or capital asset (and in any event no later than the earlier of (A)
twelve (12) months from the date of which the construction of such fixed or
capital asset is completed, and (B) twenty-four (24) months from the date on
which the real estate on which such fixed or capital asset is located, was
purchased by the Borrower), (ii) such Liens do not at any time encumber any
property other than the property financed by the such Indebtedness, (iii) the
amount of Indebtedness secured by thereby is not increased, and (iv) the
principal amount of Indebtedness secured by any such Lien shall at no time
exceed 100% of the purchase price of such property;
(i) a first mortgage Lien on the headquarters of the Borrower at 1144
East Newport Center Drive, Deerfield Beach, Florida securing Indebtedness of the
Borrower incurred to purchase such headquarters pursuant to the exercise of its
option under the lease of such headquarters;
(j) any interest or title of a lessor under any lease entered into by
the Borrower or any Subsidiary in the ordinary course of its business and
covering only the assets so leased; and
(k) Liens created under the Receivables Securitization Transaction;
7.4 Limitation on Guarantee Obligations. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) each Subsidiary Guarantee;
(b) Guarantee Obligations not exceeding $2,000,000 in the aggregate
with respect to the mortgage of the Borrower's old headquarters at 8000 North
Federal Highway, Boca Raton, Florida; and
(c) Guarantee Obligations arising as a result of guarantees by the
Borrower of any Indebtedness of a consolidated Subsidiary that would appear as a
liability on a consolidated balance sheet of the Borrower and its consolidated
Subsidiaries.
7.5 Limitations on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, enter into a new line of business or make any material change in its
present method of conducting business, except:
(a) any Subsidiary of the Borrower may be merged or consolidated with
or into the Borrower (provided that the Borrower shall be the continuing or
surviving corporation) or with or into any one or more wholly owned Subsidiaries
of the Borrower (provided that the wholly-owned Subsidiary or Subsidiaries shall
be the continuing or surviving corporation and shall be a member of the
Borrower's consolidated group for financial reporting and tax purposes);
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(b) any wholly owned Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or otherwise) to
the Borrower or any other wholly-owned Subsidiary of the Borrower; and
(c) the Borrower and its Subsidiaries may enter into and perform the
transactions contemplated by the Receivables Securitization Transaction.
7.6 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer
or otherwise dispose of any of its property, business or assets (including,
without limitation, receivables and leasehold interests), whether now owned or
hereafter acquired, except as permitted by subsection 7.5.
7.7 Limitation on Restricted Payments. Purchase, redeem or otherwise
acquire or retire for value, or set apart assets for a sinking or other
analogous fund for the benefit of, any Capital Stock of the Borrower or any
Subsidiary, either directly or indirectly, whether in cash or property or in
obligations of the Borrower or any Subsidiary (collectively, a "Restricted
Payment") except that as long as no Default exists or would result therefrom,
the Borrower may repurchase warrants issued pursuant to the Securities Purchase
Agreement in accordance with the terms thereof but only if such repurchase is
paid for with Put Notes (as defined in said Agreement) which Notes are
subordinated pursuant to the Securities Purchase Agreement.
7.8 Limitation on Investments, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment in (each, an "Investment"), any
Person, except:
(a) extensions of trade credit in the ordinary course of business;
(b) Investments in Cash Equivalents;
(c) loans and advances to employees of the Borrower or its Subsidiaries
in the ordinary course of business in an aggregate amount for the Borrower and
its Subsidiaries not to exceed $250,000 in the aggregate or $100,000 for any one
employee, at any one time outstanding (including the principal amount of the
loans listed on SCHEDULE 7.8);
(d) Investments by the Borrower in its Subsidiaries and investments by
a Subsidiary in the Borrower and in other Subsidiaries; provided that any
Subsidiary making an investment or receiving the proceeds thereof is a member of
the Borrower consolidated group for financial reporting and tax purposes;
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(e) Investments of amounts held in depositary accounts (other than
accounts assigned to the Agent) in financial institutions geographically
proximate to the location of the Borrower's or a Subsidiary's operations;
provided, that such amounts do not exceed $20,000 at any single institution or
$150,000 in the aggregate;
(f) Loans by CSF to Labor World, Office Ours and Tandem franchisees;
provided that with respect to all such loans after the Closing Date such
franchisees shall have issued a negotiable promissory note to CSF evidencing
each loan which note has been endorsed and delivered to the Agent for the
ratable benefit of the Banks;
(g) Investments by the Borrower or any Subsidiary in any Person not a
Subsidiary on the Closing Date arising out of a Permitted Acquisition; provided
that (i) the Borrower has completed due diligence on the Person whose stock or
assets are being acquired, (ii) the Agent has received (A) the financial
statements of the Person whose stock or assets are being acquired covering the
most recent three (3) fiscal years of said Person, (B) the unaudited financial
statements for such Person covering the most recent available interim period and
(C) a certificate of a Responsible Officer of the Borrower certifying as to the
identity of the shareholders or owners of the selling Person and certifying that
none of Lawrence H. Schubert, Alan E. Schubert or Louis A. Morelli is or has
been a beneficial owner, directly or indirectly, including without limitation
through a family member or trust, of the selling Person, (iii) to the extent
that an investment in a Person is a purchase of Capital Stock of an acquired
Person, (A) any such acquired Person executes and delivers to the Agent, with a
counterpart for each Bank, a supplement to the Subsidiary Guarantee,
satisfactory in form and substance to the Agent, whereby such acquired Person
guarantees the Obligations (as defined in the Subsidiary Guarantee) and agrees
to be bound by the terms and conditions of the Subsidiary Guarantee, (B) the
Capital Stock of any such acquired Person is pledged and delivered by the holder
thereof pursuant to a supplement to the OI Pledge Agreement to which such holder
is a party, duly authorized, executed and delivered by such holder and otherwise
in form and substance satisfactory to the Agent, (C) any such acquired Person
executes a Subsidiary Security Agreement, in form and substance satisfactory to
the Agent, (D) in connection with the matters contemplated by the foregoing
clauses (v)(A), (v)(B) and (v)(C) the Person executing such supplement
contemporaneously therewith causes to be delivered an opinion of counsel to such
Person so executing such supplement and such pledgor, addressed to the Agent and
the Banks and covering such matters as the Agent may request. Notwithstanding
the foregoing, the Borrower or any Subsidiary shall not make any Investment in
any Person which exceeds one percent (1%) of the voting power represented by the
Capital Stock then outstanding of such Person if the Board of Directors or other
governing body of such Person has disapproved or recommended against any such
Investment or refused to negotiate or terminated negotiations with the Borrower
or such Subsidiary.
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7.9 Limitation on Optional Payments and Modifications of Debt
Instruments. (a) Make any optional payment or prepayment on or redemption of any
Indebtedness other than Indebtedness under this Agreement, including without
limitation Subordinated Indebtedness (it being understood that regularly
scheduled payments of certain Indebtedness set forth on SCHEDULE 7.2 may be made
so long as no Default or Event of Default exists); (b) amend, modify or change,
or consent or agree to any amendment, modification or change to any of the terms
of the Securities Purchase Agreement, the Subordinated Indebtedness or the
Subordination Agreements, including, without limitation, any amendment to the
subordination provisions thereof; or (c) amend, modify or change, or consent or
agree to any amendment, modification or change to, any of the terms relating to
the payment or prepayment of principal of or interest on any Indebtedness (other
than Indebtedness pursuant to this Agreement), other than, with respect to the
Indebtedness described in the foregoing clauses (b) and (c), any such amendment,
modification or change the primary effect of which would extend the maturity or
reduce the amount of any payment of principal thereof or the primary effect of
which would reduce the rate or extend the date for payment of interest thereon.
Nothing in this Section 7.9 shall be deemed to prohibit Borrower or any of its
Subsidiaries from prepaying any obligations under the Receivables Securitization
Transaction or from entering into any amendments, modifications or changes to
the terms of the Receivables Securitization Transaction.
7.10 Transactions with Affiliates. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of property
or the rendering of any service, with any Affiliate unless such transaction is
not otherwise prohibited under this Agreement, is in the ordinary course of the
Borrower's or such Subsidiary's business (including in connection with the
Borrower's on-going franchise program) and is upon fair and reasonable terms no
less favorable to the Borrower or such Subsidiary, as the case may be, than it
would obtain in a comparable arm's length transaction with a Person not an
Affiliate. Nothing in this Section 7.10 shall be deemed to prohibit Borrower or
any of its Subsidiaries from consummating the ongoing sales of Receivables and
related transactions contemplated by the Receivables Securitization Transaction.
7.11 Sale and Leaseback. Enter into any arrangement with any Person
providing for the leasing by the Borrower or any Subsidiary of real or personal
property which has been or is to be sold or transferred by the Borrower or such
Subsidiary to such Person or to any other Person to whom funds have been or are
to be advanced by such Person on the security of such property or rental
obligations of the Borrower or such Subsidiary (a "Sale/Leaseback Transaction")
unless the proceeds received therefrom are applied to reduce the Commitment.
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7.12 Corporate Documents; Name/Location of Assets. (a) Amend its
Certificate of Incorporation (except to increase the number of authorized shares
of common stock) or (b) do any of the following, unless, in each case, it shall
provide the Agent with at least thirty (30) days prior written notice of such
action: (i) change its corporate name; (ii) change the location of its
equipment; (iii) change the location of the office where it maintains its
records pertaining to its accounts; (iv) change the location of its existing
places of business or open any new places of business; or (v) change the
location of its chief executive office; provided, however, that anything herein
to the contrary notwithstanding no notice need be provided pursuant to this
subsection so long as either (i) the Borrower or a Subsidiary, as the case may
be, executes and delivers to the Agent a Uniform Commercial Code financing
statement appropriate for filing to perfect the Agent's security interest in the
Collateral in its new location, or (ii) the Agent has previously filed a Uniform
Commercial Code financing statement which perfects the Agent's security interest
in the Collateral in its new location. As used herein, "equipment" and
"accounts" have the respective meanings ascribed to them in Title 42a of the
Connecticut General Statutes.
7.13 Fiscal Year. Permit the fiscal year of the Borrower to end on a
day other than on December 31 of each calendar year.
7.14 Limitation on Negative Pledge Clauses. Enter into any agreement,
other than (i) as permitted by this Agreement, (ii) as contemplated by the
Receivables Securitization Transaction, or (iii) any purchase money or other
mortgages, the Securities Purchase Agreement or Capital Leases (in which cases,
any prohibition or limitation shall only be effective against the assets
financed thereby), with any Person other than the Banks pursuant hereto which
prohibits or limits the ability of the Borrower or any of its Subsidiaries to
create, incur, assume or suffer to exist any Lien upon any of its property,
assets or revenues, whether now owned or hereafter acquired.
7.15 No Limit on Upstream Payments by Subsidiaries. Permit any of its
Subsidiaries (other than OutSource Funding Corporation) to enter into or agree,
or otherwise become subject, to any agreement, contract or other arrangements
with any Person pursuant to the terms of which (a) such Subsidiary is or would
be prohibited from declaring or paying any cash dividends, or distributions or
making any other payment to the Borrower, or (b) such dividends, distributions
or other payments are, or would be limited or restricted on an annual or
cumulative basis or otherwise. The Borrower shall cause its Subsidiaries (other
than OutSource Funding Corporation), to the extent permitted by applicable law,
to make such distributions of funds, including dividends, as may be necessary to
meet in a timely manner all of the Borrower's obligations under this Agreement.
7.16 AASI and Voting Trust Agreement. Terminate, modify, amend,
supplement, or deviate from the terms of, or agree to terminate, modify, amend,
or deviate from the terms of, the AASI or the Voting Trust Agreement. The
Borrower shall use its best efforts to ensure compliance by Lawrence H.
Schubert, Alan E. Schubert and Louis A. Morelli with the terms of the AASI,
including without limitation requiring that said individuals deposit in the
voting trust created by the Voting Trust Agreement all Voting Stock of the
Borrower owned by any of them, by any of their family members or by any trust
created for their benefit.
7.17 Preparation of Monthly Financial Reports. Fail to close its books
for any one-month period within thirty (30) days of the end of such calendar
month.
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7.18 Deposit Account. Fail to maintain a deposit account of the
Borrower with the Agent, through which deposit account not less than ninety
percent (90%) of all credit receipts of the Borrower and its Subsidiaries flow.
SECTION 8. EVENTS OF DEFAULT
----------------------------
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Note or any
Reimbursement Obligation when due in accordance with the terms thereof or
hereof; or the Borrower shall fail to pay any interest on any Note or any
Reimbursement Obligation, or any other amount payable hereunder, within five (5)
days after any such interest or other amount becomes due in accordance with the
terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by the Borrower
or any Subsidiary in any Loan Document to which the Borrower or such Subsidiary
is a party or which is contained in any certificate, document or financial or
other statement furnished at any time under or in connection with this Agreement
or any other Loan Document shall prove to have been incorrect in any material
respect on or as of the date made or deemed made; or
(c) The Borrower shall default in the observance or performance of any
agreement contained in subsections 6.3, 6.4, 6.5, 6.6, 6.7, 6.9 or Section 7 of
this Agreement; or
(d) The Borrower shall default in the observance or performance of any
other agreement contained in this Agreement (other than as provided in
paragraphs (a) through (c) of this subsection), and such default shall continue
unremedied for a period of thirty (30) days after the earlier of (i) a
Responsible Officer of the Borrower becomes aware of such default or (ii) notice
of such default to the Borrower by Agent or any Bank; or
(e) Any Subsidiary shall default in the observance or performance of
any agreement contained in any Loan Document to which it is a party, and such
default shall continue unremedied for a period of thirty (30) days after the
earlier of (i) a Responsible Officer of any such Subsidiary becomes aware of
such default or (ii) notice of such default to such Subsidiary by Agent or any
Bank; or
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(f) The Borrower or any of its Subsidiaries shall (i) default in any
payment of principal of or interest of any Indebtedness (other than the Notes)
which has an aggregate principal amount in excess of $100,000, individually or
in the aggregate, or in the payment of any Guarantee Obligation under which the
maximum liability of the Borrower or such Subsidiary exceeds $500,000,
individually or in the aggregate, beyond the period of grace (not to exceed
thirty (30) days), if any, provided in the instrument or agreement under which
such Indebtedness or Guarantee Obligation was created; or (ii) default in the
observance or performance of any other agreement or condition relating to any
such Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries) to
cause, with the giving of notice if required, such Indebtedness to become due
prior to its stated maturity or such Guarantee Obligation to become payable; or
(g) (i) The Borrower or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief' of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or the Borrower or any
of its Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Borrower or any of its
Subsidiaries any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of sixty (60) days; or (iii) there shall be commenced
against the Borrower or any of its Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which results
in the entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within sixty (60) days from the
entry thereof; or (iv) the Borrower or any of its Subsidiaries shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i),(ii), or (iii) above,
or (v) the Borrower or any of its Subsidiaries shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due; or
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(h) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether waived or not, shall exist with respect to any Plan, (iii) a Reportable
Event shall occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of the
Required Banks, likely to result in the termination of such Plan for purposes of
Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of
Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or
in the reasonable opinion of the Required Banks is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) any other event or condition
shall occur or exist, with respect to a Plan; and in each case in clauses (i)
through (vi) above, such event or condition, together with all other such events
or conditions, if any, could subject the Borrower or any of its Subsidiaries to
any tax, penalty or other liabilities in the aggregate material in relation to
the business, operations, property or financial or other condition of the
Borrower and its Subsidiaries taken as a whole; or
(i) One or more judgments or decrees shall be entered against the
Borrower any of its Subsidiaries involving in the aggregate a liability (to the
extent not paid or covered by insurance) of $250,000 or more and all such
judgments or decrees shall not have been vacated, discharged, stayed or bonded
pending appeal within sixty (60) days from the entry thereof; or
(j) If at any time the Borrower or all or any of its Subsidiaries shall
become liable for remediation and/or environmental compliance expenses and/or
fines, penalties or other charges which, in the aggregate, are in excess of
$250,000 at any one time outstanding (net of all reimbursements in respect of
such amounts from any state trust funds which have been or are reasonably
expected to be made to the Borrower or its Subsidiaries and have been recognized
as a receivable or may properly be set off as a credit against such liabilities
under GAAP); or
(k) A Change of Control shall have occurred; or
(l) Any Subsidiary Guarantee or any other Guarantee Obligation in
respect of the Borrower's Indebtedness hereunder shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect, or any Person having a Guarantee Obligation in respect of
the Borrower's Indebtedness hereunder, including without limitation each
Subsidiary (or any Person acting on behalf of any such Person) shall deny or
disaffirm such Guarantee Obligation; or
(m) Lawrence H. Schubert, Alan E. Schubert or Louis A. Morelli becomes
the beneficial owner, directly or indirectly, including through a family member
or trust, of any Voting Stock of the Borrower or its Subsidiaries, except in
connection with purchases of Voting Stock which, in accordance with the terms of
the AASI, are required to be placed in the voting trust created by the Voting
Trust Agreement.
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then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (g) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement (including, without limitation, all amounts of L/C Obligations,
regardless of whether the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) and the Notes
shall immediately become due and payable, and (B) if such event is any other
Event of Default, either or both of the following actions may be taken: (i) with
the consent of the Required Banks, the Agent may, or upon the request of the
Required Banks, the Agent shall, by notice to the Borrower declare the
Commitments to be terminated forthwith, whereupon the Commitments shall
immediately terminate; and (ii) with the consent of the Required Banks, the
Agent may, or upon the request of the Required Banks, the Agent shall, by notice
of default to the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement (including, without
limitation, all amounts of L/C Obligations, regardless of whether the
beneficiaries of the then outstanding Letters of Credit shall have presented the
documents required thereunder) and the Notes to be due and payable forthwith,
whereupon the same shall immediately become due and payable.
With respect to all Letters of Credit with respect to which presentment
for honor shall not have occurred at the time of an acceleration pursuant to the
preceding paragraph, the Borrower shall at such time deposit in a cash
collateral account to be opened by the Agent (the "Cash Collateral Account") an
amount equal to the aggregate then undrawn and unexpired amount of such Letters
of Credit. The Borrower hereby grants to the Agent, for the benefit of the
Issuing Bank and the L/C Participants, a security interest in the Cash
Collateral Account and all amounts from time to time on deposit therein to
secure all obligations of the Borrower in respect of such Letters of Credit
under this Agreement and the other Loan Documents. The Borrower shall execute
and deliver to the Agent, for the account of the Issuing Bank and the L/C
Participants, such further documents and instruments as the Agent may request to
evidence the creation and perfection of such security interest in the Cash
Collateral Account. Amounts held in the Cash Collateral Account shall be applied
by the Agent to the payment of drafts drawn under such Letters of Credit, and
the unused portion thereof after all such Letters of Credit shall have expired
or been fully drawn upon, if any, shall be applied to repay other obligations of
the Borrower hereunder and under the Notes. After all such Letters of Credit
shall have expired or been fully drawn upon, all Reimbursement Obligations shall
have been satisfied and all other obligations of the Borrower hereunder and
under the Notes shall have been paid in full, the balance, if any, in the Cash
Collateral Account shall be returned to the Borrower.
Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 9. THE AGENT
--------------------
9.1 Appointment. Each Bank hereby irrevocably designates and appoints
BankBoston, N.A. as the Agent of such Bank under this Agreement and the other
Loan Documents, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto.
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9.2 Delegation of Duties. The Agent may execute any of its duties under
this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
9.3 Exculpatory Provisions. Neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement or any other Loan Document (except
for its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Banks for any recitals, statements,
representations or warranties made by the Borrower or any officer thereof
contained in this Agreement or any other Loan Document or any certificate,
report, statement or other document referred to or provided for in, or received
by the Agent under or in connection with, this Agreement or any other Loan
Document or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or the Notes or any other Loan Document or for
any failure of the Borrower to perform its obligations hereunder or thereunder.
The Agent shall not be under any obligation to any Bank to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, this Agreement or any other Loan Document, or to inspect
the properties, books or records of the Borrower.
9.4 Reliance by Agent. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Borrower), independent accountants and other
experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Banks as it deems appropriate
or it shall first be indemnified to its satisfaction by the Banks against any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
Notes and the other Loan Documents in accordance with a request of the Required
Banks, and such request and any action taken or failure to act pursuant thereto
shall be binding upon all the Banks and all future holders of the Notes.
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9.5 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default hereunder unless
the Agent has received notice from a Bank or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent receives such a
notice, the Agent shall give notice thereof to the Banks. The Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Banks; 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 or Event of Default as it shall deem advisable in the best
interests of the Banks.
9.6 Non-Reliance on Agent and Other Banks. Each Bank expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by the Agent to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon the Agent or any
other Bank, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and credit worthiness of the
Borrower and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Bank also represents that it will, independently and
without reliance upon the Agent or any other Bank, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself, and keep itself informed,
as to the business, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Banks by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
the Borrower which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
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9.7 Indemnification. The Banks agree to indemnify the Agent in its
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to the
respective amounts of their original Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Agent in any way relating to
or arising out of this Agreement, any of the other Loan Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; provided that no Bank shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's gross negligence or willful misconduct. The
agreements in this subsection shall survive the payment of the Notes and all
other amounts payable hereunder.
9.8 Agent in Its Individual Capacity. The Agent and its Affiliates may
make loans to, accept deposits from and generally engage in any kind of business
with the Borrower as though the Agent were not the Agent hereunder and under the
other Loan Documents. With respect to its Loans made or renewed by it and any
Note issued to it and with respect to any Letter of Credit issued or
participated in by it, the Agent shall have the same rights and powers under
this Agreement and the other Loan Documents as any Bank and may exercise the
same as though it were not the Agent, and the terms "Bank" and "Banks" shall
include the Agent in its individual capacity.
9.9 Successor Agent. The Agent may resign as Agent upon ten (10) days'
notice to the Banks. If the Agent shall resign as Agent under this Agreement and
the other Loan Documents, then the Required Banks shall appoint a Successor
Agent, whereupon such Successor Agent shall succeed to the rights, powers and
duties of the Agent, and the term "Agent" shall mean such Successor Agent
effective upon its appointment, and the former Agent's rights, powers and duties
as Agent shall be terminated, without any other or further act or deed on the
part of such former Agent or any of the parties to this Agreement or any holders
of the Notes. After any retiring Agent's resignation as Agent, the provisions of
this subsection shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement and the other Loan
Documents.
SECTION 10. MISCELLANEOUS
-------------------------
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10.1 Amendments and Waivers. Neither this Agreement, any Note, any
other Loan Document nor any terms hereof or thereof may be amended, supplemented
or modified except in accordance with the provisions of this subsection. With
the written consent of the Agent and the Required Banks, the Agent, the Required
Banks and the Borrower may, from time to time, enter into written amendments,
supplements or modifications hereto and to the Notes and the other Loan
Documents for the purpose of adding any provisions to this Agreement, the Notes
or the other Loan Documents or changing in any manner the rights of the Banks or
of the Borrower hereunder or thereunder or waiving, on such terms and conditions
as are specified in such instrument, any of the requirements of this Agreement,
the Notes or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall (a) reduce the amount or extend the maturity of
any Note or any installment thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any fee payable to any Bank hereunder, or
change the amount or extend the expiry date of any Bank's Revolving Credit
Commitment or change any Bank's Commitment Percentage, in each case without the
consent of the Bank affected thereby, or (b) amend, modify or waive any
provision of this subsection or reduce the percentage specified in the
definition of Required Banks, or consent to the assignment or transfer by the
Borrower of any of its rights and obligations under this Agreement and the other
Loan Documents or release any Guarantee or any of the Collateral, in each case
without the written consent of the Agent and all the Banks, or (c) amend, modify
or waive any provision of Section 9 without the written consent of the then
Agent. Any such waiver and any such amendment, supplement or modification shall
apply equally to each of the Banks and shall be binding upon the Borrower, the
Banks, the Agent and all future holders of the Notes. In the case of any waiver,
the Borrower, the Banks and the Agent shall be restored to their former position
and rights hereunder and under the outstanding Notes and any other Loan
Documents, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; but no such waiver shall extend to any subsequent or
other Default or Event of Default, or impair any right consequent thereon.
10.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy, telegraph or telex), and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or three
(3) days after being deposited in the mail, postage prepaid, or, in the case of
telecopy notice, when confirmed received, or, in the case of telegraphic notice,
when delivered to the telegraph company, or, in the case of telex notice, when
sent, answer back received, addressed as follows in the case of the Borrower and
the Agent, and as set forth in SCHEDULE A in the case of the other parties
hereto, or to such other address as may be hereafter notified by the respective
parties hereto and any future holders of the Notes:
<TABLE>
<CAPTION>
<S> <C> <C>
The Borrower: OutSource International, Inc.
1144 East Newport Center Drive
Deerfield Beach, Florida 33442
Attn: Scott R. Francis, Chief Financial Officer
Brian Nugent, Esq., General Counsel
Telephone: (954) 418-6428
Telecopy: (954) 418-3365
With a copy to: (for all matters relating to the Receivables Securitization
Transaction):
Shutts & Bowen LLP
1500 Miami Center
201 S. Biscayne
Miami, FL 33131
Attn: Joseph D. Bolton, Esq.
Telephone: (305) 379-9106
Telecopy: (305) 381-9982
(for all other matters):
68
<PAGE>
Holland & Knight LLP
One East Broward Boulevard
Suite 1300
Fort Lauderdale, Florida 33301
Attn: Donn Beloff, Esq.
Telephone: (954) 468-7823
Telecopy: (954) 468-7875
The Agent: BankBoston, N. A.
100 Pearl Street
Hartford, Connecticut 06103
Attn: Scott S. Barnett
Telephone: (860) 727-6557
Telecopy: (860) 727-6575
With a copy to: Day, Berry & Howard
CityPlace I
Hartford, Connecticut 06103-3499
Attn: Richard C. MacKenzie, Esq.
Telephone: (860) 275-0100
Telecopy: (860) 275-0343
</TABLE>
provided that any notice, request or demand to or upon the Agent or the Banks
pursuant to subsections 2.1A, 2.4, 2.5, 2.9 or 2.13 shall not be effective until
received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
10.4 Survival of Representations and Warranties. All representations
and warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement and the Notes.
69
<PAGE>
10.5 Payment of Expenses and Taxes. The Borrower agrees, on demand, (a)
to pay or reimburse the Agent for all its out-of-pocket costs and expenses
incurred in connection with the development, preparation and execution of, and
any amendment, supplement or modification to, this Agreement, the Notes and the
other Loan Documents and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, the fees and disbursements of counsel to
the Agent, (b) to pay or reimburse each Bank and the Agent for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the Notes, the other Loan Documents and any such
other documents, including, without limitation, fees and disbursements of
counsel to the Agent and to the several Banks, which fees are currently
estimated not to exceed $25,000, (c) to pay, indemnify, and hold each Bank and
the Agent 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 and other taxes, if any, which may be payable or determined to be payable
in connection with the execution and delivery of, or consummation 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, the Notes, the
other Loan Documents and any such other documents, (d) to pay, indemnify and
hold each Bank harmless from any and all fees, costs and expenses incurred by
any such Bank after the occurrence and throughout the continuance of an Event of
Default in connection with any inspection or examination pursuant to subsection
6.6, and (e) to pay, indemnify, and hold each Bank and the Agent (and their
respective directors, officers, employees and agents) harmless from and against
any and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the Notes, the other Loan Documents and any
such other documents (all the foregoing, collectively, the "indemnified
liabilities"); provided that the Borrower shall have no obligation hereunder to
the Agent or any Bank with respect to indemnified liabilities arising from (i)
the gross negligence or willful misconduct of the Agent or any such Bank (or any
of their respective directors, officers, employees or agents), (ii) legal
proceedings commenced against the Agent or any such Bank by any security holder
or creditor thereof arising out of and based upon rights afforded any such
security holder or creditor solely in its capacity as such, or (iii) legal
proceedings commenced against the Agent or any such Bank by any other Bank or by
any Transferee. As long as no Default or Event of Default exists, the Agent
agrees to give the Borrower periodic reports of the costs and expenses subject
to payment or reimbursement under this subsection. The agreement in this
subsection shall survive repayment of the Notes and all other amounts payable
hereunder.
10.6 Successors and Assigns; Participations; Purchasing Banks.
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Banks, the Agent, all future holders of the Notes and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Bank.
70
<PAGE>
(b) Without the consent of the Borrower, any Bank may, in the ordinary
course of its commercial banking business and in accordance with applicable law,
at any time sell to one or more banks or other entities (other than any entity
which, to the knowledge of such Bank, is a competitor of the Borrower or an
Affiliate of such a competitor ("Participants")) participating interests in any
Loan owing to such Bank, any Note held by such Bank, any Commitment of such Bank
or any other interest of such Bank hereunder and under the other Loan Documents.
In the event of any such sale by a Bank of participating interests to a
Participant, such Bank's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Bank shall remain solely
responsible for the performance thereof, such Bank shall remain the holder of
any such Note for all purposes under this Agreement and the other Loan
Documents, and the Borrower and the Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and obligations
under this Agreement and the other Loan Documents. The Borrower agrees that if
amounts outstanding under this Agreement and the Notes are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing under
this Agreement and any Note to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this Agreement
or any Note; provided that such Participant shall only be entitled to such right
of set-off if it shall have agreed in the agreement pursuant to which it shall
have acquired its participating interest to share with the Banks the proceeds
thereof as provided in subsection 10.7. The Borrower also agrees that each
Participant shall be entitled to the benefits of subsections 2.14, 2.15, 2.16
and 10.5 with respect to its participation in the Commitments and the Loans
outstanding from time to time; provided, that no Participant shall be entitled
to receive any greater amount pursuant to such subsections than the transferor
Bank would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Bank to such Participant had no
such transfer occurred.
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<PAGE>
(c) Any Bank may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to any Bank or
any affiliate thereof and, with the consent of the Agent and (so long as no
Event of Default has occurred and is continuing) the Borrower if a Purchasing
Bank (as hereinafter defined) is not then a Bank party to this Agreement (which
shall not be unreasonably withheld), to one (1) or more additional banks or
financial institutions ("Purchasing Banks") all or any part of its rights and
obligations under this Agreement and the Notes in the minimum principal amount
of $5,000,000 and integral multiples of $1,000,000 in excess thereof, pursuant
to an Assignment and Acceptance executed by such Purchasing Bank, such
transferor Bank (and, in the case of a Purchasing Bank that is not then a Bank
or an affiliate thereof, by the Borrower and the Agent) and delivered to the
Agent for its acceptance and recording in the Register. Upon such execution,
delivery, acceptance and recording, from and after the effective date of such
Assignment and Acceptance, (x) the Purchasing Bank thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Bank hereunder with a Commitment as set forth
therein, and (y) the transferor Bank thereunder shall, to the extent provided in
such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of a transferor Bank's rights and obligations under this
Agreement, such transferor Bank shall cease to be a party hereto). Such
Assignment and Acceptance shall be deemed to amend this Agreement to the extent,
and only to the extent, necessary to reflect the addition of such Purchasing
Bank and the resulting adjustment of the appropriate Commitment Percentages
arising from the purchase by such Purchasing Bank of all or a portion of the
rights and obligations of such transferor Bank under this Agreement and the
Notes. On or prior to the effective date of such Assignment and Acceptance, the
Borrower shall execute and deliver to the Agent in exchange for the Revolving
Credit Note a new Revolving Credit Note to the order of such Purchasing Bank in
an amount equal to the Commitment assumed by it pursuant to such Assignment and
Acceptance and, if the transferor Bank has retained a Commitment hereunder, new
Notes to the order of the transferor Bank in an amount equal to the Commitment
retained by it hereunder. Such new Notes shall be dated the Closing Date, and
shall otherwise be in the form of the Notes replaced thereby. The Notes
surrendered by the transferor Bank shall be returned by the Agent to the
Borrower marked "canceled".
(d) The Agent shall maintain at its address referred to in subsection
10.2 a copy of each Assignment and Acceptance delivered to it and a register
(the "Register") for the recordation of the names and addresses of the Banks and
the Commitment of, and principal amount of the Loans owing to, each Bank from
time to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agent and the Banks may treat each Person
whose name is recorded in the Register as the owner of the Loan recorded therein
for all purposes of this Agreement. The Register shall be available for
inspection by the Borrower or any Bank at any reasonable time and from time to
time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by a
transferor Bank and Purchasing Bank (and, in the case of a Purchasing Bank that
is not then a Bank or an affiliate thereof, by the Borrower and the Agent)
together with, if such Purchasing Bank is not then a Bank hereunder, payment by
the transferor Bank and/or the Purchasing Bank (and not the Borrower) of a
registration and processing fee of $3,000, the Agent shall (i) promptly accept
such Assignment and Acceptance, and (ii) on the effective date of such
Assignment and Acceptance, record the information contained therein in the
Register and give notice of such acceptance and recordation to the Banks and the
Borrower.
72
<PAGE>
(f) The Borrower authorizes each Bank to disclose to any Participant or
Purchasing Bank (each, a "Transferee") and any prospective Transferee any and
all financial information in such Bank's possession concerning the Borrower and
its Affiliates which has been delivered to such Bank by or on behalf of the
Borrower pursuant to this Agreement or which has been delivered to such Bank by
or on behalf of the Borrower in connection with such Bank's credit evaluation of
the Borrower and its affiliates prior to becoming a party to this Agreement;
provided that prior to receiving such information, such Transferee shall agree
to hold in confidence all confidential material or proprietary information
obtained by such Transferee with respect to the Borrower's business operations
that is plainly marked by the provider of such material or information as
confidential or proprietary except (a) to the extent that the production of such
information is required pursuant to any statute, ordinance, regulation, rule or
order or any subpoena or any governmental authority or by reason of any bank
regulation in connection with any bank examination, (b) to the extent already
publicly disclosed and (c) that any Bank shall not be prohibited from disclosing
any such information to any of their agents, attorneys, accountants,
consultants, participants, assignees, or prospective participants, who are aware
of such Bank's covenant in this subsection and who have agreed with such Bank,
for the benefit of the Borrower, to comply with such covenant.
(g) If, pursuant to this subsection, any interest in this Agreement or
any Note is transferred to any Transferee which is organized under the laws of
any jurisdiction other than the United States or any state thereof, the
transferor Bank shall cause such Transferee, concurrently with the effectiveness
of such transfer, (i) to represent to the transferor Bank (for the benefit of
the transferor Bank, the Agent and the Borrower) that under applicable law and
treaties no taxes will be required to be withheld by the Agent, the Borrower or
the transferor Bank with respect to any payments to be made to such Transferee
in respect of the Loans, (ii) to furnish to the transferor Bank (and, in the
case of any Purchasing Bank registered in the Register, the Agent and the
Borrower) either (A) United States Internal Revenue Service Form 4224 or United
States Internal Revenue Service Form 1001 or (B) United States Internal Revenue
Service Form W-8 or W-9, as applicable (wherein such Transferee claims
entitlement to complete exemption from United States federal withholding tax on
all interest payments hereunder), and (iii) to agree (for the benefit of the
transferor Bank, the Agent and the Borrower) to provide the transferor Bank
(and, in the case of any Purchasing Bank registered in the Register, the Agent
and the Borrower) a new Form 4224 or Form 1001 or Form W-8 or W-9, as
applicable, upon the expiration or obsolescence of any previously delivered form
and comparable statements in accordance with applicable United States laws and
regulations and amendments duly executed and completed by such Transferee, and
to comply from time to time with all applicable United States laws and
regulations with regard to such withholding tax exemption.
(h) Nothing herein shall prohibit any Bank from pledging or assigning
any Note to any Federal Reserve Bank in accordance with applicable law.
10.7 Adjustments; Set-off.
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<PAGE>
(a) Subject to the provisions of subsection 2.13(b), if any Bank (a
"benefitted Bank") shall at any time receive any payment of all or part of its
Loans or the Reimbursement Obligations owing to it, or interest thereon, or
receive any collateral in respect thereof (whether voluntarily or involuntarily,
by set-off, pursuant to events or proceedings of the nature referred to in
subsection 8(g), or otherwise), in a greater proportion than any such payment to
or collateral received by any other Bank, if any, in respect of Loans or
Reimbursement Obligations owing to it, or interest thereon, then such benefitted
Bank shall purchase for cash from the other Bank such portion of such other
Bank's Loans or the Reimbursement Obligations owing to it, or shall provide such
other Bank with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such benefitted Bank to share the excess payment or
benefits of such collateral or proceeds ratably with each of the other Banks;
provided, however, that if all or any portion of such excess payment or benefits
is thereafter recovered from such benefitted Bank, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. The Borrower agrees that each Bank so purchasing
a portion of another Bank's Loan or the Reimbursement Obligations owing to it
may exercise all rights of payment (including, without limitation, rights of
set-off) with respect to such portion as fully as if such Bank were the direct
holder of such portion.
(b) In addition to any rights and remedies of the Banks provided by
law, each Bank shall have the right, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrower
hereunder or under the Notes (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Bank to or for the credit or the
account of the Borrower. Each Bank agrees promptly to notify the Borrower and
the Agent after any such set-off and application made by such Bank; provided
that the failure to give such notice shall not affect the validity of such
set-off and application.
10.8 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Borrower and the Agent.
10.9 Severability. Any provision of this Agreement 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 remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
74
<PAGE>
10.10 Integration. This Agreement represents the agreement of the
Borrower, the Agent and the Banks with respect to the subject matter hereof,
and, other than the fee letter and commitment letter, each dated October 6,
1997, between the Borrower and the Agent, there are no promises, undertakings,
representations or warranties by the Agent or any Bank relative to subject
matter hereof not expressly set forth or referred to herein or in the other Loan
Documents.
10.11 Governing Law. This Agreement and the Notes and the rights and
obligations of the parties under this Agreement and the Notes shall be governed
by, and construed and interpreted in accordance with, the laws of the State of
Connecticut.
10.12 Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the Courts of the State of
Connecticut, the courts of the United States of America for the District of
Connecticut, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding may
be effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to the Borrower at its
address set forth in subsection 10.2 or at such other address of which the Agent
shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service
of process in any other manner permitted by law or shall limit the right to sue
in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to in
this subsection any special, exemplary, punitive or consequential damages.
10.13 Acknowledgments. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement, the Notes and the other Loan Documents;
(b) neither the Agent nor any Bank has any fiduciary relationship to
the Borrower, and the relationship between Agent and Banks, on one hand, and the
Borrower, on the other hand, is solely that of debtor and creditor;
75
<PAGE>
(c) no joint venture exists among the Banks or among the Borrower and
the Banks; and
(d) each reference in the other Loan Documents to the Credit Agreement
shall mean the Existing Credit Agreement as amended and restated hereby, and as
the same shall be further amended, modified, supplemented or restated from time
to time, and each reference therein to "Bank" shall include the Swingline Bank
and to "Loan" shall include the Swingline Loans.
10.14 WAIVERS OF JURY TRIAL; COMMERCIAL TRANSACTIONS. (a) THE BORROWER,
THE AGENT AND THE BANKS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE NOTES OR
ANY OTHER LOAN DOCUMENTS AND FOR ANY COUNTERCLAIM THEREIN.
(b) THE BORROWER ACKNOWLEDGES THAT THE LOANS EVIDENCED HEREBY ARE
COMMERCIAL TRANSACTIONS WITHIN THE MEANING OF CHAPTER 903a OF THE CONNECTICUT
GENERAL STATUTES.
[SIGNATURE PAGES FOLLOW THIS PAGE]
76
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first written above.
OUTSOURCE INTERNATIONAL, INC.
By:/s/ Scott R. Francis
------------------------------------------
Name: Scott R. Francis
Title: Chief Financial Officer
BANKBOSTON, N.A., successor by merger to BANK
OF BOSTON CONNECTICUT,
As a Bank and as the Agent
By:/s/ S. S. Barnett
------------------------------------------
Name: Scott S. Barnett
Title: Director
COMERICA BANK
By:/s/ Martin G. Ellis
------------------------------------------
Name: Martin G. Ellis
Title: Vice President
S1
<PAGE>
LASALLE NATIONAL BANK
By:/s/ John J. McGuire
------------------------------------------
Name: John J. McGuire
Title: Vice President
SUNTRUST BANK, SOUTH FLORIDA, NATIONAL ASSOCIATION
By:/s/ Janet P. Sammons
------------------------------------------
Name: Janet P. Sammons
Title: Vice President
FLEET NATIONAL BANK
By:/s/ Deborah Lawrence
------------------------------------------
Name: Deborah Lawrence
Title: Senior Vice President
S2
<PAGE>
SCHEDULE A
COMMITMENTS; ADDRESSES
<TABLE>
<CAPTION>
Commitment
Bank Amount
- ---------------------------------------------------------------------------------------------------
<S> <C>
BankBoston, N.A. $10,000,000
100 Pearl Street, 5th Floor
Hartford Corporate Banking
Hartford, Connecticut 06103
Attention: Scott S. Barnett, Vice President
Phone: 860-727-6557
Telecopy No.: 860-727-6575
Comerica Bank $8,000,000
500 Woodward Avenue
Detroit, Michigan 48275
Attention: Marty Ellis, Vice President
Phone: 313-222-6122
Telecopy No.: 313-222-3330
LaSalle National Bank $8,000,000
135 S. LaSalle, Suite 218
Chicago, Illinois 60603
Attention: John J. McGuire, Vice President
Phone: 312-904-4657
Telecopy No.: 312-904-4660
Fleet National Bank $4,000,000
1 Federal Street
Boston, Massachusetts 02110
Attention: Dianna McCarthy, Assistant Vice President
Phone: 617-346-4406
Telecopy No.: 617-346-4667
<PAGE>
SunTrust Bank, South Florida, National Association $4,000,000
501 East Las Olas Boulevard
Fort Lauderdale, Florida 33301
Attention: Pete Kantor, Vice President
Phone: 954-765-7393
Telecopy No.: 954-765-7301
------------
TOTAL: $34,000,000
</TABLE>
<PAGE>
EXHIBIT A-1
NOTICE OF BORROWING
[Date] 1
BankBoston, N.A., as Agent
for the Banks Party to the Credit
Agreement referred to below,
100 Pearl Street
Hartford, Connecticut 06103
Attention: Scott S. Barnett
Ladies and Gentlemen:
OutSource International, Inc. (the "Borrower") refers to the Third
Amended and Restated Credit Agreement, dated as of July 27, 1998 (the "Credit
Agreement"), among OutSource International, Inc., the Banks parties thereto and
BankBoston, N.A., successor by merger to Bank of Boston Connecticut, as Agent.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement. The undersigned hereby
gives you notice pursuant to Section 2.1A(b) or 2.4 of the Credit Agreement that
it requests a borrowing under the Credit Agreement, and in that connection sets
forth below the terms on which such borrowing is requested to be made:
(A) Date of proposed borrowing
(which is a Business Day) ________________________
- ---------------
1 Except in the case of a Swingline Loan, the Notice of Borrowing must
be received by the Agent (i) in the case of a proposed Eurodollar Loan, by
telecopier or telex not later than 12:00 p.m. (Eastern time), three Business
Days prior to a proposed borrowing and (ii) in the case of a proposed Alternate
Base Rate Loan, by telecopier or telex not later than 12:00 p.m. (Eastern time),
on the day of a proposed borrowing. The Notice of Borrowing for a Swingline Loan
must be received not later than 12:00 p.m. (Eastern time) on the date of the
proposed Borrowing.
1
<PAGE>
(B) Principal amount of borrowing (2) $___________________
(C) Type of Loan (3) ___________________
(D-1) Interest Period (4) ___________________
(D-2) Pricing Level (1, 2, 3 or 4): ___________________
(E) Purpose of Loan (check applicable boxes):
1. Permitted Acquisition (5) [ ]
If checked, name of selling
Person: ___________________
2. Working Capital and General
Corporate Purposes of Borrower
and its Subsidiaries (other than
CSF) [ ]
If checked, state purpose: ___________________
- ---------------------------
2 Not less than $250,000 and in whole multiples of $100,000.
3 Swingline Loan, Eurodollar Loan or Alternate Base Rate Loan.
4 If a Eurodollar Loan, 1, 2, 3 or 6 months but which shall end
not later than the Termination Date.
5 Attach to Notice of Borrowing financial statements required by
Section 7.8(g) of the Credit Agreement.
2
<PAGE>
3. Advances to CSF (6) [ ] __________________
__________________
- ------------------------
6 If funds being advanced to Labor World, Office Ours or Tandem
franchisee, note must be issued by franchisee and endorsed to Agent.
3
<PAGE>
4. Letter of Credit (7) [ ] __________________
(F) Aggregate amount of Loans and Letters of Credit outstanding:
<TABLE>
<CAPTION>
Outstanding after
Loan Requested by
Outstanding on the this Notice is Made
Date of this Notice -------------------
Purpose Maximum Authorized -------------------
------- ------------------
<S> <C> <C> <C>
1. Permitted Acquisition The lesser of $34,000,000 less $--------------------- $ ---------------------
amounts in first column of
F(1), F(2), F(3), F(4) and F(5)
2. Working Capital and The lesser of $34,000,000 less $--------------------- $ ---------------------
General Corporate Purposes amounts of F(1), F(2), F(3),
of Borrower and F(4) and F(5)
Subsidiaries (other than
CSF)
3. Advances to CSF $ 7,500,000 $ $ ---------------------
---------------------
4. Swingline Loans $5,000,000 $ $ ---------------------
---------------------
5. Letters of Credit $15,000,000 $ $
===================== =====================
Sum of (1) through (5) $ $
--------------------- ---------------------
</TABLE>
- -------------------------
7 Application for Letter of Credit must accompany Notice of Borrowing.
4
<PAGE>
If the box in (E)1 above has been checked, the undersigned hereby
certifies that none of Lawrence H. Schubert, Alan E. Schubert or Louis A.
Morelli is or has been a beneficial owner, directly or indirectly, including
without limitation through a family member or trust, of the selling Person
identified in (E)1, and that, with respect to the Permitted Acquisition
identified in (E)1, all of the requirements of a Permitted Acquisition set forth
in the definition thereof in the Credit Agreement and in Section 7.8(g) of the
Credit Agreement have been met.
As required by Section 5 of the Credit Agreement, the undersigned
officer on behalf of the Borrower hereby further certifies that:
(a) the representations and warranties contained in Section 4 of the
Credit Agreement are true and correct in all material respects on and as of the
date hereof (or if such representation or warranty is expressly stated to have
been made as of a specific date, as of the such specific date);
(b) the Borrower has performed and complied with and is in compliance
with all of the terms, covenants and conditions of the Credit Agreement;
(c) there does not exist any Default or Event of Default under the
Credit Agreement; and
(d) each of the other conditions precedent set forth in Section 5 of
the Credit Agreement have been satisfied and complied with.
Very truly yours,
OUTSOURCE INTERNATIONAL, INC.
By____________________________
Title:
5
<PAGE>
EXHIBIT A-2
REVOLVING CREDIT NOTE
$_______ Hartford, Connecticut
________ ____, 1998
FOR VALUE RECEIVED, the undersigned, OUTSOURCE INTERNATIONAL, INC. (the
"Company"), promises to pay to the order of________________________________(the
"Bank"), at the office of BankBoston, N.A., successor by merger to Bank of
Boston Connecticut, located at 100 Pearl Street, Hartford, Connecticut 06103,
the principal sum of
MILLION AND NO/100 DOLLARS ( )
-------------- -----------------
or the aggregate unpaid principal amount of all Loans made by the Bank to the
undersigned pursuant to the Credit Agreement, as hereinafter defined, whichever
is less, in lawful money of the United States of America. As used herein,
"Credit Agreement" means the Third Amended and Restated Credit Agreement, dated
as of July 27, 1998, as the same may hereafter be amended, modified,
supplemented or restated from time to time, among the Company, the Banks from
time to time parties thereto and BankBoston, N.A., as Agent. Capitalized terms
used herein but not defined herein shall have the meanings ascribed to them in
the Credit Agreement.
The undersigned also promises to pay interest on the unpaid principal
amount of each Loan from time to time outstanding, from the date of such Loan
until the payment in full thereof, at the rates per annum which shall be
determined in accordance with the provisions of the Credit Agreement.
The Bank is authorized to record the date and amount of each Loan made
by the Bank pursuant to the Credit Agreement and the date and amount of each
payment or prepayment of principal hereof on the reverse side hereof, or reflect
such information on the records of the Bank by such other methods as the Bank
may generally employ; provided, however, that the failure to make any such entry
shall in no way detract from the Company's obligations under this Note.
<PAGE>
This Note is due and payable in full no later than on the Termination
Date. If this Note shall not be paid at maturity, whether such maturity occurs
by reason of lapse of time or by operation of any provision for acceleration of
maturity contained in the Credit Agreement, the principal hereof and the unpaid
interest thereon shall bear interest, from the date due until paid, at a rate
per annum which shall be two percent (2%) in excess of the rate of interest
which would otherwise be applicable thereto. All payments of principal of and
interest on this Note shall be made in immediately available funds. In the event
that the total amount of any payment required to be paid under this Note is not
paid within ten (10) days of the date when the same becomes due, the Bank may
collect and the undersigned agrees to pay a late charge equal to five percent
(5%) of the total amount then due.
This Note is the Revolving Credit Note referred to in the Credit
Agreement, is secured by the Security Documents and is entitled to the benefits
thereof. Reference is made to the Credit Agreement for a description of the
right of the undersigned to anticipate payments hereof, the right of the holder
hereof to declare this Note due prior to its stated maturity, and other terms
and conditions upon which this Note is issued.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF CONNECTICUT.
Witness: OUTSOURCE INTERNATIONAL, INC.
_________________________ By:________________________________
Name: Name:
Title:
2
<PAGE>
EXHIBIT A-3
SWINGLINE NOTE
$ ________ Hartford, Connecticut
________ ____, 1998
FOR VALUE RECEIVED, the undersigned, OUTSOURCE INTERNATIONAL, INC. (the
"Company"), promises to pay to the order of________________________(the "Bank"),
at the office of BankBoston, N.A., successor by merger to Bank of Boston
Connecticut, located at 100 Pearl Street, Hartford, Connecticut 06103, the
principal sum of
MILLION AND NO/100 DOLLARS ( )
------------------- -------------
or the aggregate unpaid principal amount of all Swingline Loans made by the Bank
to the undersigned pursuant to the Credit Agreement, as hereinafter defined,
whichever is less, in lawful money of the United States of America. As used
herein, "Credit Agreement" means the Third Amended and Restated Credit
Agreement, dated as of July 27, 1998, as the same may hereafter be amended,
modified, supplemented or restated from time to time, among the Company, the
Banks from time to time parties thereto and BankBoston, N.A., as Agent.
Capitalized terms used herein but not defined herein shall have the meanings
ascribed to them in the Credit Agreement.
The undersigned also promises to pay interest on the unpaid principal
amount of each Swingline Loan from time to time outstanding, from the date of
such Swingline Loan until the payment in full thereof, at the rates per annum
which shall be determined in accordance with the provisions of the Credit
Agreement.
The Bank is authorized to record the date and amount of each Swingline
Loan made by the Bank pursuant to the Credit Agreement and the date and amount
of each payment or prepayment of principal hereof on the reverse side hereof, or
reflect such information on the records of the Bank by such other methods as the
Bank may generally employ; provided, however, that the failure to make any such
entry shall in no way detract from the Company's obligations under this Note.
This Note is due and payable in full no later than on the Termination
Date. If this Note shall not be paid at maturity, whether such maturity occurs
by reason of lapse of time or by operation of any provision for acceleration of
maturity contained in the Credit Agreement, the principal hereof and the unpaid
interest thereon shall bear interest, from the date due until paid, at a rate
per annum which shall be two percent (2%) in excess of the rate of interest
which would otherwise be applicable thereto. All payments of principal of and
interest on this Note shall be made in immediately available funds. In the event
that the total amount of any payment required to be paid under this Note is not
paid within ten (10) days of the date when the same becomes due, the Bank may
collect and the undersigned agrees to pay a late charge equal to five percent
(5%) of the total amount then due.
<PAGE>
This Note is the Swingline Note referred to in the Credit Agreement, is
secured by the Security Documents and is entitled to the benefits thereof.
Reference is made to the Credit Agreement for a description of the right of the
undersigned to anticipate payments hereof, the right of the holder hereof to
declare this Note due prior to its stated maturity, and other terms and
conditions upon which this Note is issued.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF CONNECTICUT.
Witness: OUTSOURCE INTERNATIONAL, INC.
_________________________ By:_________________________________
Name: Name:
Title:
2
<PAGE>
EXHIBIT D
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Third Amended and Restated Credit Agreement,
dated as of July 27, 1998 (as the same may be amended, supplemented, restated or
otherwise modified from time to time, the "Credit Agreement"), among OUTSOURCE
INTERNATIONAL, INC., a Florida corporation (the "Company"), the Banks named
therein and BANKBOSTON, N.A., successor by merger to Bank of Boston Connecticut,
as agent for the Banks (in such capacity, the "Agent"). Unless otherwise defined
herein, terms defined in the Credit Agreement and used herein shall have the
meaning given to them in the Credit Agreement.
______________________ (the "Assignor") and _____________________
(the "Assignee") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), a ____% interest (the "Assigned Interest") in
and to the Assignor's rights and obligations under the Credit Agreement with
respect to the Assignor's Commitment thereunder in a principal amount as set
forth on Annex 1 hereto.
2. The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or any other Loan Document or
in connection with the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement, any other Loan
Document or any other instrument or document furnished pursuant thereto, or any
collateral security granted in connection therewith, if any, other than that it
has not created any adverse claim upon the interest being assigned by it
hereunder and that such interest is free and clear of any such adverse claim;
(b) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Company, any of its Subsidiaries or
any other obligor or the performance or the observance by the Company, any of
its Subsidiaries or any other obligor of any of their respective obligations
under the Credit Agreement or any other Loan Document or any other instrument or
document furnished pursuant hereto or thereto; and (c) attaches the Note held by
it evidencing the Assignor's Commitment and requests that the Agent exchange
such Note for new Notes payable to the Assignee and the Assignor in amounts
which reflect the assignment being made hereby (and after giving effect to any
other assignments which have become effective on the Effective Date).
<PAGE>
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Credit Agreement and any amendments thereto, together
with copies of the financial statements delivered pursuant to subsection 6.1
thereof and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this Assignment and
Acceptance; (c) agrees that it will, independently and without reliance upon the
Assignor, the Agent or any other Bank, based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Credit Agreement, the other
Loan Documents or any other instrument or document furnished pursuant hereto or
thereto; (d) appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers and discretion under the Credit
Agreement, the other Loan Documents or other instrument or document furnished
pursuant hereto or thereto as are delegated to the Agent by the terms thereof,
together with such powers as are incidental thereto; and (e) agrees that it will
be bound by the provisions of the Credit Agreement and will perform all the
obligations required, by the terms of the Credit Agreement, to be performed by
it as a Bank, including, if it is organized under the laws of a jurisdiction
outside the United States, its obligations pursuant to paragraph 2.16(b) of the
Credit Agreement.
4. The effective date of this Assignment and Acceptance shall be
_____________, _____ (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Agent for acceptance and
recording by the Agent pursuant to subsection 10.6 of the Credit Agreement,
effective as of the Effective Date.
5. From and after the date of receipt of this Assignment and
Acceptance, the Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees and other amounts) to
the Assignee, whether such amounts have accrued prior to the Effective Date or
accrue subsequent to the Effective Date. The Assignor and the Assignee shall
make all appropriate adjustments in payments by the Agent for periods prior to
the Effective Date or with respect to the making of this assignment directly
between themselves.
6. From and after the Effective Date, (a) the Assignee shall be a party
to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Bank thereunder and under the
other Loan Documents and shall be bound by the provisions thereof, and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
7. The Assignee advises the Agent that the address listed on Annex 1 is
its address for notices under the Credit Agreement.
8. This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the state of Connecticut.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the _____ day of ________, 199_, by their
respective duly authorized officers on Annex 1 hereto.
2
<PAGE>
Annex 1 to the
Assignment and Acceptance
-------------------------
Name of Assignor:
- ----------------
Name of Assignee:
- ----------------
Effective Date of Assignment:
- ----------------------------
Commitment Commitment
Percentage After Assignment Dollar Amount After Assignment
- --------------------------------------------------------------------------------
Assignee
- --------
Assignor
- --------
ASSIGNEE: ASSIGNOR:
By:_________________________________ By:_________________________________
Title: Title:
Accepted: Consented To:
BANKBOSTON, N.A., successor by OUTSOURCE INTERNATIONAL, INC.
merger to BANK OF BOSTON
CONNECTICUT, as Agent
By:_________________________________ By:_______________________________
Title: Title:
3
======================================================
RECEIVABLES PURCHASE AND SALE AGREEMENT
Dated as of July 27, 1998
Among
OUTSOURCE INTERNATIONAL, INC.,
OUTSOURCE FRANCHISING, INC.,
CAPITAL STAFFING FUND, INC.,
SYNADYNE I, INC.,
SYNADYNE II, INC.,
SYNADYNE III, INC.,
SYNADYNE IV, INC.,
SYNADYNE V, INC.,
and
OUTSOURCE INTERNATIONAL
OF AMERICA, INC.,
each as an Originator,
------------------------
and
OUTSOURCE FUNDING CORPORATION,
as the Buyer,
-------------
and
OUTSOURCE INTERNATIONAL, INC.,
as the Servicer.
----------------
======================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
ARTICLE I DEFINITIONS
-----------
<S> <C>
SECTION 1.01. Certain Defined Terms........................................................................1
---------------------
SECTION 1.02. Accounting and Certain Other Terms..........................................................11
----------------------------------
SECTION 1.03. Other Terms.................................................................................11
-----------
SECTION 1.04. Computation of Time Periods.................................................................12
---------------------------
ARTICLE II AMOUNTS AND TERMS OF THE PURCHASES.
-----------------------------------
SECTION 2.01. Agreement to Purchase.......................................................................12
---------------------
SECTION 2.02. Payment for the Purchases...................................................................13
-------------------------
SECTION 2.03. Settlement Procedures.......................................................................14
----------------- ---
SECTION 2.04. Payments and Computations, Etc..............................................................15
------------------------------
SECTION 2.05. Transfer of Records to the Buyer............................................................15
--------------------------------
ARTICLE III CONDITIONS OF PURCHASES
-----------------------
SECTION 3.01. Conditions Precedent to Initial Purchase....................................................16
----------------------------------------
SECTION 3.02. Conditions Precedent to All Purchases and Remittances of Collections........................16
--------------------------------------------------------------------
SECTION 3.03. Effect of Payment of Purchase Price.........................................................16
-----------------------------------
ARTICLE IV REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 4.01. Representations and Warranties of the Originators...........................................17
-------------------------------------------------
ARTICLE V GENERAL COVENANTS
-----------------
SECTION 5.01. General Covenants...........................................................................21
-----------------
ARTICLE VI ADMINISTRATION, COLLECTION AND MONITORING OF ASSETS
---------------------------------------------------
SECTION 6.01. Appointment and Designation of the Servicer.................................................26
-------------------------------------------
SECTION 6.02. Collection of Receivables by the Servicer; Extensions and Amendments of Receivables.........26
-----------------------------------------------------------------------------------
SECTION 6.03. Distribution and Application of Collections.................................................27
-------------------------------------------
SECTION 6.04. Other Rights of the Buyer...................................................................27
-------------------------
SECTION 6.05. Records; Audits.............................................................................27
---------------
SECTION 6.06. Receivable Reporting........................................................................28
--------------------
SECTION 6.07. Collections and Lock-Boxes..................................................................28
--------------------------
SECTION 6.08. UCC Matters; Protection and Perfection of Transferred Assets................................29
------------------------------------------------------------
SECTION 6.09. Obligations of the Originators With Respect to Receivables..................................30
----------------------------------------------------------
SECTION 6.10. Applications of Collections.................................................................30
---------------------------
SECTION 6.11. Annual Servicing Report of Independent Public Accountants...................................30
---------------------------------------------------------
ARTICLE VII EVENTS OF TERMINATION
---------------------
SECTION 7.01. Events of Termination.......................................................................31
---------------------
ARTICLE VIII INDEMNIFICATION
---------------
SECTION 8.01 Indemnities by the Originators..............................................................33
i
<PAGE>
ARTICLE IX MISCELLANEOUS
--------------
SECTION 9.01. Amendments and Waivers......................................................................35
----------------------
SECTION 9.02. Notices, Etc................................................................................35
-------------
SECTION 9.03. Setoff and Counterclaim.....................................................................35
-----------------------
SECTION 9.04. No Waiver; Remedies.........................................................................35
-------------------
SECTION 9.05. Binding Effect; Assignability...............................................................36
-----------------------------
SECTION 9.06. Term of this Agreement......................................................................36
----------------------
SECTION 9.07. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF OBJECTION TO VENUE........................36
--------------------------------------------------------------------
SECTION 9.08. WAIVER OF JURY TRIAL........................................................................36
--------------------
SECTION 9.09. Costs, Expenses and Taxes...................................................................37
-------------------------
SECTION 9.10. Execution in Counterparts; Severability; Integration........................................37
----------------------------------------------------
SECTION 9.11. Confidentiality.............................................................................37
---------------
</TABLE>
ii
<PAGE>
SCHEDULES
- ---------
Schedule I -- Condition Precedent Documents
Schedule II -- Description of Credit and Collection Policy
Schedule III -- Lock-Box Banks and Lock-Box Accounts
Schedule IV -- Tradenames, Fictitious Names and "Doing Business As" Names
Schedule V -- List of Franchisees as of Closing Date
EXHIBITS
- --------
Exhibit A -- Form of Contracts
Exhibit B -- Form of Lock-Box Agreements
Exhibit C -- Form of Asset Report
Exhibit D -- Form of Opinion of Counsel for the Originators
Exhibit E -- Form of Originator Note
Exhibit F -- Form of Franchise Agreement
<PAGE>
THIS RECEIVABLES PURCHASE AND SALE AGREEMENT (the "Agreement")
is made as of July 27, 1998, by and among OUTSOURCE INTERNATIONAL, INC., a
Florida corporation ("OutSource International"), OUTSOURCE FRANCHISING, INC., a
Florida corporation ("OutSource Franchising"), CAPITAL STAFFING FUND, INC., a
Florida corporation ("CSF"), SYNADYNE I, INC., a Florida corporation, SYNADYNE
II, INC., a Florida corporation, SYNADYNE III, INC., a Florida corporation,
SYNADYNE IV, INC., a Florida corporation, SYNADYNE V, INC., a Florida
corporation, and OUTSOURCE INTERNATIONAL OF AMERICA, INC., a Florida
corporation, as the originators (each an "Originator" and, collectively, the
"Originators"), OUTSOURCE FUNDING CORPORATION, a Delaware corporation (the
"Buyer"), and OUTSOURCE INTERNATIONAL, INC., in its capacity as the initial
Servicer (as defined below).
WITNESSETH:
WHEREAS, the Originators desire to sell, and the Buyer desires
to purchase, all of the Originators' right, title and interest in the accounts
receivable originated by the Originators on the terms and conditions provided
herein;
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
ARTICLE I
---------
DEFINITIONS
------------
SECTION 1.01. Certain Defined Terms. (a) Certain
capitalized terms used throughout this Agreement are defined above or in this
Section 1.01.
(b) As used in this Agreement and its exhibits, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined).
"Actual Dilution" means, on any Business Day with respect to
any Receivable or Receivables, the actual reduction in the Outstanding Balance
of such Receivable or Receivables as a result of any of the Dilution Factors.
"Adverse Claim" means a lien, security interest, charge,
encumbrance or other right or claim of any Person having the practical effect of
a lien, security interest, charge or encumbrance.
"Affiliate" when used with respect to a Person means any other
Person controlling, controlled by or under common control with such Person. For
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract, or otherwise; and the terms "controlling" and "controlled" have the
meanings correlative to the foregoing.
<PAGE>
"Asset Report" has the meaning set forth in the Receivables
Purchase Agreement.
"Asset Report Date" means, with respect to any Collection
Period, the tenth day of such Collection Period, or if such date is not a
Business Day, the next Business Day to occur thereafter.
"Average Maturity" has the meaning set forth in the
Receivables Purchase Agreement.
"Bankruptcy Code" means the United States Bankruptcy Reform
Act of 1978 (11 U.S.C. " 101 et seq.), as amended from time to time, or any
successor statute.
"Base Rate" means, on any day, a fluctuating rate of interest
per annum equal to the higher of (a) the per annum rate of interest announced
from time to time by BankBoston, N.A. at its head office in Boston,
Massachusetts as its "base rate", and (b) 2 of one percent per annum above the
Federal Funds Rate.
"Benefit Plan" means any employee benefit plan as defined in
Section 3(3) of ERISA in respect of which any Originator or any ERISA Affiliate
of any Originator is, or at any time during the immediately preceding six years
was, an "employer" as defined in Section 3(5) of ERISA.
"Business Day" means a day of the year other than a Saturday
or a Sunday on which banks are required to be open in New York City and Boston,
Massachusetts.
"Capital Stock" means any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person (other than
a corporation) and any and all warrants or options to purchase any of the
foregoing.
"Closing Date" means the date on which the Buyer makes the
Initial Purchase of Receivables under this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute.
"Collection Account" has the meaning set forth in the
Receivables Purchase Agreement.
"Collection Account Agreement" means that certain Collection
Account Agreement dated as of even date herewith among the Collection Account
Bank, the Servicer, the Buyer and the Deal Agent.
"Collection Account Bank" means the financial institution
maintaining the Collection Account, which initially shall be BankBoston, N.A.
2
<PAGE>
"Collection Date" means the date following the Termination
Date on which the aggregate Outstanding Balance of all Receivables sold
hereunder has been reduced to zero (or such earlier date which is 365 days after
all outstanding Receivables sold hereunder have become written-off in accordance
with the Credit and Collection Policy), the Buyer has received all other amounts
due to it in connection with this Agreement or any other agreement executed
pursuant hereto or in connection herewith.
"Collection Period" means an accounting period of four or five
weeks as used by the Originators consistent with their present accounting
methods and as set forth in a written calendar to be provided to the Deal Agent
at closing for the remainder of 1998 and to be provided to the Deal Agent on or
prior to December 1st of each year for the immediately succeeding calendar year.
"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all cash proceeds of the Related Security with respect thereto.
"Confidential Information" has the meaning assigned to such
term in Section 9.11.
"Contract" means an invoice issued by an Originator to a
Person, or an agreement between an Originator and a Person, in each case in
substantially the form of one of the forms set forth in Exhibit A pursuant to or
under which such Obligor shall be obligated to make one or more payments to an
Originator.
"Credit and Collection Policy" means those credit and
collection policies and practices relating to Contracts and Receivables
described in Schedule II.
"CSF Advance" means an advance of money by CSF to a
Franchisee.
"DCR" means Duff & Phelps Credit Rating Co., and any successor
thereto.
"Deal Agent" means the "Deal Agent" under the Receivables
Purchase Agreement.
"Debt" of any Person means (a) indebtedness of such Person for
borrowed money, (b) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) obligations of such Person to pay the
deferred purchase price of property or services beyond ordinary course of
business payment terms for trade payables, (d) obligations of such Person as
lessee under leases which shall have been or should be, in accordance with GAAP,
recorded as capital leases, (e) obligations secured by an Adverse Claim upon
property or assets owned by such Person, even though such Person has not assumed
or become liable for the payment of such obligations and (f) without duplication
obligations of such Person under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (a) through (e) above.
3
<PAGE>
"Defaulted Receivable" means a Receivable (a) as to which any
payment, or part thereof, remains unpaid for more than 150 days from the
original invoice date for such payment, (b) as to which the Obligor thereof has
taken any action constituting an Insolvency Event or suffered any Insolvency
Event or (c) which, consistent with the Credit and Collection Policy, has been
or should be written off the applicable Originator's books as uncollectible.
"Delinquent Receivable" means a Receivable which is not a
Defaulted Receivable and (a) as to which any payment, or part thereof, remains
unpaid for more than 120 days from the original invoice date for such payment,
or (b) which, consistent with the Credit and Collection Policy, has been or
should be classified as delinquent by the applicable Originator.
"Dilution Factors" means, with respect to the Receivables, any
credits, rebates, freight charges, discounts, allowances, disputes, chargebacks,
returned or repossessed goods, inventory transfers, allowances for early
payments and other allowances or adjustments granted in accordance with the
Buyer's or the Originators' usual practices.
"Dilution Adjustment Credit" means, on any Business Day, the
Actual Dilution reported by the Servicer in the most recent applicable Weekly
Settlement Report.
"Discount Factor" means a percentage calculated to provide the
Buyer with a reasonable return on its investment in the Transferred Assets after
taking account of (i) the time value of money based upon the anticipated dates
of collection of the Transferred Assets, (ii) the risk of nonpayment by the
Obligors and (iii) the costs of servicing the Receivables to be performed by the
Originators. The initial Discount Factor shall be 3.0%. The Originators and the
Buyer may agree in writing from time to time to change the Discount Factor based
on changes in one or more of the items affecting the calculation thereof;
provided, however, that any change to the Discount Factor shall take effect as
of the commencement of a Collection Period, shall apply only prospectively and
shall not affect the Purchase Price payment in respect of Purchases which
occurred during any Collection Period ending prior to the Collection Period
during which the Originators and the Buyer agree to make such change.
"EagleFunding" means EagleFunding Capital Corporation, a
Delaware corporation.
"Eligible Receivable" means, at any time, a Receivable:
(a) the Obligor of which is a United States resident, is not
an Affiliate of the Buyer, the Servicer or any Originator, and is not a
government or a governmental subdivision or agency; provided, however,
that an otherwise "Eligible Receivable" owed by a Franchisee of any
Originator shall not be excluded under this clause (a) due to such
Franchisee being an Affiliate of such Originator;
4
<PAGE>
(b) which is not a Defaulted Receivable or a Delinquent
Receivable or any other Receivable with respect to which a scheduled
payment or any part thereof remains unpaid for (x) more than 60 days
after the original invoice date therefor for any Receivable originated
by OutSource Franchising and (y) more than 90 days after the original
invoice date therefor for any other Receivable, and the Obligor of
which is not the Obligor of any Delinquent Receivables in the aggregate
amount of 20% or more of the aggregate Outstanding Balance of all
Receivables of such Obligor;
(c) which arises under a Contract (i) the performance of which
has been completed by the applicable Originator and by all other
parties other than the Obligor, (ii) that requires such Receivable to
be paid in full within (x) 60 days of the original invoice date
therefor for any Receivable originated by OutSource Franchising and (y)
90 days of the original invoice date therefor for any other Receivable
and (iii) that has been duly authorized and, together with such
Receivable, is in full force and effect and constitutes the legal,
valid and binding obligation of the Obligor of such Receivable,
enforceable against such Obligor in accordance with its terms and is
not subject to any dispute, offset, counterclaim or defense whatsoever;
(d) (i) which is an "account" (or, in the case of a CSF
Advance, is an "account" or a "general intangible") within the meaning
of Section 9-106 of the UCC of all applicable jurisdictions, (ii) as to
which all performance and other action required to be taken in
connection therewith by such Originator for the Obligor has been so
performed or taken, (iii) is denominated and payable only in United
States dollars in the United States, (iv) no portion of which is
payable on account of sales taxes, and (v) in which the applicable
Originator can grant a perfected security interest;
(e) which arises in the ordinary course of the Originators'
business in connection with providing services or the sale of goods
within the United States (or, in the case of a CSF Advance, arises from
the advance of money by CSF to a Franchisee);
(f) the assignment of which (including, without limitation,
the sale of an undivided percentage interest therein and the assignment
of any Related Security) does not contravene or conflict with any
applicable laws, rules or regulations or any contractual or other
restriction, limitation or encumbrance;
(g) which does not have an Adverse Claim filed against it
(other than pursuant to the Receivables Purchase Agreement) and is not
otherwise subject to an Adverse Claim and has not been compromised,
adjusted or modified (including by extension of time of payment or the
granting of any discounts, allowances or credits) except for discounts,
allowances or credits made in accordance with the Credit and Collection
Policy and in the ordinary course of the Originators' business;
(h) which, together with the Contract related thereto, does
not contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which no party to the
Contract related thereto is in violation of any such law, rule or
regulation in any material respect;
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(i) which (i) satisfies, and has been originated in accordance
with, all applicable requirements of the Credit and Collection Policy
and (ii) complies with such other criteria and requirements as the
Buyer may, in its reasonable credit judgment, from time to time specify
to the applicable Originator following 60 days' notice;
(j) as to which the Buyer has not notified the applicable
Originator and the Servicer that the Deal Agent (as Buyer's assignee)
has determined, in its reasonable business judgement, that the Obligor
of such Receivable is an unreasonable risk;
(k) the Obligor of which is not a Person to whom any of the
Originators or their Affiliates owe any accounts payable or other Debt
and is otherwise not a Person in respect of which the Originators
maintain any contra accounts on their books and records; provided,
however, that a Receivable which is subject only in part to any of the
foregoing shall constitute an Eligible Receivable to the extent such
Receivable is not subject to an accounts payable, other Debt or contra
account and otherwise satisfies the eligibility criteria set forth
herein;
(l) as to which the Buyer has not notified the applicable
Originator in writing that the Buyer or Deal Agent (as Buyer's
assignee) has determined, in its reasonable business judgment, that
such Receivable (or class of Receivables) is not acceptable for
purchase hereunder;
(m) with respect to which, (i) prior to the Purchase hereunder
by Buyer, the applicable Originator has a first priority ownership
interest therein, free and clear of any Adverse Claim except as
otherwise contemplated under the Intercreditor Agreement, and (ii) from
and after the Purchase hereunder, Buyer has a properly perfected first
priority ownership interest therein, free and clear of any Adverse
Claim; and
(n) which was not acquired by the applicable Originator
pursuant to a Permitted Acquisition and which does not arise in a line
of business acquired by such Originator as a result of a Permitted
Acquisition unless the Buyer and the Deal Agent shall, after conducting
such due diligence as they deem necessary, have determined (in their
sole discretion) that such Receivables are acceptable for Purchase
hereunder; provided, however, that Receivables which would otherwise be
eligible but for this clause (n) shall be eligible for Purchase
hereunder so long as the aggregate outstanding amount thereof at any
one time does not exceed 2% of the aggregate Outstanding Balance of all
Receivables at such time.
"ERISA" means the U.S. Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
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"ERISA Affiliate" means (a) any corporation which is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as the Originators; (b) a partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Code) with the Originators or (c) a member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
the Originators, any corporation described in clause (a) above or any
partnership, trade or business described in clause (b) above.
"Event of Termination" has the meaning assigned to that term
in Section 7.01.
"Franchise Agreement" means a Franchise Agreement
substantially in the form of Exhibit F attached hereto.
"Franchisee" means those entities listed on Schedule V
attached hereto and any other entity which executes a Franchise Agreement with
OutSource International or an Affiliate of OutSource International.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, in each case consistently
applied.
AIndemnified Amounts" has the meaning assigned to that term in
Section 8.01.
AIndemnified Parties" has the meaning assigned to that term in
Section 8.01.
"Initial Purchase" means the initial Purchase made by the
Buyer hereunder.
"Insolvency Event" means, with respect to any Person, any of
the following events such Person shall make a general assignment for the benefit
of creditors; or any case or proceeding shall be instituted by or against such
Person seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
dissolution, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property.
"Intercreditor Agreement" means that certain Intercreditor
Agreement, dated as of July 27, 1998, among BankBoston, N.A. (in its capacity as
"Agent" under the Revolving Credit Agreement), the Originators, the Servicer,
the Buyer, EagleFunding and the Deal Agent, as the same be amended, restated,
supplemented or otherwise modified or replaced from time to time thereafter.
"Investment" means, with respect to any Person, any direct or
indirect loan, advance or investment by such Person in any other Person, whether
by means of share purchase, capital contribution, loan or otherwise, excluding
the acquisition of Receivables and other Transferred Assets (and interests
therein) pursuant to this Agreement and excluding commission, travel and similar
advances to officers, employees and directors made in the ordinary course of
business.
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"Investment Company Act" means the Investment Company Act of
1940, as amended and any successor.
"Lock-Box" means a post office box to which Collections are
remitted for retrieval by a Lock-Box Bank and deposited by such Lock-Box Bank
into a Lock-Box Account.
"Lock-Box Account" means an account maintained for the purpose
of receiving Collections at a bank or other financial institution which has
executed a Lock-Box Agreement.
"Lock-Box Agreement" means an agreement, in substantially the
form of Exhibit B, among the applicable Originator, the Buyer, the Deal Agent
and a Lock-Box Bank.
"Lock-Box Bank" means any of the banks or other financial
institutions holding one or more Lock-Box Accounts.
"Material Adverse Effect@ means any act, omission, situation,
circumstance, event or undertaking which could, singly or in any combination
with one or more other acts, omissions, situations, circumstances, events or
undertakings, have, or are reasonably likely to have, a material adverse effect
upon (a) the business, assets, properties, liabilities, financial condition, or
results of operations of any Originator and its subsidiaries taken as a whole,
(b) the value of the whole or any material part of the Transferred Assets, the
interests therein transferred or purported to be transferred pursuant to the
terms hereof or the priority of such interests, (c) the respective ability of
the Originators or any of their subsidiaries to perform any obligations under
this Agreement or any other Originator Document to which it is a party, or (d)
the legality, validity, binding effect or enforceability of any Originator
Document or the ability of the Buyer or the Deal Agent to enforce any rights or
remedies under or in connection with any Originator Document.
"Moody's" means Moody's Investors Service, Inc., and any
successor thereto.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding five years contributed to by an Originator or
any ERISA Affiliate on behalf of its employees.
"Noncomplying Receivable" means any Receivable with respect to
which any Originator has received notice from the Buyer that such Receivable was
not an Eligible Receivable as of the date purchased hereunder or that such
Originator otherwise breached any representation, warranty or covenant made with
respect to such Receivable hereunder.
"Noncomplying Receivables Adjustment" means, with respect to
any Collection Period, an amount equal to (i) the aggregate Outstanding Balance
for all Receivables which the Buyer identified to the applicable Originator as
Noncomplying Receivables during such Collection Period minus (ii) all
Collections received during such Collection Period on account of Receivables
originated by such Originator with respect to which Noncomplying Receivables
Adjustments were previously paid.
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"Obligor" means a Person obligated to make payments pursuant
to a Contract.
"Originator Documents" means this Agreement, the Lock-Box
Agreements, the Intercreditor Agreement, and all other certificates,
instruments, UCC financing statements, reports, notices, agreements and
documents executed or delivered under or in connection with this Agreement, in
each case as the same may be amended, supplemented or otherwise modified from
time to time in accordance with this Agreement.
"Originator Loan" has the meaning set forth in Section
2.02(b).
"Originator Note" has the meaning set forth in Section
2.02(c).
"Outstanding Balance" of any Receivable at any time means the
then outstanding principalbalance thereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Person succeeding to the functions thereof.
"Permitted Acquisition" has the meaning set forth in the
Revolving Credit Agreement (as such agreement is in effect on the date hereof
without giving effect to any amendments or modifications thereof).
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture, limited liability company, government (or any agency
or political subdivision thereof) or other entity.
"Purchase" means a purchase of Transferred Assets by the Buyer
from the Originators pursuant to Section 2.01.
"Purchase Price" means, with respect to any Purchase on any
date, the aggregate price to be paid to the applicable Originator for such
Purchase in accordance with Section 2.02 for the Receivables, Related Security
and Collections being sold to the Buyer on such date, which price shall equal
the product of (x) the aggregate Outstanding Balance of such Receivables and (y)
one minus the Discount Factor then in effect.
"Receivable" means the indebtedness of any Obligor under a
Contract whether constituting an account, chattel paper, instrument, general
intangible or any other type of property, (a) which arises from a sale of
merchandise or the performance of services by an Originator or (b) which is a
CSF Advance. Each Receivable shall include the right to payment of any interest
or finance charges and other obligations of such Obligor with respect thereto.
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"Receivables Purchase Agreement" means that certain
Receivables Purchase Agreement dated as of even date herewith by and among the
Buyer, as the seller thereunder, EagleFunding, as the purchaser, BancBoston
Securities Inc., as the "Deal Agent", and the Servicer, as the same may be
amended, restated, supplemented or otherwise modified from time to time.
"Records" means all Contracts and other documents, books,
records and other information (including without limitation, computer programs,
tapes, disks, punch cards, data processing software and related property and
rights) maintained with respect to Receivables and the related Obligors which
the applicable Originator has itself generated or in which such Originator has
otherwise obtained an interest.
"Related Security" means with respect to any Receivable:
(a) all of the applicable Originator's interest in the
merchandise (including returned, repossessed or foreclosed
merchandise), if any, relating to the sale which gave rise to such
Receivable;
(b) all other Adverse Claims and property subject thereto from
time to time purporting to secure payment of such Receivable, whether
pursuant to the Contract related to such Receivable or otherwise;
(c) the assignment to the Buyer of all UCC financing
statements covering any collateral securing payment of such Receivable;
(d) all guarantees, indemnities, warranties, letters of
credit, insurance policies and proceeds and premium refunds thereof and
other agreements or arrangements of whatever character from time to
time supporting or securing payment of such Receivable whether pursuant
to the Contract related to such Receivable or otherwise;
(e) all Records; and
(f) all proceeds of the foregoing.
"Revolving Credit Agreement" means that certain Third Amended
and Restated Credit Agreement dated as of July 27, 1998 by and among OutSource
International, the banks and other financial institutions from time to time
parties thereto and BankBoston, N.A., as successor by merger to Bank of Boston
Connecticut, as agent for the banks thereunder, as the same may be amended,
restated, supplemented, replaced or otherwise modified from time to time, any
successor agreement, and any agreement pursuant to which the Debt issued under
any such "Revolving Credit Agreement" is refinanced.
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., and any successor thereto.
"Servicer" means at any time the Person then authorized
pursuant to Article VI to service, administer and collect Receivables.
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"Servicer Fee" has the meaning set forth in the Receivables
Purchase Agreement.
"Servicer Termination Event" means the occurrence of any of
the following:
(a) any Event of Termination; or
(b) a material failure on the part of the Servicer to observe
or perform any of its duties or obligations as Servicer under this Agreement or
as "Servicer" under the Receivables Purchase Agreement and such failure shall
remain unremedied for two Business Days after written notice to the Servicer.
"Settlement Date" means, with respect to any Collection
Period, the fifteenth day of such Collection Period, or if such date is not a
Business Day, the next Business Day to occur thereafter.
"Termination Date" means the date on which the Originators'
obligation to sell and the Buyer's obligation to purchase Receivables hereunder
terminates, which date shall occur on the earliest of (i) the occurrence of the
"Termination Date" under the Receivables Purchase Agreement, (ii) the date on
which an Insolvency Event occurs with respect to OutSource International, any
Originator or the Buyer and (iii) upon the occurrence and during the continuance
of an Event of Termination, the date on which the Buyer declares its obligation
to purchase Receivables hereunder to be terminated.
"Transferred Assets" means, with respect to any Purchase or
Purchases, (a) the Receivables sold to the Buyer in connection with such
Purchase or Purchases, (b) all Related Security relating to such Receivables,
and (c) all Collections with respect to, and other proceeds of, such
Receivables.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the specified jurisdiction.
"United States" means the United States of America.
"Weekly Settlement Report" means the "Weekly Settlement
Report" prepared by the Servicer under the Receivables Purchase Agreement.
SECTION 1.02. Accounting and Certain Other Terms. All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP, and all accounting determinations made and all financial
statements prepared hereunder shall be made and prepared in accordance with
GAAP. All undefined terms contained in this Agreement which are used in Article
9 of the UCC in the State of New York shall have the meanings provided for by
such Article 9.
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SECTION 1.03. Other Terms. The words "herein," "hereof," and
"hereunder" and other words of similar import refer to this Agreement as a
whole, including the exhibits and schedules hereto, as the same may from time to
time be amended or supplemented and not to any particular section, subsection,
or clause contained in this Agreement, and all references to Sections, Exhibits
and Schedules shall mean, unless the context clearly indicates otherwise, the
Sections hereof and the Exhibits and Schedules attached hereto, the terms of
which Exhibits and Schedules are hereby incorporated into this Agreement.
Whenever appropriate, in the context, terms used herein in the singular also
include the plural, and vice versa.
SECTION 1.04. Computation of Time Periods. Unless otherwise
stated in this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each mean "to but excluding."
ARTICLE II
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AMOUNTS AND TERMS OF THE PURCHASES.
-----------------------------------
SECTION 2.01. Agreement to Purchase. (a) On the terms and
conditions hereinafter set forth, the Buyer agrees to make the Initial Purchase
hereunder on the Closing Date by purchasing from each Originator, and each
Originator agrees to sell to the Buyer, all Receivables of such Originator
existing as of the close of business on the Business Day immediately prior to
the Closing Date, together with all of the Related Security relating to such
Receivables, all Collections with respect to, and other proceeds of, such
Receivables. On each Business Day after the Initial Purchase until the
occurrence of the Termination Date, the Buyer agrees to purchase from each
Originator, and each Originator agrees to sell to the Buyer, all Receivables of
such Originator existing as of the close of business on the immediately
preceding Business Day which have not been previously purchased hereunder,
together with all of the Related Security relating to such Receivables and all
Collections with respect to and other proceeds of such Receivables. Prior to
making any Purchase hereunder, the Buyer may request of any Originator, and the
applicable Originator shall deliver, such approvals, opinions, information,
reports or documents as the Buyer may reasonably request.
(b) It is the intention of the parties hereto that each
Purchase of Receivables to be made hereunder shall constitute a "sale of
accounts," as such term is used in Article 9 of the UCC of the State of New
York, and not a loan secured by such accounts. Except for the Noncomplying
Receivables Adjustment made on each Asset Report Date and the Dilution
Adjustment Credit made on any Business Day, each sale of Receivables by any
Originator to the Buyer is made without recourse; provided, however, that (i)
the Originators shall be liable to the Buyer for all representations, warranties
and covenants made by the Originators pursuant to the terms of this Agreement,
and (ii) such sale does not constitute and is not intended to result in an
assumption by the Buyer or any assignee thereof of any obligation of the
Originators or any other person arising in connection with the Transferred
Assets, or any other obligations of the Originators. In view of the intention of
the parties hereto that the Purchases of Receivables to be made hereunder shall
constitute a sale of such Receivables rather than a loan secured by such
Receivables, each Originator agrees to clearly, expressly and accurately state
on its respective financial statements that the Receivables have been sold to
the Buyer.
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(c) The parties hereto acknowledge that on the Closing Date
OutSource International shall, and from time to time thereafter OutSource
International may (but without any obligation to do so), contribute to the
capital of Buyer such amounts as may be necessary or desirable for the operation
of Buyer's business and the payment of its obligations under this Agreement. In
connection with any such contribution, the parties hereto agree that OutSource
International may, in lieu of making a cash transfer, authorize Buyer to deduct
the amount of such contributions from the Purchase Price otherwise payable by
Buyer to OutSource International on the applicable date. All of the Receivables
so paid for through such deductions shall constitute Transferred Assets within
the meaning of this Agreement and shall be subject to all of the
representations, warranties and covenants hereunder to the same extent as if
Buyer had paid the Purchase Price for such Receivables with cash from its own
funds.
SECTION 2.02. Payment for the Purchases. (a) The Purchase
Price for each Purchase shall be payable in full in cash by the Buyer to the
applicable Originator or its designee on the date of such Purchase; except that
the Buyer may, with respect to any Purchase, offset against such Purchase Price,
(i) any positive Noncomplying Receivables Adjustments or other amounts shown on
an Asset Report as owing from such Originator to the Buyer and which remain
unpaid; (ii) any Dilution Adjustment Credits for Receivables sold by such
Originator reported on the most recent Weekly Settlement Report and any Dilution
Adjustment Credits for Receivables sold by such Originator and reported in any
previous Weekly Settlement Report which remain unpaid; and (iii) any other
amounts owed by such Originator to the Buyer hereunder and which remain unpaid.
(b) If, on any day, the amount of cash available to the Buyer
under the Receivables Purchase Agreement is less than the Purchase Price owing
for all Purchases of Receivables to be made on such day, then the Buyer may, by
written notice to the Originators, elect to pay such remaining part of the
Purchase Price by borrowing a subordinated revolving loan (each an "Originator
Loan") and each Originator shall have irrevocably agreed to advance, and shall
be deemed to have advanced, an Originator Loan in the amount so specified by the
Buyer; provided, however, that the Buyer may not make any such election and no
Originator shall have any obligation to extend any Originator Loans to the Buyer
if, as a result thereof, the aggregate unpaid principal amount of all of the
Originator Loans would exceed the sum of (i) the aggregate Outstanding Balance
of Eligible Receivables as of the opening of business on such date minus (ii)
the outstanding "Capital" under the Receivables Purchase Agreement minus (iii)
an amount equal to the product of (x) the amount described in clause (ii) above
times (y) 0.75 times (z) the "Loss Reserve Percentage" most recently calculated
under the Receivables Purchase Agreement.
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(c) The Originator Loans advanced by each Originator shall be
evidenced by, and payable in accordance with the terms and provisions of, a
promissory note (the "Originator Note") payable to such Originator in the form
of Exhibit E attached hereto. On each Business Day, to the extent that the Buyer
receives either Collections or proceeds from any sales under the Receivables
Purchase Agreement which, in any case, it is not required to hold in trust for,
or remit to, the Servicer or the Deal Agent, then the Buyer shall remit such
funds to the Originators (net of any funds needed to pay existing expenses which
are then accrued and unpaid) in the following order of priority and application:
first to pay the Purchase Price owed on such date; second to pay any
Noncomplying Receivables Adjustment payments owed under Section 2.03; and third
to pay amounts owed under the Originator Notes.
(d) The Originator Loans shall, subject to the terms of the
Originator Note, be subordinated to the prior right and payment in full of all
recourse obligations of the Buyer under the Receivables Purchase Agreement. The
Buyer shall, to the extent reasonably practicable, use its best efforts (i) to
allocate the amount of Originator Loans made on any day first to OutSource
International and then ratably according to the respective Purchase Prices owed
to each other Originator for Receivables sold on such date and (ii) to allocate
payments of principal and interest on the Originator Notes ratably to each
Originator other than OutSource International according to the outstanding
principal amounts thereof and thereafter to OutSource International.
SECTION 2.03. Settlement Procedures. (a) Weekly. The Servicer
shall, as part of the Weekly Settlement Report delivered under the Receivables
Purchase Agreement, note the Dilution Adjustment Credit due to the Buyer from
any Originator. The Buyer shall, pursuant to Section 2.02, subtract such
Dilution Adjustment Credit from the Purchase Price which would otherwise be owed
to such Originator on such day and, if the amount of such credit exceeds the
amount of such Purchase Price, the unused amount of the Dilution Adjustment
Credit shall be applied as a prepayment of the then outstanding principal amount
of the Originator Note issued in favor of such Originator. Any remaining
unutilized amount of the Dilution Adjustment Credit shall be credited by the
Buyer against all future Purchases from such Originator; provided, however, that
if such credits are not fully utilized within five (5) Business Days, the
applicable Originator shall pay the remaining amount of such credit in cash on
the next succeeding Business Day.
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(b) Monthly. On or prior to each Asset Report Date, the
Servicer shall prepare and deliver to the Buyer, as part of the Asset Report
delivered under the Receivables Purchase Agreement, a statement of the
Noncomplying Receivables Adjustment due to the Buyer from any Originator or from
the Buyer to any Originator, as the case may be. If the Noncomplying Receivables
Adjustment is a positive number, such number shall be shown on the Asset Report
as an amount due to the Buyer and the Buyer shall subtract such Noncomplying
Receivables Adjustment from the Purchase Price which would otherwise be owed to
the applicable Originator on such day and, if the amount of such adjustment
exceeds the amount of such Purchase Price, the unused positive amount of the
Noncomplying Receivables Adjustment shall be applied as a prepayment of the then
outstanding principal amount of the Originator Note held by such Originator. Any
remaining unutilized positive amount of the Noncomplying Receivables Adjustment
shall be credited by the Buyer against all future Purchases from the applicable
Originator; provided, however, that if such credits are not fully utilized
within five (5) Business Days, such Originator shall pay the remaining amount of
such adjustment in cash on the next succeeding Business Day. Alternatively, if
the Noncomplying Receivables Adjustment is a negative number, such number shall
be shown on the Asset Report as an amount due to such Originator, and the Buyer
shall pay to such Originator the amount, if any, shown on the Asset Report as
the net amount due from Buyer to such Originator. To the extent that such net
amount due remains unpaid as of the end of such Asset Report Date, the principal
amount of the Originator Note issued to such Originator shall be increased on
the applicable Asset Report Date by such remaining unpaid amount, subject,
however, to the limits on the amounts of the Originator Note permitted under
Section 2.02(b) above.
(c) Generally. Until the Originators or the Buyer shall notify
the Servicer of any exceptions to the calculations contained therein, the
calculations of the Dilution Adjustment Credit and Noncomplying Receivables
Adjustment in each Weekly Settlement Report and each Asset Report shall be
deemed to be correct as originally delivered. If any Originator or the Buyer
shall have notified the Servicer of any exceptions to such calculations, such
Originator and the Buyer shall promptly endeavor to resolve the matters set
forth in such notice. If no such resolution is agreed upon on or before the next
Asset Report Date, however, then the Asset Report originally delivered by the
Servicer shall, absent manifest error, continue to be presumed correct until a
resolution is reached to the contrary. Nothing contained in this Section 2.03(c)
shall be deemed to limit the rights of the Buyer under Section 8.01.
SECTION 2.04. Payments and Computations, Etc. All amounts to
be paid by any Originator or the Servicer to the Buyer hereunder shall be paid
in accordance with the terms hereof no later than 11:00 A.M. (Boston,
Massachusetts time) on the day when due in immediately available funds to such
account as the Buyer may from time to time specify in writing. Payments received
by the Buyer after such time shall be deemed to have been received on the next
Business Day. In the event that any payment becomes due on a day which is not a
Business Day, then such payment shall be made on the next succeeding Business
Day. Each of the Originators shall, and if any Originator is the Servicer, the
Servicer shall, to the extent permitted by law, pay to the Buyer, on demand,
interest on all amounts not paid when due hereunder (whether owing by any
Originator individually or as Servicer) at 2.0% per annum above the Base Rate,
payable on demand; provided, however, that such interest rate shall not at any
time exceed the maximum rate permitted by applicable law. All computations of
interest payable hereunder shall be made on the basis of a year of 360 days for
the actual number of days (including the first but excluding the last day)
elapsed.
SECTION 2.05. Transfer of Records to the Buyer. (a) Each
Purchase of Receivables hereunder shall include the transfer to the Buyer of all
of the applicable Originator's right and title to and interest in the Records
relating to such Receivables and rights to the use of such Originator's computer
software to access and create the Records, and each Originator hereby agrees
that such transfer shall be effected automatically with each such Purchase,
without any action on the part of the parties hereto or any further
documentation.
(b) Each Originator shall take such action requested by the
Buyer, from time to time hereafter, that may be necessary or appropriate to
ensure that the Buyer and its assignees have (i) an enforceable ownership
interest in the Records relating to the Receivables purchased hereunder and (ii)
an enforceable right (whether by license or sublicense or otherwise) to use all
of the computer software used to account for the Receivables and/or to recreate
such Records.
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ARTICLE III
-----------
CONDITIONS OF PURCHASES
-------------------------
SECTION 3.01. Conditions Precedent to Initial Purchase. The
Initial Purchase hereunder is subject to the conditions precedent that the Buyer
shall have received on or before the date of such purchase the items listed in
Schedule I, each (unless otherwise indicated) dated such date, in form and
substance satisfactory to the Buyer.
SECTION 3.02. Conditions Precedent to All Purchases and
Remittances of Collections. Each Purchase (including the Initial Purchase) from
the Originator by the Buyer shall be subject to the further conditions precedent
that (a) with respect to any such Purchase (other than the Initial Purchase), on
or prior to the date of such Purchase, the Servicer shall have delivered to the
Buyer, in each case in form and substance satisfactory to the Buyer, a completed
Asset Report dated as of the most recent Asset Report Date, and a completed
Weekly Settlement Report dated no more than seven Business Days prior to the
date of such Purchase, and in each case containing such additional information
as may be reasonably requested by the Buyer; (b) on the date of such Purchase,
the following statements shall be true:
(i) The representations and warranties contained in Section
4.01 are correct on and as of such day as though made on and as of such
date,
(ii) No event has occurred and is continuing, or would result
from such Purchase, which constitutes an Event of Termination, and
(iii) No law or regulation shall prohibit, and no order,
judgment or decree of any federal, state or local court or governmental
body, agency or instrumentality shall prohibit or enjoin, the making of
such Purchase by the Buyer in accordance with the provisions hereof and
c) the Buyer shall have received such other approvals, opinions or
documents as the Buyer may reasonably request.
SECTION 3.03. Effect of Payment of Purchase Price. Each
Originator, by accepting the proceeds of the Purchase Price for a Purchase,
shall be deemed to have certified to the Buyer the satisfaction of the
conditions precedent described in the immediately preceding Section 3.02. Upon
the payment of the Purchase Price for any Purchase, (whether in cash or by the
making of an Originator Loan pursuant to Section 2.02(b)), title to the
Transferred Assets included in such Purchase shall vest irrevocably in the
Buyer, whether or not the conditions precedent to such Purchase were in fact
satisfied; provided, however, that the Buyer shall not be deemed to have waived
thereby any claim for indemnification it may have under this Agreement for the
failure by any Originator in fact to have satisfied any such condition
precedent.
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ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES
----------------------------------
SECTION 4.01. Representations and Warranties of the
Originators. The Originators represent and warrant that as of the date hereof,
as of the date of the Initial Purchase and as of the date of each subsequent
Purchase:
(a) Each of the Originators is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified to do business, and is in
good standing, in every jurisdiction in which the nature of its business
requires it to be so qualified and the failure to do so could reasonably be
expected to have a Material Adverse Effect.
(b) The execution, delivery and performance by the Originators
of this Agreement and all other Originator Documents to be entered into by them,
including the Originators' use of the proceeds of Purchases, are within each
Originator's corporate powers, have been duly authorized by all necessary
corporate action, do not contravene (i) each Originator's charter or by-laws,
(ii) any law, rule or regulation applicable to the Originators, (iii) any
contractual restriction binding on or affecting each Originator or its property
or (iv) any order, writ, judgment, award, injunction or decree binding on or
affecting each Originator or its property, and do not result in or require the
creation of any Adverse Claim upon or with respect to any of its properties
(other than in favor of the Buyer with respect to the Transferred Assets); and
no transaction contemplated hereby requires compliance with any bulk sales act
or similar law. This Agreement and each other Originator Document to be entered
into by the Originators have each been duly executed and delivered by the
Originators.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Originators of
this Agreement or any other Originator Document to be entered into by them,
except for the filing of the UCC financing statements referred to in Article
III, all of which financing statements have been duly filed and are in full
force and effect.
(d) This Agreement and each other Originator Document to be
entered into by the Originators constitute the legal, valid and binding
obligation of the Originators enforceable against each Originator in accordance
with their respective terms subject to bankruptcy and similar laws affecting
creditors generally and principles of equity.
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(e) (i) OutSource International has furnished to the Buyer and
the Deal Agent (A) copies of the audited consolidated balance sheets of
OutSource International and its consolidated subsidiaries as at December 31,
1997, and the related audited consolidated statements of income, shareholders'
equity and cash flows for the fiscal year of OutSource International and its
consolidated subsidiaries then ended reported on by Deloitte & Touche, LLP,
which financial statements present fairly in all material respects in accordance
with GAAP the financial position of OutSource International and its consolidated
subsidiaries as at December 31, 1997, and the results of operations of OutSource
International and its consolidated subsidiaries for the fiscal year of OutSource
International then ended, and (B) copies of the unaudited consolidated balance
sheets of OutSource International and its consolidated subsidiaries as at March
31, 1998, and the related unaudited consolidated statements of income,
shareholders' equity and cash flows for the three-month period then ended, which
financial statements present fairly in all material respects in accordance with
GAAP the financial position of OutSource International and its consolidated
subsidiaries as at March 31, 1998, and the results of operations of OutSource
International and its consolidated subsidiaries for the three-month period then
ended; and (ii) since March 31, 1998, (A) no material adverse change has
occurred in the business, assets, liabilities, financial condition, or results
of operations or business prospects of OutSource International and its
subsidiaries taken as a whole, and (B) no event has occurred or failed to occur
which has had, or may have, singly or in the aggregate, a Material Adverse
Effect.
(f) There is no pending or threatened action or proceeding
affecting any Originator or any subsidiaries of any Originator before any court,
governmental agency or arbitrator that could reasonably be expected to have a
Material Adverse Effect. None of the Originators, or any subsidiary of any
Originator is in default with respect to any order of any court, arbitrator or
governmental body except for defaults with respect to orders of governmental
agencies which defaults are not material to the business or operations of the
Originators or any subsidiary of any of the Originators.
(g) No proceeds of any Purchase will be used by the
Originators to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(h) Immediately prior to each Purchase hereunder, each
Receivable to be sold hereunder, together with the Contract related thereto and
the other Transferred Assets relating thereto, is owned by the applicable
Originator free and clear of any Adverse Claim except as provided herein or
permitted hereby, and the Buyer shall acquire all of such Originator's right,
title and interest in such Transferred Assets and a valid and perfected first
priority ownership interest in each such Receivable then existing or thereafter
arising and in the Related Security and Collections with respect thereto, free
and clear of any Adverse Claim except as created hereby or by the Buyer in the
Receivables Purchase Agreement or any related document. No effective financing
statement or other instrument similar in effect covering any Transferred Assets
shall at any time be on file in any recording office except such as may be filed
in favor of the Buyer relating to this Agreement or in favor of assignees of the
Buyer under the Receivables Purchase Agreement. The Purchases of the Transferred
Assets by the Buyer constitute true and valid sales and transfers for
consideration (and not merely a pledge of such Transferred Assets for security
purposes), enforceable against creditors of the Buyers and no Transferred Assets
shall constitute property of any Originator.
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(i) No Asset Report or Weekly Settlement Report (if prepared
by OutSource International, an Originator or any Affiliate thereof, or to the
extent that information contained therein is supplied by OutSource
International, an Originator or any such Affiliates), information, exhibit,
financial statement, document, book, record or report furnished or to be
furnished by OutSource International or an Originator to the Buyer in connection
with this Agreement is or will be inaccurate in any material respect as of the
date it is or shall be dated or (except as otherwise disclosed to the Buyer, as
the case may be, at such time) as of the date so furnished, and no such document
contains or will contain any material misstatement of fact or omits or shall
omit to state a material fact or any fact necessary to make the statements
contained therein not misleading.
(j) The principal place of business and chief executive office
of the Originators and the offices where the Originators keep all the Records
are located at the addresses of the Originators referred to in Section 9.02
hereof (or at such other locations as to which the notice and other requirements
specified in Section 6.08 shall have been satisfied).
(k) The names and addresses of all the Lock-Box Banks,
together with the account numbers of the Lock-Box Accounts at such Lock-Box
Banks and the names, addresses and account numbers of all accounts to which
Collections of the Receivables outstanding before the Initial Purchase hereunder
have been sent, are specified in Schedule III (which shall be deemed to be
amended in respect of terminating or adding any Lock-Box Account or Lock-Box
Bank upon satisfaction of the notice and other requirements specified in respect
thereof). The Originators have no other lock-box accounts or similar deposit
accounts for the collection of the Transferred Assets except for the Lock-Box
Accounts.
(l) Except as described in Schedule IV, none of the
Originators has any trade names, fictitious names, assumed names or "doing
business as" names or other names under which it has done (at any time during
the five year period preceding the date hereof) or is currently doing business.
(m) No event has occurred and is continuing, or would result
from any Purchase hereunder or from the application of the proceeds therefrom,
which constitutes an Event of Termination.
(n) The Purchase Price constitutes reasonably equivalent value
in consideration for the transfer to the Buyer of the Transferred Assets from
the Originators and no such transfer shall have been made for or on account of
an antecedent debt owed by any Originator to the Buyer and no such transfer is
or may be voidable under any Section of the Bankruptcy Code.
(o) Each Originator has received advice from its counsel which
is consistent with the conclusions set forth in the legal opinion(s) of Shutts &
Bowen, counsel to the Originators relating to the issues of substantive
consolidation and true sale of the Receivables and the related property.
(p) Each Originator is solvent at the time of (and immediately
after) each transfer of Transferred Assets to the Buyer hereunder.
(q) Each Originator has accounted for and has otherwise
treated each Purchase of Transferred Assets hereunder in its books, records and
financial statements as a sale to the Buyer, in each case consistent with GAAP
and with the requirements set forth herein.
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(r) OutSource International owns one hundred percent (100%) of
the outstanding capital stock of the Buyer and has not granted or issued any
options, warrants or other rights to acquire any such capital stock.
(s) None of the Originators has (i) guaranteed any obligation
of the Buyer, allowed any of its other Affiliates to guarantee any obligations
of the Buyer, and no Originator nor any of its other Affiliates has held itself
out as responsible for debts of the Buyer or actions with respect to the
business and affairs of the Buyer; or (ii) permitted the commingling or pooling
of its funds or other assets with those of the Buyer and has otherwise permitted
any other of its Affiliates to commingle or pool any of their funds or other
assets with those of the Buyer. Each of the Originators (i) has agreed with the
Buyer, and has caused each of its other Affiliates to the extent applicable to
agree with the Buyer, to allocate between themselves shared corporate operating
services and expenses which are not reflected in the Servicer Fee (including,
without limitation, the services of shared employees, consultants and agents and
reasonable legal and auditing expenses) on the basis of the reasonably projected
use or the projected value of services rendered, and otherwise on a basis
reasonably related to actual use or the value of services rendered, (ii) has not
named the Buyer, and has not allowed any other Affiliate to name the Buyer, as a
direct or contingent beneficiary or loss payee on any insurance policy covering
the property of the Originators, OutSource International or any other
Affiliates; and (iii) acknowledges that the Buyer, the "Deal Agent" and the
"Purchaser" under the Receivables Purchase Agreement are entering into the
transactions contemplated by the Receivables Purchase Agreement in reliance on
the Buyer's identity as a separate legal entity from the Originators, OutSource
International and any other Affiliates.
(t) None of the Originators is an "investment company" or a
company controlled by an "investment company" registered or required to be
registered under the Investment Company Act, or otherwise subject to any other
federal or state statute or regulation limiting its ability to incur
indebtedness.
(u) None of the Originators is engaged, principally or as one
of its important activities, in the business of extending credit for the purpose
of "purchasing" or "carrying" any "margin stock" (as each of the quoted terms is
defined or used in Regulation G, T, U or X). No part of the proceeds of any
Transferred Asset has been used for so purchasing or carrying margin stock or
for any purpose which violates, or which would be inconsistent with, the
provisions of Regulation G, T, U or X.
(v) Each of the Originators and the Servicer has the right
(whether by license, sublicense or assignment) to use all of the computer
software used by the Servicer and/or the Originators to account for the
Transferred Assets to the extent necessary to administer the Transferred Assets,
and to assign (by way of sale) or sublicense such rights to use all of such
software to the Buyer.
(w) None of the Originators' inventory, the sale of which
would give rise to a Receivable, is subject to any Adverse Claim except as
contemplated under the Intercreditor Agreement.
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(x) Each Originator has filed or caused to be filed all
Federal, state and local tax returns which are required to be filed by it, and
has paid or caused to be paid all taxes shown to be due and payable on such
returns or on any assessments received by it, other than any taxes or
assessments, the validity of which are being contested in good faith by
appropriate proceedings and with respect to which the applicable Originator has
set aside adequate reserves on its books in accordance with GAAP and which
proceedings have not given rise to any Adverse Claim.
(y) Each Receivable sold hereunder is, as of the date of sale,
unless otherwise identified to the Buyer and the Deal Agent on or prior to such
date, an Eligible Receivable.
(z) The copy of the Credit and Collection Policy attached
hereto as Schedule II is a true and complete copy thereof.
ARTICLE V
---------
GENERAL COVENANTS
---------------------
SECTION 5.01. General Covenants.
(a) Compliance with Laws; Preservation of Corporate Existence.
The Originators shall comply in all material respects with all applicable laws
(including, without limitation, ERISA and the Code), rules, regulations, orders
and Originator Documents and preserve and maintain their corporate existence,
rights, franchises, qualifications and privileges where the failure to comply
could reasonably be expected to have a Material Adverse Effect.
(b) Sales, Liens, Etc. Except as otherwise specifically
provided herein, no Originator shall (i) sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any Adverse
Claim upon or with respect to, any Transferred Asset, or upon or with respect to
any Lock-Box Account, the Collection Account or any other account to which any
Collections of any Receivable are sent, or assign any right to receive income in
respect thereof or (ii) create or suffer to exist any Adverse Claim upon or with
respect to any of the Originators' inventory, the sale of which would give rise
to a Receivable, except such Adverse Claims as are contemplated under the
Intercreditor Agreement.
(c) General Reporting Requirements. OutSource International
and each Originator will provide, or cause to be provided, to the Buyer the
following:
(i) as soon as available and in any event within 90 days after
the end of each fiscal year of OutSource International, consolidated
balance sheets of OutSource International and its consolidated
subsidiaries and the related statement of income, shareholders' equity
and cash flows for such year, each prepared in accordance with GAAP and
reported on by nationally recognized independent public accountants
acceptable to the Buyer;
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(ii) as soon as available and in any event within 45 days
after the end of each of the first three quarters of each fiscal year
of OutSource International, consolidated balance sheets of OutSource
International and its consolidated subsidiaries and the related
statements of income, shareholders' equity and cash flows each for the
period commencing at the end of the previous fiscal year and ending
with the end of such quarter, prepared in accordance with GAAP and
certified by a senior financial officer of OutSource International;
(iii) promptly after the sending or filing thereof (as the
case may be), copies of (1) all reports which OutSource International
sends to any of its securityholders and (2) all reports and
registration statements which OutSource International files with the
Securities and Exchange Commission or any national securities exchange
other than registration statements relating to employee benefit plans
and to registrations of securities for selling securityholders and (3)
all reports, notices and/or certificates which OutSource International
delivers to any of its "Lenders" under the Revolving Credit Agreement;
(iv) promptly after the filing or receiving thereof, copies of
all reports and notices with respect to any Reportable Event defined in
Article IV of ERISA which the applicable Originator or any ERISA
Affiliate files under ERISA with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation or the U.S. Department of Labor or
which the applicable Originator or any ERISA Affiliate receives from
such Corporation;
(v) as soon as possible and in any event within three days
after the occurrence of each Event of Termination or each event which,
with the giving of notice or lapse of time or both, would constitute an
Event of Termination, a statement of the chief financial officer or
chief accounting officer of the applicable Originator setting forth
details of such Event of Termination or event and the action which the
applicable Originator has taken and proposes to take with respect
thereto; and
(vi) promptly following the Buyer's request therefor, such
other information respecting the Receivables or the conditions or
operations, financial or otherwise, of the Originators, OutSource
International or any of their Affiliates as the Buyer may from time to
time reasonably request in order to protect the interests of the Buyer
in connection with this Agreement.
(d) Merger, Acquisition, Etc. No Originator shall enter into
any merger, consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution), or convey, sell, lease,
assign, transfer, or otherwise dispose of, any of its property, business or
assets, or acquire the Capital Stock or assets constituting a business unit, or
enter into a new line of business or make any material change in its present
method of conducting business, except:
(1) dispositions of inventory in the ordinary course of
business;
(2) dispositions of unnecessary, obsolete or worn out
equipment;
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(3) sales of Transferred Assets to the Buyer contemplated by
and in accordance with the terms of this Agreement;
(4) merger or consolidation of any Originator with or into
OutSource International (provided that OutSource International shall be
the continuing or surviving corporation) or with or into any one or
more of the other Originators;
(5) any sale, lease, transfer or other disposition of any
Originator of any or all of its assets (upon voluntary liquidation or
otherwise) to OutSource International or any other Originator; and
(6) any Permitted Acquisition; provided, however, that any
receivables acquired by an Originator from any Person shall not be sold
to the Buyer under Section 2.01 hereof except to the extent such
receivables are Eligible Receivables and the sale thereof would not
otherwise cause a breach of any provision of this Agreement.
(e) Accounting of Purchases. Each Originator will not prepare
any financial statements which shall account for the transactions contemplated
hereby in any manner other than as the sale of the Transferred Assets to the
Buyer or in any other respect account for or treat the transactions contemplated
hereby in any manner other than as a sale of the Transferred Assets by the
applicable Originator to the Buyer (it being understood, however, that such
sales may not be recognized for all accounting and tax purposes due to
principles of consolidated financial reporting and the filing of tax returns on
a consolidated basis).
(f) ERISA Matters. No Originator will (a) fail to comply in
all material respects with ERISA and the provisions of the Code applicable to
the Benefit Plans; (b) engage or permit any ERISA Affiliate to engage in any
prohibited transaction which would subject any Originator to a material tax or
penalty imposed on a prohibited transaction; (c) permit to exist any accumulated
funding deficiency, as defined in Section 302(a) of ERISA and Section 412(a) of
the Code, or funding deficiency with respect to any Benefit Plan other than a
Multiemployer Plan; (d) incur any liability to the PBGC over and above the
premiums required by law; and (e) terminate any Benefit Plan in a manner which
could result in the imposition of a lien on the property of any Originator or
any such ERISA Affiliate.
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(g) Maintenance of Separate Existence. Each Originator will
take all actions required on its part to help maintain the Buyer's status as a
separate legal entity, including, without limitation, (i) not misleading third
parties as to the Buyer's identity as an entity with assets and liabilities
distinct from those of the Originators and their Affiliates; (ii) not holding
itself out to be responsible for the debts or decisions or actions relating to
the business and affairs of the Buyer; (iii) using its best efforts not to
commingle its funds or other assets with those of the Buyer, and not to hold its
assets in any manner that would create an appearance that such assets belong to
the Buyer or that the Buyer's assets belong to it; (iv) taking such action as is
necessary on its part to ensure that the covenant made in Section 5.01(i) of the
Receivables Purchase Agreement is not breached; (v) taking such other actions as
are necessary on its part to ensure that the representations made in Section
4.01(s) hereunder and by the Buyer in Section 4.01(t) of the Receivables
Purchase Agreement are true and correct at all times; (vi) taking such actions
as are necessary on its part to ensure that the Buyer's corporate procedures
required by its certificate of incorporation and by-laws are duly and validly
taken; and (vii) taking such other actions on its part to ensure that the
factual assumptions set forth in, and forming the basis of the legal opinion(s)
of Shutts & Bowen, counsel to the Originators, issued in connection with this
Agreement and relating to the issues of substantive consolidation and true sale
of the Receivables and the related property, are true and correct at all times.
Without limiting the foregoing, the Originators will cause any financial
statements consolidated with those of the Buyer to contain footnotes or other
disclosures which describe the Buyer's business and otherwise inform the
Originators' creditors that the Buyer is a separate corporate entity whose
creditors have a claim on its assets prior to those assets becoming available to
its equity holders and therefore to any creditors of the Originators or any of
their Affiliates.
(h) Supplemental Opinions. Each Originator will cause to be
delivered to the Buyer within 30 days following the Buyer's request therefor,
but in no event more frequently than once during each calendar year commencing
after the first anniversary date of the Initial Purchase, supplemental opinions
of outside counsel to the Originators in the form of Exhibit D or otherwise in
form and substance reasonably satisfactory to the Buyer, reaffirming the
opinions set forth in the opinion letters of Shutts & Bowen delivered to the
Buyer in connection with the Initial Purchase hereunder pursuant to Section 3.01
or providing in reasonable detail the reasons why any such opinions cannot be
reaffirmed.
(i) Change in Corporate Name. No Originator will make any
change to its corporate name or use any trade names, fictitious names, assumed
names or conduct business under any names other than those described in Schedule
IV, unless at least 30 days prior to the effective date of any such name change
or use, the applicable Originator shall have delivered to the Buyer such
financing statements (Form UCC-1 and UCC-3) executed by such Originator which
the Buyer may request to reflect such name change or use, together with such
other documents and instruments that the Buyer may request in connection
therewith.
(j) Audits. At any time and from time to time upon prior
written notice from the Buyer during regular business hours and on an annual (or
more frequent) basis, if requested by the Buyer, the Originators will permit the
Buyer, or their agents or representatives, (i) to examine and make copies of and
abstracts from all Records, (ii) to visit the offices and properties of the
Originators for the purpose of examining such Records, and to discuss matters
relating to the Receivables or the Originators' performance hereunder with any
of the officers or employees of the Originators having knowledge of such matters
and (iii) to have access to its software for the purposes of examining such
Records. Each such audit shall be at the sole expense of the Originators.
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(k) Keeping of Records and Books of Account. The Originators
will maintain (or cause to be maintained) and implement administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing the Receivables in the event of the destruction of the
originals thereof) and keep and maintain, all documents, books, records and
other information which are reasonably necessary or advisable for the collection
of the Transferred Assets (including all Receivables and Collections included
therein). Such books and records shall be marked to indicate the sales of all
Receivables and Related Security hereunder and shall include, without
limitation, records adequate to permit the daily identification of each new
Receivable and all collections of and adjustments (including, without
limitation, adjustments on account of Dilution Factors) to each Receivable.
(l) Location of Records. Each Originator will keep its chief
place of business and chief executive office, and the offices where it keeps the
Records, at the addresses referred to in Section 9.02, or, in any such case,
upon 30 days' prior written notice to the Buyer, at such other locations within
the United States where all action required by Section 6.09 shall have been
taken and completed.
(m) Credit and Collection Policies. Each Originator will
comply in all material respects with the Credit and Collection Policy in regard
to each Receivable and the related Contract. The Originators shall not, without
the written consent of the Buyer and the Deal Agent (as Buyer's assignee), make
any change in the Credit and Collection Policy.
(n) Change in Payment Instructions to Obligors. The
Originators will not add or terminate any bank as a Lock-Box Bank from those
listed in Schedule III or make any change in its instructions to Obligors
regarding payments to be made to any Lock-Box Bank, unless the Buyer shall have
given its prior written consent to such addition, termination or change (which
consent shall not be unreasonably withheld) and the Buyer shall have received
(i) ten Business Days' prior notice of such addition, termination or change,
(ii) prior to the effective date of such addition, termination or change, (x)
executed copies of Lock-Box Agreements executed by each new Lock-Box Bank and
the applicable Originator and (y) copies of all agreements and documents signed
by either the applicable Originator or the respective Lock-Box Bank with respect
to any new Lock-Box Account, and (iii) the prior written consent of the Buyer to
such addition, termination or change (which consent shall not be unreasonably
withheld).
(o) Taxes. Each Originator will file or cause to be filed all
federal, state and local tax returns which are required to be filed by it. Each
Originator shall pay or cause to be paid all taxes shown to be due and payable
on such returns or on any assessments received by it, other than any taxes or
assessments, the validity of which are being contested in good faith by
appropriate proceedings and with respect to which the applicable Originator
shall have set aside adequate reserves on its books in accordance with GAAP.
(p) Segregation of Collections. The Originators will to the
fullest extent practicable prevent the deposit into any of the Lock-Box Accounts
of any funds other than Collections and, to the extent that any such funds are
nevertheless deposited into any of such Lock-Box Accounts, such funds will be
relatively insignificant in amount and the applicable Originator will promptly
identify any such funds to the Servicer for segregation and remittance to the
owner thereof. To the extent that an Obligor has assigned other receivables as
payment for any Receivables and the Collections of such receivables exceeds the
balance of such Receivables, the applicable Originator will promptly identify
any such funds to the Servicer for segregation and remittance to the applicable
Obligor.
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(q) Insolvency. So long as the Buyer is not "insolvent" within
the meaning of the Bankruptcy Code, OutSource International and the Originators
will not cause the Buyer to file a voluntary petition under the Bankruptcy Code
or any other bankruptcy or insolvency laws.
ARTICLE VI
----------
ADMINISTRATION, COLLECTION AND MONITORING OF ASSETS
-----------------------------------------------------
SECTION 6.01. Appointment and Designation of the Servicer. The
Originators and the Buyer hereby appoint the Person (the "Servicer") designated
by the Buyer from time to time pursuant to this Section 6.01, as the Buyer's
agent to service, administer and collect the Receivables and otherwise to
enforce its rights and interests in, to and under the Receivables, the Related
Security and the Contracts. The Servicer's authorization under this Agreement
shall terminate on the Collection Date. Until the Buyer gives notice to the
Originators of a designation of a new Servicer, OutSource International is
hereby designated as, and hereby agrees to perform the duties and obligations
of, the Servicer pursuant to the terms hereof. The Buyer may designate as
Servicer any Person to succeed OutSource International or any successor
Servicer, on the condition in each case that any such Person so designated shall
agree to perform the duties and obligations of the Servicer pursuant to the
terms hereof and of the Receivables Purchase Agreement. Each of the Originators
and the Servicer hereby grants to any successor Servicer an irrevocable power of
attorney to take any and all steps in such Originators' or the Servicer's name,
as applicable, and on behalf of the Buyer, as may be necessary or desirable, in
the determination of the successor Servicer, to collect all amounts due under
any and all Receivables, including, without limitation, endorsing the applicable
Originator's name on checks and other instruments representing Collections and
enforcing such Receivables and the related Contracts. The Servicer may, with the
prior consent of the Buyer, subcontract with any other Person for servicing,
administering or collecting the Receivables, provided that the Servicer shall
remain liable for the performance of the duties and obligations of the Servicer
pursuant to the terms hereof. Notwithstanding anything to the contrary contained
in this Agreement, the Servicer, if not OutSource International, an Originator
or an Affiliate thereof, shall have no obligation to collect, enforce or take
any other action described in this Article VI with respect to any Receivable
that is not a Transferred Asset other than to deliver to the Originators the
Collections and documents with respect to any such Receivable that is not a
Transferred Asset as described in Sections 6.03 and 6.06(b). The Servicer
hereunder acknowledges and agrees that the Servicer Fee paid under the
Receivables Purchase Agreement shall constitute the consideration for its
performance of services as Servicer hereunder.
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SECTION 6.02. Collection of Receivables by the Servicer;
Extensions and Amendments of Receivables. The Servicer shall take or cause to be
taken all such actions as may be necessary or advisable to collect each
Receivable from time to time, all in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Credit and Collection Policy; provided, however, that, (a) the Buyer shall have
the absolute and unlimited right to direct the Servicer (whether the Servicer is
OutSource International, an Originator or otherwise) to commence or settle any
legal action, to enforce collection of any Transferred Asset or to foreclose
upon or repossess any Related Security, and (b) the Servicer shall not make the
Buyer a party to any litigation without the express written consent of the
Buyer. If the Termination Date shall not have occurred, OutSource International,
while it is Servicer, may, in accordance with the Credit and Collection Policy,
(1) extend the maturity or adjust the Outstanding Balance of any Defaulted
Receivable as OutSource International may determine to be appropriate to
maximize Collections thereof and (2) adjust the Outstanding Balance of any
Receivable to reflect Actual Dilution and any reductions or cancellations as a
result of setoff in respect of any claim by the Obligor thereof, in accordance
with the requirements of the Credit and Collection Policy and provided that such
extension or adjustment shall not alter the status of such Receivable as a
Defaulted Receivable or limit the rights of the Buyer under this Agreement.
Except as otherwise permitted pursuant to the next preceding sentence, neither
the Servicer nor the Originators will extend, amend, cancel or otherwise modify
the terms of any Transferred Asset, or amend, modify, cancel or waive any term
or condition of any Contract related thereto without the prior written approval
of the Buyer.
SECTION 6.03. Distribution and Application of Collections. The
Servicer shall set aside and segregate funds to the extent required in the
Receivables Purchase Agreement and shall be required to segregate all
Collections on the Receivables from the other funds belonging to the Servicer.
The Servicer shall as soon as practicable following receipt turn over to the
applicable Originator the Collections of any Receivable which is not a
Transferred Asset less, in the event neither OutSource International, an
Originator nor an Affiliate thereof is the Servicer, all reasonable and
appropriate out-of-pocket costs and expenses of such Servicer of servicing,
collecting and administering the Receivables to the extent not covered by the
Servicer Fee received by it.
SECTION 6.04. Other Rights of the Buyer. At any time following
the occurrence of a Servicer Termination Event or the designation of a Servicer
other than OutSource International, an Originator or any Affiliate of either
thereof pursuant to Section 6.01:
(a) The Buyer may or, at the request of the Buyer, the
Originators shall (in either case, at the Originators' expense) direct the
Obligors of Receivables, or any of them, to pay all amounts payable under any
Receivable directly to the Buyer or its designee;
(b) The Buyer may, or at the request of the Buyer, the
Originators shall (in either case, at the Originators' expense) give each of the
Obligors notice of the Buyer's interests in the Transferred Assets; and
(c) The Originators shall, at the Buyer's request and at the
Originators' expense, (i) assemble all Records and make the same available to
the Buyer or its designee at a place selected by the Buyer or its designee, and
(ii) segregate all cash, checks and other instruments received by it from time
to time constituting Collections of Receivables in a manner acceptable to the
Buyer and, promptly following receipt, remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of transfer, to the
Buyer or its designee.
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SECTION 6.05. Records; Audits. (a) The Servicer will maintain
and implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing the Receivables in the
event of the destruction of the originals thereof), and keep and maintain all
documents, books, records and other information reasonably necessary or
advisable for the collection of all Receivables (including, without limitation,
records adequate to permit the daily identification of each new Transferred
Asset and all Collections of and adjustments to each existing Transferred
Asset).
(b) The Servicer, whether or not OutSource International, an
Originator or an Affiliate thereof, shall hold all Records in trust for the
Buyer. Subject to the receipt of contrary instructions from the Buyer, each
Originator will deliver all Records to such Servicer; provided, however, that
the Servicer, if other than OutSource International or an Originator, shall as
soon as practicable upon demand deliver to the Originators all Records in its
possession relating to Receivables of the Originators other than Transferred
Assets, and copies of Records in its possession relating to Transferred Assets.
(c) The Servicer will, from time to time during regular
business hours as requested by the Buyer, permit the Buyer, or its agents or
representatives, (i) to examine and make copies of and abstracts from all
Records and (ii) to visit the offices and properties of the Servicer for the
purpose of examining such Records and to discuss matters relating to the
Receivables or the Servicer=s or the Originators' performance hereunder with any
of the officers or employees of the Servicer or the Originators having knowledge
of such matters.
SECTION 6.06. Receivable Reporting. (a) The Servicer, so long
as it is OutSource International, an Originator or an Affiliate thereof, and
otherwise the Originators, will deliver to the Buyer (i) prior to the Asset
Report Date occurring during each Collection Period hereafter, a report
identifying the Transferred Assets (and the aged balance thereof), by Obligor
and invoice number, as of the last day of the next preceding Collection Period,
(ii) as of the Termination Date, a report identifying the Transferred Assets
(and the aged balance thereof), by Obligor and invoice number, within five (5)
Business Days after the Termination Date, (iii) upon the Buyer's request, no
less frequently than once per week, a report identifying the Transferred Assets
by Obligor and invoice number as of the close of business on the preceding
Sunday and (iv) prior to the Asset Report Date occurring in each Collection
Period hereafter, a report identifying the outstanding accounts payable of each
of the Originators as of the last day of the next preceding Collection Period,
identified by the relevant account payee.
(b) On or prior to the Asset Report Date occurring in each
Collection Period, the Servicer shall prepare and forward to the Buyer, an Asset
Report relating to all Transferred Assets, as of the close of business of the
Servicer on the last day of the preceding Collection Period.
SECTION 6.07. Collections and Lock-Boxes. The Originators
and the Servicer will
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(i) instruct all Obligors to cause all Collections to be
either (A) remitted to a Lock-Box and will cause each Lock-Box Bank to retrieve
such Collections promptly and deposit the same to the respective Lock-Box
Accounts or (B) deposited directly with the Lock-Box Bank, and
(ii) pursuant to the Receivables Purchase Agreement, instruct
all Lock-Box Banks to transfer such Collections in same day funds to a
Collection Account maintained with a Collection Account Bank. If the Originators
receive any Collections, the applicable Originator will remit such Collections
to the Collection Account within one Business Day following such Originator's
receipt thereof. The Originators will not add or terminate any bank as Lock-Box
Bank from those listed in Schedule III or make any change in their instructions
to Obligors regarding payments to be made to any Lock Box or any Lock-Box Bank,
unless the Buyer shall have received at least ten Business Days' prior written
notice of such addition, termination or change and all actions reasonably
requested by the Buyer to protect and perfect the interest of the Buyer in the
Collections of Transferred Assets have been taken and completed. The Originators
hereby transfer to the Buyer, effective upon the Initial Purchase, the exclusive
ownership and control of each of the Lock-Box Accounts, and each Lock-Box Bank
shall be instructed to remit any amounts deposited in its Lock-Box Accounts
solely according to the direction of the Buyer or its assigns. The Originators
hereby agree to take any further action necessary that the Buyer may reasonably
request to effect such transfer.
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SECTION 6.08. UCC Matters; Protection and Perfection of
Transferred Assets. Each Originator will keep its principal place of business
and chief executive office, and the office where it keeps the Records, at the
address of such Originator referred to in Section 9.02 or, upon 30 days' prior
written notice to the Buyer, at such other locations within the United States
where all actions reasonably requested by the Buyer to protect and perfect the
interest of the Buyer in the Transferred Assets have been taken and completed.
Each Originator will not make any change to its corporate name or use any
tradenames, fictitious names, assumed names, "doing business as" names or other
names other than those described in Schedule IV, unless prior to the effective
date of any such name change or use, the applicable Originator delivers to the
Buyer such executed financing statements as the Buyer may request to reflect
such name change or use, together with such other documents and instruments as
the Buyer may request in connection therewith. Each Originator agrees that from
time to time, at its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action that the Buyer may
reasonably request in order to perfect, protect or more fully evidence the
Transferred Assets acquired by the Buyer hereunder, or to enable the Buyer to
exercise or enforce any of its respective rights hereunder. Without limiting the
generality of the foregoing, the Originators will: (a) upon the request of the
Buyer, execute and file such financing or continuation statements, or amendments
thereto or assignments thereof, and such other instruments or notices, as may be
necessary or appropriate or as the Buyer may request, and (b) on or prior to the
date hereof, mark their master data processing records evidencing such
Transferred Assets and related Contracts with a legend, acceptable to the Buyer,
evidencing that the Buyer or its assigns have purchased all right and title
thereto. Each Originator hereby authorizes the Buyer to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relative to all or any of the Transferred Assets now existing or
hereafter arising without the signature of the applicable Originator where
permitted by law. A carbon, photographic or other reproduction of this Agreement
or any financing statement covering the Transferred Assets or any part thereof
shall be sufficient as a financing statement. The Originators shall, upon the
request of the Buyer at any time and at the Originators' expense, notify the
Obligors of Transferred Assets, or any of them, of the ownership of Transferred
Assets by the Buyer. If the Originators fail to perform any of their agreements
or obligations under this Section 6.08, the Buyer may (but shall not be required
to) itself perform, or cause performance of, such agreement or obligation, and
the expenses of the Buyer incurred in connection therewith shall be payable by
the Originators upon the Buyer's demand therefor. For purposes of enabling the
Buyer to exercise its rights described in the preceding sentence and elsewhere
in this Article VI, the Originators hereby authorize the Buyer to take any and
all steps in the Originators' names and on behalf of the Originators necessary
or desirable, in the determination of the Buyer, to collect all amounts due
under any and all Receivables, including, without limitation, endorsing the
Originators' names on checks and other instruments representing Collections and
enforcing such Receivables and the related Contracts.
SECTION 6.09. Obligations of the Originators With Respect to
Receivables. Each Originator will (a) at its expense, regardless of any exercise
by the Buyer of its rights hereunder, timely and fully perform and comply with
all material provisions, covenants and other promises required to be observed by
it under the Contracts related to the Transferred Assets to the same extent as
if Transferred Assets therein had not been sold hereunder and (b) pay when due
any taxes, including without limitation, sales and excise taxes, payable in
connection with the Transferred Assets. In no event shall the Buyer have any
obligation or liability with respect to any Transferred Assets or related
Contracts, nor shall it be obligated to perform any of the obligations of the
Originators or any of their Affiliates thereunder. The Originators will timely
and fully comply in all material respects with the Credit and Collection Policy
in regard to each Receivable and the related Contract. The Originators will not
make any change in the character of their businesses or in the Credit and
Collection Policy, which change would, in either case, impair the collectibility
of any Transferred Asset.
SECTION 6.10. Applications of Collections. Any payment by an
Obligor in respect of any indebtedness owed by it to any Originator shall,
except as otherwise specified by such Obligor or otherwise required by contract
or law and unless otherwise instructed by the Buyer, be applied as a Collection
of any Receivables constituting Transferred Assets of such Obligor, in the order
of the age of such Receivables, starting with the oldest such Receivable, to the
extent of any amounts then due and payable thereunder, before being applied to
any Receivable that is not a Transferred Asset or other indebtedness of such
Obligor.
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SECTION 6.11. Annual Servicing Report of Independent Public
Accountants. On an annual basis on or before March 31 of each calendar year,
beginning with March 31, 1999, the Servicer shall cause nationally recognized
independent public accountants acceptable to the Buyer to furnish a report to
each of the Servicer and the Buyer substantially to the effect that (i) such
accountants have examined certain documents and records relating to the
servicing of Receivables under this Agreement, compared the information
contained in the Weekly Settlement Reports and Asset Reports delivered by or on
behalf of the Originators under this Agreement during the annual period covered
by such report (or such shorter initial period, as the case may be) with such
documents and records and that, on the basis of such examination, and subject to
such reasonable limitations and qualifications as may be set forth in such
report, such accountants are of the opinion that the servicing has been
conducted substantially in compliance with the terms and conditions as set forth
in Article VI of this Agreement, except for such exceptions as they believe to
be immaterial and such other exceptions as shall be set forth in such statement
and (ii) such accountants have compared the mathematical calculations of each
amount set forth in the Weekly Settlement Reports and Asset Reports delivered
pursuant to this Agreement during the period covered by such report with the
Servicer=s computer reports which were the source of such amounts and that on
the basis of such comparison, such accountants are of the opinion that such
amounts are in agreement, except for such exceptions as they believe to be
immaterial and such other exceptions as shall be set forth in such statement.
ARTICLE VII
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EVENTS OF TERMINATION
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SECTION 7.01. Events of Termination. If any of the following
events ("Events of Termination")shall occur:
(a) (i) The Servicer (if OutSource International, an
Originator or any Affiliate thereof) shall fail to perform or observe any term,
covenant or agreement hereunder (other than as referred to in clause (ii) of
this Section 7.01(a)) and such failure shall remain unremedied for two Business
Days after written notice to the Servicer or (ii) either the Servicer (if
OutSource International, an Originator or any Affiliate thereof) or any
Originator shall fail to make any payment or deposit to be made by it hereunder
when due; or
(b) (i) Any representation or warranty made or deemed to be
made by OutSource International or any Originator (or any of their officers or
agents) under or in connection with this Agreement or any Asset Report or other
information or report delivered pursuant hereto shall prove to have been false
or incorrect in any material respect when made or (ii) any representation or
warranty made or deemed to be made by the Servicer (or any of its officers or
agents) under or in connection with the Receivables Purchase Agreement or this
Agreement (as the case may be) shall prove to have been false or incorrect in
any material respect when made; or
(c) Any Originator (individually or in its capacity as
Servicer) shall fail to perform or observe any other term, covenant or agreement
contained in this Agreement on its part to be performed or observed and any such
failure shall remain unremedied for two Business Days after written notice
thereof shall have been given by the Buyer to the Originators; or
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(d)(i) Any Originator shall fail to pay any principal of or
premium or interest on any Debt, if the aggregate principal amount of such Debt
is $500,000 or more, when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Debt; or (ii) any other default or
any event which, with the passage of time or the giving of notice, or both,
would constitute a default under any agreement or instrument relating to any
such Debt, shall occur and shall continue after the applicable grace period, if
any, specified in such agreement or instrument; provided, however, that, if such
default arises solely under the Revolving Credit Agreement and the lenders
thereunder have waived or rescinded such event, such event shall not constitute
an "Event of Termination" hereunder; or (iii) any Debt of any Originator, or of
any of their Affiliates, if, in the case of any Originator the aggregate
principal amount of such Debt is $500,000 or more, shall be declared to be due
and payable or required to be prepaid (other than by a regularly scheduled
required prepayment) prior to the stated maturity thereof; or
(e) Either (i) any Purchase shall for any reason, except to
the extent permitted by the terms hereof, cease to create a valid and perfected
ownership interest in each Transferred Asset with respect thereto free and clear
of an Adverse Claim or (ii) this Agreement shall for any reason cease to
evidence the transfer to the Buyer of legal and equitable title to, and
ownership of, the Transferred Assets; or
(f)(i) Any Originator or any of their respective Affiliates
shall generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be instituted
by or against any Originator seeking to adjudicate it a bankrupt or insolvent,
or seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property and, in the
case of any such proceeding instituted against (but not by) any Originator or
any such Affiliate, either such proceeding shall have remained undismissed or
unstayed for a period of 60 days or any order for relief of the sort described
above shall have been entered; or (ii) any Originator shall take any corporate
action to authorize any of the actions set forth in clause (i) above in this
Section 7.01(f); or
(g) There shall have occurred and be continuing an "Event of
Termination" under the Receivables Purchase Agreement; or
(h) A Servicer Termination Event shall have occurred and be
continuing; or
(i) Any Originator or the Servicer shall fail to perform or
observe any material term, covenant or agreement contained in the Credit and
Collection Policy and such failure shall remain unremedied for two Business Days
after written notice to Servicer and Seller; or
(j) The IRS or the PBGC shall have filed notice of one or more
Adverse Claims against any Originator or any of their ERISA Affiliates under
ERISA or the Code, unless such Adverse Claim does not purport to cover the
Receivables, and such notice shall have remained in effect for more than thirty
(30) Business Days unless, prior to the expiration of such period, such Adverse
Claims shall have been adequately bonded by such Originator or any of their
ERISA Affiliates (as the case may be) in a transaction with respect to which the
Buyer has given its prior written approval; or
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(k) The Buyer shall have become subject to registration as an
"investment company" within the meaning of the Investment Company Act; or
(l) The Revolving Credit Agreement shall cease to be in full
force and effect;
then, and in any such event, the Buyer may, by notice to the Originators declare
the Termination Date to have occurred, except that, in the case of any event
described in Section 7.01(f) above, the Termination Date shall be deemed to have
occurred automatically upon the occurrence of such event. Upon any such
declaration or automatic occurrence, the Buyer shall have, in addition to all
other rights and remedies under this Agreement or otherwise, all other rights
and remedies provided under the UCC of the applicable jurisdiction and other
applicable laws, which rights shall be cumulative.
ARTICLE VIII
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INDEMNIFICATION
-----------------
SECTION 8.01. Indemnities by the Originators. Without limiting
any other rights which the Buyer may have hereunder or under applicable law,
each of the Originators, on a joint and several basis, hereby agrees to
indemnify the Buyer and its assigns, and each of their respective directors,
officers, employees, agents and attorneys (all of the foregoing being
collectively referred to as "Indemnified Parties") from and against any and all
damages, losses, claims, liabilities and related costs and expenses, including
reasonable attorneys' fees and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts") awarded against or incurred
by any of them arising out of or resulting from:
(i) the sale of any Receivable under this Agreement which is
not at the date of Purchase an Eligible Receivable;
(ii) reliance on any representation or warranty made or deemed
made by any Originator, the Servicer (if OutSource International, an Originator
or one of its Affiliates) or any of their respective officers under or in
connection with this Agreement, which shall have been false or incorrect in any
material respect when made or deemed made or delivered;
(iii) the failure by any Originator or the Servicer (if
OutSource International, an Originator or one of its Affiliates) to comply with
any term, provision or covenant contained in this Agreement or the Receivables
Purchase Agreement or any of the other Originator Documents, or with any
applicable law, rule or regulation with respect to any Receivable, the related
Contract or the Related Security, or the nonconformity of any Receivable, the
related Contract or the Related Security with any such applicable law, rule or
regulation;
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(iv) (A) the failure to vest and maintain vested in the Buyer
or to transfer to the Buyer, legal and equitable title to and ownership of, the
Receivables and the other Transferred Assets which are, or are purported to be,
sold by the Originators hereunder; or (B) the failure to grant to the Buyer a
valid and perfected ownership interest under Article 9 of the UCC in and to the
Receivables which are, or are purported to be, Transferred Assets, together with
all Collections and Related Security; in each case free and clear of any Adverse
Claim whether existing at the time of the Purchase of any such Receivable or at
any time thereafter (other than Adverse Claims created in favor of the Buyer
hereunder or by the Buyer under the Receivables Purchase Agreement);
(v) the failure by any Originator to make any payment required
on its part to be made hereunder;
(vi) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to any Receivables
and other Transferred Assets which are, or are purported to be, sold by the
Originators hereunder, whether at the time of any Purchase or at any subsequent
time;
(vii) any dispute, claim, offset or defense (other than the
discharge in bankruptcy of the Obligor) of the Obligor to the payment of any
Receivable which is, or is purported to be sold by an Originator hereunder
(including, without limitation, a defense based on such Receivable or the
related Contract not being a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms), or any other claim
resulting from the sale of the merchandise or services related to such
Receivable or the furnishing or failure to furnish such merchandise or services;
(viii) any failure of any Originator or the Servicer (if
OutSource International, an Originator or one of its Affiliates) to perform its
duties or obligations in accordance with the provisions of this Agreement or any
failure by any Originator or any Affiliate thereof to perform its respective
duties under the Contracts;
(ix) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of whatever
sort arising out of or in connection with goods and/or merchandise which are the
subject of any Receivable or Contract;
(x) the failure to pay when due any taxes, including without
limitation, sales, excise or personal property taxes payable in connection with
the Transferred Assets;
(xi) the commingling of Collections of Transferred Assets at
any time with other funds;
(xii) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of Purchases or the ownership by the Buyer
of Transferred Assets except any such investigation, litigation or proceeding
arising from the gross negligence or willful misconduct of the Buyer;
(xiii) any attempt by any Person to void or otherwise avoid
any transfer of a Transferred Asset from the Originators to the Buyer under any
statutory provision or common law or equitable action, including, without
limitation, any provision of the Bankruptcy Code; or
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(xiv) the failure of any Originator or any of their respective
agents or representatives (including, without limitation, agents,
representatives and employees of the Originators acting pursuant to authority
granted under Section 6.01) to remit to the Servicer, Collections of Transferred
Assets remitted to such Originator or any such agent or representative.
Any amounts subject to the indemnification provisions of this
Section 8.01 shall be paid by the applicable Originator to the Buyer within five
(5) Business Days following the Buyer's written demand therefor. Notwithstanding
any other provision of this Agreement to the contrary, the Originators shall not
indemnify the Indemnified Parties for or with respect to any Indemnified Amounts
that would constitute recourse for uncollectible Transferred Assets due to
credit reasons.
ARTICLE IX
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MISCELLANEOUS
---------------
SECTION 9.01. Amendments and Waivers. No amendment to or
modification of any provision of this Agreement shall be effective without the
written agreement of the parties hereto and, to the extent then required in the
Receivables Purchase Agreement, the written consent of the Deal Agent. Any
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 9.02. Notices, Etc. All notices and other
communications provided for hereunder shall, unless otherwise stated herein, be
in writing (including telex communication and communication by facsimile copy)
and mailed, telexed, transmitted or delivered, as to each party hereto, at its
address set forth under its name on the signature pages hereof or at such other
address as shall be designated by such party in a written notice to the other
parties hereto. All such notices and communications shall be effective, upon
receipt, or in the case of (a) notice by mail, five days after being deposited
in the United States mails, first class postage prepaid, (b) notice by telex,
when telexed against receipt of answerback, or (c) notice by facsimile copy,
when verbal communication of receipt is obtained, except that notices and
communications pursuant to Article II shall not be effective until received.
SECTION 9.03. Setoff and Counterclaim. All payments to be made
by the Originators or the Servicer under this Agreement shall be made free and
clear of any counterclaim, set-off, deduction or other defense, which the
Originators or the Servicer may have against the Buyer, or against each other.
SECTION 9.04. No Waiver; Remedies. No failure on the part of
the Buyer to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder 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.
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SECTION 9.05. Binding Effect; Assignability. (a) This
Agreement shall be binding upon and inure to the benefit of the Originators, the
Buyer and their respective successors and permitted assigns. None of the
Originators may assign its rights and obligations or any interest herein without
the prior written consent of the Buyer. The Buyer may, subject to any
restrictions in the Receivables Purchase Agreement, assign at any time all of
its rights and obligations hereunder and interests herein without the consent of
the Originators. Without limiting the foregoing, the Originators acknowledge the
assignment of Buyer's rights and interests hereunder pursuant to the Receivables
Purchase Agreement and agrees that, subject to the terms set forth in the
Receivables Purchase Agreement, any such assignee of the Buyer (and any further
assignee of such assignee) shall have the right, as the assignee of the Buyer
(or the assignee of such assignee), to enforce the Buyer's rights and remedies
under this Agreement directly against such party (including, without limitation,
the right (i) to appoint a successor Servicer and (ii) to give or withhold any
and all consents, requests, notices, directions, approvals, demands, extensions
or waivers under or with respect to this Agreement or the obligations in respect
of any Originator hereunder to the same extent as the Buyer may do), but without
any obligation on the part of any such assignee to perform any of the
obligations of the Buyer hereunder. Each of the Originators also agrees that it
shall send to the Deal Agent a copy of all notices required or desired to be
given by the Originators to the Buyer hereunder.
SECTION 9.06. Term of this Agreement. This Agreement,
including, without limitation, the Originators' obligations to observe its
covenants set forth in Articles V and VI, and the Servicer's obligation to
observe its covenants set forth in Article VI, shall remain in full force and
effect until the Collection Date; provided, however, that the rights and
remedies with respect to any breach of any representation and warranty made or
deemed made by OutSource International or the Originators pursuant to Articles
III and IV, and the indemnification and payment provisions of Article VIII shall
be continuing and shall survive any termination of this Agreement.
SECTION 9.07. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF OBJECTION TO VENUE. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. THE BUYER, THE ORIGINATORS,
AND THE SERVICER EACH HEREBY AGREES TO THE JURISDICTION OF ANY FEDERAL COURT
LOCATED WITHIN THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO HEREBY WAIVES
ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS TO
THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT.
36
<PAGE>
SECTION 9.08. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE BUYER, THE ORIGINATORS AND THE SERVICER EACH WAIVES ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE BETWEEN THE PARTIES HERETO ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN ANY OF
THEM IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL
WITHOUT A JURY.
SECTION 9.09. Costs, Expenses and Taxes. In addition to the
rights of indemnification granted to the Buyer and the Indemnified Parties under
Article VIII hereof, the Originators agree to pay on demand, on a joint and
several basis, all costs and expenses of the Buyer and its assignee incurred in
connection with the preparation, execution, delivery, administration (including
periodic auditing), amendment or modification of, or any waiver or consent
issued in connection with, this Agreement and the other documents to be
delivered hereunder or in connection herewith, including, without limitation,
the reasonable fees and out-of-pocket expenses of counsel for the Buyer and its
assignee with respect thereto, and with respect to advising the Buyer and its
assignee as to its respective rights and remedies under this Agreement and the
other documents to be delivered hereunder or in connection herewith, and all
costs and expenses, if any (including reasonable counsel fees and expenses),
incurred by the Buyer and its assignee in connection with the enforcement of
this Agreement and the other documents to be delivered hereunder or in
connection herewith.
SECTION 9.10. Execution in Counterparts; Severability;
Integration. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, superseding all prior oral or written understandings.
37
<PAGE>
SECTION 9.11. Confidentiality. Except to the extent otherwise
required by applicable laws, rules or regulation, unless the provider thereof
shall otherwise consent in writing, each Originator agrees that it shall (i)
maintain the confidentiality of information obtained as a result of being a
party hereto, to any related documents or to any of the transactions
contemplated hereby or thereby (including, without limitation, the contents of
any summary of indicative terms and conditions with respect to such
transactions, and the provisions of this Agreement and any of the other
Originator Documents) ("Confidential Information") and (ii) not disclose,
deliver or otherwise make available to any third party any part of any such
Confidential Information; provided, however, that the Originators may disclose
any Confidential Information (w) to its legal counsel, auditors and accountants,
(x) as may be required or requested by any governmental authority, regulatory
body or rating agency, (y) subject to a written confidentiality agreement having
terms substantially similar to this Section 9.11, to any financial institution
or other party that extends or is considering the extension of material debt or
equity financing to the applicable Originator or (z) as may be required or
appropriate in response to a court order or in connection with any litigation;
provided further, however, that the Originators shall have no obligation of
confidentiality whatsoever in respect of any information which may be generally
available to the public or becomes available to the public through no fault of
the Buyer.
38
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE ORIGINATORS: OUTSOURCE INTERNATIONAL, INC.
By:/s/ Scott R. Francis
_________________________________
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attention: Scott Francis
Facsimile No.: (954) 418-3365
Telephone No.: (954) 418-6573
OUTSOURCE FRANCHISING, INC.
By: /s/ Scott R. Francis
_________________________________
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attention: Scott Francis
Facsimile No.: (954) 418-3365
Telephone No.: (954) 418-6573
CAPITAL STAFFING FUND, INC.
By: /s/ Scott R. Francis
_________________________________
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attention: Scott Francis
Facsimile No.: (954) 418-3365
Telephone No.: (954) 418-6573
SYNADYNE I, INC.
By:/s/ Scott R. Francis
_________________________________
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attention: Scott Francis
Facsimile No.: (954) 418-3365
Telephone No.: (954) 418-6573
SYNADYNE II, INC.
By:/s/ Scott R. Francis
_________________________________
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attention: Scott Francis
Facsimile No.: (954) 418-3365
Telephone No.: (954) 418-6573
SYNADYNE III, INC.
By:/s/ Scott R. Francis
_________________________________
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attention: Scott Francis
Facsimile No.: (954) 418-3365
Telephone No.: (954) 418-6573
<PAGE>
SYNADYNE IV, INC.
By: /s/ Scott R. Francis
_________________________________
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attention: Scott Francis
Facsimile No.: (954) 418-3365
Telephone No.: (954) 418-6573
SYNADYNE V, INC.
By: /s/ Scott R. Francis
_________________________________
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attention: Scott Francis
Facsimile No.: (954) 418-3365
Telephone No.: (954) 418-6573
OUTSOURCE INTERNATIONAL
OF AMERICA, INC.
By: /s/ Scott R. Francis
_________________________________
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attention: Scott Francis
Facsimile No.: (954) 418-3365
Telephone No.: (954) 418-6573
Signature Page to the Receivables
Purchase and Sale Agreement
<PAGE>
THE BUYER: OUTSOURCE FUNDING CORPORATION
By: /s/ Joseph C. Wasch
_________________________________
Name: Joseph C. Wasch
Title: Vice President
1144 E. Newport Center Drive
Suite 2A
Deerfield Beach, Florida 33442
Attention: Scott Francis
Facsimile No.: (954) 418-3365
Telephone No.: (954) 418-6573
THE SERVICER: OUTSOURSE INTERNATIONAL, INC.
By: /s/ Scott R. Francis
_________________________________
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attention: Scott Francis
Facsimile No.: (954) 418-3365
Telephone No.: (954) 418-6573
Signature Page to the Receivables
Purchase and Sale Agreement
<PAGE>
SCHEDULE I
CONDITION PRECEDENT DOCUMENTS
As required by Section 3.01 of the Agreement, each of the
following items must be delivered to the Buyer prior to the Closing Date:
(a) a copy of this Agreement duly executed by each of the
Originators, the Servicer and the Buyer;
(b) a certificate of the Secretary or Assistant Secretary of
each Originator dated the date of this Agreement, certifying (i) the names and
true signatures of the incumbent officers of each of the Originators authorized
to sign this Agreement and the other Originator Documents to be delivered by it
hereunder, (ii) that the copy of the certificate of incorporation of each of the
Originators attached thereto is a complete and correct copy and that such
certificate of incorporation has not been amended, modified or supplemented and
is in full force and effect, (iii) that the copy of the by-laws of each of the
Originators attached thereto is a complete and correct copy and that such
by-laws have not been amended, modified or supplemented and are in full force
and effect, and (iv) the resolutions of each Originator's board of directors
approving and authorizing the execution, delivery and performance by each of the
Originators of this Agreement and the other Originator Documents to which it is
a party;
(c) Good standing certificates for each Originator issued by
the Secretaries of State of their respective jurisdiction of incorporation;
(d) Acknowledgment copies of proper financing statements (the
"Facility Financing Statements"), dated a date reasonably near to the Closing
Date, describing the Receivables and Related Security and naming each Originator
as seller of Receivables and Related Security, the Buyer as purchaser, or other,
similar instruments or documents, as may be necessary or, in the opinion of the
Buyer, desirable under the UCC of all appropriate jurisdictions or any
comparable law to perfect the Buyer=s interests in all Receivables and Related
Security and other Transferred Assets;
(e) Acknowledgment copies of proper financing statements, if
any, necessary to release all security interests and other rights of any Person
in the Receivables and Related Security previously granted by any Originator;
(f) Certified copies of requests for information or copies (or
a similar search report certified by a party acceptable to the Buyer), dated a
date reasonably near to the Closing Date, listing all effective financing
statements (including the Facility Financing Statements) which name any
Originator and/or OutSource International (under their present names and any
previous names) as debtor and which are filed in the jurisdictions in which the
Facility Financing Statements were filed, together with copies of such financing
statements (none of which, other than the Facility Financing Statements, shall
cover any Receivables or Contracts except to the extent permitted under the
Intercreditor Agreement);
<PAGE>
(g) Executed copies of Lock-Box Agreements with each of the
Lock-Box Banks and an executed copy of the Collection Account Agreement with the
Collection Account Bank;
(h) An opinion of Shutts & Bowen, counsel to the Originators
relating to the issues of substantive consolidation and true sale of the
Receivables and the related property, in form and substance satisfactory to the
Buyer;
(i) An opinion of Shutts & Bowen, counsel to the Originators,
issued in connection with this Agreement and relating to corporate issues,
perfection and priority of security interests, in substantially the form of
Exhibit D, and as to such other matters as the Buyer may reasonably request;
(j) Original copies of the Receivables Purchase Agreement and
all documents described in Section 3.01 of the Receivables Purchase Agreement
and not otherwise described above;
(k) A fully and correctly completed Asset Report, as of the
last day of the most recently concluded Collection Period and a fully and
correctly completed Weekly Settlement Report as of the most recent Business Day;
and
(l) The Intercreditor Agreement executed by all parties
thereto.
<PAGE>
SCHEDULE II
DESCRIPTION OF CREDIT AND COLLECTION POLICY
Attached.
---------
<PAGE>
SCHEDULE III
LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
Lock-Box Bank:
- --------------
LaSalle National Bank
135 South LaSalle Street
Chicago, Illinois 60603
Title of Account Account No. Lock-box No.
- ---------------- ---------- ------------
OutSource International, Inc. 5800103110 [__________]
Capital Staffing Fund, Inc. 5800103128 [__________]
<PAGE>
SCHEDULE IV
TRADENAMES, FICTITIOUS NAMES AND "DOING BUSINESS AS" NAMES
OutSource International, Inc.:
- ------------------------------
None
OutSource Franchising, Inc.:
- ----------------------------
None
Capital Staffing Fund, Inc.:
- ----------------------------
None
Synadyne I, Inc.:
- -----------------
Synadyne
Synadyne II, Inc.:
- ------------------
Synadyne
Synadyne III, Inc.:
- -------------------
Labor World
Payroll Partners
Synadyne
Synadyne IV, Inc.:
- ------------------
Synadyne
Synadyne V, Inc.:
- -----------------
Synadyne
OutSource International of America, Inc.:
- -----------------------------------------
Labor Quick
Labor World
Office Network
Office Ours
Senior Achievement
Tandem
<PAGE>
SCHEDULE V
LIST OF FRANCHISEES AS OF CLOSING DATE
[List of Franchisees]
<PAGE>
EXHIBIT A
FORM OF CONTRACTS
Attached.
---------
<PAGE>
EXHIBIT B
FORM OF LOCK-BOX AGREEMENT
____________, 19__
[Name and Address of
Lock-Box Bank]
Re: OutSource International, Inc.
Lock-Box Account No. [___________]
(the "Lock-Box Account")
Ladies and Gentlemen:
The undersigned, OutSource International, Inc. ("OutSource
International") hereby notifies you that we have transferred exclusive ownership
and control of the above-referenced Lock-Box Account to OutSource Funding
Corporation, a Delaware corporation, and that OutSource Funding Corporation (the
"Seller"), in connection with certain purchase and financing arrangements
between the Seller and EagleFunding Capital Corporation (the "Purchaser"),
hereby transfers exclusive ownership and control of the above-referenced
Lock-Box Account to BancBoston Securities Inc., acting in its capacity as deal
agent (the "Deal Agent") for itself and for the Purchaser under that certain
Receivables Purchase Agreement dated as of July 27, 1998 (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the
"Receivables Purchase Agreement") by and among the Seller, the Purchaser, the
Deal Agent and OutSource International, as Servicer thereunder (in such
capacity, the "Servicer").
In connection with the foregoing, OutSource International, the
Seller and the Deal Agent each hereby instructs you, beginning on the date
hereof and in accordance with your existing procedures for management of the
Lock-Box Account, (i) to change the name of the Lock-Box Account to BancBoston
Securities Inc., as Deal Agent for OutSource Funding Securitization, (ii) to
collect and deposit into the Lock-Box Account all monies, checks, instruments
and other items of payment received in the related lock-box (the "Lock-Box") and
(iii) to transfer to the Deal Agent an amount equal to all monies, checks,
instruments and other items of payment deposited in the Lock-Box Account on a
daily basis. All such transfers shall be made on a daily basis by depository
transfer check (DTC), automated clearing house (ACH) transfer, or wire or
otherwise, as the Deal Agent may direct you in its sole discretion, to the
following account (the "Collection Account"):
<PAGE>
BankBoston, N.A.
Account No: 56391332
Reference: BancBoston Securities Inc.
Collection Account, as Deal Agent for
OutSource Funding Securitization
or to such other account as the Deal Agent may instruct from time to time.
You are hereby further instructed, unless and until the Deal
Agent notifies you of the occurrence of a "Servicer Termination Event" under and
as defined in the Receivables Purchase Agreement, (i) to make transfers to the
Collection Account at such times and in such manner as OutSource International,
Inc., in its capacity as servicer (the "Servicer") for the Seller, shall from
time to time instruct; provided, however, that in no case shall OutSource
International, the Servicer or the Seller be allowed to withdraw funds from the
Lock-Box Account or have access to the Lock-Box, and (ii) to permit the Servicer
to obtain upon request any information relating to the Lock-Box Account or
Lock-Box, including, without limitation, any information regarding the balance
or activity of the Lock-Box Account or Lock-Box.
The Seller and OutSource International also each hereby
notifies you that the Deal Agent shall be irrevocably entitled to exercise any
and all rights (if any) of OutSource International and the Seller in respect of
or in connection with the Lock-Box Account, including, without limitation, the
right to specify when payments are to be made out of or in connection with the
Lock-Box Account. All monies in the Lock-Box Account will be held for and in
trust for the Deal Agent upon deposit therein and neither OutSource
International nor the Seller will have any control over the Lock-Box Account or
the funds on deposit therein. Without limiting the generality of the foregoing,
neither OutSource International nor the Seller shall have any right to draw
against the Lock-Box Account, direct the transfer of funds therein or otherwise
assign, pledge or have access to the Lock-Box Account or the funds on deposit
therein.
You will have no duty to inquire into the source or use of any
monies, checks, drafts, instruments or other items or amounts deposited into the
Lock-Box Account. The Seller and OutSource International each hereby agrees that
any deposits of monies, checks, drafts, instruments or other items into or
withdrawals from the Lock-Box Account now or hereafter directed by the Deal
Agent or the Servicer on behalf of the Deal Agent are authorized by the Seller
and OutSource International, and each of OutSource International and the Seller
acknowledges that it has no right to direct such transfers at any time. You
shall be fully protected in acting on any instruction of the Deal Agent with
respect to the Lock-Box Account without making any inquiry as to the Deal
Agent's authority to give such instruction.
B-2
<PAGE>
Notwithstanding anything herein or elsewhere to the contrary,
you hereby waive any and all rights to bankers liens and rights to deduct from
or set-off against amounts in the Lock-Box Account, except that: (i) in the
event that any checks deposited in the Lock-Box Account are returned unpaid to
you, the amount thereof shall be charged to the Lock-Box Account, and (ii) any
monthly maintenance fees in connection with the Lock-Box Account may also be
charged to the Lock-Box Account. The Seller hereby agrees that if there are
insufficient funds in the Lock-Box Account to cover any such charges to the
Lock-Box Account, then it will pay to you the amount of such deficiency on
demand. In the event the Seller fails to reimburse you as set forth above, you
may so notify the Deal Agent, and the Deal Agent may, but shall have no
obligation to, pay the same.
The use of any such checks or electronic or other means of
funds transfer, together with the resolutions authorizing the same, are intended
to affirm the rights and the interests of the Deal Agent in the Lock-Box Account
and all funds deposited therein and not to derogate therefrom.
The taxpayer identification number associated with the
Lock-Box Account shall be that of the Seller and the Seller will report for
federal, state and local income tax purposes the income, if any, earned on funds
in the Lock-Box Account.
This letter agreement may not be terminated at any time by
OutSource International or the Seller, but may be terminated by either you or
the Deal Agent upon 30 days' prior written notice to the other and to the
undersigned.
You will not assign or transfer your rights or obligations
hereunder (other than to the Deal Agent) without the prior written consent of
the other parties hereto. Subject to the preceding sentence, this letter
agreement shall inure to the benefit of and be binding upon all parties hereto
and their respective successors and assigns.
Any change, amendment, modification or waiver of this letter
agreement or any provision hereof will not be effective unless such change,
amendment, modification or waiver is in writing and signed by all parties
hereto.
All notices, demands, instructions and other communications
required or permitted to be given to or made upon any party hereto shall be
effective if communicated in writing and personally delivered or sent by
registered, certified, express or regular mail, postage prepaid, return receipt
requested, or by telex, telecopy (receipt promptly confirmed by telephone) or
prepaid telegram (with messenger delivery specified in the case of a telegram)
or by telephone (promptly confirmed in writing) and shall be deemed to be given
for purposes of this letter agreement on the day that such communication is
delivered to the intended recipient thereof in accordance with the provisions of
this paragraph. Unless otherwise specified in a notice sent or delivered in
accordance with the foregoing provisions of this paragraph, notices, demands,
instructions and other communications shall be given to or made upon the
respective parties hereto at their respective addresses (or to their respective
telex, telecopy or telephone numbers) indicated below, or at such other address
as any party hereto may notify to the other parties in accordance with the
provisions of this paragraph.
All bank statements on the Lock-Box Account should be sent to the
Seller at:
OutSource Funding Corporation
1144 E. Newport Center Drive
Suite 2A
Deerfield Beach, Florida 33442
Attn: Scott Francis
B-3
<PAGE>
With a copy to the Deal Agent at:
BancBoston Securities Inc.
100 Federal Street
Boston, MA 02110
Attn: Adam Cohen
Each of OutSource International and the Seller consents and
agrees to the foregoing, authorizes you to enter into this letter agreement, and
agrees to indemnify and hold you harmless from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses and liabilities of every nature and character arising out of your
compliance with the terms of this letter agreement, except such as result from
your gross negligence or willful misconduct, and in no event shall you be liable
for any consequential, indirect or special damages and except that losses for
uncollected checks shall be the responsibility of the Seller to the extent not
set-off against other funds in the Lock-Box Account.
You and each of the parties hereto (other than the Seller)
hereby agree (which agreement shall, pursuant to the terms of this letter
agreement, be binding upon its successors and assigns) that you and each of the
parties hereto shall not institute against, or join any other Person in
instituting against the Seller any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any federal or
state bankruptcy or similar law, for one year and a day after the payment in
full of all of the indebtedness of the Seller and the termination of any of the
commitments under each of the "Facility Documents", as such term is defined
under the Receivables Purchase Agreement. The provisions of this paragraph shall
survive the termination of this letter agreement.
This letter agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts and
applicable federal law.
This letter agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original and all of
which when taken together shall constitute one and the same instrument.
This letter agreement constitutes the entire agreement between
the parties hereto relating to the Lock-Box Account and the other matters herein
described and supersedes any and all prior agreements relating to such matters.
[Remainder of Page Intentionally Left Blank]
B-4
<PAGE>
Please agree to the terms of, and acknowledge receipt of, this
notice by signing in the space provided below.
Very truly yours,
OUTSOURCE INTERNATIONAL, INC.
By:________________________________
Name:
Title:
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attn: Scott Francis
Telephone: (954) 418-6573
Telecopy: (954) 418-3365
OUTSOURCE FUNDING CORPORATION
By:________________________________
Name:
Title:
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attn: Scott Francis
Telephone: (954) 418-6573
Telecopy: (954) 418-3365
BANCBOSTON SECURITIES INC.,
as Deal Agent
By:________________________________
Name:
Title:
100 Federal Street
Boston, MA 02110
Attn: Adam Cohen
Telephone: (617) 434-4301
Telecopy: (617) 434-1533
B-5
<PAGE>
Accepted this __th day
of ___________, 19__
[NAME OF BANK]
By:________________________________
Name:
Title:
[Address]
Attn: [______________]
Telephone: [(___) ________]
Telecopy: [(___) ________]
B-6
<PAGE>
EXHIBIT C
FORM OF ASSET REPORT
Attached.
---------
<PAGE>
EXHIBIT D
FORM OF OPINION OF COUNSEL FOR THE ORIGINATORS
Attached.
---------
<PAGE>
EXHIBIT E
FORM OF ORIGINATOR NOTE
Attached.
---------
<PAGE>
EXHIBIT E
FORM OF
OUTSOURCE FUNDING CORPORATION
NON-NEGOTIABLE SUBORDINATED PROMISSORY NOTE
[Date]
THIS NON-NEGOTIABLE SUBORDINATED PROMISSORY NOTE AND ANY
INTEREST REPRESENTED HEREBY SHALL NOT BE TRANSFERRED,
ASSIGNED, EXCHANGED, CONVEYED, PLEDGED, HYPOTHECATED, OR
OTHERWISE THE SUBJECT OF A GRANT OF A SECURITY INTEREST,
ABSENT THE PRIOR WRITTEN CONSENT OF THE HOLDER AND THE DEAL
AGENT, AND ANY ATTEMPT TO TRANSFER, ASSIGN, CONVEY, PLEDGE,
HYPOTHECATE OR GRANT A SECURITY INTEREST IN THIS NOTE OR ANY
INTEREST REPRESENTED HEREBY, EXCEPT WITH THE PRIOR WRITTEN
CONSENT OF THE HOLDER AND THE AGENT, SHALL BE VOID AND OF NO
EFFECT.
OUTSOURCE FUNDING CORPORATION (the "Issuer"), for value
received, hereby promises to pay to [INSERT APPLICABLE ORIGINATOR] (the
"Holder"), or its permitted assigns, at its address for payments set forth in
the Originator Sale Agreement hereinafter referred to, an amount equal to the
aggregate principal amount of the Originator Loans, as calculated under the
Originator Sale Agreement from time to time (which amount shall be equal to the
Purchase Price of the Purchase made on or about July 27, 1998 minus the amount
of cash paid to the Holder on the date of such Purchase pursuant to Section
2.02(a) of the Originator Sale Agreement minus the amount of the Purchase Price
of the Purchase paid by way of a capital contribution under Section 2.01(c) of
the Originator Sale Agreement, upon the date occurring one year and one day
after the occurrence of the Collection Date (the "Final Payment Date"), unless
earlier prepaid pursuant to the provisions for repayment referred to herein, to
the extent permitted under the terms of the Originator Sale Agreement, and to
pay interest (computed on the basis of a 360-day year and the actual number of
days in each calendar year) on the unpaid principal sum, at a variable interest
rate per annum equal to the Base Rate, from the date such principal sum is
advanced, such interest being payable on (a) August 15, 1998, and on each
Settlement Date thereafter and (b) on the earlier of (1) the date of prepayment
and (2) the Final Payment Date, until the principal hereof is paid in full. The
Holder shall enter on the grid attached hereto, as Attachment A, information
reflecting the date and the amount of any payments made hereon.
Payments of the principal of and interest on this
Non-negotiable Subordinated Promissory Note (the "Note") will be made in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts by check
E-1
<PAGE>
mailed to, or wire transfer in federal funds to the account of, the Holder as
directed by the Holder. If any payment on this Note shall remain unpaid on the
due date thereof, the same shall thereafter be payable with interest thereon (to
the extent permitted by law) at a variable rate equal to 2% per annum above the
Base Rate, from such due date to the date of payment thereof.
This Note is issued under the Receivables Purchase and Sale
Agreement dated as of July 27, 1998, among OutSource International, Inc.
("OutSource International"), Capital Staffing Fund, Inc., OutSource Franchising,
Inc., Synadyne I, Inc., Synadyne II, Inc., Synadyne III, Inc., Synadyne IV,
Inc., Synadyne V, Inc., and OutSource International of America, Inc., as the
originators, OutSource International, as the "Servicer" thereunder, and the
Issuer (as amended, restated, supplemented or otherwise modified from time to
time, the "Originator Sale Agreement"), and is an "Originator Note" described
in, and is subject to the terms and conditions set forth in, the Originator Sale
Agreement. This Note represents all or a portion of the Purchase Price for
Receivables purchased by the Issuer from the Holder pursuant to the terms of the
Originator Sale Agreement. Each capitalized term utilized herein which is
defined in the Originator Sale Agreement shall have the meaning ascribed to such
term in the Originator Sale Agreement.
This Note is subject to prepayment in full or in part at the
option of the Issuer at any time upon three Business Days' prior notice to the
Holder, without a premium, subject in all events to the terms of the Originator
Sale Agreement.
This Note is subordinate and junior in right and time of
payment to all obligations and required payments or deposits of the Issuer in
favor of EagleFunding Capital Corporation ("EagleFunding") and/or BancBoston
Securities Inc. (as the "Deal Agent" for and on behalf of EagleFunding and its
assignees) (collectively, together with their respective successors and
assignees, the "Senior Claimants"), howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter, or due or
to become due on or before the Final Payment Date (collectively, the "Senior
Issuer Claims"), pursuant to the following subordination provisions (the
"Subordination Provisions"):
E-2
<PAGE>
(A) The Holder agrees upon any distribution of all or
any of the assets of the Issuer to creditors of the Issuer upon the dissolution,
winding up, total or partial liquidation, arrangement, reorganization,
adjustment protection, relief, or composition of the Issuer or its debts, any
payment or distribution of any kind in respect of this Note (including, without
limitation, cash, property, securities and any payment or distribution which may
be payable or deliverable by reason of the payment of any other Debt of the
Issuer being subordinated to the payment of this Note) that otherwise would be
payable or deliverable upon or with respect to this Note, directly or
indirectly, by set-off or in any other manner, including, without limitation,
from or by way of liquidation of the Transferred Assets, shall be paid or
delivered directly to the Deal Agent for application (in the case of cash) to,
or as Related Security or Collections on, the Transferred Assets, for the
payment or prepayment in full of all amounts payable under the Senior Issuer
Claims, until all of the Senior Issuer Claims shall have been indefeasibly paid
in full in cash. BancBoston Securities Inc. as the Deal Agent, is irrevocably
authorized and empowered (in its own name or in the name of the Holder or
otherwise), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution referred to in the preceding sentence and
give acquittance therefor and to file claims and proofs of claim and take such
other action (including, without limitation, voting this Note and enforcing any
security interest or other lien securing payment of this Note) as the Deal Agent
may request to (i) collect this Note for the account of itself and the other
Senior Claimants and to file appropriate claims or proofs of claim in respect of
this Note, (ii) execute and deliver to the Deal Agent such powers of attorney,
assignments or other instruments as the Deal Agent may request in order to
enable the Deal Agent to enforce any and all claims with respect to, and any
security interest and other liens securing payment of, this Note, and (iii)
collect and receive any and all payments or distribution which may be payable or
deliverable upon or with respect to this Note.
(B) All payments or distributions upon or with respect to this
Note that are received by the Holder contrary to the provisions of this Note,
any of the Originator Sale Agreement, the Receivables Purchase Agreement, the
Intercreditor Agreement or the Lock-Box Agreement, or any of the other
documents, agreements and instruments entered into in connection therewith and
the transactions contemplated thereby (collectively, the "Facility Documents")
shall be received in trust for the benefit of the Senior Claimants, shall be
segregated from other funds and property held by the Holder and shall be
forthwith paid over to the Deal Agent in the same form as so received (with any
necessary endorsement) to be applied (in the case of cash) to, or held as
Related Security or Collections (in the case of non-cash property) for the
payment or prepayment in full of the Senior Issuer Claims until the Senior
Issuer Claims shall have been indefeasibly paid in full in cash. The Holder
agrees that no payment or distribution to any of the Senior Claimants pursuant
to the provisions of this Note shall entitle the Holder to exercise any rights
of subrogation in respect thereof against the Issuer until the Senior Issuer
Claims shall have been indefeasibly paid in full and in cash. The Holder and the
Issuer hereby waive promptness, diligence, notice of acceptance and any other
notice with respect to any of the Senior Issuer Claims and any requirement that
the Deal Agent or any other Person protect, secure, perfect or insure any
security interest or lien on any property subject thereto or exhaust any right
or take any action against the Issuer or any other Person or any assets or
property.
(C) The Holder agrees and confirms that none of the Senior
Claimants (including, without limitation, the Deal Agent) shall have any duty
whatsoever to the Holder as holder of this Note and that none of the Senior
Claimants shall be liable to the Holder for any action taken or omitted, to the
extent authorized under the terms of any Facility Document, with respect to this
Note.
(D) Prior to the indefeasible payment in full and in cash of
all of the Senior Issuer Claims, the Holder will not seek to collect, ask,
demand, sue for or take or receive from the Issuer in cash or other property, by
set-off or in any other manner, any amounts owing under this Note in any manner,
or exercise or enforce any of its rights under this Note.
(E) The Holder and the Issuer agree that at no time
hereafter will any part of the
indebtedness represented by this Note be represented by any negotiable
instruments or other writings except this Note.
E-3
<PAGE>
(F) The Holder and the Issuer waive notice of and consent to
the creation of additional Senior Issuer Claims from time to time pursuant to
the other Facility Documents, and any other obligation, any extensions granted
by any of the Senior Claimants with respect thereto, the taking or releasing of
collateral or any obligors or guarantors for the payment thereof, and the
releasing of the Holder or any other subordinating creditors. No failure or
delay by any of the Senior Claimants to exercise any right granted herein, or in
any other agreement or bylaw shall constitute a waiver of such right or of any
other right.
(G) The Holder and the Issuer agree to execute and deliver to
any of the Senior Claimants, such additional documents, and to take such further
actions as any of such Senior Claimants may hereafter reasonably require to
evidence the subordination of this Note.
(H) The terms of this Note and the subordination
effected hereby and the rights of the
Senior Claimants, and the obligations of the Holder and the Issuer arising
hereunder and under the Originator Sale Agreement, shall not be affected,
modified or impaired in any manner or to any extent by (i) any amendment or
modification of or supplement to any provision of any Facility Document, or any
instrument or document executed or delivered pursuant thereto or in connection
with the transactions contemplated thereby; (ii) the validity or enforceability
of any of such documents; (iii) any exercise or non-exercise of any right, power
or remedy under or in respect of any of the Issuer or the Senior Issuer Claims
or any agreements, instruments or documents related thereto or arising at law or
equity; or (iv) any waiver, consent release, indulgence, extension, renewal,
modification, delay or other action, inaction, or omission in respect of the
Issuer, the Senior Issuer Claims or any of the instruments, documents or
agreements related thereto.
(I) All payments of principal, interest and all other amounts
payable in respect of the Senior Issuer Claims must be paid before any portion
of the principal amount of this Note may be paid or prepaid. All payments of
principal, interest and all other amounts then due and payable in respect of the
Senior Issuer Claims must be paid before any portion of the accrued interest on
this Note may be paid on any day. All scheduled payments of principal and
interest then due on this Note shall be payable only to the extent that the
Issuer has available funds to make such payments, and is permitted to make such
payments under the Facility Documents (including, without limitation, the
Originator Sale Agreement).
The Holder, and any assignee of the Holder, by accepting this
Note, hereby agrees to the Subordination Provisions. Neither this Note nor any
right of the Holder to receive any payment thereunder, shall be assigned,
transferred, exchanged, pledged, hypothecated, participated or otherwise
conveyed; provided, however, that the Holder may pledge or otherwise transfer
this Note with the prior written consent of the Issuer and the Deal Agent;
provided, further, that any assignee of this Note shall be bound by all of the
terms applicable to this Note set forth in the Facility Documents.
The Holder of this Note and any of its assignees, by its
acceptance hereof, hereby covenants and agrees that it will not at any time
institute against the Issuer, or join any other Person in instituting against
the Issuer, any proceedings of the type referred to in clause (i) of Section
7.01(f) of the Originator Sale Agreement, or take any corporate action in
furtherance of any such action.
This Note shall be governed by, and construed in accordance
with, the laws of the State of New York.
E-4
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be duly executed manually by its undersigned officer duly authorized thereunto.
Dated: [Date]
OUTSOURCE FUNDING CORPORATION
By: _________________________
Name:
Title:
E-5
<PAGE>
EXHIBIT F
FORM OF FRANCHISE AGREEMENT
Attached.
---------
===================================
U.S. $50,000,000
RECEIVABLES PURCHASE AGREEMENT
Dated as of July 27, 1998
Among
OUTSOURCE FUNDING CORPORATION,
as the Seller
-------------
and
EAGLEFUNDING CAPITAL CORPORATION,
as the Purchaser
----------------
and
BANCBOSTON SECURITIES INC.,
as the Deal Agent
-----------------
and
OUTSOURCE INTERNATIONAL, INC.,
as the Servicer
---------------
===================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
ARTICLE I DEFINITIONS
<S> <C> <C>
SECTION 1.01. Certain Defined Terms.....................................................................2
SECTION 1.02. Other Terms..............................................................................22
SECTION 1.03. Computation of Time Periods..............................................................22
ARTICLE II THE PURCHASE FACILITY
SECTION 2.01. Purchases of Purchased Interests; Stop Events............................................22
SECTION 2.02. The Initial Purchase, Subsequent Purchases and Capital Increases.........................23
SECTION 2.03. Termination or Reduction of the Purchase Limit...........................................24
SECTION 2.04. Selection of Purchase Periods............................................................24
SECTION 2.05. Non-Liquidation Settlement Procedures....................................................25
SECTION 2.06. Liquidation Settlement Procedures........................................................26
SECTION 2.07. Special Settlement Procedures............................................................27
SECTION 2.08. Payments and Computations, Etc...........................................................28
SECTION 2.09. Fees.....................................................................................29
SECTION 2.10. Increased Costs; Capital Adequacy; Illegality............................................29
SECTION 2.11. Taxes....................................................................................31
SECTION 2.12. Assignment of the Originator Sale Agreement..............................................32
ARTICLE III CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial Purchase.................................................32
SECTION 3.02. Conditions Precedent to All Purchases and Remittances of Collections.....................32
ARTICLE IV REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Seller.............................................34
ARTICLE V GENERAL COVENANTS OF THE SELLER
SECTION 5.01. General Covenants........................................................................38
i
<PAGE>
ARTICLE VI ADMINISTRATION, COLLECTION AND MONITORING OF ASSETS
SECTION 6.01. Appointment and Designation of the Servicer..............................................45
SECTION 6.02. Collection of Receivables by the Servicer; Extensions and Amendments of Receivables......46
SECTION 6.03. Distribution and Application of Collections..............................................46
SECTION 6.04. Other Rights of the Deal Agent...........................................................46
SECTION 6.05. Records; Audits..........................................................................47
SECTION 6.06. Receivable Reporting.....................................................................47
SECTION 6.07. Collections and Lock-Boxes...............................................................48
SECTION 6.08. UCC Matters; Protection and Perfection of Purchased Property.............................48
SECTION 6.09. Obligations of the Seller With Respect to Receivables....................................49
SECTION 6.10. Applications of Collections..............................................................50
SECTION 6.11. Annual Servicing Report of Independent Public Accountants................................50
ARTICLE VII EVENTS OF TERMINATION
SECTION 7.01. Events of Termination....................................................................50
ARTICLE VIII INDEMNIFICATION
SECTION 8.01. Indemnities by the Seller................................................................53
SECTION 8.02. Optional Repurchases of Purchased Interest...............................................55
ARTICLE IX THE DEAL AGENT
SECTION 9.01. Authorization and Action.................................................................57
SECTION 9.02. Deal Agent's Reliance, Etc...............................................................57
SECTION 9.03. Deal Agent and Affiliates................................................................58
SECTION 9.04. [Reserved]...............................................................................58
SECTION 9.05. Resignation of the Deal Agent............................................................58
SECTION 9.06. Payments.................................................................................58
ARTICLE X MISCELLANEOUS
SECTION 10.01. Amendments and Waivers..................................................................59
SECTION 10.02. Notices, Etc............................................................................59
SECTION 10.03 Setoff and Counterclaim..................................................................59
SECTION 10.04. No Waiver; Remedies.....................................................................60
SECTION 10.05. Binding Effect; Assignability...........................................................60
SECTION 10.06. Term of this Agreement..................................................................60
SECTION 10.07. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF OBJECTION TO VENUE....................60
SECTION 10.08. WAIVER OF JURY TRIAL....................................................................61
SECTION 10.09. Costs, Expenses and Taxes...............................................................61
SECTION 10.10. No Proceedings..........................................................................62
SECTION 10.11. Recourse Against Certain Parties........................................................62
SECTION 10.12. Execution in Counterparts; Severability; Integration....................................62
SECTION 10.13. Confidentiality.........................................................................63
</TABLE>
ii
<PAGE>
SCHEDULES
- ---------
Schedule I -- Condition Precedent Documents
Schedule II -- Description of Credit and Collection Policy
Schedule III -- Lock-Box Banks and Lock-Box Accounts
Schedule IV -- Tradenames, Fictitious Names and "Doing Business As"
Names
Schedule V -- List of Franchisees as of Closing Date
EXHIBITS
- --------
Exhibit A -- Form of Contracts
Exhibit B -- Form of Lock-Box Agreements
Exhibit C -- Form of Asset Report
Exhibit D -- Form of Opinion of Counsel for the Seller
Exhibit E -- Seller's Certificate of Incorporation
Exhibit F -- Form of Franchise Agreement
iii
<PAGE>
THIS RECEIVABLES PURCHASE AGREEMENT (the "Agreement") is made
as of July 27, 1998, among:
(1) OUTSOURCE FUNDING CORPORATION, a Delaware corporation
(the "Seller");
(2) EAGLEFUNDING CAPITAL CORPORATION, a Delaware corporation
("EagleFunding");
(3) BANCBOSTON SECURITIES INC. ("BSI"), as agent (the "Deal
Agent"); and
(4) OUTSOURCE INTERNATIONAL, INC., a Florida corporation
("OutSource International"), in its capacity as the initial
Servicer hereunder (in such capacity, the "Servicer").
IT IS AGREED as follows:
ARTICLE I
---------
DEFINITIONS
-----------
SECTION 1.01. Certain Defined Terms. (a) Certain capitalized
terms used throughout this Agreement are defined above or in this Section 1.01.
(b) As used in this Agreement and its exhibits, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Adjusted Base Rate" means, at any time, the rate of interest
equal to the sum of (a) the Applicable Base Rate Margin and (b) the Base Rate in
effect at such time and from time to time.
"Adjusted Eurodollar Rate" means, with respect to any Purchase
Period for all Capital allocated to such Purchase Period, an interest rate per
annum equal to the sum of
(a) a per annum rate equal to the Applicable Eurodollar
Margin; plus
(b) the quotient, stated as a percentage, of (i) the per annum
rate determined by the Deal Agent at which Dollar deposits for such Purchase
Period are offered by BankBoston, N.A. based on information presented on
Telerate Page 3750 as of 11:00 a.m. London time on the second Business Day prior
to the first day of such Purchase Period, divided by (ii) a number equal to 1.00
minus the Eurodollar Reserve Percentage, if applicable.
2
<PAGE>
"Administrative Fee" means the fee payable by the Seller to
the Deal Agent annually in advance on the Closing Date and on each anniversary
of the Closing Date, and identified as the "Administrative Fee" in the Fee
Letter. If a Termination Date occurs prior to July 27, 2003 for any reason other
than (i) the date of the declaration or automatic occurrence of the Termination
Date pursuant to Section 7.01, or (ii) as the result of the occurrence of a
Reinvestment Termination Date resulting from the failure of the condition
precedent of Section 3.02 to be satisfied, the Deal Agent shall be required to
refund to the Seller the unearned portion of the Administrative Fee (calculated
based on a year of 365 or 366 days, as the case may be, and the actual number of
days elapsed from the Closing Date (or such anniversary) to such Termination
Date.
"Administrative Services and Lease Agreement" means that
certain Administrative Services and Lease Agreement dated as of July 27, 1998 by
and between OutSource International and the Seller.
"Adverse Claim" means a lien, security interest, charge,
encumbrance or other right or claim of any Person having the practical effect of
a lien, security interest, charge or encumbrance.
"Affected Party" has the meaning assigned to that term in
Section 2.10(a).
"Affiliate" when used with respect to a Person means any other
Person controlling, controlled by or under common control with such Person. For
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract, or otherwise; and the terms "controlling" and "controlled" have the
meanings correlative to the foregoing.
"Aggregate Reserves" means, on any day, the greater of (a) the
sum of the Dilution Reserve, the Loss Reserve and the Yield Reserve, in each
case as in effect on such day, and (b) the product of (i) a fraction, the
numerator of which is 0.15 and the denominator of which is the remainder of 1.0
minus 0.15, multiplied by (ii) the aggregate amount of Capital outstanding on
such day.
"Alternative Rate" means, with respect to any Purchase Period
for all Capital allocated to such Purchase Period, an interest rate per annum
equal to the Adjusted Eurodollar Rate or the Adjusted Base Rate as the Seller
shall select by notice to the Deal Agent in accordance with the terms of this
Agreement; provided, however, that the "Alternative Rate" for such Capital
allocated to such Purchase Period shall be the Adjusted Base Rate if (a) on or
before the first day of such Purchase Period, the Purchaser shall have notified
the Deal Agent that a Eurodollar Disruption Event has occurred, (b) such
Purchase Period is a period of 29 days or less, or (c) such Capital is less than
$1,000,000.
3
<PAGE>
"Applicable Base Rate Margin" means the "Applicable Margin" as
such term is defined in the Revolving Credit Agreement applicable to "Base Rate
Loans" thereunder (as such agreement is in effect on the date hereof without
giving effect to any amendments or modifications thereof); provided, however,
that, at all times after the occurrence of a Event of Termination (other than
with respect to an event of the type described in Sections 7.01(l) and 7.01(r)
hereof), the "Applicable Base Rate Margin" means such "Applicable Margin" plus
2.0% per annum.
"Applicable Eurodollar Rate Margin" means the "Applicable
Margin" as such term is defined in the Revolving Credit Agreement applicable to
"Eurodollar Rate Loans" thereunder (as such agreement is in effect on the date
hereof without giving effect to any amendments or modifications thereof);
provided, however, that, at all times after the occurrence of a Event of
Termination (other than with respect to an event of the type described in
Sections 7.01(l) and 7.01(r) hereof), the "Applicable Eurodollar Rate Margin"
means such "Applicable Margin" plus 2.0% per annum.
"Asset Report" means a report, in substantially the form of
Exhibit C, furnished by the Servicer to the Deal Agent for the Purchaser
pursuant to Section 6.06(b).
"Asset Report Date" means, with respect to any Collection
Period, the tenth day of such Collection Period, or if such date is not a
Business Day, the next Business Day to occur thereafter.
"Assignment and Acceptance" means an assignment and acceptance
pursuant to which the assignee agrees to purchase an interest in the Purchased
Interest and this Agreement from the Purchaser, in form and substance
satisfactory to the Deal Agent and the Seller, entered into by the Purchaser and
such assignee pursuant to Section 10.05.
"Average Maturity" means, on any day, that period (expressed
in days) computed as of the last day of the Collection Period relating to the
Asset Report most recently delivered hereunder, as the average days outstanding
of the Receivables in accordance with the following formula: the quotient of (a)
the Outstanding Balance of Receivables on the first day of such Collection
Period plus the Outstanding Balance of Receivables on the last day of such
Collection Period, divided by two, and then multiplied by 30; divided by (b) the
aggregate amount of the original principal balances of all Receivables which
became Receivables during such Collection Period.
"Bankruptcy Code" means the United States Bankruptcy Reform
Act of 1978 (11 U.S.C. 101, et seq.), as amended from time to time, or any
successor statute.
"Base Rate" means, on any day, a fluctuating rate of interest
per annum equal to the higher of (a) the per annum rate of interest announced
from time to time by BankBoston, N.A. at its head office in Boston,
Massachusetts as its "base rate", and (b) of one percent per annum above the
Federal Funds Rate.
"Benefit Plan" means any employee benefit plan as defined in
Section 3(3) of ERISA in respect of which the Seller or any ERISA Affiliate of
the Seller is, or at any time during the immediately preceding six years was, an
"employer" as defined in Section 3(5) of ERISA.
4
<PAGE>
"Business Day" means a day of the year other than a Saturday
or a Sunday on which (a) banks are required to be open in New York City and
Boston, Massachusetts and (b) if the term "Business Day" is used in connection
with the Adjusted Eurodollar Rate, dealings in dollar deposits are carried on in
the London interbank market.
"Capital" means the sum of the amounts paid to the Seller for
the initial Purchase and in connection with each Capital Increase pursuant to
Section 2.02, reduced from time to time by any amounts paid by the Seller to the
Purchaser as a reduction to Capital and any Collections received and distributed
on account of such Capital pursuant to Section 2.06; provided, however, that
such Capital shall not be reduced by any distribution of any portion of
Collections if at any time such distribution is rescinded or must be returned
for any reason.
"Capital Increase" means any increase in the aggregate
outstanding Capital hereunder pursuant to Sections 2.01 and 2.02.
"Capital Limit" means, at any time, an amount equal to the
remainder of (a) the Eligible Receivables Balance at such time, minus (b) the
Aggregate Reserves at such time.
"Closing Date" means July 27, 1998.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor.
"Collection Account" has the meaning specified in Section
6.07.
"Collection Account Agreement" means that certain Collection
Account Agreement dated as of even date herewith among the Collection Account
Bank, the Servicer, the Purchaser and the Deal Agent
"Collection Account Bank" means the financial institution
maintaining the Collection Account, which initially shall be BankBoston, N.A.
"Collection Date" means the date following the Termination
Date on which the aggregate outstanding Capital has been reduced to zero, the
Purchaser has received all Yield and other amounts due to it in connection with
this Agreement and the Deal Agent has received all amounts due to it in
connection with this Agreement.
"Collection Period" means an accounting period of four or five
weeks as used by the Originators consistent with their present accounting
methods and as set forth in a written calendar to be provided to the Deal Agent
at closing for the remainder of 1998 and to be provided to the Deal Agent on or
prior to December 1st of each year for the immediately succeeding calendar year.
5
<PAGE>
"Collections" means, (a) with respect to any Receivable, all
cash collections and other cash proceeds of such Receivable, including, without
limitation, all cash proceeds of the Related Security with respect to such
Receivable, and any "Collection" of such Receivable deemed to have been received
pursuant to Section 2.07, and (b) any amounts paid to the Seller (or the Deal
Agent, the Servicer, the Purchaser or any assignees thereof) pursuant to the
terms of the Originator Sale Agreement.
"Commercial Paper" means the short-term promissory notes of
EagleFunding denominated in dollars, issued by EagleFunding in connection with
the transactions contemplated by the Facility Documents, including any portion
of such short-term promissory notes that are identified on the books and records
of EagleFunding as issued in respect of the transactions contemplated by the
Facility Documents.
"Concentration Limit" for any Obligor means at any time the
percentage of the aggregate Outstanding Balance of Eligible Receivables in
effect at such time, as follows: (a) for any single Obligor having an
indebtedness rating of at least "A-1" or its equivalent by each of S&P, Moody's
and DCR (if rated by DCR), 12.5%; (b) for any single Obligor having an
indebtedness rating of at least "A-2" or its equivalent by each of S&P, Moody's
and DCR (if rated by DCR) (but not satisfying the criteria set forth in clause
(a) above), 8.0%; (c) for any single Obligor having an indebtedness rating of at
least "A-3" or its equivalent by each of S&P, Moody's and DCR (if rated by DCR)
(but not satisfying the criteria set forth in either of clauses (a) or (b)
above), 4.0%; and (d) any other single Obligor, 2.5%; unless, a "Special
Concentration Limit" has been determined for a particular Obligor by the mutual
agreement of the Deal Agent and the Seller, in which case, such Special
Concentration Limit shall apply; provided, however, the Concentration Limit for
any Obligor shall be calculated as if such Obligor and all of such Obligor's
Affiliates were one single Obligor. Any amendment or modification of the
Concentration Limit and the Special Concentration Limit shall not be effective
absent written confirmation by each Rating Agency then rating the Commercial
Paper at the request of EagleFunding in accordance with Section 10.01(c) of this
Agreement.
"Confidential Information" has the meaning assigned to such
term in Section 10.13.
"Contract" means an invoice issued by an Originator to a
Person, or an agreement between an Originator and a Person, in each case in
substantially the form of one of the forms set forth in Exhibit A or otherwise
reasonably acceptable to the Deal Agent, pursuant to or under which such Obligor
shall be obligated to make one or more payments to an Originator.
"Coverage Shortfall Event" means, at any time, the aggregate
Capital outstanding hereunder exceeds the lesser of (i) the Purchase Limit in
effect at such time or (ii) the Capital Limit in effect at such time.
"CP Dealer Fee" means, on any day, the fees payable to the
Dealer in respect of any Commercial Paper.
6
<PAGE>
"CP Disruption Event" means the inability of EagleFunding, at
any time, whether as a result of a prohibition, a contractual restriction or any
other event or circumstance whatsoever, to raise funds through the issuance of
its commercial paper notes (whether or not constituting "Commercial Paper"
hereunder) in the United States commercial paper market.
"CP Rate" means, with respect to any Purchase Period for all
Capital allocated to such Purchase Period, the interest rate equivalent to the
rate (or if more than one rate, the weighted average of the rates) at which
commercial paper notes of EagleFunding having a term equal to such Purchase
Period and to be issued to fund or maintain the applicable Purchase by
EagleFunding may be sold by any placement agent or commercial paper dealer
selected by EagleFunding, as agreed between each such agent or dealer and
EagleFunding and notified by EagleFunding or such agent or dealer to the Deal
Agent and the Servicer, including an increment to such rate sufficient in amount
to enable EagleFunding to collect all amounts of CP Dealer Fees payable in
respect of all such commercial paper notes issued for the term of such Purchase
Period; provided, however, if the rate (or rates) as agreed between any such
agent or dealer and EagleFunding with regard to any Purchase Period for the
applicable Purchase is a discount rate (or rates), the "CP Rate" for such
Purchase Period shall be the rate (or if more than one rate, the weighted
average of the rates) resulting from converting such discount rate (or rates) to
an interest-bearing equivalent rate per annum.
"Credit and Collection Policy" means those credit and
collection policies and practices relating to Contracts and Receivables
described in Schedule II, as modified in compliance with this Agreement.
"CSF" means Capital Staffing Fund, Inc., a Florida
corporation.
"CSF Advance" means an advance of money by CSF to a
Franchisee.
"DCR" means Duff & Phelps Credit Rating Co., and any successor
thereto.
"Deal Agent's Account" means a special account (account number
24207) in the name of the Deal Agent (or for so long as EagleFunding is the
Purchaser, in the name of EagleFunding), maintained at Bankers Trust Company for
the benefit of the Deal Agent and the Purchaser.
"Dealer" means any dealer or placement agent in respect of the
Commercial Paper.
7
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"Debt" of any Person means (a) indebtedness of such Person for
borrowed money, (b) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) obligations of such Person to pay the
deferred purchase price of property or services beyond ordinary course of
business payment terms for trade payables, (d) obligations of such Person as
lessee under leases which shall have been or should be, in accordance with GAAP,
recorded as capital leases, (e) obligations secured by an Adverse Claim upon
property or assets owned by such Person, even though such Person has not assumed
or become liable for the payment of such obligations and (f) without duplication
obligations of such Person under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (a) through (e) above.
"Default Ratio" means, in respect of any Collection Period,
the arithmetic average of the ratios (each expressed as a percentage) for each
of the three most recently ended Collection Periods, computed as of the last day
of each such Collection Period, by dividing
(a) the aggregate Outstanding Balance of all
Receivables which became Defaulted Receivables as of the last
day of the Collection Period then ended plus (without
duplication) the amount of all Receivables as to which any
payment, or part thereof, remains unpaid for less than 180
days from the original invoice date as of such date and which
were written off the books of the Seller during the Collection
Period then ended, by
(b) the sum of the aggregate dollar amount of all
Contracts generated during the sixth Collection Period next
preceding the Collection Period then ended.
"Defaulted Receivable" means a Receivable (a) as to which any
payment, or part thereof, remains unpaid for more than 150 days from the
original invoice date for such payment, (b) as to which the Obligor thereof has
taken any action, or suffered any event to occur, of the type described in
Section 7.01(f), or (c) which, consistent with the Credit and Collection Policy,
has been or should be written off the Seller's books as uncollectible.
"Delinquency Ratio" means, in respect of any Collection
Period, the arithmetic average of the ratios (each expressed as a percentage)
for each of the three most recently ended Collection Periods, computed as of the
last day of each such Collection Period, by dividing
(a) the aggregate Outstanding Balance of all
Receivables that were Delinquent Receivables as of the last
day of such Collection Period, plus (without duplication) the
amount of all Receivables which, consistent with the Credit
and Collection Policy, were or should have been classified as
Delinquent Receivables by the Seller during such Collection
Period, by
(b) the sum of the aggregate dollar amount of all
Contracts generated during the fifth Collection Period next
preceding the Collection Period then ended.
"Delinquent Receivable" means a Receivable which is not a
Defaulted Receivable and (a) as to which any payment, or part thereof, remains
unpaid for more than 120 days from the original invoice date for such payment,
or (b) which, consistent with the Credit and Collection Policy, has been or
should be classified as delinquent by the Seller.
"Dilution Factors" means, with respect to the Receivables, any
credits, rebates, freight charges, discounts, allowances, disputes, chargebacks,
returned or repossessed goods, inventory transfers, allowances for early
payments and other allowances or adjustments granted in accordance with the
Originators' and the Seller's usual practices.
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"Dilution Ratio" means, with respect of any Collection Period,
the arithmetic average of the ratios (expressed as a percentage) for each of the
three most recently ended Collection Periods, computed as of the last day of
each such Collection Period, by dividing
(a) the aggregate reduction as a result of any of the Dilution
Factors in the aggregate original principal balance of the Receivables
during the Collection Period then ended, by
(b) the sum of the aggregate dollar amount of all Contracts
generated during the Collection Period next preceding the Collection
Period then ended.
"Dilution Reserve" means, at any time, the product of (a) the
aggregate outstanding Capital at such time multiplied by (b) a fraction, the
numerator of which is the Dilution Reserve Percentage in effect at such time and
the denominator of which is the remainder of one minus the sum of the Dilution
Reserve Percentage, the Loss Reserve Percentage and the Yield Reserve
Percentage, each as in effect at such time.
"Dilution Reserve Percentage" means the ratio (expressed as a
percentage) computed as of the last day of each Collection Period as the lesser
of (a) 2.0% and (b) the Dilution Reserve Ratio for such Collection Period.
"Dilution Reserve Ratio" means, in respect of any Collection
Period, the ratio (expressed as a percentage) which is calculated as follows:
DRR = [(2.0 * ADR) + [(HDR-ADR) * (HDR/ADR)]] * DHV
where:
DRR = the Dilution Reserve Ratio;
ADR = the average of the Dilution Ratios during
the period of twelve consecutive Collection
Periods ending prior to such Collection
Period;
HDR = the highest Dilution Ratio for any
Collection Period during the period of
twelve consecutive Collection Periods ending
prior to such Collection Period; and
DHV = a fraction (i) the numerator of which
equals the sum of the aggregate dollar
amount of all Contracts generated during the
Collection Period then ended and (ii) the
denominator of which equals the Eligible
Receivables Balance as of the last day of
the Collection Period then ended.
"Eligible Receivable" means, at any time, a Receivable:
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(a) the Obligor of which is a United States resident, is not
an Affiliate of the Seller, the Servicer or any Originator, and is not
a government or a governmental subdivision or agency; provided,
however, that an otherwise "Eligible Receivable" owed by a Franchisee
of any Originator shall not be excluded under this clause (a) due to
such Franchisee being an Affiliate of such Originator;
(b) which is not a Defaulted Receivable or a Delinquent
Receivable or any other Receivable with respect to which a scheduled
payment or any part thereof remains unpaid for (x) more than 60 days
after the original invoice date therefor for any Receivable originated
by OutSource Franchising and (y) more than 90 days after the original
invoice date therefor for any other Receivable, and the Obligor of
which is not the Obligor of any Delinquent Receivables in the aggregate
amount of 20% or more of the aggregate Outstanding Balance of all
Receivables of such Obligor;
(c) which arises under a Contract (i) the performance of which
has been completed by the applicable Originator and by all other
parties other than the Obligor, (ii) that requires such Receivable to
be paid in full within (x) 60 days of the original invoice date
therefor for any Receivable originated by OutSource Franchising and (y)
90 days of the original invoice date therefor for any other Receivable
and (iii) that has been duly authorized and, together with such
Receivable, is in full force and effect and constitutes the legal,
valid and binding obligation of the Obligor of such Receivable,
enforceable against such Obligor in accordance with its terms and is
not subject to any dispute, offset, counterclaim or defense whatsoever;
(d) (i) which is an "account" (or, in the case of a CSF
Advance, is an "account" or a "general intangible") within the meaning
of Section 9-106 of the UCC of all applicable jurisdictions, (ii) as to
which all performance and other action required to be taken in
connection therewith by such Originator (and, if applicable, the
Seller) for the Obligor has been so performed or taken, (iii) is
denominated and payable only in United States dollars in the United
States, (iv) no portion of which is payable on account of sales taxes,
and (v) in which the applicable Originator can grant a perfected
security interest;
(e) which arises in the ordinary course of the Originators'
business in connection with providing services or the sale of goods
within the United States (or, in the case of a CSF Advance, arises from
the advance of money by CSF to a Franchisee);
(f) the assignment of which (including, without limitation,
the sale of an undivided percentage interest therein and the assignment
of any Related Security) does not contravene or conflict with any
applicable laws, rules or regulations or any contractual or other
restriction, limitation or encumbrance;
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<PAGE>
(g) which does not have an Adverse Claim filed against it and
is not otherwise subject to an Adverse Claim and has not been
compromised, adjusted or modified (including by extension of time of
payment or the granting of any discounts, allowances or credits) except
for discounts, allowances or credits made in accordance with the Credit
and Collection Policy and in the ordinary course of the Originators'
business;
(h) which, together with the Contract related thereto, does
not contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which no party to the
Contract related thereto is in violation of any such law, rule or
regulation in any material respect;
(i) which (i) satisfies, and has been originated in accordance
with, all applicable requirements of the Credit and Collection Policy
and (ii) complies with such other criteria and requirements as the Deal
Agent may, in its reasonable credit judgment, from time to time specify
to the Seller following 60 days' notice;
(j) as to which the Deal Agent has not notified the Seller and
the Servicer that the Deal Agent has determined, in its reasonable
business judgement, that the Obligor of such Receivable is an
unreasonable risk;
(k) the Obligor of which is not a Person to whom any of the
Originators or their Affiliates owe any accounts payable or other Debt
and is otherwise not a Person in respect of which the Originators
maintain any contra accounts on their books and records; provided,
however, that a Receivable which is subject only in part to any of the
foregoing shall constitute an Eligible Receivable to the extent such
Receivable is not subject to an accounts payable, other Debt or contra
account and otherwise satisfies the eligibility criteria set forth
herein;
(l) as to which the Deal Agent has not notified the Seller in
writing that the Deal Agent has determined, in its reasonable business
judgment, that such Receivable (or class of Receivables) is not
acceptable for purchase hereunder; and
(m) with respect to which, (i) prior to the Purchase thereof
by Purchaser, Seller has a first priority ownership interest therein,
free and clear of any Adverse Claim, and (ii) from and after the
Purchase thereof, EagleFunding has a properly perfected first priority
undivided percentage ownership interest therein, free and clear of any
Adverse Claim.
(n) which was not acquired by the applicable Originator
pursuant to a Permitted Acquisition and which does not arise in a line
of business acquired by such Originator as a result of a Permitted
Acquisition unless the Purchaser and the Deal Agent shall, after
conducting such due diligence as they deem necessary, have determined
(in their sole discretion) that such Receivables are acceptable for
Purchase hereunder; provided, however, that Receivables which would
otherwise be eligible but for this clause (n) shall be eligible for
Purchase hereunder so long as the aggregate outstanding amount thereof
at any one time does not exceed 2% of the aggregate Outstanding Balance
of all Receivables at such time.
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<PAGE>
"Eligible Receivables Balance" means, at any time, the
aggregate Outstanding Balance of Eligible Receivables which constitute Purchased
Receivables, minus, in the case of each Obligor, the amount (if any) by which
the aggregate Outstanding Balance of any Eligible Receivables owing by such
Obligor and its Affiliates exceeds the Concentration Limit for such Obligor.
"ERISA" means the U.S. Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means (a) any corporation which is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as the Seller; (b) a partnership or other trade or business
(whether or not incorporated) under common control (within the meaning of
Section 414(c) of the Code) with the Seller or (c) a member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
the Seller, any corporation described in clause (a) above or any partnership,
trade or business described in clause (b) above.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System, as
in effect from time to time.
"Eurodollar Disruption Event" means, with respect to all
Capital allocated to any Purchase Period, any of the following: (a) a
determination by the Purchaser that it would be contrary to law or to the
directive of any central bank or other governmental authority (whether or not
having the force of law) to obtain United States dollars in the London interbank
market to make, fund or maintain any Purchase for such Purchase Period, (b) the
failure of BankBoston, N.A. to furnish timely information for purposes of
determining the Adjusted Eurodollar Rate, (c) a determination by the Purchaser
that the rate at which deposits of United States dollars are being offered in
the London interbank market does not accurately reflect the cost to the
Purchaser of making, funding or maintaining any Purchase for such Purchase
Period or (d) the inability of the Purchaser to obtain United States dollars in
the London interbank market to make, fund or maintain any Purchase for such
Purchase Period.
"Eurodollar Reserve Percentage" means, for any day with
respect to a Purchase Period to which Capital has been allocated hereunder, the
maximum rate (expressed as a decimal) at which any lender subject thereto would
be required to maintain reserves under Regulation D of the Board of Governors of
the Federal Reserve System (or any successor or similar regulations relating to
such reserve requirements) against Eurocurrency Liabilities, if such liabilities
were outstanding. The Eurodollar Reserve Percentage shall be adjusted
automatically on and as of the effective date of any change in the maximum rate
described above.
"Event of Termination" has the meaning assigned to that term
in Section 7.01.
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<PAGE>
"Facility Documents" means this Agreement, the Lock- Box
Agreements, the Collection Account Agreement, the Originator Sale Agreement, the
Intercreditor Agreement, the Fee Letter, the Liquidity Agreement, the Liquidity
Security Agreement, and all other certificates, instruments, UCC financing
statements, reports, notices, agreements and documents executed or delivered
under or in connection with this Agreement, in each case as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
this Agreement.
"Federal Funds Rate" means, 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
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day for such transactions
received by the Liquidity Agent from three Federal funds brokers of recognized
standing selected by it.
"Fee Letter" has the meaning assigned to that term in Section
2.09(a).
"Franchise Agreement" means a Franchise Agreement
substantially in the form of Exhibit F attached hereto.
"Franchisee" means those entities listed on Schedule V
attached hereto and any other entity which executes a Franchise Agreement with
OutSource International or an Affiliate of OutSource International.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, in each case consistently
applied.
"Indemnified Amounts" has the meaning assigned to that term in
Section 8.01.
"Indemnified Parties" has the meaning assigned to that term in
Section 8.01.
"Intercreditor Agreement" means that certain Intercreditor
Agreement dated as of July 27, 1998, among BankBoston, N.A. (in its capacity as
"Agent" under the Revolving Credit Agreement), the Originators, the Servicer,
the Seller, the Purchaser and the Deal Agent, as the same may be amended,
restated, supplemented or otherwise modified or replaced from time to time
thereof.
"Investment" means, with respect to any Person, any direct or
indirect loan, advance or investment by such Person in any other Person, whether
by means of share purchase, capital contribution, loan or otherwise, excluding
the acquisition of Receivables and other Purchased Property (and interests
therein) pursuant to the Originator Sale Agreement and excluding commission,
travel and similar advances to officers, employees and directors made in the
ordinary course of business.
"Investment Company Act" means the Investment Company Act of
1940, as amended and any successor.
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"IRS" shall mean the Internal Revenue Service and any Person
succeeding to the functions thereof.
"Issuer" means EagleFunding and any other Purchaser whose
principal business consists of issuing commercial paper or other rated
securities to fund the acquisition and maintenance of interests in, or the
making of loans secured by a grant of security interests in, receivables,
accounts, instruments, chattel paper, general intangibles and other similar
assets.
"Liquidation Fee" means, for the Capital allocated to a
Purchase Period (computed without regard to any shortened duration of such
Purchase Period as a result of the occurrence of the Termination Date) during
which such Capital is reduced or the applicable Yield Rate for such Capital is
for any reason changed, the amount, if any, by which (a) the additional Yield
(calculated without taking into account any Liquidation Fee) which would have
accrued on the reduction of such Capital during such Purchase Period (as so
computed) if such reductions had remained as Capital or if the applicable Yield
Rate had remained unchanged, as the case may be, exceeds (b) the sum of (i)
Yield actually received by a Purchaser in respect of such Capital for such
Purchase Period and (ii) if applicable, the income, if any, received by such
Purchaser from such Purchaser's investing the proceeds of reductions of Capital.
"Liquidity Agent" means BankBoston, N.A., in its capacity as
"Liquidity Agent" under the Liquidity Agreement, together with any successor or
permitted assign in such capacity.
"Liquidity Agreement" means that certain Liquidity Agreement
dated as of even date herewith by and among EagleFunding, the financial
institutions party thereto from time to time as "Liquidity Providers," and the
Liquidity Agent, as the same may be amended, restated, supplemented or otherwise
modified from time to time.
"Liquidity Fee" means the fee payable by the Seller and
identified as the "Liquidity Fee" in the Fee Letter.
"Liquidity Fee Percentage" means, at any time, the per annum
rate used to calculate the "Liquidity Fee" under the Fee Letter, as in effect at
such time.
"Liquidity Providers" means the financial institutions party
to the Liquidity Agreement from time to time as "Liquidity Providers"
thereunder.
"Liquidity Security Agreement" means that certain Security
Agreement dated as of even date herewith by and between EagleFunding and Bankers
Trust Company, as "Collateral Agent" thereunder, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
"Lock-Box" means a post office box to which Collections are
remitted for retrieval by a Lock-Box Bank and deposited by such Lock-Box Bank
into a Lock-Box Account.
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"Lock-Box Account" means an account maintained for the purpose
of receiving Collections at a bank or other financial institution which has
executed a Lock-Box Agreement.
"Lock-Box Agreement" means an agreement, in substantially the
form of Exhibit B, among the applicable Originator, the Seller, the Deal Agent
and a Lock-Box Bank.
"Lock-Box Bank" means any of the banks or other financial
institutions holding one or more Lock-Box Accounts.
"Loss Horizon Factor" means, as of any date, a ratio computed
by dividing (i) the sum of (a) the aggregate Outstanding Balance of all
Receivables acquired by the Seller during the four most recently ended
Collection Periods plus (b) the aggregate Outstanding Balance of all Receivables
acquired by the Seller in the fifth most recently ended Collection Period
divided by four by (ii) the Eligible Receivables Balance computed as of the last
day of the most recently ended Collection Period.
"Loss Reserve" means, at any time, the product of aggregate
outstanding Capital at such time times a fraction, the numerator of which is the
Loss Reserve Percentage in effect at such time and the denominator of which is
the remainder of one minus the sum of the Dilution Reserve Percentage, the Loss
Reserve Percentage and the Yield Reserve Percentage, each as in effect at such
time.
"Loss Reserve Percentage" means, as of any date, the greater
of
(a) the product (expressed as a percentage) of (i) a factor of
2.0, times (ii) the Loss Horizon Factor as of the last day of the most
recently ended Collection Period, times (iii) the largest Loss Reserve
Ratio for any of the next preceding twelve Collection Periods, computed
as of the last day of each such Collection Period (including, without
limitation, the most recently ended Collection Period);
(b) the quotient (expressed as a percentage), computed as of
the last day of the most recently ended Collection Period of
(i) the sum, for each of the four largest Obligors
described in clause (d) of the definition of the term
"Concentration Limit" (determined on the basis of the
aggregate amount of Outstanding Balances of Eligible
Receivables owing by such Obligors on such day), of the lesser
of (A) the aggregate amount of Outstanding Balances of
Eligible Receivables of such Obligor on such day, and (B) the
product of the Concentration Limit described in such clause
(d) and the aggregate Outstanding Balance of all Eligible
Receivables in effect at such time; divided by
(ii) the aggregate Outstanding Balance of all
Eligible Receivables in effect at such time; and
(c) 10%.
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<PAGE>
"Loss Reserve Ratio" means, in respect of any Collection
Period, the arithmetic average of the ratios (each expressed as a percentage)
for each of the three most recently ended Collection Periods, computed as of the
last day of each such Collection Period, by dividing
(a) the aggregate Outstanding Balance of all
Receivables that became Defaulted Receivables during such
Collection Period plus (without duplication) the amount of all
Receivables which were written off the books of the Seller
during such Collection Period, by
(b) the sum of the aggregate dollar amount of all
Contracts generated during the sixth Collection Period next
preceding such Collection Period.
"Moody's" means Moody's Investors Service, Inc., and any
successor thereto.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding five years contributed to by the Seller or any
ERISA Affiliate on behalf of its employees.
"Obligor" means a Person obligated to make payments pursuant
to a Contract.
"Originator" means each of OutSource International, CSF,
OutSource Franchising, Synadyne I, Inc., a Florida corporation, Synadyne II,
Inc., a Florida corporation, Synadyne III, Inc., a Florida corporation, Synadyne
IV, Inc., a Florida corporation, Synadyne V, Inc., a Florida corporation, and
OutSource International of America, Inc., a Florida corporation, and
"Originators" means such corporations, collectively.
"Originator Sale Agreement" means the Receivables Purchase and
Sale Agreement of even date herewith among the Originators, the Seller and the
Servicer, together with all instruments, documents and agreements executed by
the Originators in connection therewith, in each case as the same may from time
to time be amended, supplemented or otherwise modified in accordance with the
terms hereof.
"Other Costs" has the meaning assigned to such term in Section
10.09(c).
"Other Sellers" has the meaning assigned to such term in
Section 10.09(c).
"Outstanding Balance" of any Receivable at any time means the
then outstanding principal balance thereof.
"OutSource Franchising" means OutSource Franchising, Inc., a
Florida corporation.
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"PBGC" means the Pension Benefit Guaranty Corporation and any
Person succeeding to the functions thereof.
"Permitted Acquisition" has the meaning set forth in the
Revolving Credit Agreement (as such agreement is in effect on the date hereof
without giving effect to any amendments or modifications thereof).
"Permitted Investments" means (a) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of no more than 45 days from
the date of acquisition (or, if earlier, maturing no later than the next
occurring end of any Purchase Period); (b) time deposits and certificates of
deposit having maturities of no more than 45 days from the date of acquisition
(or, if earlier, maturing no later than the next occurring end of any Purchase
Period), maintained with or issued by any commercial bank having capital and
surplus in excess of $500,000,000 and having a short-term rating of not less
than P-1 or the equivalent thereof from Moody's, A-1 or the equivalent thereof
from S&P, and D-1 or the equivalent thereof from DCR (if rated by DCR); (c)
repurchase obligations for underlying securities of the types described in
clauses (a) or (b) above with a term of not more than ten days and maturing no
later than 45 days after the date of acquisition (or, if earlier, maturing no
later than the next occurring end of any Purchase Period); and (d) commercial
paper maturing within 45 days after the date of acquisition (or, if earlier,
maturing no later than the next occurring end of any Purchase Period) and having
a rating of not less than P-1 or the equivalent thereof from Moody's, A-1 or the
equivalent thereof from S&P, and D-1 or the equivalent thereof from DCR (if
rated by DCR).
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture, limited liability company, government (or any agency
or political subdivision thereof) or other entity.
"Program Fee" means the fee payable by the Seller and
identified as the "Program Fee" in the Fee Letter.
"Program Fee Percentage" means, at any time, the per annum
rate used to calculate the "Program Fee" under the Fee Letter, as in effect at
such time.
"Purchase" means a purchase by the Purchaser of interests in
the Purchased Property from the Seller pursuant to Article II, including without
limitation, any such purchase in consideration of the remittance by the Servicer
to the Seller of Collections of Purchased Receivables pursuant to Section 2.05.
"Purchase Limit" means, at any time, $50,000,000, as such
amount may be adjusted from time to time pursuant to Section 2.03, provided,
however, that at all times, on or after the Termination Date, the "Purchase
Limit" shall mean the aggregate outstanding Capital.
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"Purchase Period" for any outstanding Capital means (a) if
Yield in respect of all or any part thereof is computed by reference to the CP
Rate, a period of 1 to and including 45 days, (b) if Yield in respect thereof is
computed by reference to the Adjusted Eurodollar Rate, a period of one month and
(c) if Yield in respect thereof is computed at the Adjusted Base Rate, a period
of 1 to and including 31 days, in each case, as determined pursuant to Section
2.04.
"Purchased Interest" means the undivided percentage ownership
interest in the Purchased Property conveyed by Seller to the Purchaser under
this Agreement, which percentage interest shall deemed to be computed as of the
close of business on each Business Day as a fraction, the numerator of which
equals Capital plus the Aggregate Reserves and the denominator of which equals
the Eligible Receivables Balance at such time. The Purchased Interest shall be
determined from time to time in accordance with the provisions of Section
2.05(c).
"Purchased Property" means (a) at any time prior to the
Termination Date, (i) all then outstanding Receivables purchased or purported to
be purchased in accordance with Section 2.01, 2.02 or 2.05, (ii) all Related
Security relating to such Receivables and (iii) all Collections with respect to,
and other proceeds of, such Receivables and (b) at all times on and after the
Termination Date, (i) all Receivables purchased or purported to be purchased in
accordance with Section 2.01, 2.02 or 2.05, and outstanding as of the close of
business of the Servicer on the date preceding the Termination Date (including
any interest or finance charges accruing before or after the Termination Date
which relate to any Receivable outstanding as of the close of business on the
day preceding the Termination Date), (ii) all Related Security related to such
Receivables and (iii) all Collections with respect to, and other proceeds of,
such Receivables.
"Purchased Receivable" means any Receivable included in the
Purchased Property and in which a Purchased Interest has been purchased under
this Agreement.
"Purchaser" means EagleFunding or any other Person that
agrees, pursuant to an Assignment and Acceptance, to purchase an interest in
this Agreement and in the Purchased Interest pursuant to Sections 2.02 or 2.05
of this Agreement, and to assume the obligations of EagleFunding under this
Agreement.
"Rate Variance Factor" means that number which reflects the
Deal Agent's reasonable estimate of the potential variance in selected interest
rates over a period of time designated by the Deal Agent, as shall be computed
from time to time by the Deal Agent. The Deal Agent shall notify the Servicer in
writing of the Rate Variance Factor in effect from time to time.
"Rating Agency" has the meaning assigned to such term in
Section 10.01 of this Agreement.
"Receivable" means the indebtedness of any Obligor under a
Contract whether constituting an account, chattel paper, instrument, general
intangible or any other type of property, (a) (1) which arises from a sale of
merchandise or the performance of services by an Originator or (2) which is a
CSF Advance and (b) in which the Seller has acquired an interest pursuant to the
Originator Sale Agreement. Each Receivable shall include the right to payment of
any interest or finance charges and other obligations of such Obligor with
respect thereto.
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"Records" means all Contracts and other documents, books,
records and other information (including without limitation, computer programs,
tapes, disks, punch cards, data processing software and related property and
rights) maintained with respect to Receivables and the related Obligors which
the Seller has itself generated, in which the Seller has acquired an interest
pursuant to the Originator Sale Agreement or in which the Seller has otherwise
obtained an interest.
"Reinvestment Termination Date" means that Business Day which
the Seller designates as the Reinvestment Termination Date by prior written
notice to the Deal Agent at least 30 Business Days prior to such Business Day
or, if any of the conditions precedent in Section 3.02 are not satisfied, that
Business Day which the Deal Agent designates as the Reinvestment Termination
Date by notice to the Seller at least one Business Day prior to such Business
Day.
"Related Security" means with respect to any Receivable:
(a) all of the Seller's interest in the merchandise (including
returned, repossessed or foreclosed merchandise), if any, relating to
the sale which gave rise to such Receivable;
(b) all other Adverse Claims and property subject thereto from
time to time purporting to secure payment of such Receivable, whether
pursuant to the Contract related to such Receivable or otherwise;
(c) the assignment to the Deal Agent, for the benefit of the
Purchaser, of all UCC financing statements covering any collateral
securing payment of such Receivable;
(d) all guarantees, indemnities, warranties, letters of
credit, insurance policies and proceeds and premium refunds thereof and
other agreements or arrangements of whatever character from time to
time supporting or securing payment of such Receivable whether pursuant
to the Contract related to such Receivable or otherwise;
(e) all Records;
(f) all of the Seller's right and title to, and interest in,
the Originator Sale Agreement and the assignment to the Deal Agent of
all UCC financing statements filed by the Seller against the
Originators under or in connection with the Originator Sale Agreement;
and
(g) all proceeds of the foregoing.
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"Revolving Credit Agreement" means that certain Third Amended
and Restated Credit Agreement dated as of July 27, 1998 by and among OutSource
International, the banks and other financial institutions from time to time
parties thereto and BankBoston, N.A., as successor by merger to Bank of Boston
Connecticut, as agent for the banks thereunder, as the same may be amended,
restated, supplemented, replaced or otherwise modified from time to time, any
successor agreement, and any agreement pursuant to which Debt under any such
"Revolving Credit Agreement" is refinanced.
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., and any successor thereto.
"Servicer" means at any time the Person then authorized
pursuant to Article VI to service, administer and collect Receivables.
"Servicer Fee" has the meaning assigned to that term in
Section 2.09(b).
"Servicer Fee Percentage" means, at any time, the per annum
rate used to calculated the Servicer Fee pursuant to Section 2.09(b),as set
forth in the Asset Report most recently delivered to the Deal Agent hereunder.
"Servicer Termination Event" means the occurrence of any of
the following:
(a) any Event of Termination; or
(b) a material failure on the part of the Servicer to observe
or perform any of its duties or obligations as Servicer under this Agreement or
as "Servicer" under the Originator Sale Agreement, as determined by the Deal
Agent in the exercise of its reasonable commercial judgment and such failure
shall remain unremedied for two Business Days.
"Settlement Date" means, with respect to any Collection
Period, the fifteenth day of such Collection Period, or if such date is not a
Business Day, the next Business Day to occur thereafter.
"Stop Event" means any of the following events:
(a) An Event of Termination; or
(b) A regulatory, tax or accounting body has ordered that the
activities of the Purchaser, or any Affiliate of the Purchaser,
contemplated hereby be terminated or, as a result of any other event or
circumstance, the activities of the Purchaser contemplated hereby may
reasonably be expected to cause the Purchaser, the Person then acting
as the administrator or the manager for the Purchaser (if any), or any
of their respective Affiliates to suffer materially adverse regulatory,
accounting or tax consequences.
"Taxes" has the meaning assigned to such term in Section
2.11(a).
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"Termination Date" means the earliest of (a) the Reinvestment
Termination Date, (b) the date of termination of the Purchase Limit pursuant to
Section 2.03, (c) the date of the declaration or automatic occurrence of the
Termination Date pursuant to Section 7.01, (d) the date on which some or all of
the "Liquidity Commitments" under the Liquidity Agreement shall cease to be
effective or shall terminate without renewal, and (e) July 27, 2003.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the specified jurisdiction.
"United States" means the United States of America.
"Weekly Settlement Report" has the meaning assigned to that
term in Section 5.01(c)(viii).
"Yield" means, for all Capital allocated to any Purchase
Period during any such Purchase Period, the product of
YRT x C x ED
360
where:
C = the Capital allocated to such Purchase Period,
ED = the actual number of days elapsed during such Purchase
Period, and
YRT = the Yield Rate for such Purchase Period;
provided, however that (a) no provision of this Agreement shall require the
payment or permit the collection of Yield in excess of the maximum permitted by
applicable law and (b) Yield shall not be considered paid by any distribution if
at any time such distribution is rescinded or must otherwise be returned for any
reason.
"Yield Rate" means, for any Purchase Period for all Capital
allocated to such Purchase Period:
(a) to the extent a Purchaser will be funding the applicable
Purchase on the first day of such Purchase Period through the issuance
of commercial paper, a rate equal to the CP Rate for such Purchase
Period, and
(b) to the extent a Purchaser will not be funding the
applicable Purchase on the first day of such Purchase Period through
the issuance of commercial paper, a rate equal to the Alternative Rate
for such Purchase Period or such other rate as the Deal Agent and the
Seller shall agree to in writing.
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"Yield Reserve" means at any time an amount equal to the sum
of (a) the product of (i) the aggregate outstanding Capital at such time times
(ii) a rate equal to the sum of (v) the Liquidity Fee Percentage at such time,
plus (w) the Program Fee Percentage at such time, plus (x) the Servicer Fee
Percentage at such time, plus (y) the Applicable Base Rate Margin, plus (z) the
product of (1) the Rate Variance Factor times (2) the Base Rate then in effect,
times (iii) a fraction, the numerator of which equals a factor of 2.0 times the
Average Maturity at such time and the denominator of which equals 360 plus (b)
all accrued and unpaid Yield, Liquidity Fee, Program Fee and Servicer Fee minus
any Collections of Purchased Receivables set aside for payment thereof pursuant
to Section 2.05(a).
"Yield Reserve Percentage" means at any time an amount equal
to a ratio (expressed as a percentage) computed by dividing (i) the Yield
Reserve on such day by (ii) the Eligible Receivables Balance on such day.
SECTION 1.02. Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. All
terms used in Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such Article 9.
SECTION 1.03. Computation of Time Periods. Unless otherwise
stated in this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each mean "to but excluding."
ARTICLE II
----------
THE PURCHASE FACILITY
---------------------
SECTION 2.01. Purchases of Purchased Interests; Stop Events.
(a) On the terms and conditions hereinafter set forth, the Purchaser shall
purchase Purchased Interests from the Seller and make Capital Increases from
time to time during the period from the date hereof until the Termination Date.
Under no circumstances shall the Purchaser make the initial Purchase or any
Capital Increase if, after giving effect to such Purchase or Capital Increase, a
Coverage Shortfall Event would exist or the Purchased Interest would exceed
100%.
(b) Notwithstanding anything to the contrary herein, upon the
occurrence and during the continuation of a Stop Event, the Purchaser shall not
issue Commercial Paper in order to fund or maintain its investments in the
Purchased Interests. In addition, after the occurrence of a Stop Event triggered
by Section 7.01(n), the Purchaser shall not issue Commercial Paper without
written confirmation from each Rating Agency then rating the Commercial Paper at
the request of EagleFunding, that the ratings of such Commercial Paper will not
be reduced or withdrawn as a result thereof. Each of Seller and Servicer agrees
to give the Deal Agent prompt written notice of the occurrence of any Stop
Event. It is expressly understood that the occurrence of a Stop Event (other
than a Stop Event arising as a result of an Event of Termination) shall not
relieve the Purchaser of its obligations under this Agreement to fund or
maintain investments in Purchased Interests.
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(c) It is the intention of the parties hereto that each
Purchase to be made hereunder shall constitute a "sale of accounts" as such term
is used in Article 9 of the UCC. If at any time a court characterizes the
transactions hereunder as loans by the Purchaser to the Seller, then the Seller
hereby pledges, grants a security interest in and assigns to the Deal Agent, for
the benefit of the Purchaser, all of its right and title to and interest in the
Purchased Property, including the Purchased Receivables, Related Security and
Collections related thereto, as security for such loans and for the payment and
performance of all obligations of the Seller hereunder (including, without
limitation, its indemnification obligations under Article VIII). The security
interest granted pursuant to the foregoing sentence shall be released and
terminated upon the occurrence of the Collection Date.
SECTION 2.02. The Initial Purchase, Subsequent Purchases and
Capital Increases. (a) Subject to the conditions described in Section 2.01(a),
the initial Purchase and each Capital Increase shall be made in accordance with
the procedures described in Section 2.02(b). After the date of the initial
Purchase, until the occurrence of the Termination Date, the Purchaser shall on
each day make subsequent Purchases of Purchased Property in accordance with
Section 2.05 and the Purchased Interest shall be automatically recalculated in
accordance with Section 2.05(c). Subsequent Purchases of Purchased Property and
Capital Increases are made in consideration of the Purchaser's agreement to
permit the Servicer to remit Collections of Purchased Property to the Seller in
accordance with Section 2.05. After the Collection Date has occurred, the
Purchaser and the Deal Agent, in accordance with their respective interests,
shall assign and transfer to the Seller their respective remaining interest in
the Purchased Property to the Seller in accordance with Section 2.06 free and
clear of any Adverse Claim resulting or arising from any act or omission by the
Purchaser or the Deal Agent, but without any other representation or warranty,
express or implied.
(b) The initial Purchase and each Capital Increase shall be
made on at least two Business Days' notice from the Seller to the Deal Agent
prior to 10:00 a.m. (Boston, Massachusetts time) on the day of notice; provided,
however, that if the Yield to accrue with respect to such Capital Increase is
computed by reference to the Adjusted Eurodollar Rate, such notice must be
received by the Deal Agent prior to 10:00 a.m. (Boston, Massachusetts time) at
least three Business Days prior to the date of such Capital Increase. Each such
notice shall specify (i) the aggregate amount of such Purchase or Capital
Increase, which shall be in an amount equal to $1,000,000 or an integral
multiple of $250,000 in excess thereof, (ii) the date of such Purchase or
Capital Increase, (iii) the duration of the initial Purchase Periods for the
Capital arising as a result of such Purchase or Capital Increase, and (iv) the
rate at which Yield is to accrue on such Capital for such Purchase Periods. The
Deal Agent shall notify the Seller whether the duration and applicable rates of
the initial Purchase Periods described in such notice are acceptable or, if not
acceptable, the Deal Agent shall advise the Seller of such Purchase Periods and
rates as may be acceptable. On the date of such Purchase or Capital Increase, as
the case may be, the Purchaser shall, upon satisfaction of the applicable
conditions set forth in Article III, make available to the Seller in same day
funds, at Account No. 56391358, OutSource Funding Corporation Operating Account
at BankBoston, N.A., the amount of such initial Purchase or Capital Increase, as
the case may be.
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(c) It is expressly acknowledged that each Purchase or Capital
Increase hereunder shall be made without recourse to the Seller; provided,
however, that the Seller shall be liable to the Deal Agent and the Purchaser (i)
for all representations, warranties, covenants and indemnities made hereunder,
(ii) for all obligations to remit any deemed Collections of Purchased
Receivables pursuant to Section 2.07, and (iii) for all fees, costs, expenses,
taxes and other indemnifications owed under this Agreement.
SECTION 2.03. Termination or Reduction of the Purchase Limit.
The Seller may, upon at least three Business Days' notice to the Deal Agent,
terminate in whole or reduce in part the portion of the Purchase Limit that
exceeds the sum of the aggregate Capital; provided, however, that each partial
reduction of the Purchase Limit shall be in an aggregate amount equal to
$5,000,000 or an integral multiple thereof.
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SECTION 2.04. Selection of Purchase Periods. At all times
hereafter until the Termination Date, the Seller shall, subject to the Deal
Agent's and the Purchaser's approval and the limitations described below, select
(a) Purchase Periods and allocate a portion of the outstanding Capital to each
selected Purchase Period, so that the outstanding Capital is at all times
allocated to a Purchase Period and (b) Yield Rates to apply to such Capital for
such Purchase Periods. The initial Purchase Period(s) and Yield Rate(s)
applicable to the Capital arising as a result of the initial Purchase or any
Capital Increase shall be specified in the notice relating to the Purchase or
Capital Increase described in Section 2.02(b). Each subsequent Purchase Period
shall commence on the last day of the immediately preceding Purchase Period, and
the duration of and Yield Rate applicable to such subsequent Purchase Period
shall be such as the Seller shall select and the Deal Agent shall approve on
notice from the Seller received by the Deal Agent (including notice by
telephone, confirmed in writing) not later than 11:00 A.M. (Boston,
Massachusetts time) on the Business Day next preceding such last day, except
that (a) if the Deal Agent shall not have received such notice before 11:00 A.M.
(Boston, Massachusetts time) or the Deal Agent and the Seller shall not have so
mutually agreed before 12:30 P.M. (Boston, Massachusetts time) on the Business
Day next preceding such last day, such Purchase Period shall be one day and the
applicable Yield Rate shall be the Adjusted Base Rate and (b) if the Deal Agent
notifies the Seller that the Yield shall accrue for each Purchase Period at the
Alternative Rate, and the Seller notifies the Deal Agent that it selects the
Adjusted Eurodollar Rate (as opposed to the Adjusted Base Rate) for such
Purchase Period, such notice must be received by the Deal Agent no later than
11:00 A.M. (Boston, Massachusetts time) on the third Business Day prior to such
last day. Any Purchase Period which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding Business Day; provided,
however, that if Yield in respect of such Purchase Period is computed by
reference to the Adjusted Eurodollar Rate, and such next succeeding Business Day
is in the next calendar month, then such Purchase Period shall end on the next
preceding Business Day. In addition, whenever any Purchase Period as to which
Yield accrues at the Adjusted Eurodollar Rate commences on the last Business Day
in a month or on a day for which there is no numerically corresponding day in
the month in which such Purchase Period ends, the last day of such Purchase
Period shall occur on the last Business Day of the month in which such Purchase
Period ends. Furthermore, if a CP Disruption Event shall have occurred and be
continuing, the Purchaser, or the Deal Agent on its behalf, may, upon notice to
the Seller, terminate any Purchase Period then in effect if the Purchaser has
funded the Capital allocated to such Purchase Period by issuing its commercial
paper notes. Any Purchase Period which commences before the Termination Date and
would otherwise end on a date occurring after the Termination Date shall end on
the Termination Date. On or after the Termination Date, the Deal Agent shall
have the right to allocate outstanding Capital to Purchase Periods of such
duration as shall be selected by the Deal Agent. The Purchaser shall, on the
first day of each Purchase Period, notify the Deal Agent of the Yield Rate for
the Capital allocated to such Purchase Period.
SECTION 2.05. Non-Liquidation Settlement Procedures. (a) On
each day prior to the Termination Date, the Servicer shall cause all Collections
received by it or deposited in the Lock-Box Accounts to be transferred in same
day funds to the Collection Account and shall instruct the Collection Account
Bank: (i) out of the percentage interest representing the Purchased Interest in
Collections of Purchased Receivables received on such day, to set aside and hold
in trust in the Collection Account, for the Purchaser, an amount equal to the
Yield, Program Fee, Liquidity Fee and Servicer Fee accrued through such day and
not so previously set aside, (ii) on each Business Day occurring in the week
prior to the date on which the Administrative Fee is payable, out of the
percentage interest representing the Purchased Interest in Collections of
Purchased Receivables received on such day, to set aside and hold in trust in
the Collection Account, for the Deal Agent, an amount equal to the
Administrative Fee to be so paid, and (iii) except as otherwise required under
Section 2.05(b) below, to reinvest the remainder of such Collections in
Purchased Interests by paying such Collections to the Seller. Each such payment
shall constitute a Purchase by the Purchaser of Purchased Interests in all
Purchased Property not previously purchased hereunder, as such Purchased
Interest is recomputed pursuant to Section 2.05(c) below, it being agreed that
such Purchased Property shall, to the extent of the Purchased Interest,
automatically become the property of the Purchaser when the Seller acquires an
interest in such new Purchased Property from the Originators. On the last day of
each Purchase Period to occur prior to the Termination Date, the Servicer shall
deposit to the Deal Agent's Account the amounts in respect of Yield set aside as
described in clause (i) of the first sentence of this Section 2.05. On each
Settlement Date to occur prior to the Termination Date, the Servicer shall
deposit to the Deal Agent's Account the amounts in respect of Program Fee,
Liquidity Fee and Servicer Fee set aside as described in clause (i) of the first
sentence of this Section 2.05. On the Business Day prior to the date on which
the Administrative Fee is due and payable under the Fee Letter, the Servicer
shall deposit to the Deal Agent's Account the amounts in respect of the
Administrative Fee set aside as described in clause (ii) of the first sentence
of this Section 2.05. Upon receipt of such funds by the Deal Agent, the Deal
Agent shall distribute them first, to the Purchaser, on the next succeeding last
day of a Purchase Period, in full payment of the accrued and unpaid Yield for
such Purchase Period, second, to the Purchaser, on the next succeeding
Settlement Date, in full payment of the accrued and unpaid Program Fee for the
related Collection Period, third, to the Purchaser (or to the Liquidity Agent on
behalf of the Purchaser), on the next succeeding Settlement Date, in full
payment of the accrued and unpaid Liquidity Fee for the related Collection
Period, fourth, to the Deal Agent, on the next succeeding date on which the
Administrative Fee is payable under the Fee Letter, in full payment of the
Administrative Fee for the following year, and fifth, to the Servicer, on the
next succeeding Settlement Date, in full payment of any accrued and unpaid
Servicer Fee payable with respect to the Purchased Receivables for the related
Collection Period.
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(b) Notwithstanding anything to the contrary contained in this
Section 2.05 or any other provision in this Agreement, if, on any Business Day
prior to the Termination Date a Coverage Shortfall Event exists, then the Seller
shall remit to the Deal Agent, prior to any reinvestment of funds in Purchased
Interests and in any event no later than the close of business of the Deal Agent
on the third succeeding Business Day, a payment (to be applied by the Deal Agent
to outstanding Capital allocated to Purchase Periods selected by the Deal Agent,
in its sole discretion) in such amount as may be necessary to reduce outstanding
Capital so that a Coverage Shortfall Event no longer exists.
(c) The Purchased Interest shall be initially computed on the
date of the initial Purchase hereunder. Thereafter until the Termination Date,
the Purchased Interest shall be automatically recomputed (or deemed to be
recomputed) on each Business Day and concurrently with each Capital Increase
based on the aggregate Capital then outstanding and on the Eligible Receivables
Balance and Aggregate Reserves as computed for such day. From and after the
Termination Date, the Purchased Interest, as computed (or deemed recomputed) as
of the close of business on the day immediately preceding the Termination Date,
shall remain constant until the Collection Date, on which date the Purchased
Interest shall become zero.
SECTION 2.06. Liquidation Settlement Procedures.
(a) On the Termination Date and on each Business Day
thereafter, the Servicer shall segregate, set aside and hold in trust for the
Purchaser, in the Collection Account, the percentage interest representing the
Purchased Interest in Collections of Purchased Receivables received on such day.
(b) On the Termination Date and on each Business Day
thereafter, the amounts set aside in the Collection Account in accordance with
clause (a) above shall be withdrawn from the Collection Account solely upon
direction of the Deal Agent to be applied in the following order of priority;
(i)(A) First, to pay any accrued and unpaid Servicer Fee (if
the Servicer is a party other than an Originator or an Affiliate
thereof) which is then due and payable, and (B) second, to be retained
in the Collection Account to the extent of any daily accrued and unpaid
amounts of such Servicer Fee which are not then due and payable, until
the next relevant payment date therefor, and not to be applied to any
of the following items;
(ii)(A) First, to pay accrued and unpaid Yield which is then
due and payable, and (B) second, to be retained in the Collection
Account to the extent of any accrued and unpaid amounts of such Yield
which are not then due and payable, and not to be applied to any of the
following items;
(iii)(A) First, to pay all Capital then outstanding relating
to any Yield which is then due and payable, and (B) second, to be
retained in the Collection Account to the extent of any Capital
remaining outstanding;
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(iv)(A) First, to pay accrued and unpaid Liquidity Fee which
is then due and payable, and (B) second, to be retained in the
Collection Account to the extent of any accrued and unpaid amounts of
such Liquidity Fee which are not then due and payable, and not to be
applied to any of the following items;
(v)(A) First, to pay accrued and unpaid Program Fee which is
then due and payable, and (B) second, to be retained in the Collection
Account to the extent of any accrued and unpaid amounts of such Program
Fee which are not then due and payable, and not to be applied to any of
the following items;
(vi)(A) First, to pay any Administrative Fee which is then due
and payable, and (B) second, to be retained in the Collection Account
to the extent of the Administrative Fee payable in respect of the next
succeeding annual period, until the next relevant payment date
therefor, and not to be applied to any of the following items;
(vii)(A) First, to pay the portion of any other accrued and
unpaid obligations which have not been paid pursuant to clauses (i)
through (vi) above and which are then due and payable by the Seller to
the Purchaser or the Deal Agent under this Agreement or any of the
other Facility Documents, and (B) second, to be retained in the
Collection Account to the extent of any accrued and unpaid amounts of
such obligations which are not then due and payable, until the next
relevant payment date therefor, and not to be applied to any of the
following items;
(viii)(A) First, to pay any accrued and unpaid Servicer Fee
(if the Servicer is an Originator or an Affiliate thereof) which is
then due and payable, and (B) second, to be retained in the Collection
Account to the extent of any accrued and unpaid amounts of such
Servicer Fee which are not then due and payable, until the next
relevant payment date therefor.
Following the Collection Date, the Servicer shall pay to the Seller any
remaining Collections set aside and held by the Servicer pursuant to clause (a)
of this Section 2.06.
(c) If at any time on or after the Termination Date, the Deal
Agent or the Seller determines that as of the close of business on the day
immediately preceding the Termination Date the outstanding amount of Capital was
greater than the lesser of (i) the Purchase Limit, or (ii) the Capital Limit,
then the Seller shall immediately pay to the Deal Agent, for the benefit of the
Purchaser, the amount (to be applied against Capital) which would have been
required to make the outstanding amount of Capital equal to the lesser of (i)
the Purchase Limit, or (ii) the Capital Limit on or as of the close of business
on the date immediately preceding the Termination Date.
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SECTION 2.07. Special Settlement Procedures. If on any day the
Outstanding Balance of any Purchased Receivable is either (a) reduced or
adjusted as a result of any defective, rejected, returned, repossessed or
foreclosed merchandise, any defective or rejected services, any failure to
provide services, any discount, rebate or any other adjustment made or performed
by the Seller or any other Person (including, without limitation, those
described in the definition of "Dilution Factors") or (b) reduced or canceled as
a result of a setoff in respect of any claim by the Obligor thereof against any
Originator, the Seller or any other Person (whether such claim arises out of the
same or a related transaction or an unrelated transaction), the Seller shall be
deemed to have received on such day a Collection of such Purchased Receivable in
the amount of such reduction, cancellation or adjustment. If on any day any of
the representations or warranties in Section 4.01(h) is no longer true with
respect to a Purchased Receivable or the Seller discovers or is notified that a
Purchased Receivable was not an Eligible Receivable on the day it was purchased,
the Seller shall be deemed to have received on such day a Collection of such
Purchased Receivable in full. If on any day the representation and warranty in
Section 4.01(i) is no longer true the Seller shall, in accordance with Section
2.05(b) and/or 2.06(c), immediately pay to the Deal Agent, for the benefit of
the Purchaser, an amount sufficient to make such representation true and
accurate.
SECTION 2.08. Payments and Computations, Etc. (a) All amounts
to be paid or deposited by the Seller or the Servicer hereunder shall be paid or
deposited in accordance with the terms hereof no later than 11:00 A.M. (Boston,
Massachusetts time) on the day when due in lawful money of the United States in
immediately available funds to the Deal Agent's Account. The Seller shall, to
the extent permitted by law, pay to the Deal Agent interest on all amounts not
paid or deposited when due hereunder (whether owing by the Seller individually
or by the Servicer) at 2.0% per annum above the Adjusted Base Rate, payable on
demand; provided, however, that such interest rate shall not at any time exceed
the maximum rate permitted by applicable law. Such interest shall be retained by
the Deal Agent except to the extent that such failure to make a timely payment
or deposit has continued beyond the date for distribution by the Deal Agent of
such overdue amount to the Purchaser, in which case such interest accruing after
such date shall be for the account of, and distributed by the Deal Agent to the
Purchaser. All computations of interest and all computations of Yield, Servicer
Fee, Program Fee, Liquidation Fee and other fees hereunder shall be made on the
basis of a year of 360 days for the actual number of days (including the first
but excluding the last day) elapsed.
(b) Whenever any payment hereunder shall be stated to be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of Yield, interest or any fee payable
hereunder, as the case may be; provided, however, that, if such extension would
cause payment of Yield on or Capital in respect of any Purchased Property on
which Yield accrues at the Adjusted Eurodollar Rate to be made in the next
following month, such payment shall be made on the next preceding Business Day.
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(c) If any Purchase or Capital Increase requested by the
Seller and approved by the Purchaser and the Deal Agent pursuant to Section 2.02
or any selection of a subsequent Purchase Period for any Capital requested by
the Seller and approved by the Deal Agent pursuant to Section 2.05 is not for
any reason other than the act or omission of Purchaser contrary to this
Agreement made or effectuated, as the case may be, on the date specified
therefor, the Seller shall indemnify the Purchaser against any loss, reasonable
cost or expense incurred by the Purchaser, including, without limitation, any
loss (including loss of anticipated profits, net of anticipated profits in the
reemployment of such funds in the manner determined by the Purchaser), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by the Purchaser to fund or maintain such Purchase or
Capital Increase, as the case may be, during such Purchase Period.
SECTION 2.09. Fees. (a) The Seller shall pay to the Purchaser
(either directly or through the Deal Agent) and to the Deal Agent certain fees
in the amounts and on the dates set forth in a fee letter executed among the
Seller, the Purchaser and the Deal Agent, dated on or about the date hereof (as
the same may be amended, restated, supplemented or otherwise modified from time
to time, the "Fee Letter").
(b) The Purchaser shall pay to the Servicer a collection fee
(the "Servicer Fee") of 1% per annum on the average daily amount of the
Outstanding Balance of Purchased Receivables, from the date hereof until the
Collection Date, payable on each Settlement Date; provided, however, that such
fee shall be payable only from Collections pursuant to, and subject to the
priority of payment set forth in, Sections 2.05 and 2.06; and provided, further,
that, upon three Business Days' notice to the Deal Agent, the Servicer may (if
not OutSource International or an Affiliate thereof), elect to be paid, as such
fee, another percentage per annum on the average daily amount of outstanding
Receivables, but in no event shall the Servicer Fee payable in respect of any
Collection Period after the date any such election is made exceed 110% of the
reasonable and appropriate costs and expenses of the Servicer incurred during
such Collection Period.
(c) The Seller shall pay to the Deal Agent, within one
Business Day after the Deal Agent's demand therefore, for the benefit of the
Purchaser, the Liquidation Fee relating to the Purchased Property.
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SECTION 2.10. Increased Costs; Capital Adequacy; Illegality.
(a) If either (i) the introduction of or any change (including, without
limitation, any change by way of imposition or increase of reserve requirements)
in any law, regulation, treaty or official directive, or in the interpretation
or application thereof by any central bank or other governmental agency or
authority charged with the administration thereof (whether or not having the
force of law), or (ii) the compliance by the Deal Agent, the Purchaser or any
affiliate of either thereof (each of which, an "Affected Party") with any
guideline or request from any central bank or other governmental agency or
authority (whether or not having the force of law), (A) shall subject an
Affected Party to any tax (except for taxes on the overall net income of such
Affected Party imposed by the United States of America or any political
subdivision thereof), duty or other charge with respect to the Purchased
Property, or any right or obligation to make Purchases hereunder, or on any
payment made hereunder or (B) shall impose, modify or deem applicable any
reserve requirement (including, without limitation, any reserve requirement
imposed by the Board of Governors of the Federal Reserve System, but excluding
any reserve requirement, if any, included in the determination of Yield),
special deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Affected Party or (C) shall impose
any other condition affecting the Purchased Property or the Purchaser's rights
or obligations hereunder, the result of which is to increase the cost to any
Affected Party or to reduce the amount of any sum received or receivable by an
Affected Party under this Agreement, then within ten days after demand by such
Affected Party (which demand shall be accompanied by a statement setting forth
the basis for such demand), the Seller shall pay directly to such Affected Party
such additional amount or amounts as will compensate such Affected Party for
such additional or increased cost incurred or such reduction suffered.
(b) If either (i) the introduction of or any change
(including, without limitation, any change by way of imposition or increase of
reserve requirements) in any law, regulation, treaty or official directive, or
in the interpretation or application thereof, in each case occurring after the
date hereof, by any central bank or other governmental agency or authority
charged with the administration thereof (whether or not having the force of
law), or (ii) the compliance by an Affected Party with any guideline or request
from any central bank or other governmental agency or authority (whether or not
having the force of law) in each case promulgated after the date hereof,
including, without limitation, compliance by an Affected Party with any request
or directive regarding capital adequacy, has or would have the effect of
reducing the rate of return on the capital of any Affected Party as a
consequence of its obligations hereunder or otherwise arising in connection
herewith to a level below that which any such Affected Party could have achieved
but for such introduction, change or compliance (taking into consideration the
policies of such Affected Party with respect to capital adequacy and assuming
full utilization of such Affected Party's capital) by an amount deemed by such
Affected Party to be material, then from time to time, within ten days after
demand by such Affected Party (which demand shall be accompanied by a statement
setting forth the basis for such demand), the Seller shall pay directly to such
Affected Party such additional amount or amounts as will compensate such
Affected Party for such reduction.
(c) If as a result of any event or circumstance similar to
those described in Section 2.10(a) or 2.10(b), any Affected Party is required to
compensate a bank or other financial institution providing liquidity support,
credit enhancement or other similar support to such Affected Party in connection
with this Agreement or the funding or maintenance of Purchases hereunder, then
within ten days after demand by such Affected Party, the Seller shall pay to
such Affected Party such additional amount or amounts as may be necessary to
reimburse such Affected Party for any amounts to be paid by it.
(d) In determining any amount provided for in this Section
2.10, the Affected Party may use any reasonable averaging and attribution
methods. Any Affected Party making a claim under this Section 2.10 shall submit
to the Seller a certificate as to the calculation of such additional or
increased cost or reduction, which certificate shall be conclusive absent
manifest error.
(e) If the Purchaser shall notify the Deal Agent that a
Eurodollar Disruption Event as described in clause (a) of the definition of
"Eurodollar Disruption Event" has occurred, the Deal Agent shall in turn so
notify the Seller, whereupon all Capital in respect of which Yield accrues at
the Adjusted Eurodollar Rate for the then current Purchase Period shall
immediately be converted into Capital in respect of which Yield accrues at the
Adjusted Base Rate for the remainder of such Purchase Period.
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(f) Without prejudice to the survival of any other agreement
of the Seller hereunder, the agreements and obligations of the Seller contained
in this Section 2.10 shall survive the termination of this Agreement.
SECTION 2.11. Taxes. (a) Any and all payments by the Seller or
the Servicer hereunder shall be made, in accordance with Section 2.08, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of the Purchaser and the Deal Agent, net income
taxes and branch profits taxes that are imposed by the United States and
franchise taxes, net income taxes and branch profits taxes that are imposed on
the Purchaser or the Deal Agent by the state or foreign jurisdiction under the
laws of which the Purchaser or the Deal Agent (as the case may be) is organized
or conducts business or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Seller or the Servicer shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to the Purchaser or the Deal Agent, (i) the Seller shall make an
additional payment to the Purchaser or the Deal Agent, as the case may be, in an
amount sufficient so that, after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.11), the
Purchaser or the Deal Agent (as the case may be) receives an amount equal to the
sum it would have received had no such deductions been made, (ii) the Seller or
the Servicer, as the case may be, shall make such deductions and (iii) the
Seller or the Servicer, as the case may be, shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law.
(b) The Seller will indemnify the Purchaser and the Deal Agent for
the full amount of Taxes (including, without limitation, any Taxes imposed by
any jurisdiction on amounts payable under this Section 2.11) paid by the
Purchaser or the Deal Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto;
provided that the Purchaser or the Deal Agent, as appropriate, making a demand
for indemnity payment shall provide the Seller, at its address referred to in
Section 10.02, with a certificate from the relevant taxing authority or from a
responsible officer of the Purchaser or the Deal Agent stating or otherwise
evidencing that the Purchaser or the Deal Agent has made payment of such Taxes
and will provide a copy of or extract from documentation, if available,
furnished by such taxing authority evidencing assertion or payment of such
Taxes. This indemnification shall be made within ten days from the date the
Purchaser or the Deal Agent (as the case may be) makes written demand therefor.
(c) Within 30 days after the date of any payment by the Seller
of any Taxes, the Seller will furnish to the Deal Agent, at its address referred
to in Section 10.02, appropriate evidence of payment thereof.
(d) Within 30 days of the written request of the Seller
therefor, the Deal Agent and the Purchaser, as appropriate, shall execute and
deliver to the Seller such certificates, forms or other documents which can be
furnished consistent with the facts and which are reasonably necessary to assist
the Seller in applying for refunds of taxes remitted hereunder.
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(e) If, in connection with an agreement or other document
providing liquidity support, credit enhancement or other similar support to the
Purchaser in connection with this Agreement or the funding or maintenance of
Purchases hereunder, the Purchaser is required to compensate a bank or other
financial institution in respect of taxes under circumstances similar to those
described in this Section 2.11 then within ten days after written demand by the
Purchaser which shall include reasonable information or documentation in support
of such additional amount or amounts, the Seller shall pay to the Purchaser such
additional amount or amounts as may be necessary to reimburse such Purchaser for
any amounts paid by it.
(f) Without prejudice to the survival of any other agreement
of the Seller hereunder, the agreements and obligations of the Seller contained
in this Section 2.11 shall survive the termination of this Agreement.
SECTION 2.12. Assignment of the Originator Sale Agreement. The
Seller hereby represents, warrants and confirms to the Deal Agent that the
Seller has assigned to the Deal Agent, for the benefit of itself and the
Purchaser hereunder, all of the Seller's right and title to and interest in the
Originator Sale Agreement. The Seller confirms and agrees that the Deal Agent
shall have, following an Event of Termination, the sole right to enforce the
Seller's rights and remedies under the Originator Sale Agreement for the benefit
of the Purchaser, but without any obligation on the part of the Deal Agent, the
Purchaser or any of their respective Affiliates, to perform any of the
obligations of the Seller under the Originator Sale Agreement. The Seller
further confirms and agrees that such assignment to the Deal Agent shall
terminate upon the Collection Date; provided, however, that the rights of the
Deal Agent and the Purchaser pursuant to such assignment with respect to rights
and remedies in connection with any indemnities and any breach of any
representation, warranty or covenants made by the Originators pursuant to the
Originator Sale Agreement, which rights and remedies survive the termination of
the Originator Sale Agreement, shall be continuing and shall survive any
termination of such assignment.
ARTICLE III
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CONDITIONS OF PURCHASES
-----------------------
SECTION 3.01. Conditions Precedent to Initial Purchase. The
initial Purchase hereunder is subject to the conditions precedent (a) that the
Deal Agent shall have received on or before the date of such purchase the items
listed in Schedule I, each (unless otherwise indicated) dated such date, in form
and substance satisfactory to the Deal Agent and the Purchaser, (b) that all
fees and expenses required to be paid prior to the initial Purchase pursuant to
the Fee Letter have been paid and (c) each of S&P, Moody's and DCR shall have
delivered written confirmation to the Deal Agent to the effect that the
consummation of this Agreement will not result in the reduction or withdrawal of
their respective ratings of the Commercial Paper.
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SECTION 3.02. Conditions Precedent to All Purchases and
Remittances of Collections. Each Purchase (including the initial Purchase) from
the Seller by the Purchaser, the right of the Servicer to remit Collections to
the Seller pursuant to Section 2.05 and each Capital Increase shall be subject
to the further conditions precedent that (a) with respect to any such Purchase
or Capital Increase, on or prior to the date of such Purchase or Capital
Increase, the Servicer shall have delivered to the Deal Agent, in each case in
form and substance satisfactory to the Deal Agent, a completed Asset Report
dated as of the most recent Asset Report Date, and a completed Weekly Settlement
Report dated no more than seven Business Days prior to the date of such Purchase
or Capital Increase, and in each case containing such additional information as
may be reasonably requested by the Deal Agent; (b) on the date of such Purchase,
remittance of Collections or Capital Increase the following statements shall be
true and the Seller by accepting the amount of such Purchase or by receiving the
proceeds of such reinvestment shall be deemed to have certified that:
(i) The representations and warranties contained in Section
4.01 are correct on and as of such day as though made on and as of such
date,
(ii) No event has occurred and is continuing, or would result
from such purchase or reinvestment, which constitutes an Event of
Termination,
(iii) On and as of such day, after giving effect to such
Purchase, remittance of Collections or Capital Increase, a Coverage
Shortfall Event does not exist and the Purchased Interest does not
exceed 100%, and
(iv) No law or regulation shall prohibit, and no order,
judgment or decree of any federal, state or local court or governmental
body, agency or instrumentality shall prohibit or enjoin, the making of
such Purchase, remittance of Collections or Capital Increase by the
Purchaser in accordance with the provisions hereof.
and (c) the Deal Agent shall have received such other approvals, opinions or
documents as the Deal Agent may reasonably request.
Notwithstanding the fact that any of the above-described
conditions precedent may not have been satisfied in connection with any Purchase
hereunder, prior to the Termination Date and as a result of the Seller's
acceptance of the amount of any Capital Increase, and/or its receipt of the
proceeds of any reinvestment of Collections (x) the Seller shall be deemed to
have certified to the Deal Agent that such conditions precedent have, in fact,
been satisfied and (y) the Purchase of the Purchased Interests shall be deemed
to have been made automatically pursuant to Section 2.01 and Section 2.05.
SECTION 3.03. Conditions Precedent to Certain Capital
Increases. Each Capital Increase hereunder shall be subject to the further
conditions precedent that, on the date of such Capital Increase, no event has
occurred and is continuing, or would result from such Capital Increase, which
constitutes an "Event of Default" or similar event (however named) under the
Revolving Credit Agreement or event which with the giving of notice or passage
of time or both would constitute an "Event of Default" or similar event (however
named) thereunder, and the Seller by accepting the amount of such Capital
Increase shall be deemed to have certified to such effect.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Seller.
The Seller represents and warrants as follows:
(a) The Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction named at the
beginning hereof and is duly qualified to do business, and is in good standing,
in every jurisdiction in which the nature of its business requires it to be so
qualified and the failure to do so could reasonably be expected to have a
material adverse effect on the Seller's ability to perform its obligations
hereunder or the ability to assign or collect the Purchased Receivables
hereunder.
(b) The execution, delivery and performance by the Seller of
this Agreement, the Originator Sale Agreement and all other Facility Documents
to be entered into by it, including the Seller's use of the proceeds of
Purchases and reinvestments of Collections, are within the Seller's corporate
powers, have been duly authorized by all necessary corporate action, do not
contravene (i) the Seller's charter or by-laws, (ii) any law, rule or regulation
applicable to the Seller, (iii) any contractual restriction binding on or
affecting the Seller or its property or (iv) any order, writ, judgment, award,
injunction or decree binding on or affecting the Seller or its property, and do
not result in or require the creation of any Adverse Claim upon or with respect
to any of its properties (other than in favor of the Deal Agent for the benefit
of the Purchaser with respect to the Purchased Receivables and related Purchased
Property); and no transaction contemplated hereby or by the Originator Sale
Agreement requires compliance with any bulk sales act or similar law. This
Agreement, the Originator Sale Agreement and each other Facility Document to be
entered into by the Seller have each been duly executed and delivered by the
Seller.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Seller of this
Agreement, the Originator Sale Agreement or any other Facility Document to be
entered into by it, except for the filing of the UCC financing statements
described in Schedule I, all of which financing statements have been duly filed
and are in full force and effect.
(d) This Agreement, the Originator Sale Agreement and each
other Facility Document to be entered into by the Seller constitute the legal,
valid and binding obligation of the Seller enforceable against the Seller in
accordance with their respective terms subject to bankruptcy and similar laws
affecting creditors generally and principles of equity.
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(e) (i) The Seller has furnished to the Deal Agent (A) copies
of the audited consolidated balance sheets of OutSource International and its
consolidated subsidiaries as at December 31, 1997, and the related audited
consolidated statements of income, shareholders' equity and cash flows for the
fiscal year of OutSource International and its consolidated subsidiaries then
ended reported on by Deloitte & Touche, LLP, which financial statements present
fairly in all material respects in accordance with GAAP the financial position
of OutSource International and its consolidated subsidiaries as at December 31,
1997, and the results of operations of OutSource International and its
consolidated subsidiaries for the fiscal year of OutSource International then
ended, and (B) copies of the unaudited consolidated balance sheets of OutSource
International and its consolidated subsidiaries as at March 31, 1998, and the
related unaudited consolidated statements of income, shareholders' equity and
cash flows for the three-month period then ended, which financial statements
present fairly in all material respects in accordance with GAAP the financial
position of OutSource International and its consolidated subsidiaries as at
March 31, 1998, and the results of operations of OutSource International and its
consolidated subsidiaries for the three-month period then ended; and (ii) since
March 31, 1998, (A) no material adverse change has occurred in the business,
assets, liabilities, financial condition, results of operations or business
prospects of OutSource International and its subsidiaries taken as a whole, and
(B) no event has occurred or failed to occur which has had, or may have, singly
or in the aggregate, a material adverse effect on the ability of any Originator
to perform its obligations under the Originator Sale Agreement or the ability of
the Seller to perform its obligations under this Agreement or the ability to
assign or collect the Purchased Receivables hereunder.
(f) There is no pending or threatened action or proceeding
affecting any Originator, the Seller or any subsidiary of any Originator before
any court, governmental agency or arbitrator that could reasonably be expected
to have a material adverse effect on the financial condition of any Originator,
the Seller or any subsidiary of any Originator or the ability of any Originator
to perform its obligations under the Originator Sale Agreement or the ability of
the Seller to perform its obligations under this Agreement or the ability to
assign or collect the Purchased Receivables hereunder. None of the Originators,
the Seller, or any subsidiary of any of the Originators is in default with
respect to any order of any court, arbitrator or governmental body except for
defaults with respect to orders of governmental agencies which defaults are not
material to the business or operations of the Originators, the Seller or any
subsidiary of any of the Originators.
(g) No proceeds of any Purchase or Capital Increase will be
used by the Seller (i) to acquire any security in any transaction which is
subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended,
or (ii) for any purpose other than to fund a purchase of Receivables and related
assets from the Originators.
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(h) Each Receivable, together with the Contract related
thereto, shall, at all times, be owned by the Seller free and clear of any
Adverse Claim except as provided herein, and upon each Purchase, remittance of
Collections or Capital Increase, the Purchaser shall acquire a valid and
perfected first priority undivided percentage ownership interest in each
Purchased Receivable then existing or thereafter arising and in the Related
Security and Collections with respect thereto, which percentage shall correspond
at any time hereunder to the Purchased Interest in effect at such time, free and
clear of any Adverse Claim except as provided hereunder. No effective financing
statement or other instrument similar in effect covering any Receivable or the
Related Security or Collections with respect thereto shall at any time be on
file in any recording office except such as may be filed in favor of the Deal
Agent relating to this Agreement or in favor of Seller relating to the
Originator Sale Agreement. The purchases of the Receivables and related assets
by the Seller from each of the Originators constitute valid and true sales and
transfers for consideration (and not merely a pledge of such Receivables and
assets for security purposes), enforceable against creditors of each such
Originator, and no such Receivables or related assets shall constitute property
of any such Originator.
(i) As of the close of business on each Business Day prior to
the Termination Date, a Coverage Shortfall Event shall not exist.
(j) No Asset Report or Weekly Settlement Report (if prepared
by the Seller or any Affiliate thereof, or to the extent that information
contained therein is supplied by the Seller or such Affiliate), information,
exhibit, financial statement, document, book, record or report furnished or to
be furnished by the Seller to the Deal Agent or the Purchaser in connection with
this Agreement is or will be inaccurate in any material respect as of the date
it is or shall be dated or (except as otherwise disclosed to the Deal Agent or
the Purchaser, as the case may be, at such time) as of the date so furnished,
and no such document contains or will contain any material misstatement of fact
or omits or shall omit to state a material fact or any fact necessary to make
the statements contained therein not misleading.
(k) The principal place of business and chief executive office
of the Seller and the office where the Seller keeps all the Records are located
at the address of the Seller referred to in Section 10.02 hereof (or at such
other locations as to which the notice and other requirements specified in
Section 6.08 shall have been satisfied).
(l) The names and addresses of all the Lock-Box Banks,
together with the account numbers of the Lock-Box Accounts at such Lock-Box
Banks and the names, addresses and account numbers of all accounts to which
Collections of the Receivables outstanding before the initial Purchase hereunder
have been sent, are specified in Schedule III (which shall be deemed to be
amended in respect of terminating or adding any Lock-Box Account or Lock-Box
Bank upon satisfaction of the notice and other requirements specified in respect
thereof). The Seller has no other lock-box accounts or similar deposit accounts
for the collection of the Purchased Property except for the Lock-Box Accounts.
(m) Except as described in Schedule IV, the Seller has no
trade names, fictitious names, assumed names or "doing business as" names or
other names under which it has done or is doing business.
(n) The Originator Sale Agreement is the only agreement
pursuant to which the Seller purchases Receivables; the Seller has furnished to
the Deal Agent true, correct and complete copies of the Originator Sale
Agreement; and the Originator Sale Agreement is in full force and effect and no
event or circumstance has occurred that would constitute (or, with the giving of
notice or the passage of time or both, would constitute) an Event of Termination
pursuant to Section 7.01(k).
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(o) The Seller shall have given reasonably equivalent value to
each Originator in consideration for the transfer by such Originator to the
Seller of the Receivables and Related Security under the Originator Sale
Agreement, no such transfer shall have been made for or on account of an
antecedent debt owed by any Originator to the Seller, and no such transfer is or
may be voidable or subject to avoidance under any section of the Bankruptcy
Code.
(p) A copy of the Certificate of Incorporation of the Seller
as in effect on the date of this Agreement is attached as Exhibit E hereto, and
OutSource International has confirmed in writing to the Seller that, so long as
the Seller is not "insolvent" within the meaning of the Bankruptcy Code,
OutSource International will not cause the Seller to file a voluntary petition
under the Bankruptcy Code or any other bankruptcy or insolvency laws. Each of
the Seller and OutSource International has received advice from its counsel
which is consistent with the conclusions set forth in the legal opinion(s) of
Shutts & Bowen, counsel to the Originators and the Seller, issued in connection
with the Originator Sale Agreement and relating to the issues of substantive
consolidation and true sale of the Receivables and the related property.
(q) The Seller is not "insolvent" (within the meaning of such
term in the Bankruptcy Code); at the time of (and immediately after) each
transfer of Purchased Receivables to the Seller under the Originator Sale
Agreement, the Seller shall not have been insolvent; and at the time of (and
immediately after) each purchase hereunder, the Seller shall not have been
insolvent.
(r) The Seller accounts for the transfers to it from the
Originators of interests in Receivables, Related Security and Collections under
the Originator Sale Agreement as sales of such Receivables, Related Security and
Collections in its books, records and financial statements, in each case
consistent with GAAP and with the requirements set forth herein.
(s) The sole and exclusive business of the Seller is the
purchase of Receivables and Related Security pursuant to the Originator Sale
Agreement for its own account and for resale to the Purchaser pursuant to the
terms of this Agreement.
(t) The Seller is operated as an entity with assets and
liabilities distinct from those of the Originators and any Affiliates thereof
(other than the Seller), and the Seller hereby acknowledges that the Deal Agent
and the Purchaser are entering into the transactions contemplated by this
Agreement in reliance upon the Seller's identity as a separate legal entity from
each Originator and from each such other Affiliate.
(u) The Seller is not an "investment company" or a company
controlled by an "investment company" registered or required to be registered
under the Investment Company Act, or otherwise subject to any other federal or
state statute or regulation limiting its ability to incur indebtedness.
(v) The Seller is not engaged, principally or as one of its
important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" (as each of the quoted terms is
defined or used in Regulation G, T, U or X). No part of the proceeds of any
Purchased Receivable has been used for so purchasing or carrying margin stock or
for any purpose which violates, or which would be inconsistent with, the
provisions of Regulation G, T, U or X.
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(w) Each of the Seller, the Servicer and the Deal Agent has
the right (whether by license, sublicense or assignment) to use all of the
computer software used by the Servicer and/or the Originators to account for the
Purchased Property to the extent necessary to administer the Purchased Property,
and, in the case of the Seller and the Servicer, to assign (by way of sale or
collateral pledge) or sublicense such rights to use all of such software to the
Deal Agent.
(x) The Seller has filed or caused to be filed all Federal,
state and local tax returns which are required to be filed by it, and has paid
or caused to be paid all taxes shown to be due and payable on such returns or on
any assessments received by it, other than any taxes or assessments, the
validity of which are being contested in good faith by appropriate proceedings
and with respect to which the Seller has set aside adequate reserves on its
books in accordance with GAAP and which proceedings have not given rise to any
Adverse Claim.
(y) The copy of the Credit and Collection Policy attached
hereto as Schedule II is a true and complete copy thereof.
(z) Each Purchased Receivable is, unless otherwise identified
in a Weekly Settlement Report or otherwise excluded from the Eligible
Receivables Balance, an Eligible Receivable.
ARTICLE V
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GENERAL COVENANTS OF THE SELLER
-------------------------------
SECTION 5.01. General Covenants.
(a) Compliance with Laws; Preservation of Corporate Existence.
The Seller shall comply in all material respects with all applicable laws
(including, without limitation, ERISA and the Code), rules, regulations, orders
and Facility Documents and preserve and maintain its corporate existence,
rights, franchises, qualifications and privileges where the failure to comply
could reasonably be expected to have a material adverse effect on the Seller's
ability to perform its obligations hereunder or the ability to assign or collect
the Purchased Receivables hereunder.
(b) Sales, Liens, Etc. Except as otherwise specifically
provided herein, the Seller shall not (i) sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any Adverse
Claim upon or with respect to, any Purchased Receivable or the related Contract,
Collections or Related Security, or upon or with respect to any Lock-Box
Account, the Collection Account or any other account to which any Collections of
any Receivable are sent, or assign any right to receive income in respect
thereof or (ii) create or suffer to exist any Adverse Claim upon or with respect
to any of the Seller's other assets.
(c) General Reporting Requirements. The Seller will provide,
or cause to be provided, to the Deal Agent (with a copy for the Purchaser) the
following:
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(i) as soon as available and in any event within 90 days after
the end of each fiscal year of the Seller, a copy of the balance sheet
of the Seller and the related statement of income and cash flows for
such year, each prepared in accordance with GAAP consistently applied
and reported on by nationally recognized independent public accountants
acceptable to the Deal Agent;
(ii) as soon as available and in any event within 45 days
after the end of each of the first three quarters of each fiscal year
of OutSource International, consolidated balance sheets of OutSource
International and its consolidated subsidiaries and the related
statements of income, shareholders' equity and cash flows each for the
period commencing at the end of the previous fiscal year and ending
with the end of such quarter, prepared in accordance with GAAP and
certified by a senior financial officer of OutSource International;
(iii) as soon as available and in any event within 90 days
after the end of each fiscal year of OutSource International, a copy of
the consolidated balance sheets of OutSource International and its
consolidated subsidiaries and the related statements of income,
shareholders' equity and cash flows for such year, each prepared in
accordance with GAAP consistently applied and reported on by nationally
recognized independent public accountants acceptable to the Deal Agent;
(iv) promptly after the sending or filing thereof (as the case
may be), copies of (1) all reports which OutSource International sends
to any of its securityholders, (2) all reports and registration
statements which OutSource International files with the Securities and
Exchange Commission or any national securities exchange other than
registration statements relating to employee benefit plans and to
registrations of securities for selling securityholders, in each such
case to the extent that the Seller has received the same from OutSource
International pursuant to the Originator Sale Agreement and (3) all
reports, notices and/or certificates which OutSource International
sends to any of its "Lenders" under the Revolving Credit Agreement, in
each case to the extent that the Seller has received the same from
OutSource International pursuant to the Originator Sale Agreement;
(v) promptly after the filing or receiving thereof, copies of
all reports and notices with respect to any Reportable Event defined in
Article IV of ERISA which the Seller or any ERISA Affiliate files under
ERISA with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or which the Seller or any
ERISA Affiliate receives from such Corporation;
(vi) as soon as possible and in any event within three days
after the occurrence of each Event of Termination or each event which,
with the giving of notice or lapse of time or both, would constitute an
Event of Termination, a statement of the chief financial officer or
chief accounting officer of the Seller setting forth details of such
Event of Termination or event and the action which the Seller has taken
and proposes to take with respect thereto;
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(vii) promptly following receipt thereof, copies of all
financial statements, settlement statements, portfolio and other
reports, notices, disclosures, certificates, budgets and other written
material delivered or made available to the Seller by any Originator
pursuant to the terms of the Originator Sale Agreement;
(viii) no later than 10:00 a.m. Boston, Massachusetts time on
each Thursday of each calendar week (or, if such day is not a Business
Day, then the next Business Day to occur thereafter), and at the time
of any Capital Increase, a certificate in form and substance
satisfactory to the Deal Agent setting forth, as of the close of
business of the preceding Sunday, the Purchase Limit, the Capital
Limit, the outstanding Capital, the Aggregate Reserves, and the
Purchased Interest (and demonstrating compliance with the
representation and warranty set forth in Section 4.01(i)) (the "Weekly
Settlement Report"); and
(ix) promptly following the Deal Agent's request therefor,
such other information respecting the Receivables or the conditions or
operations, financial or otherwise, of the Seller as the Deal Agent may
from time to time reasonably request in order to protect the interests
of the Deal Agent or the Purchaser in connection with this Agreement.
(d) Merger, Etc. The Seller will not merge or consolidate
with, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions), all or substantially all of its
assets (whether now owned or hereafter acquired), or acquire all or
substantially all of the assets or capital stock or other ownership interest of
any Person, other than, with respect to asset dispositions, in connection
herewith.
(e) Accounting of Purchases. The Seller will not account for
or treat (whether in financial statements or otherwise) the transactions
contemplated by the Originator Sale Agreement in any manner other than the sale
of the "Transferred Assets" (as defined therein) by the Originators to the
Seller (it being understood, however, that such sales may not be recognized for
all accounting and tax purposes due to principles of consolidated financial
reporting and the filing of tax returns on a consolidated basis)..
(f) ERISA Matters. The Seller will not (a) fail to comply in
all material respects with ERISA and the provisions of the Code applicable to
the Benefit Plans; (b) engage or permit any ERISA Affiliate to engage in any
prohibited transaction which would subject the Seller to a material tax or
penalty imposed on a prohibited transaction; (c) permit to exist any accumulated
funding deficiency, as defined in Section 302(a) of ERISA and Section 412(a) of
the Code, or funding deficiency with respect to any Benefit Plan other than a
Multiemployer Plan; (d) incur any liability to the PBGC over and above the
premiums required by law; or (e) terminate any Benefit Plan in a manner which
could result in the imposition of a lien on the property of the Seller or any
such ERISA Affiliate.
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(g) Nature of Business. The Seller will engage in no business
other than the purchase of Receivables and Related Security from the
Originators, the resale or grant of such Receivables and Related Security to the
Purchaser and the other transactions permitted or contemplated by this
Agreement.
(h) Originator Receivables. With respect to each Receivable
acquired by the Seller from an Originator, the Seller (i) will (A) acquire such
Receivable pursuant to and in accordance with the terms of the Originator Sale
Agreement, (B) take all action necessary to perfect, protect and more fully
evidence the Seller's ownership of such Receivable, including, without
limitation, (1) filing and maintaining effective financing statements (Form
UCC-1) against the Originators in all necessary or appropriate filing offices,
and filing continuation statements, amendments or assignments with respect
thereto in such filing offices and (2) executing or causing to be executed such
other instruments or notices as may be necessary or appropriate and (C) take all
additional action that the Deal Agent may reasonably request to perfect, protect
and more fully evidence the respective interests of the parties to this
Agreement in the Receivables and other Purchased Property related thereto and
(ii) will not purchase from any Originator pursuant to the Originator Sale
Agreement any receivables acquired by such Originator from any Person pursuant
to a Permitted Acquisition except to the extent such receivables are Eligible
Receivables and the sale thereof would not otherwise cause a breach of any
provision of this Agreement or the Originator Sale Agreement.
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(i) Maintenance of Separate Existence. The Seller will do all
things necessary to maintain its corporate existence separate and apart from the
Originators and all other Affiliates of the Seller, including, without
limitation, (i) practicing and adhering to corporate formalities, such as
maintaining appropriate corporate books and records; (ii) maintaining at all
times at least one "Independent Director", as defined in and as required under
the Seller's Certificate of Incorporation; (iii) owning or leasing pursuant to
written leases (including the Administrative Services and Lease Agreement) all
office furniture and equipment necessary to operate its business; (iv)
refraining from (A) guaranteeing or otherwise becoming liable for any
obligations of any of its Affiliates, (B) having obligations guaranteed by its
Affiliates, (C) holding itself out as responsible for debts of any of its
Affiliates or for decisions or actions with respect to the affairs of any of its
Affiliates, and (D) being named as a direct or contingent beneficiary or loss
payee on any insurance policy of any Affiliate; (v) maintaining all of its
deposit and other bank accounts and all of its assets separate from those of any
other Person; (vi) maintaining all of its financial records separate and apart
from those of any other Person and ensuring that any of the Originators'
consolidated financial statements contain appropriate disclosures concerning the
Seller's separate existence; (vii) compensating all its employees, officers,
consultants and agents for services provided to it by such Persons, or
reimbursing any of its Affiliates in respect of services provided to it by
employees, officers, consultants and agents of such Affiliate, out of its own
funds; (viii) maintaining office space that is physically segregated from that
of any of its Affiliates (even if such office space is subleased from or is on
or near premises occupied by any of its Affiliates) and a separate telephone
number which will be answered only in its name; (ix) accounting for and managing
all of its liabilities separately from those of any of its Affiliates; (x)
allocating, on an arm's-length basis pursuant to the Administrative Services and
Lease Agreement, all shared corporate operating services, leases and expenses,
including, without limitation, those associated with the services of shared
consultants and agents and shared computer equipment and software; (xi)
refraining from paying dividends or making distributions, loans or other
advances to any of its Affiliates except, in each case, as duly authorized by
its board of directors and in accordance with applicable corporation law; (xii)
refraining from filing or otherwise initiating or supporting the filing of a
motion in any bankruptcy or other insolvency proceeding involving the Seller,
any Originator or any other Affiliate of the Seller to substantively consolidate
assets and liabilities of the Seller with the assets and liabilities of any such
Person or any other Affiliate of the Seller; (xiii) maintaining adequate
capitalization in light of its business and purpose and without the need for
ongoing capital contributions from OutSource International; (xiv) conducting all
of its business (whether written or oral) solely in its own name; (xv) require
that its employees, if any, when conducting its business identify themselves as
such and not as employees of any other Affiliate of the Seller (including,
without limitation, by means of providing appropriate employees with business or
identification cards identifying such employees as the Seller's employees); and
(xvi) taking all other actions necessary to maintain the accuracy of the factual
assumptions set forth in the legal opinion(s) of Shutts & Bowen, counsel to the
Originators and the Seller, issued in connection with the Originator Sale
Agreement and relating to the issues of substantive consolidation and true sale
of the Receivables and the related property.
(j) Supplemental Opinions. The Seller will cause to be
delivered to the Deal Agent within 30 days following the Deal Agent's request
therefor, but in no event more frequently than once during each calendar year
commencing after the first anniversary date of the initial Purchase,
supplemental opinions of outside counsel to the Seller and the Originators in
the form of Exhibit D or otherwise in form and substance reasonably satisfactory
to the Deal Agent, reaffirming the opinions set forth in the opinion letters of
Shutts & Bowen delivered to the Deal Agent in connection with the initial
Purchase hereunder pursuant to Section 3.01 or providing in reasonable detail
the reasons why any such opinions cannot be reaffirmed.
(k) Transactions with Affiliates. The Seller will not enter
into, or be a party to, any transaction with any of its Affiliates, except (i)
the transactions permitted or contemplated by this Agreement and the Originator
Sale Agreement, and (ii) other transactions (including, without limitation, the
lease of office space or computer equipment or licensing of software by the
Seller to or from an Affiliate) (A) in the ordinary course of business, (B)
pursuant to the reasonable requirements of the Seller's business, (C) upon fair
and reasonable terms that are substantially similar to the terms that could be
obtained in a comparable arm's-length transaction with a Person not an Affiliate
of the Seller, and (D) not inconsistent with the factual assumptions set forth
in the opinion letter issued by Shutts & Bowen delivered to the Deal Agent
pursuant to Section 3.01 (relating to the issues of substantive consolidation
and true sale of the Receivables and the related property), as such assumptions
may be modified in any subsequent opinion letter delivered pursuant to Section
5.01(j). It is understood that any compensation arrangement for officers shall
be permitted under clause (ii)(A), (B) and (C) above if such arrangement has
been expressly approved by the board of directors of the Seller.
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(l) Debt; Investments. The Seller will not incur any Debt
other than (i) Debt arising hereunder or under the Originator Sale Agreement and
(ii) Debt owing to each of the Originators evidenced by subordinated
non-negotiable promissory notes in form and substance satisfactory to the Deal
Agent and not inconsistent with the factual assumptions set forth in the opinion
letter issued by Shutts & Bowen delivered to the Deal Agent pursuant to Section
3.01 (relating to the issues of substantive consolidation and true sale of the
Receivables and the related property), as such assumptions may be modified in
any subsequent opinion letter delivered pursuant to Section 5.01(j). The Seller
will not make any Investments (including, without limitation, the creation of,
and the making of capital contributions to, a subsidiary) other than Permitted
Investments.
(m) Change in the Originator Sale Agreement. The Seller will
not, without the prior consent of the Deal Agent, (a) amend, modify, waive or
terminate any terms or conditions of the Originator Sale Agreement or of any
other Facility Document to which it is a party, or (b) exercise any
discretionary rights granted to the Seller under the Originator Sale Agreement
pursuant to provisions thereof providing for certain actions to be taken "with
the consent of the Buyer", "acceptable to the Buyer" as "specified by the
Buyer", "in the reasonable judgment of the Buyer" or similar provisions.
(n) Amendment to Certificate of Incorporation. The Seller will
not amend, modify or otherwise make any change to its Certificate of
Incorporation, except in accordance with the terms and provisions thereof.
(o) Audits. At any time and from time to time upon prior
written notice to the Seller during regular business hours and on an annual (or
more frequent) basis, if requested by the Deal Agent, the Seller will permit the
Deal Agent, or its agents or representatives, (i) to examine and make copies of
and abstracts from all Records, and (ii) to visit the offices and properties of
the Seller for the purpose of examining such Records, and to discuss matters
relating to the Receivables or the Seller's performance hereunder with any of
the officers or employees of the Seller having knowledge of such matters;
provided, however, that, unless an event or circumstance has occurred that would
constitute (or, with the giving of notice or the passage of time or both, would
constitute) an Event of Termination pursuant to Section 7.01(k) hereof or the
Deal Agent otherwise in good faith considers it prudent to perform such
functions more frequently, the Deal Agent will limit such functions to only
twice a year. Each such audit shall be at the sole expense of the Seller
(subject to the Seller's right under the Originator Sale Agreement to recover
such expenses from the Originators).
(p) Keeping of Records and Books of Account. The Seller will
maintain and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing the Receivables in
the event of the destruction of the originals thereof) and keep and maintain,
all documents, books, records and other information reasonably necessary or
advisable for the collection of all Purchased Receivables (including, without
limitation, records adequate to permit the daily identification of all
collections of and adjustments to each Purchased Receivable).
(q) Location of Records. The Seller will keep its chief place
of business and chief executive office, and the offices where it keeps the
Records, at the address of the Seller referred to in Section 10.02, or, in any
such case, upon 30 days' prior written notice to the Deal Agent, at such other
locations within the United States where all action required by Section 6.08
shall have been taken and completed.
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(r) Credit and Collection Policies. The Seller will, and will
cause the Servicer to, comply in all material respects with the Credit and
Collection Policy in regard to each Purchased Receivable and the related
Contract. The Seller shall not, without the written consent of the Deal Agent
(i) make any change in the character of its business or (ii) make or agree to
make any material change in the Credit and Collection Policy.
(s) Change in Payment Instructions to Obligors. The Seller
will not add or terminate any bank as a Lock-Box Bank from those listed in
Schedule III to the Originator Sale Agreement or Schedule III hereto or make any
change in its instructions to Obligors regarding payments to be made to any
Lock-Box Bank, unless the Deal Agent shall have given its prior written consent
to such addition, termination or change (which consent shall not be unreasonably
withheld) and the Deal Agent shall have received (i) ten Business Days' prior
notice of such addition, termination or change, (ii) prior to the effective date
of such addition, termination or change, (x) executed copies of Lock-Box
Agreements executed by each new Lock-Box Bank and the Seller and (y) copies of
all agreements and documents signed by either the Seller or the respective
Lock-Box Bank with respect to any new Lock-Box Account, and (iii) the prior
written consent of the Purchaser to such addition, termination or change (which
consent shall not be unreasonably withheld).
(t) Change in Corporate Name. The Seller will not make any
change to its corporate name, or use any trade names, fictitious names, assumed
names or "doing business as" names.
(u) Taxes. The Seller will file or cause to be filed all
federal, state and local tax returns which are required to be filed by it. The
Seller shall pay or cause to be paid all taxes shown to be due and payable on
such returns or on any assessments received by it, other than any taxes or
assessments, the validity of which are being contested in good faith by
appropriate proceedings and with respect to which the Seller shall have set
aside adequate reserves on its books in accordance with GAAP.
(v) Facility Documents. The Seller will comply in all material
respects with the terms of and employ the procedures outlined in and enforce the
obligations of the Originators under the Originator Sale Agreement, enforce all
of the other rights of the Seller under each of the other Facility Documents to
which it is a party, take all such action to such end as may be from time to
time reasonably requested by the Deal Agent, and maintain all such Facility
Documents in full force and effect and make to the Originators such reasonable
demands and requests for information and reports or for action as the Seller is
entitled to make thereunder and as may be from time to time reasonably requested
by the Deal Agent.
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(w) Segregation of Collections. The Seller will to the fullest
extent practicable prevent the deposit into any of the Lock-Box Accounts of any
funds other than Collections and, to the extent that any such funds are
nevertheless deposited into any of such Lock-Box Accounts, such funds will be
relatively insignificant in amount and the Seller will promptly identify any
such funds to the Servicer for segregation and remittance to the owner thereof.
To the extent that an Obligor has assigned other receivables as payment for any
Receivables and the Collections of such receivables exceeds the balance of such
Receivables, the Seller will promptly identify any such funds to the Servicer
for segregation and remittance to the applicable Obligor.
(x) Accounting Treatment. The Seller will not prepare any
financial statements or other statements (including any tax filings which are
not consolidated with those of the Originators) which shall account for the
transactions contemplated by the Originator Sale Agreement in any manner other
than as the sale of, or a capital contribution of, the "Transferred Assets" (as
defined therein) by the Originators to the Seller (it being understood, however,
that such sales may not be recognized for all accounting and tax purposes due to
principles of consolidated financial reporting and the filing of tax returns on
a consolidated basis).
(y) Qualification to Do Business. The Seller will duly qualify
to do business, and be in good standing, in every jurisdiction in which the
nature of its business requires it to be so qualified and the failure to do so
could reasonably be expected to have a material adverse effect on the Seller's
ability to perform its obligations hereunder or the ability to assign or collect
the Purchased Receivables hereunder.
ARTICLE VI
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ADMINISTRATION, COLLECTION AND MONITORING OF ASSETS
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SECTION 6.01. Appointment and Designation of the Servicer. The
Seller, the Purchaser and the Deal Agent hereby appoint the Person (the
"Servicer") designated by the Deal Agent from time to time with the approval of
the Purchaser pursuant to this Section 6.01, as their agent to service,
administer and collect the Receivables and otherwise to enforce their respective
rights and interests in, to and under the Receivables, the Related Security and
the Contracts. The Servicer's authorization under this Agreement shall terminate
on the Collection Date. Until the Deal Agent gives notice to the Seller of a
designation of a new Servicer after the occurrence of a Servicer Termination
Event, or consents to the appointment by the Seller of a new "Servicer" under
and pursuant to the Originator Sale Agreement, OutSource International is hereby
designated as, and hereby agrees to perform the duties and obligations of, the
Servicer pursuant to the terms hereof. The Deal Agent may (with the approval of
the Purchaser and only after the occurrence of a Servicer Termination Event)
designate as Servicer any Person to succeed OutSource International or any
successor Servicer, on the condition in each case that any such Person so
designated shall agree to perform the duties and obligations of the Servicer
pursuant to the terms hereof. Each of the Seller and the Servicer hereby grants
to any successor Servicer an irrevocable power of attorney to take any and all
steps in the Seller's or the Servicer's name, as applicable, and on behalf of
the Seller or the Purchaser, as may be necessary or desirable, in the
determination of the successor Servicer, to collect all amounts due under any
and all Receivables, including, without limitation, endorsing the Seller's name
on checks and other instruments representing Collections and enforcing such
Receivables and the related Contracts. The Servicer may, with the prior consent
of the Deal Agent, subcontract with any other Person for servicing,
administering or collecting the Receivables, provided that the Servicer shall
remain liable for the performance of the duties and obligations of the Servicer
pursuant to the terms hereof. Notwithstanding anything to the contrary contained
in this Agreement, the Servicer, if not the Seller or an Affiliate thereof,
shall have no obligation to collect, enforce or take any other action described
in this Article VI with respect to any Receivable that is not a Purchased
Receivable other than to deliver to the Seller the Collections and documents
with respect to any such Receivable that is not a Purchased Receivable as
described in Sections 6.03 and 6.06(b).
SECTION 6.02. Collection of Receivables by the Servicer;
Extensions and Amendments of Receivables. The Servicer shall take or cause to be
taken all such actions as may be necessary or advisable to collect each
Receivable from time to time, all in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Credit and Collection Policy; provided, however, that, (a) the Deal Agent shall
have the absolute and unlimited right to direct the Servicer (whether the
Servicer is the Seller, an Originator or otherwise) to commence or settle any
legal action, to enforce collection of any Purchased Receivable or to foreclose
upon or repossess any Related Security, (b) the Servicer shall not make the Deal
Agent or the Purchaser a party to any litigation without the express written
consent of the Deal Agent or the Purchaser, as the case may be. If the
Termination Date shall not have occurred, OutSource International, while it is
Servicer, may, in accordance with the Credit and Collection Policy, (a) extend
the maturity or adjust the Outstanding Balance of any Defaulted Receivable as
OutSource International may determine to be appropriate to maximize Collections
thereof and (b) adjust the Outstanding Balance of any Receivable to reflect the
reductions or cancellations described in the first sentence of Section 2.07, in
each such case in accordance with the requirements of the Credit and Collection
Policy and provided that such extension or adjustment shall not alter the status
of such Receivable as a Defaulted Receivable or limit the rights of the
Purchaser or Deal Agent under this Agreement. Except as otherwise permitted
pursuant to the next preceding sentence, neither the Servicer nor the Seller
will extend, amend, cancel or otherwise modify the terms of any Purchased
Receivable, or amend, modify, cancel or waive any term or condition of any
Contract related thereto without the prior written approval of the Deal Agent.
SECTION 6.03. Distribution and Application of Collections. The
Servicer shall set aside for the account of the Seller and the Purchaser their
respective allocable shares of the Collections of Receivables in accordance with
Sections 2.05 and 2.06. The Servicer shall as soon as practicable following
receipt turn over to the Seller the Collections of any Receivable which is not a
Purchased Receivable less, in the event neither OutSource International nor an
Affiliate thereof is the Servicer, all reasonable and appropriate out-of-pocket
costs and expenses of such Servicer of servicing, collecting and administering
the Receivables to the extent not covered by the Servicer Fee received by it.
SECTION 6.04. Other Rights of the Deal Agent. At any time
following the occurrence of a Servicer Termination Event or the designation of a
Servicer other than OutSource International, the Seller or any Affiliate of
either thereof pursuant to Section 6.01:
(a) The Deal Agent may or, at the request of the Deal Agent,
the Seller shall (in either case, at the Seller's expense) direct the
Obligors of Receivables, or any of them, to pay all amounts payable
under any Receivable directly to the Deal Agent or its designee;
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(b) The Deal Agent may or, at the request of the Deal Agent,
the Seller shall (in either case, at the Seller's expense) give each of
the Obligors notice of the Purchaser's interests in the Purchased
Receivables; and
(c) The Seller shall, at the Deal Agent's request and at the
Seller's expense, (i) assemble all Records and make the same available
to the Deal Agent or its designee at a place selected by the Deal Agent
or its designee, and (ii) segregate all cash, checks and other
instruments received by it from time to time constituting Collections
of Receivables in a manner acceptable to the Deal Agent and, promptly
following receipt, remit all such cash, checks and instruments, duly
endorsed or with duly executed instruments of transfer, to the Deal
Agent or its designee.
SECTION 6.05. Records; Audits. (a) The Servicer will maintain
and implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing the Receivables in the
event of the destruction of the originals thereof), and keep and maintain all
documents, books, records and other information reasonably necessary or
advisable for the timely and full collection of all Receivables (including,
without limitation, records adequate to permit the daily identification of each
new Purchased Receivable and all Collections of and adjustments to each existing
Purchased Receivable).
(b) The Servicer, whether or not OutSource International or an
Affiliate thereof, shall hold all Records in trust for the Seller and the
Purchaser in accordance with their respective interests. Subject to the receipt
of contrary instructions from the Deal Agent, the Seller will deliver all
Records to such Servicer; provided, however, that the Servicer, if other than
OutSource International, shall as soon as practicable upon demand deliver to the
Seller all Records in its possession relating to Receivables of the Seller other
than Purchased Receivables, and copies of Records in its possession relating to
Purchased Receivables.
(c) The Servicer will, from time to time during regular
business hours as requested by the Deal Agent, permit the Deal Agent, or its
agents or representatives, (i) to examine and make copies of and abstracts from
all Records and (ii) to visit the offices and properties of the Servicer for the
purpose of examining such Records and to discuss matters relating to the
Receivables or the Servicer's or the Seller's performance hereunder with any of
the officers or employees of the Servicer or the Seller having knowledge of such
matters.
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SECTION 6.06. Receivable Reporting. (a) The Servicer, so long
as it is OutSource International or an Affiliate thereof, and otherwise the
Seller, will deliver to the Deal Agent (i) prior to the Asset Report Date
occurring during each Collection Period hereafter, a report identifying the
Purchased Receivables (and the aged balance thereof), by Obligor and invoice
number, as of the last day of the preceding Collection Period, (ii) as of the
Termination Date, a report identifying the Purchased Receivables (and the aged
balance thereof), by Obligor and invoice number, within five (5) Business Days
after the Termination Date, (iii) upon the Deal Agent's written request, no less
frequently than once per week, a report identifying the Purchased Receivables,
by Obligor and invoice number as of the close of business on the preceding
Sunday and (iv) prior to the Asset Report Date occurring in each Collection
Period hereafter, a report identifying the outstanding accounts payable of each
of the Originators as of the last day of the preceding Collection Period,
identified by the relevant Originator and the account payee.
(b) On or prior to the Asset Report Date occurring in each
Collection Period, the Servicer shall prepare and forward to the Deal Agent for
the Purchaser, an Asset Report relating to all Purchased Receivables, as of the
close of business of the Servicer on the last day of the preceding Collection
Period.
SECTION 6.07. Collections and Lock-Boxes. The Seller and the
Servicer will
(i) instruct all Obligors to cause all Collections to be
either (A) remitted to a Lock-Box and will cause each Lock-Box Bank to retrieve
such Collections promptly and deposit the same to the respective Lock-Box
Accounts or (B) deposited directly with the Lock-Box Bank, and
(ii) instruct all Lock-Box Banks to transfer such Collections
in same day funds to a special-purpose segregated interest-bearing trust account
in the name of the Deal Agent (the "Collection Account") maintained with a
financial institution (the "Collection Account Bank") acceptable to the Deal
Agent, which shall initially be BankBoston, N.A. (provided, however, that in the
event that the Collection Account is maintained at a commercial bank having (x)
combined capital and surplus of at least $250,000,000 and (y) a short-term debt
rating of at least A-1 from S&P, P-1 from Moody's and D-1 from DCR (if rated by
DCR), the Collection Account need not be a trust account). In accordance with
the terms of the Collection Account Agreement, to be entered into among the
Collection Account Bank, the Servicer, the Purchaser and the Deal Agent, the
Servicer shall instruct the Collection Account Bank to allocate and remit such
Collections in accordance with Sections 2.05 and 2.06; provided, however, that
the Deal Agent may, upon the occurrence of a Servicer Termination Event, revoke
the Servicer's authority with respect to the Collection Account, direct the
Collection Account Bank to cease taking instructions from the Servicer and to
thereafter take direction solely from the Deal Agent. If the Seller receives any
Collections, the Seller will remit such Collections to the Collection Account
(including, without limitation, any Collections deemed to have been received
pursuant to Section 2.07) within one Business Day following the Seller's receipt
thereof. The Seller will not add or terminate any bank as Lock-Box Bank from
those listed in Schedule III or make any change in its instructions to Obligors
regarding payments to be made to any Lock Box or any Lock-Box Bank, unless the
Deal Agent shall have received at least ten Business Days' prior written notice
of such addition, termination or change and all actions reasonably requested by
the Deal Agent to protect and perfect the interest of the Deal Agent and the
Purchaser in the Collections of Purchased Receivables have been taken and
completed. The Seller hereby transfers to the Deal Agent, effective upon the
initial Purchase, the exclusive ownership and control of each of the Lock-Box
Accounts. The Seller hereby agrees to take any further action necessary that the
Deal Agent may reasonably request to effect such transfer.
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SECTION 6.08. UCC Matters; Protection and Perfection of
Purchased Property. The Seller will keep its principal place of business and
chief executive office, and the office where it keeps the Records, at the
address of the Seller referred to in Section 4.01(k) or, upon 30 days' prior
written notice to the Deal Agent, at such other locations within the United
States where all actions reasonably requested by the Deal Agent to protect and
perfect the interest of the Deal Agent and the Purchaser in the Purchased
Receivables have been taken and completed. The Seller will not make any change
to its corporate name or use any tradenames, fictitious names, assumed names,
"doing business as" names or other names other than those described in Schedule
IV, unless prior to the effective date of any such name change or use, the
Seller delivers to the Deal Agent such executed financing statements as the Deal
Agent may request to reflect such name change or use, together with such other
documents and instruments as the Deal Agent may request in connection therewith.
The Seller agrees that from time to time, at its expense, it will promptly
execute and deliver all further instruments and documents, and take all further
action that the Deal Agent may reasonably request in order to perfect, protect
or more fully evidence the Purchased Interests acquired by the Purchaser
hereunder, or to enable the Purchaser or the Deal Agent to exercise or enforce
any of their respective rights hereunder. Without limiting the generality of the
foregoing, the Seller will: (a) upon the request of the Deal Agent, execute and
file such financing or continuation statements, or amendments thereto or
assignments thereof, and such other instruments or notices, as may be necessary
or appropriate or as the Deal Agent may request, and (b) on or prior to the date
hereof, mark its master data processing records evidencing such Purchased
Receivables and related Contracts with a legend, acceptable to the Deal Agent,
evidencing that the Purchaser has acquired an interest therein as provided in
this Agreement. The Seller hereby authorizes the Deal Agent to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relative to all or any of the Purchased Property now existing or
hereafter arising without the signature of the Seller where permitted by law. A
carbon, photographic or other reproduction of this Agreement or any financing
statement covering the Purchased Property or any part thereof shall be
sufficient as a financing statement. The Seller shall, upon the request of the
Deal Agent at any time and at the Seller's expense, notify the Obligors of
Purchased Receivables, or any of them, of the ownership of Purchased Interests
by the Purchaser. If the Seller fails to perform any of its agreements or
obligations under this Section 6.08, the Deal Agent may (but shall not be
required to) itself perform, or cause performance of, such agreement or
obligation, and the expenses of the Deal Agent incurred in connection therewith
shall be payable by the Seller upon the Deal Agent's demand therefor. For
purposes of enabling the Deal Agent to exercise its rights described in the
preceding sentence and elsewhere in this Article VI, the Seller and the
Purchaser hereby authorize the Deal Agent to take any and all steps in the
Seller's name and on behalf of the Seller and the Purchaser necessary or
desirable, in the determination of the Deal Agent, to collect all amounts due
under any and all Receivables, including, without limitation, endorsing the
Seller's name on checks and other instruments representing Collections and
enforcing such Receivables and the related Contracts.
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SECTION 6.09. Obligations of the Seller With Respect to
Receivables. The Seller will (a) at its expense, regardless of any exercise by
the Deal Agent or the Purchaser of their rights hereunder, timely and fully
perform and comply with all material provisions, covenants and other promises
required to be observed by it under the Contracts related to the Purchased
Receivables to the same extent as if Purchased Interests therein had not been
sold hereunder and (b) pay when due any taxes, including without limitation,
sales and excise taxes, payable in connection with the Purchased Receivables. In
no event shall the Deal Agent or the Purchaser have any obligation or liability
with respect to any Purchased Receivables or related Contracts, nor shall any of
them be obligated to perform any of the obligations of the Seller or the
Originators or any of their Affiliates thereunder. The Seller will, and will
cause the Servicer to, timely and fully comply in all material respects with the
Credit and Collection Policy in regard to each Purchased Receivable and the
related Contract. The Seller will not make any change in the character of its
business or make or agree to make any change in the Credit and Collection
Policy, which change would, in either case, impair the collectibility of any
Purchased Receivable.
SECTION 6.10. Applications of Collections. Any payment by an
Obligor in respect of any indebtedness owed by it to the Seller or any
Originator shall, except as otherwise specified by such Obligor or otherwise
required by contract or law and unless otherwise instructed by the Deal Agent,
be applied as a Collection of any Purchased Receivable of such Obligor, in the
order of the age of such Receivables, starting with the oldest such Purchased
Receivable, to the extent of any amounts then due and payable thereunder, before
being applied to any Receivable that is not a Purchased Receivable or other
indebtedness of such Obligor.
SECTION 6.11. Annual Servicing Report of Independent Public
Accountants. On an annual basis on or before March 31 of each calendar year,
beginning with March 31, 1999, the Servicer shall cause nationally recognized
independent public accountants acceptable to the Deal Agent, to furnish a report
to each of the Servicer, the Seller, the Purchaser, the Deal Agent and each
Rating Agency then rating the Commercial Paper at the request of EagleFunding
substantially to the effect that (i) such accountants have examined certain
documents and records relating to the servicing of Receivables under this
Agreement, compared the information contained in the Weekly Settlement Reports
and Asset Reports delivered by or on behalf of the Seller under this Agreement
during the annual period covered by such report (or such shorter initial period,
as the case may be) with such documents and records and that, on the basis of
such examination, and subject to such reasonable limitations and qualifications
as may be set forth in such report, such accountants are of the opinion that the
servicing has been conducted substantially in compliance with the terms and
conditions as set forth in Article VI of this Agreement, except for such
exceptions as they believe to be immaterial and such other exceptions as shall
be set forth in such statement and (ii) such accountants have compared the
mathematical calculations of each amount set forth in the Weekly Settlement
Reports and Asset Reports delivered pursuant to this Agreement during the period
covered by such report with the Servicer's computer reports which were the
source of such amounts and that on the basis of such comparison, such
accountants are of the opinion that such amounts are in agreement, except for
such exceptions as they believe to be immaterial and such other exceptions as
shall be set forth in such statement.
ARTICLE VII
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EVENTS OF TERMINATION
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SECTION 7.01. Events of Termination. If any of the following
events ("Events of Termination") shall occur:
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(a) (i) The Servicer (if other than the Deal Agent) shall fail
to perform or observe any term, covenant or agreement hereunder (other than as
referred to in clause (ii) of this Section 7.01(a)) and such failure shall
remain unremedied for two Business Days after written notice to Servicer and
Seller or (ii) either the Servicer (if other than the Deal Agent) or the Seller
shall fail to make any payment or deposit to be made by it hereunder when due;
or
(b) (i) Any representation or warranty made or deemed to be
made by the Seller (or any of its officers or agents) under or in connection
with this Agreement or any Asset Report or other information or report delivered
pursuant hereto shall prove to have been false or incorrect in any material
respect when made or (ii) any representation or warranty made or deemed to be
made by OutSource International, any Originator or the Servicer (or any of their
respective officers or agents) under or in connection with the Originator Sale
Agreement or this Agreement (as the case may be) shall prove to have been false
or incorrect in any material respect when made; or
(c) Either the Seller, OutSource International or any
Originator (individually or in its capacity as Servicer) shall fail to perform
or observe any term, covenant or agreement (other than any term covenant, or
agreement described in either of clauses (a) or (b) above) contained in this
Agreement or in the Originator Sale Agreement on its part to be performed or
observed and any such failure shall remain unremedied for two (2) Business Days
after written notice thereof shall have been given by the Deal Agent to the
Seller; or
(d) (i) The Seller, OutSource International or any Originator
shall fail to pay any principal of or premium or interest on any Debt, if, in
the case of OutSource International or any Originator, the aggregate principal
amount of such Debt is $500,000 or more, when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) and such failure shall continue after the applicable grace period, if
any, specified in the agreement or instrument relating to such Debt; or (ii) any
other default or any event which, with the passage of time or the giving of
notice, or both, would constitute a default under any agreement or instrument
relating to any such Debt, shall occur and shall continue after the applicable
grace period, if any, specified in such agreement or instrument; provided,
however, that, if such default arises solely under the Revolving Credit
Agreement and the lenders thereunder have waived or rescinded such event, such
event shall not constitute an "Event of Termination" hereunder; or (iii) any
Debt of the Seller, OutSource International or any Originator, if, in the case
of OutSource International or any Originator the aggregate principal amount of
such Debt is $500,000 or more, shall be declared to be due and payable or
required to be prepaid (other than by a regularly scheduled required prepayment)
prior to the stated maturity thereof; or
(e) Either (i) any Purchase, Capital Increase or remittance of
Collections shall for any reason, except to the extent permitted by the terms
hereof, cease to create a valid and perfected first priority undivided
percentage ownership or security interest in each Purchased Receivable and the
Related Security and Collections with respect thereto or (ii) any purchase by
the Seller of a Receivable from the Originator shall, for any reason, cease to
create in favor of the Seller a valid and perfected first priority ownership or
security interest in each Purchased Receivable and the Related Security and
Collections with respect thereto; or
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(f) (i) The Seller, OutSource International, any Originator or
any of their respective Affiliates shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Seller, OutSource
International or any Originator seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against (but not by)
OutSource International or any Originator, either such proceeding shall have
remained undismissed or unstayed for a period of 60 days or any order for relief
of the sort described above shall have been entered; or (ii) the Seller,
OutSource International or any Originator shall take any corporate action to
authorize any of the actions set forth in clause (i) above in this Section
7.01(f); or
(g) the Default Ratio for any Collection Period shall exceed
5.0%, or the Delinquency Ratio for any Collection Period shall exceed 8.0%, or
the Dilution Ratio for any Collection Period shall exceed 4.0%; or
(h) (i) There shall have occurred and be continuing an "Event
of Termination" under the Originator Sale Agreement, or (ii) the Originator Sale
Agreement shall have ceased to be valid, binding and enforceable as against any
of the parties thereto without any amendment, modification, waiver or
termination of any terms or conditions thereof, other than as agreed to in
writing by the Deal Agent, or (iii) the Originators shall have ceased for any
reason to sell all of the "Receivables" under and as defined in the Originator
Sale Agreement to the Seller pursuant to the Originator Sale Agreement, or (iv)
the assignment to the Deal Agent of all of the Seller's right and title to and
interest in the Originator Sale Agreement shall have ceased, for any reason, to
be fully effective and enforceable by the Deal Agent as against any of the
parties of the Originator Sale Agreement; or
(i) OutSource International shall cease to own (whether
directly or indirectly) 100% of the issued and outstanding stock of the Seller;
or
(j) The Seller shall fail to make payment as specified in
Section 2.05(b) and such failure shall remain unremedied for two Business Days
after written notice thereof shall have been given by the Deal Agent to the
Seller; or
(k) A Servicer Termination Event shall have occurred and be
continuing; or
(l) The date on which some or all of the "Liquidity
Commitments" under the Liquidity Agreement shall cease to be effective or shall
terminate without renewal or such "Liquidity Commitments" shall ever be less
than 102% of the Purchase Limit; or
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(m) Any Originator, the Seller or the Servicer shall fail to
perform or observe any material term, covenant or agreement contained in the
Credit and Collection Policy and such failure shall remain unremedied for two
Business Days after written notice to Servicer and Seller; or
(n) A Coverage Shortfall Event shall exist and such Coverage
Shortfall Event shall remain unremedied for two Business Days, or the Purchased
Interest shall exceed 100% and such condition shall remain unremedied for two
Business Days; or
(o) The IRS or the PBGC shall have filed notice of one or more
Adverse Claims against any Originator, the Seller or any ERISA Affiliate under
ERISA or the Code, unless such Adverse Claim does not purport to cover the
Receivables, and such notice shall have remained in effect for more than thirty
(30) Business Days unless, prior to the expiration of such period, such Adverse
Claims shall have been adequately bonded by such Originator, Seller or the ERISA
Affiliate (as the case may be) in a transaction with respect to which the Deal
Agent has given its prior written approval; or
(p) The Seller shall have become subject to registration as an
"investment company" within the meaning of the Investment Company Act; or
(q) The Deal Agent shall have received an "Enforcement Notice"
under the Intercreditor Agreement; or
(r) The Revolving Credit Agreement shall cease to be in full
force and effect;
then, and in any such event, the Deal Agent may, by notice to the Seller declare
the Termination Date to have occurred, except that, in the case of any event
described in Section 7.01(l) or (p), or in clause (i) of Section 7.01(f) above,
the Termination Date shall be deemed to have occurred automatically upon the
occurrence of such event. Upon any such declaration or automatic occurrence, the
Deal Agent and the Purchaser shall have, in addition to all other rights and
remedies under this Agreement or otherwise, all other rights and remedies
provided under the UCC of the applicable jurisdiction and other applicable laws,
which rights shall be cumulative.
ARTICLE VIII
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INDEMNIFICATION
---------------
SECTION 8.01. Indemnities by the Seller. Without limiting any
other rights which the Deal Agent, the Purchaser, the Liquidity Providers or any
of their respective Affiliates may have hereunder or under applicable law, the
Seller hereby agrees to indemnify the Deal Agent, the Purchaser, each Liquidity
Provider, each of their respective Affiliates, and each of their respective
directors, officers, employees, agents and attorneys (all of the foregoing being
collectively referred to as "Indemnified Parties") from and against any and all
damages, losses, claims, liabilities and related costs and expenses, including
reasonable attorneys' fees and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts") awarded against or actually
incurred by any of them arising out of or resulting from:
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(i) any Purchased Receivable represented or deemed represented
by the Seller to be an Eligible Receivable which is not an Eligible
Receivable at the time such representation is made or deemed made;
(ii) reliance on any representation or warranty made or deemed
made by the Seller, the Servicer (if OutSource International or one of
its Affiliates) or any of their respective officers under or in
connection with this Agreement, which shall have been false or
incorrect in any material respect when made or deemed made or
delivered;
(iii) the failure by the Seller or the Servicer (if OutSource
International or one of its Affiliates) to comply with any term,
provision or covenant contained in this Agreement or any of the other
Facility Documents, or with any applicable law, rule or regulation with
respect to any Receivable, the related Contract or the Related
Security, or the nonconformity of any Receivable, the related Contract
or the Related Security with any such applicable law, rule or
regulation;
(iv) (A) the failure to vest and maintain vested in the
Purchaser or to transfer to the Purchaser, legal and equitable title to
and ownership of, a percentage ownership interest, corresponding to the
Purchased Interest, in the Receivables which are, or are purported to
be, Purchased Receivables, together with all Collections and Related
Security; or (B) the failure to grant to the Deal Agent, for the
benefit of itself and the Purchaser, a valid and perfected first
priority "security interest," under Article 9 of the UCC, in and to the
Receivables which are, or are purported to be, Purchased Receivables,
together with all Collections and Related Security; in each case free
and clear of any Adverse Claim whether existing at the time of the
Purchase of any such Receivable or at any time thereafter;
(v) the failure to prevent, as of the close of business on
each Business Day prior to the Termination Date, a Coverage Shortfall
Event from occurring;
(vi) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to
any Receivables which are, or are purported to be, Purchased
Receivables, whether at the time of any Purchase or at any subsequent
time;
(vii) any dispute, claim, offset or defense (other than the
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Receivable which is, or is purported to be, a Purchased
Receivable (including, without limitation, a defense based on such
Receivable or the related Contract not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with
its terms), or any other claim resulting from the sale of the
merchandise or services related to such Receivable or the furnishing or
failure to furnish such merchandise or services;
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(viii) any failure of the Seller or the Servicer (if OutSource
International or one of its Affiliates) to perform its duties or
obligations in accordance with the provisions of this Agreement or any
failure by an Originator, the Seller or any Affiliate thereof to
perform its respective duties under the Contracts;
(ix) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with merchandise or
services which are the subject of any Receivable or Contract;
(x) the failure to pay when due any taxes, including without
limitation, sales, excise or personal property taxes payable in
connection with the Purchased Receivables;
(xi) any repayment by the Deal Agent or the Purchaser of any
amount previously distributed in reduction of Capital or payment of
Yield or any other amount due hereunder, in each case which amount the
Deal Agent or the Purchaser believes in good faith is required to be
repaid;
(xii) the commingling of Collections of Purchased Receivables
at any time with other funds;
(xiii) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of Purchases or reinvestments or
the ownership of Purchased Property or in respect of any Receivable,
Related Security or Contract except any such investigation, litigation
or proceeding arising from the gross negligence or willful misconduct
of the Purchaser or Deal Agent;
(xiv) any failure by the Seller to give reasonably equivalent
value to each Originator in consideration for the transfer by such
Originator to the Seller of any Receivables or Related Security, or any
attempt by any Person to void or otherwise avoid any such transfer
under any statutory provision or common law or equitable action,
including, without limitation, any provision of the Bankruptcy Code; or
(xv) the failure of the Seller, any Originator or any of their
respective agents or representatives (including, without limitation,
agents, representatives and employees of the Originators acting
pursuant to authority granted under Section 6.01) to remit to the
Servicer or the Deal Agent, Collections of Purchased Receivables
remitted to the Seller, such Originator or any such agent or
representative.
Any amounts subject to the indemnification provisions of this Section 8.01 shall
be paid by the Seller to the Deal Agent within five Business Days following the
Deal Agent's written demand therefor. Notwithstanding any other provision of
this Agreement to the contrary, the Seller shall not indemnify the Indemnified
Parties for or with respect to any Indemnified Amounts that would constitute
recourse for uncollectible Purchased Receivables due to credit reasons.
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SECTION 8.02. Optional Repurchases of Purchased Interest. (a)
The Seller may, at any time upon not less than five Business Days' prior written
notice to the Deal Agent, elect to repurchase the Purchased Interest (or a
portion thereof), which repurchase shall take place on the Business Day next
succeeding the fifth Business Day to occur following the Deal Agent's receipt of
such notice, in consideration of the payment of all or a portion of outstanding
Capital and accrued Yield on such day in accordance with the terms of subsection
(b) of this Section 8.02.
(b) In the case of a repurchase from the Purchaser by the
Seller of the Purchased Interest (or a portion thereof) pursuant to this Section
8.02, the Seller shall, on the Business Day coinciding with such repurchase,
make a payment to the Deal Agent, the proceeds of which repurchase shall be
deemed to be Collections relating to the Purchased Interest received by the
Seller, and the amount of which payment shall be applied in the following order
of priority:
(i)(A) First, to pay any accrued and unpaid Servicer Fee (if
the Servicer is a party other than OutSource International or an
Affiliate thereof), and (B) second, to pay any such Servicer Fee to be
accrued through (and including) the next scheduled payment date
therefor;
(ii)(A) First, to pay accrued and unpaid Yield with respect to
Purchase Periods associated with the portions of Capital to be reduced
in accordance with clause (vii) below, and (B) second, to pay any
Liquidation Fee payable in connection with such reduction of Capital;
(iii)(A) First, to pay accrued and unpaid Liquidity Fee which
is then due and payable, and (B) second, to pay any such Liquidity Fee
to be accrued through such date;
(iv)(A) First, to pay accrued and unpaid Program Fee which is
then due and payable, and (B) second, to pay any such Program Fee to be
accrued through such date;
(v)(A) First, to pay any Administrative Fee which is then due
and payable, and (B) second (unless such payment is sufficient to
reduce Capital to zero in accordance with the application to be made
pursuant to this Section 8.02(b)), to be retained in the Collection
Account to the extent of the Administrative Fee payable in respect of
the next succeeding annual period;
(vi)(A) First, to pay to pay the portion of any other accrued
and unpaid obligations which have not been paid pursuant to clauses (i)
through (v) above and which are then due and payable by the Seller to
the Purchaser or the Deal Agent under this Agreement or any of the
other Facility Documents;
(vii) to pay all Capital relating to any Purchase Periods
selected by the Deal Agent in the exercise of its sole discretion;
(viii)(A) First, to pay any accrued and unpaid Servicer Fee
(if the Servicer is OutSource International or an Affiliate thereof)
which is then due and payable, and (B) second, to pay any such Servicer
Fee to be accrued through (and including) the next scheduled payment
date therefor.
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(c) Notwithstanding anything herein or elsewhere to the
contrary, the Purchased Interest shall be recomputed as of the close of business
of the Servicer on the date of any repurchase made under this Section 8.02,
after giving effect to the reduction of Capital arising as a result of such
repurchase, and thereafter shall be automatically recomputed or deemed
recomputed, or remain constant, as the case may be, in accordance with the
provisions of Section 2.05(c).
(d) Any repurchase made pursuant to this Section 8.02 shall be
made without recourse or warranty, express or implied (other than a
representation and warranty that the Purchased Interest (or portion thereof) so
repurchased is free and clear of any Adverse Claim created by or through the
Purchaser).
ARTICLE IX
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THE DEAL AGENT
--------------
SECTION 9.01. Authorization and Action. The Purchaser hereby
appoints and authorizes the Deal Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to the
Deal Agent by the terms hereof, together with such powers as are reasonably
incidental thereto, including, without limitation, the power and authority to
hold and to perfect any ownership interest or security interest created pursuant
hereto or in connection herewith on behalf of the Purchaser.
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SECTION 9.02. Deal Agent's Reliance, Etc. Neither the Deal
Agent nor any of its directors, officers, agents or employees shall be liable
for any action taken or omitted to be taken by it or them as Deal Agent under or
in connection with this Agreement (including, without limitation, any action
taken or omitted to be taken by it or them if the Deal Agent is designated as
Servicer pursuant to Section 6.01) or any other agreement executed pursuant
hereto, except for its or their own negligence or willful malfeasance or
misfeasance. Without limiting the foregoing, the Deal Agent: (i) may consult
with legal counsel (including counsel for the Seller), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (ii) makes no warranty or
representation to any Person and shall not be responsible to any other Person
for any statements, warranties or representations made in or in connection with
this Agreement or in connection with any of the other agreements executed
pursuant hereto; (iii) shall not have any duty to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or conditions of
this Agreement on the part of the Seller or to inspect the property (including
the books and records) of the Seller; (iv) shall not be responsible to the
Purchaser or any other Person for the due execution, legality, validity,
enforceability, genuineness or sufficiency of value of this Agreement or any
other agreement, instrument or document furnished pursuant hereto; and (v) shall
incur no liability under or in respect of this Agreement or any other agreement
executed pursuant hereto, by acting upon any notice (including notice by
telephone with respect to notices under Section 2.02), consent, certificate or
other instrument or writing (which may be by telex or facsimile) believed by it
to be genuine and signed or sent by the proper party or parties. Notwithstanding
anything in this Section 9.02 to the contrary, the foregoing provisions of this
Section 9.02 shall not run in favor of the Deal Agent in connection with any
claim against the Deal Agent made by EagleFunding.
SECTION 9.03. Deal Agent and Affiliates. With respect to any
interests which may be assigned by the Purchaser to BSI, or any Affiliate of
BSI, pursuant to Section 10.04, BSI or such Affiliate shall have the same rights
and powers under this Agreement as would the Purchaser if it were holding such
interests and may exercise the same as though it were not the Deal Agent. BSI
and its Affiliates may generally engage in any kind of business with the Seller,
any Originator or any Obligor, any of their respective Affiliates and any Person
who may do business with or own securities of the Seller, any Originator or any
Obligor or any of their respective Affiliates, all as if BSI were not the Deal
Agent and without any duty to account therefor to the Purchaser or any Liquidity
Provider.
SECTION 9.04. [Reserved].
SECTION 9.05. Resignation of the Deal Agent. The Deal Agent
may resign as Deal Agent hereunder at any time by giving not less than five (5)
Business Days' prior written notice to the Purchaser, the Seller, the Servicer
and each Rating Agency then rating the Commercial Paper, at the request of
EagleFunding; such resignation to become effective only upon the later to occur
of
(i) the earlier of (x) the appointment and acceptance of a
successor Deal Agent as provided below and (y) the 30th day following
delivery of such notice, and
(ii) the Purchaser's obtaining of written confirmation from
each such Rating Agency that such resignation and appointment will not
result in a withdrawal or downgrading of the then-current rating of the
Commercial Paper by such Rating Agency.
Upon any such resignation, the Purchaser shall appoint a financial institution
of its choosing as Deal Agent. Following the appointment of a successor Deal
Agent and such successor Deal Agent's acceptance thereof, such successor Deal
Agent shall succeed to and become vested with all the rights, powers, privileges
and duties of the resigning Deal Agent as Deal Agent hereunder, and the
resigning Deal Agent shall be discharged from its duties and obligations as Deal
Agent hereunder. After the Deal Agent's resignation, the provisions of this
Article IX 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 Deal Agent.
SECTION 9.06. Payments. If in the opinion of the Deal Agent
the distribution of any amount received by it in such capacity hereunder or
under any of the other Facility Documents might involve it in liability, it may
refrain from making distribution until its right to make distribution shall have
been adjudicated by a court of competent jurisdiction. If a court of competent
jurisdiction shall adjudge that any amount received and distributed by the Deal
Agent is to be repaid, each Person to whom any such distribution shall have been
made shall either repay to the Deal Agent its proportionate share of the amount
so adjudged to be repaid or shall pay over the same in such manner and to such
Persons as shall be determined by such court.
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ARTICLE X
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MISCELLANEOUS
-------------
SECTION 10.01. Amendments and Waivers. (a) Except as provided
in Section 10.01(b), no amendment or modification of any provision of this
Agreement shall be effective without the written agreement of the Seller, the
Servicer and the Deal Agent, and no termination or waiver of any provision of
this Agreement or consent to any departure therefrom by the Seller shall be
effective without the written concurrence of the Deal Agent. Any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
(b) Notwithstanding the provisions of Section 10.01(a), (i)
the written consent of the Purchaser shall be required for any amendment,
modification or waiver (A) reducing any Capital, or the Yield thereon, for any
Purchase Period, (B) postponing any date for any payment of any Capital or the
Yield thereon, for any Purchase Period, or for any payment of fees payable under
the terms of the Fee Letter, or (C) modifying the provisions of this Section
10.01, and (ii) the written consent of the Purchaser shall be required for any
amendment, modification or waiver increasing the Purchase Limit.
(c) Any time that the Commercial Paper is being rated by one
or more of Moody's, S&P and DCR (as applicable) (each, a "Rating Agency"), at
the request of EagleFunding, no material amendment or modification of any
material provisions hereof shall be effective absent written confirmation by
each such Rating Agency that such amendment or modification will not result in a
withdrawal or downgrading of the then-current rating of the Commercial Paper by
such Rating Agency. EagleFunding shall send, or shall cause to be sent, copies
of all amendments, modifications or supplements to this Agreement to each Rating
Agency then rating the Commercial Paper, at the request of EagleFunding, prior
to the execution thereof by all parties thereto.
SECTION 10.02. Notices, Etc. All notices and other
communications provided for hereunder shall, unless otherwise stated herein, be
in writing (including telex communication and communication by facsimile copy)
and mailed, telexed, transmitted or delivered, as to each party hereto, at its
address set forth under its name on the signature pages hereof or specified in
such party's Assignment and Acceptance or at such other address as shall be
designated by such party in a written notice to the other parties hereto. All
such notices and communications shall be effective, upon receipt, or in the case
of (a) notice by mail, five days after being deposited in the United States
mails, first class postage prepaid, (b) notice by telex, when telexed against
receipt of answerback, or (c) notice by facsimile copy, when verbal
communication of receipt is obtained, except that notices and communications
pursuant to Article II shall not be effective until received.
SECTION 10.03 Setoff and Counterclaim. All payments to be made
by the Seller or the Servicer under this Agreement shall be made free and clear
of any counterclaim, set-off, deduction or other defense, which the Seller or
the Servicer may have against the Purchaser, the Deal Agent, any Liquidity
Provider, or against each other.
59
<PAGE>
SECTION 10.04. No Waiver; Remedies. No failure on the part of
the Deal Agent or the Purchaser to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder 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.
SECTION 10.05. Binding Effect; Assignability. This Agreement
shall be binding upon and inure to the benefit of the Seller, the Deal Agent,
the Purchaser, the Servicer and their respective successors and permitted
assigns. This Agreement and the Purchaser's rights and obligations hereunder and
interest herein shall be assignable in whole or in part (including by way of the
sale of participation interests therein) by the Purchaser and their respective
successors and assigns. EagleFunding shall send, or cause to be sent, notice of
such proposed assignment by the Purchaser, to each Rating Agency then rating the
Commercial Paper at the request of EagleFunding, prior to the effectiveness
thereof. The Seller may not assign any of its rights and obligations hereunder
or any interest herein without the prior written consent of the Purchaser and
the Deal Agent. The parties to each assignment or participation made pursuant to
this Section 10.05 shall execute and deliver to the Deal Agent for its
acceptance and recording in its books and records, an Assignment and Acceptance
or a participation agreement or other transfer instrument reasonably
satisfactory in form and substance to the Deal Agent and the Seller. Each such
assignment or participation shall be effective as of the date specified in the
applicable Assignment and Acceptance or other agreement or instrument only after
the execution, delivery, acceptance and recording as described in the preceding
sentence. The Deal Agent shall notify the Seller of any assignment or
participation thereof made pursuant to this Section 10.05. The Purchaser may in
connection with any assignment or participation or any proposed assignment or
participation pursuant to this Section 10.05, disclose to the assignee or
participant or proposed assignee or participant any information relating to the
Seller and the Purchased Property furnished to the Purchaser by or on behalf of
the Seller or the Servicer.
SECTION 10.06. Term of this Agreement. This Agreement,
including, without limitation, the Seller's obligation to observe its covenants
set forth in Articles V and VI, and the Servicer's obligation to observe its
covenants set forth in Article VI, shall remain in full force and effect until
the Collection Date; provided, however, that the rights and remedies with
respect to any breach of any representation and warranty made or deemed made by
the Seller pursuant to Articles III and IV, and the indemnification and payment
provisions of Article VIII and Article IX and the provisions of Section 10.10
and Section 10.11 shall be continuing and shall survive any termination of this
Agreement.
60
<PAGE>
SECTION 10.07. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF OBJECTION TO VENUE. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. THE PURCHASER, THE SELLER
AND THE DEAL AGENT EACH HEREBY AGREES TO THE JURISDICTION OF ANY FEDERAL COURT
LOCATED WITHIN THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO HEREBY WAIVES
ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS TO
THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT.
SECTION 10.08. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, THE PURCHASER, THE SELLER AND THE DEAL AGENT EACH WAIVES ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE BETWEEN THE PARTIES HERETO ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN ANY OF
THEM IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL
WITHOUT A JURY.
SECTION 10.09. Costs, Expenses and Taxes. (a) In addition to
the rights of indemnification granted to the Deal Agent, the Purchaser and the
Indemnified Parties under Article VIII hereof, the Seller agrees to pay on
demand all costs and expenses of EagleFunding and the Deal Agent incurred in
connection with the preparation, execution, delivery, administration (including
periodic auditing), amendment or modification of, or any waiver or consent
issued in connection with, this Agreement and the other documents to be
delivered hereunder or in connection herewith, including, without limitation,
the reasonable fees and out-of-pocket expenses of counsel for the Deal Agent and
EagleFunding with respect thereto, and with respect to advising the Deal Agent
and the Purchaser as to their respective rights and remedies under this
Agreement and the other documents to be delivered hereunder or in connection
herewith, and all costs and expenses, if any (including reasonable counsel fees
and expenses), incurred by the Deal Agent or the Purchaser in connection with
the enforcement of this Agreement and the other documents to be delivered
hereunder or in connection herewith.
(b) The Seller shall pay on demand any and all commissions of
placement agents and dealers in respect of commercial paper notes (to the extent
not otherwise received by the Purchaser as a portion of Yield or Program Fee)
issued to fund the Purchase of any interests in Purchased Property and any and
all stamp, sales, excise and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing and recording of this
Agreement, the other documents to be delivered hereunder or any agreement or
other document providing liquidity support, credit enhancement or other similar
support to the Purchaser in connection with this Agreement or the funding or
maintenance of Purchases hereunder.
61
<PAGE>
(c) The Seller shall pay on demand all other costs, expenses
and taxes (excluding income taxes) incurred by an Issuer or any general or
limited partner or shareholder of such Issuer ("Other Costs"), including,
without limitation, the cost of auditing such Issuer's books by certified public
accountants, the cost of rating such Issuer's commercial paper by independent
financial rating agencies, the taxes (excluding income taxes) resulting from
such Issuer's operations, and the reasonable fees and out-of-pocket expenses of
counsel for such Issuer or any counsel for any general or limited partner or
shareholder of such Issuer with respect to (i) advising such Person as to its
rights and remedies under this Agreement and the other documents to be delivered
hereunder or in connection herewith, (ii) the enforcement of this Agreement and
the other documents to be delivered hereunder or in connection herewith or
matters relating to such Issuer's operations and (iii) advising such Person as
to the issuance of its commercial paper notes and action in connection with such
issuance; provided, however, that the Seller and any other Persons who from time
to time sell receivables or interests therein to the Purchaser ("Other Sellers")
each shall be liable for such Other Costs ratably in accordance with the usage
under their respective facilities; and provided, further, that if such Other
Costs are attributable to the Seller and not attributable to any Other Seller,
the Seller shall be solely liable for such Other Costs.
SECTION 10.10. No Proceedings. Each of the Seller, the Deal
Agent, the Servicer and the Purchaser hereby agrees that it will not institute
against, or join any other Person in instituting against, any Issuer any
proceedings of the type referred to in clause (i) of Section 7.01(f) so long as
any commercial paper issued by such Issuer shall be outstanding or there shall
not have elapsed one year and one day since the last day on which any such
commercial paper shall have been outstanding.
SECTION 10.11. Recourse Against Certain Parties. No recourse
under or with respect to any obligation, covenant or agreement (including,
without limitation, the payment of any fees or any other obligations) of the
Purchaser as contained in this Agreement or any other agreement, instrument or
document entered into by it pursuant hereto or in connection herewith shall be
had against any administrator of the Purchaser or any incorporator, affiliate,
stockholder, officer, employee or director of the Purchaser or of any such
administrator, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise; it being expressly
agreed and understood that the agreements of the Purchaser contained in this
Agreement and all of the other agreements, instruments and documents entered
into by it pursuant hereto or in connection herewith are, in each case, solely
the corporate obligations of the Purchaser, and that no personal liability
whatsoever shall attach to or be incurred by any administrator of the Purchaser
or any incorporator, stockholder, affiliate, officer, employee or director of
the Purchaser or of any such administrator, as such, or any other of them, under
or by reason of any of the obligations, covenants or agreements of the Purchaser
contained in this Agreement or in any other such instruments, documents or
agreements, or which are implied therefrom, and that any and all personal
liability of every such administrator of the Purchaser and each incorporator,
stockholder, affiliate, officer, employee or director of the Purchaser or of any
such administrator, or any of them, for breaches by the Purchaser of any such
obligations, covenants or agreements, which liability may arise either at common
law or at equity, by statute or constitution, or otherwise, is hereby expressly
waived as a condition of and in consideration for the execution of this
Agreement. The provisions of this Section 10.11 shall survive the termination of
this Agreement.
62
<PAGE>
SECTION 10.12. Execution in Counterparts; Severability;
Integration. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, superseding all prior oral or written understandings
other than the fee letters described in Section 2.09(a).
SECTION 10.13. Confidentiality. Except to the extent otherwise
required by applicable laws, rules or regulation, unless the provider thereof
shall otherwise consent in writing the Seller agrees that it shall (i) maintain
the confidentiality of information obtained as a result of being a party hereto,
to any related documents or to any of the transactions contemplated hereby or
thereby (including, without limitation, the contents of any summary of
indicative terms and conditions with respect to such transactions, and the
provisions of this Agreement and any of the other Facility Documents)
("Confidential Information") and (ii) not disclose, deliver or otherwise make
available to any third party any part of any such Confidential Information;
provided, however, that the Seller may disclose any Confidential Information (w)
to its legal counsel, auditors and accountants, (x) as may be required or
requested by any governmental authority, regulatory body or rating agency, (y)
subject to a written confidentiality agreement having terms substantially
similar to this Section 10.13, to any Originator or any Affiliate thereof, any
financial institution or other party that extends or is considering the
extension of material debt or equity financing to any Originator or any
Affiliate thereof, or (z) as may be required or appropriate in response to a
court order or in connection with any litigation; provided further, however,
that the Seller shall have no obligation of confidentiality whatsoever in
respect of any information which may be generally available to the public or
becomes available to the public through no fault of the Seller, any Originator
or any of their respective Affiliates.
63
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE SELLER: OUTSOURCE FUNDING CORPORATION
By:/s/ Joseph C. Wasch
-------------------------------
Name: Joseph C. Wasch
Title: Vice President
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Suite 2A
Attention: Scott Francis
Facsimile No.: (954) 418-3365
Telephone No.: (954) 418-6573
THE SERVICER: OUTSOURCE INTERNATIONAL, INC.
By:/s/ Scott R. Francis
-------------------------------
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attention: Scott Francis
Facsimile No.: (954) 418-3365
Telephone No.: (954) 418-6573
THE DEAL AGENT: BANCBOSTON SECURITIES INC.
By:/s/ Mark Gallivan
-------------------------------
Name: Mark Gallivan
Title: Director
BancBoston Securities Inc.
100 Federal Street, 9th Floor
Boston, Massachusetts 02110
Attention: Adam Cohen
Facsimile No.: (617) 434-1533
Telephone No.: (617) 434-4301
64
<PAGE>
THE PURCHASER: EAGLEFUNDING CAPITAL CORPORATION
By: BankBoston, N.A., as its
attorney-in-fact
By:/s/ Mark Gallivan
-------------------------------
Name: Mark Gallivan
Title: Director
EagleFunding Capital Corporation
c/o BancBoston Securities Inc.
100 Federal Street, 9th Floor
Boston, Massachusetts 02110
Attention: Mitchell Feldman
Facsimile No.: (617) 434-9591
Telephone No.: (617) 434-5760
c/o Lord Securities Corporation
2 Wall Street, 19th Floor
New York, New York 10005
Attention: Dwight Jenkins
Telephone No.: (212) 346-9007
Facsimile No.: (212) 346-9012
65
<PAGE>
SCHEDULE I
CONDITION PRECEDENT DOCUMENTS
As required by Section 3.01 of the Agreement, each of the
following items must be delivered to the Deal Agent prior to the date of the
initial Purchase:
(a) A copy of this Agreement duly executed by the Seller, the
Purchaser and the Deal Agent;
(b) A certificate of the Secretary or Assistant Secretary of
the Seller dated the date of this Agreement, certifying (i) the names and true
signatures of the incumbent officers of the Seller authorized to sign this
Agreement and the other Facility Documents to be delivered by it hereunder (on
which certificate the Deal Agent and the Purchaser may conclusively rely until
such time as the Deal Agent shall receive from the Seller a revised certificate
meeting the requirements of this paragraph (b)), (ii) that the copy of the
certificate of incorporation of the Seller attached thereto is a complete and
correct copy and that such certificate of incorporation has not been amended,
modified or supplemented and is in full force and effect, (iii) that the copy of
the by-laws of the Seller attached thereto is a complete and correct copy and
that such by-laws have not been amended, modified or supplemented and are in
full force and effect, and (iv) the resolutions of the Seller's board of
directors approving and authorizing the execution, delivery and performance by
the Seller of this Agreement and the other Facility Documents to which it is a
party;
(c) Good standing certificates for the Seller issued by the
Secretaries of State of Delaware and Florida;
(d) Acknowledgment copies of proper financing statements (the
"Facility Financing Statements"), dated a date reasonably near to the date of
the initial Purchase, describing the Receivables and Related Security and (i)
naming each Originator as seller, the Seller as purchaser and the Deal Agent as
assignee and (ii) naming the Seller as debtor and the Deal Agent, on behalf of
the Purchaser, as secured party, or other, similar instruments or documents, as
may be necessary or, in the opinion of the Deal Agent or the Purchaser,
desirable under the UCC of all appropriate jurisdictions or any comparable law
to perfect the Purchaser's interests in all Receivables and Related Security and
other Purchased Property;
(e) Acknowledgment copies of proper financing statements, if
any, necessary to release all security interests and other rights of any Person
in the Receivables and Related Security previously granted by any Originator or
the Seller;
<PAGE>
(f) Certified copies of requests for information or copies (or
a similar search report certified by a party acceptable to the Deal Agent),
dated a date reasonably near to the date of the initial Purchase, listing all
effective financing statements (including the Facility Financing Statements)
which name any Originator or the Seller (under their present names and any
previous names) as debtor and which are filed in the jurisdictions in which the
Facility Financing Statements were filed, together with copies of such financing
statements (none of which, other than the Facility Financing Statements, shall
cover any Receivables or Contracts) except to the extent permitted under the
Intercreditor Agreement;
(g) Executed copies of Lock-Box Agreements with each of the
Lock-Box Banks and an executed copy of the Collection Account Agreement with the
Collection Account Bank;
(h) An opinion of Shutts & Bowen, counsel to the Originators
and the Seller, issued in connection with the Originator Sale Agreement and
relating to the issues of substantive consolidation and true sale of the
Receivables and the related property, in form and substance satisfactory to the
Deal Agent;
(i) An opinion of Shutts & Bowen, counsel to the Seller,
issued in connection with this Agreement and relating to corporate issues,
perfection and priority of security interests, in substantially the form of
Exhibit D, and as to such other matters as the Deal Agent may reasonably
request, together with a similar opinion of Shutts & Bowen, counsel to the
Originators, issued in connection with the Originator Sale Agreement; and
(j) Original copies of the Originator Sale Agreement and all
documents described in Section 3.01 of the Originator Sale Agreement and not
otherwise described above.
(k) A copy of the Fee Letter duly executed by the Seller, the
Purchaser and the Deal Agent;
(l) A fully and correctly completed Weekly Settlement Report,
as of the close of business of the Servicer on the next preceding Business Day,
and a fully and correctly completed Asset Report, as of the last day of the most
recently concluded Collection Period.
(m) The Intercreditor Agreement executed by all parties
thereto.
<PAGE>
SCHEDULE II
DESCRIPTION OF CREDIT AND COLLECTION POLICY
Attached.
<PAGE>
SCHEDULE III
LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
Lock-Box Bank:
- --------------
LaSalle National Bank
135 South LaSalle Street
Chicago, Illinois 60603
Title of Account Account No. Lock-box No.
- ---------------- ---------- -----------
OutSource International, Inc. 5800103110 3718
Capital Staffing Fund, Inc. 5800103128 3699
<PAGE>
SCHEDULE IV
TRADENAMES, FICTITIOUS NAMES AND "DOING BUSINESS AS" NAMES
OutSource International, Inc.:
- ----------------------------
None
OutSource Franchising, Inc.:
- ---------------------------
None
Capital Staffing Fund, Inc.:
- ---------------------------
None
Synadyne I, Inc.:
- -----------------
Synadyne
Synadyne II, Inc.:
- -----------------
Synadyne
Synadyne III, Inc.:
- -------------------
Labor World
Payroll Partners
Synadyne
Synadyne IV, Inc.:
- ------------------
Synadyne
Synadyne V, Inc.:
- -----------------
Synadyne
OutSource International of America, Inc.:
- -----------------------------------------
Labor Quick
Labor World
Office Network
Office Ours
Senior Achievement
Tandem
<PAGE>
SCHEDULE V
LIST OF FRANCHISEES AS OF CLOSING DATE
[List of Franchisees]
<PAGE>
EXHIBIT A
FORM OF CONTRACTS
Attached.
---------
<PAGE>
EXHIBIT B
FORM OF LOCK-BOX AGREEMENT
____________, 19__
[Name and Address of
Lock-Box Bank]
Re: OutSource International, Inc.
Lock-Box Account No. [___________]
(the "Lock-Box Account")
Ladies and Gentlemen:
The undersigned, OutSource International, Inc. ("OutSource
International") hereby notifies you that we have transferred exclusive ownership
and control of the above-referenced Lock-Box Account to OutSource Funding
Corporation, a Delaware corporation, and that OutSource Funding Corporation (the
"Seller"), in connection with certain purchase and financing arrangements
between the Seller and EagleFunding Capital Corporation (the "Purchaser"),
hereby transfers exclusive ownership and control of the above-referenced
Lock-Box Account to BancBoston Securities Inc., acting in its capacity as deal
agent (the "Deal Agent") for itself and for the Purchaser under that certain
Receivables Purchase Agreement dated as of July 27, 1998 (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the
"Receivables Purchase Agreement") by and among the Seller, the Purchaser, the
Deal Agent and OutSource International, as servicer thereunder (in such
capacity, the "Servicer").
<PAGE>
In connection with the foregoing, OutSource International, the
Seller and the Deal Agent each hereby instructs you, beginning on the date
hereof and in accordance with your existing procedures for management of the
Lock-Box Account, (i) to change the name of the Lock-Box Account to BancBoston
Securities Inc., as Deal Agent for OutSource Funding Securitization, (ii) to
collect and deposit into the Lock-Box Account all monies, checks, instruments
and other items of payment received in the related lock-box (the "Lock-Box") and
(iii) to transfer to the Deal Agent an amount equal to all monies, checks,
instruments and other items of payment deposited in the Lock-Box Account on a
daily basis. All such transfers shall be made on a daily basis by depository
transfer check (DTC), automated clearing house (ACH) transfer, or wire or
otherwise, as the Deal Agent may direct you in its sole discretion, to the
following account (the "Collection Account"):
BankBoston, N.A.
Account No: 56391332
Reference: BancBoston Securities Inc. Collection Account,
as Deal Agent for Securitization
or to such other account as the Deal Agent may instruct from time to time.
You are hereby further instructed, unless and until the Deal
Agent notifies you of the occurrence of a "Servicer Termination Event" under and
as defined in the Receivables Purchase Agreement, (i) to make transfers to the
Collection Account at such times and in such manner as OutSource International,
Inc., in its capacity as servicer (the "Servicer") for the Seller, shall from
time to time instruct; provided, however, that in no case shall OutSource
International, the Servicer or the Seller be allowed to withdraw funds from the
Lock-Box Account or have access to the Lock-Box, and (ii) to permit the Servicer
to obtain upon request any information relating to the Lock-Box Account or
Lock-Box, including, without limitation, any information regarding the balance
or activity of the Lock-Box Account or Lock-Box.
The Seller and OutSource International also each hereby
notifies you that the Deal Agent shall be irrevocably entitled to exercise any
and all rights (if any) of OutSource International and the Seller in respect of
or in connection with the Lock-Box Account, including, without limitation, the
right to specify when payments are to be made out of or in connection with the
Lock-Box Account. All monies in the Lock-Box Account will be held for and in
trust for the Deal Agent upon deposit therein and neither OutSource
International nor the Seller will have any control over the Lock-Box Account or
the funds on deposit therein. Without limiting the generality of the foregoing,
neither OutSource International nor the Seller shall have any right to draw
against the Lock-Box Account, direct the transfer of funds therein or otherwise
assign, pledge or have access to the Lock-Box Account or the funds on deposit
therein.
You will have no duty to inquire into the source or use of any
monies, checks, drafts, instruments or other items or amounts deposited into the
Lock-Box Account. The Seller and OutSource International each hereby agrees that
any deposits of monies, checks, drafts, instruments or other items into or
withdrawals from the Lock-Box Account now or hereafter directed by the Deal
Agent or the Servicer on behalf of the Deal Agent are authorized by the Seller
and OutSource International, and each of OutSource International and the Seller
acknowledges that it has no right to direct such transfers at any time. You
shall be fully protected in acting on any instruction of the Deal Agent with
respect to the Lock-Box Account without making any inquiry as to the Deal
Agent's authority to give such instruction.
<PAGE>
Notwithstanding anything herein or elsewhere to the contrary,
you hereby waive any and all rights to bankers liens and rights to deduct from
or set-off against amounts in the Lock-Box Account, except that: (i) in the
event that any checks deposited in the Lock-Box Account are returned unpaid to
you, the amount thereof shall be charged to the Lock-Box Account, and (ii) any
monthly maintenance fees in connection with the Lock-Box Account may also be
charged to the Lock-Box Account. The Seller hereby agrees that if there are
insufficient funds in the Lock-Box Account to cover any such charges to the
Lock-Box Account, then it will pay to you the amount of such deficiency on
demand. In the event the Seller fails to reimburse you as set forth above, you
may so notify the Deal Agent, and the Deal Agent may, but shall have no
obligation to, pay the same.
The use of any such checks or electronic or other means of
funds transfer, together with the resolutions authorizing the same, are intended
to affirm the rights and the interests of the Deal Agent in the Lock-Box Account
and all funds deposited therein and not to derogate therefrom.
The taxpayer identification number associated with the
Lock-Box Account shall be that of the Seller and the Seller will report for
federal, state and local income tax purposes the income, if any, earned on funds
in the Lock-Box Account.
This letter agreement may not be terminated at any time by
OutSource International or the Seller, but may be terminated by either you or
the Deal Agent upon 30 days' prior written notice to the other and to the
undersigned.
You will not assign or transfer your rights or obligations
hereunder (other than to the Deal Agent) without the prior written consent of
the other parties hereto. Subject to the preceding sentence, this letter
agreement shall inure to the benefit of and be binding upon all parties hereto
and their respective successors and assigns.
Any change, amendment, modification or waiver of this letter
agreement or any provision hereof will not be effective unless such change,
amendment, modification or waiver is in writing and signed by all parties
hereto.
All notices, demands, instructions and other communications
required or permitted to be given to or made upon any party hereto shall be
effective if communicated in writing and personally delivered or sent by
registered, certified, express or regular mail, postage prepaid, return receipt
requested, or by telex, telecopy (receipt promptly confirmed by telephone) or
prepaid telegram (with messenger delivery specified in the case of a telegram)
or by telephone (promptly confirmed in writing) and shall be deemed to be given
for purposes of this letter agreement on the day that such communication is
delivered to the intended recipient thereof in accordance with the provisions of
this paragraph. Unless otherwise specified in a notice sent or delivered in
accordance with the foregoing provisions of this paragraph, notices, demands,
instructions and other communications shall be given to or made upon the
respective parties hereto at their respective addresses (or to their respective
telex, telecopy or telephone numbers) indicated below, or at such other address
as any party hereto may notify to the other parties in accordance with the
provisions of this paragraph.
All bank statements on the Lock-Box Account should be sent to the
Seller at:
Corporation
1144 E. Newport Center Drive
Suite 2A
Deerfield Beach, Florida 33442
Attn: Scott Francis
<PAGE>
With a copy to the Deal Agent at:
BancBoston Securities Inc.
100 Federal Street
Boston, MA 02110
Attn: Adam Cohen
Each of OutSource International and the Seller consents and
agrees to the foregoing, authorizes you to enter into this letter agreement, and
agrees to indemnify and hold you harmless from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses and liabilities of every nature and character arising out of your
compliance with the terms of this letter agreement, except such as result from
your gross negligence or willful misconduct, and in no event shall you be liable
for any consequential, indirect or special damages and except that losses for
uncollected checks shall be the responsibility of the Seller to the extent not
set-off against other funds in the Lock-Box Account.
You and each of the parties hereto (other than the Seller)
hereby agree (which agreement shall, pursuant to the terms of this letter
agreement, be binding upon its successors and assigns) that you and each of the
parties hereto shall not institute against, or join any other Person in
instituting against the Seller any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any federal or
state bankruptcy or similar law, for one year and a day after the payment in
full of all of the indebtedness of the Seller and the termination of any of the
commitments under each of the "Facility Documents", as such term is defined
under the Receivables Purchase Agreement. The provisions of this paragraph shall
survive the termination of this letter agreement.
This letter agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts and
applicable federal law.
This letter agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original and all of
which when taken together shall constitute one and the same instrument.
This letter agreement constitutes the entire agreement between
the parties hereto relating to the Lock-Box Account and the other matters herein
described and supersedes any and all prior agreements relating to such matters.
[Remainder of Page Intentionally Left Blank]
<PAGE>
Please agree to the terms of, and acknowledge receipt of, this
notice by signing in the space provided below.
Very truly yours,
OUTSOURCE INTERNATIONAL, INC.
By:________________________________
Name:
Title:
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attn: Scott Francis
Telephone: (954) 418-6573
Telecopy: (954) 418-3365
CORPORATION
By:________________________________
Name:
Title:
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attn: Scott Francis
Telephone: (954) 418-6573
Telecopy: (954) 418-3365
BANCBOSTON SECURITIES INC.,
as Deal Agent
By:________________________________
Name:
Title:
100 Federal Street
Boston, MA 02110
Attn: Adam Cohen
Telephone: (617) 434-4301
Telecopy: (617) 434-1533
<PAGE>
Accepted this __th day
of ___________, 19__
[NAME OF BANK]
By:________________________________
Name:
Title:
[Address]
Attn: [______________]
Telephone: [(___) ________]
Telecopy: [(___) ________]
<PAGE>
EXHIBIT C
FORM OF ASSET REPORT
Attached.
---------
<PAGE>
EXHIBIT D
FORM OF OPINION OF COUNSEL FOR THE SELLER
[Date of Initial Purchase]
To: EagleFunding Capital Corporation,
as the Purchaser under the
Purchase Agreement (as defined below).
BancBoston Securities Inc., as Deal Agent under said
Purchase Agreement.
[Moody's]
[S&P]
[DCR]
Re: OutSource Funding Corporation
-----------------------------
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 3.01 of
the Receivables Purchase Agreement dated as of July 27, 1998 (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the
"Purchase Agreement"), by and among OutSource Funding Corporation, as seller
(the "Seller"), EagleFunding Capital Corporation, as purchaser (the
"Purchaser"), BancBoston Securities, Inc., acting in its capacity as deal agent
(the "Deal Agent") for itself and for the Purchaser, and OutSource
International, Inc., as servicer thereunder. Terms defined in the Purchase
Agreement are used herein as therein defined.
We have acted as counsel for the Seller in connection with the
preparation, execution and delivery of, and the initial purchase of Purchased
Interests made under, the Purchase Agreement.
In that connection we have examined:
(1) The Purchase Agreement.
(2) The documents furnished by the Seller pursuant to Section
3.01 of the Purchase Agreement, and each of the other Facility
Documents.
<PAGE>
(3) The Certificate of Incorporation of the Seller and all
amendments thereto (the "Charter").
(4) The by-laws of the Seller and all amendments thereto (the
"By-Laws").
(5) Certificates from the Secretary of State of Delaware,
dated ________, 19__, the Secretary of State of [the state in which the
Seller's chief executive office is located], dated ________, 19__, the
Secretary of State of ________, dated ________, 19__, and the Secretary
of State of ________, dated ________, 19__, each attesting to the
continued corporate existence and good standing of the Seller in such
States.1
(6) Acknowledgment cop[y][ies] of [appropriate number]
financing statement[s] (the "Financing Statement[s]") under the Uniform
Commercial Code (the "UCC") as in effect in the State of [the state in
which the Seller's chief executive office is located], naming the
Seller as debtor and the Deal Agent as secured party, which Financing
Statements have been filed in the filing offices listed in Schedule I
hereto located in the respective states listed in Schedule I hereto.
(7) Certificates from [name of search report service] as to
copies of financing statements on file with the filing offices listed
in Schedule I hereto located in the respective states listed in
Schedule I hereto.
We have also examined the originals, or copies certified to our satisfaction, of
the documents listed in a certificate of the chief financial officer of the
Seller, dated the date hereof (the "Seller's Certificate"), certifying that the
documents listed in such Certificate are all of the indentures, loan or credit
agreements, security agreements, bonds and notes (except bonds and notes issued
pursuant to the aforesaid indentures and loan or credit agreements), which
affect or purport to affect the Seller's ability to sell or otherwise dispose of
Receivables or the Seller's obligations under the Purchase Agreement. In
addition, we have examined the originals, or copies certified to our
satisfaction, of such other corporate records of the Seller, certificates of
public officials and of officers of the Seller, and agreements, instruments and
documents, as we have deemed necessary as a basis for the opinions hereinafter
expressed. As to questions of fact material to such opinions, we have, when
relevant facts were not independently established by us, relied upon
certificates of the Seller or its officers or of public officials. We have
assumed the due execution and delivery, pursuant to due authorization, of the
Purchase Agreement by the Purchaser and the Deal Agent. In our examination of
the certificates referred to in (7) above, we have assumed that all financing
statements, other than the Financing Statements, in which the Seller is named as
debtor have been properly filed and indexed in the appropriate filing offices in
the states listed on Schedule I hereto, that such certificates are accurate and
complete, and that you have no knowledge of the contents of any other financing
statement.
- --------
1 Enumerated jurisdictions should include the State of New Jersey and any
other State that has enacted legislation comparable to the New Jersey
Corporation Business Activities Reporting Act, or compliance with the
relevant statute should be otherwise confirmed.
<PAGE>
Based upon the foregoing and upon such investigation as we
have deemed necessary, we are of the opinion that:
1. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and is duly qualified to do business, and is in good standing, in every
jurisdiction where the nature of its business requires it to be so
qualified.
2. The execution, delivery and performance by the Seller of
the Purchase Agreement, each of the Facility Documents to which it is a
party, and all other instruments and documents to be delivered by the
Seller thereunder, and the transactions contemplated thereunder, are
within the Seller's corporate powers, have been duly authorized by all
necessary corporate action, and (a) do not contravene (i) the Charter
or the By-Laws or (ii) any law, rule or regulation applicable to the
Seller or (iii) any contractual or legal restriction contained in any
document listed in the Seller's Certificate or, to the best of our
knowledge, contained in any other similar document, and (b) do not
result in or require the creation of any lien, security interest or
other charge or encumbrance upon or with respect to any of the Seller's
properties, and (c) do not require compliance with any bulk sales act
or similar law. Each of the Facility Documents to which the Seller is a
party has been duly executed and delivered on behalf of the Seller.
3. No authorization, approval, or other action by, and no
notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the
Seller of the Purchase Agreement or any other document or instrument to
be delivered under the Purchase Agreement or for the perfection of or
the exercise by the Deal Agent or the Purchaser of its respective
rights and remedies under the Purchase Agreement, except for the
filings referred to in paragraph 6 below and as otherwise stated in
such paragraph 6.
4. The Purchase Agreement and the other Facility Documents to
which the Seller is a party constitute the legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance
with its terms.
5. To the best of our knowledge there is no pending or
threatened action, suit or proceeding, or any order, writ, judgment,
award, injunction or decree, against or affecting the Seller or any of
its subsidiaries before any court, governmental agency or arbitrator
which may materially adversely affect the financial condition or
operations of the Seller or the Seller and its consolidated
subsidiaries taken as a whole or materially adversely affect the
ability of the Seller to perform its obligations under the Facility
Documents. Neither the Seller nor any subsidiary is in default with
respect to any order of any court, arbitrator or governmental body
except for defaults with respect to orders of governmental agencies
which defaults are not material to the Seller or to the business or
operations of the Seller or any subsidiary.
<PAGE>
6. [Insert opinion as to the perfection and priority of the
Purchaser's interest in each Purchased Receivable then existing or
thereafter arising and in the Related Security and Collections with
respect thereto, such opinion to be negotiated for this transaction,
taking into account the circumstances of the transaction, the nature of
the Purchased Receivables and Related Security and applicable law.]
7. The Seller is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
The opinions set forth above are subject to the following
qualifications:
(a) The enforceability of the Seller's obligations under the
Facility Documents is subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally.
(b) The enforceability of the Seller's obligations under the
Facility Documents is subject to general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
We do not purport to be experts on, or to express any opinion
herein concerning, any law other than the general corporation law of the State
of Delaware, law of the States of New York and [the state in which the Seller's
chief executive office is located] and the federal law of the United States.
Copies of this opinion letter may be delivered to the
Purchaser, any financial institution providing liquidity support or credit
enhancement in connection with the transactions contemplated by the Purchase
Agreement, any financial institution acting as agent in connection with any such
liquidity support or credit enhancement facility or any successor or assign of
the foregoing, and each such Person shall be entitled to rely upon the opinions
set forth herein.
Very truly yours,
<PAGE>
EXHIBIT E
SELLER'S CERTIFICATE OF INCORPORATION
Attached.
---------
<PAGE>
EXHIBIT F
FORM OF FRANCHISE AGREEMENT
Attached.
---------
Execution Copy
INTERCREDITOR AGREEMENT
This INTERCREDITOR AGREEMENT is made as of this 27th day of
July, 1998 by and among BANKBOSTON, N.A., as "Agent" for itself and the other
"Lenders" party to the Revolving Credit Agreement referred to below (in such
capacity, the "Lender Agent"), OUTSOURCE FUNDING CORPORATION, a Delaware
corporation (the "Finco"), OUTSOURCE INTERNATIONAL, INC., a Florida corporation
("OutSource International"), OUTSOURCE FRANCHISING, INC., a Florida corporation
("OutSource Franchising"), CAPITAL STAFFING FUND, INC., a Florida corporation
("CSF"), SYNADYNE I, INC., a Florida corporation ("Synadyne I"), SYNADYNE II,
INC., a Florida corporation ("Synadyne II"), SYNADYNE III, INC., a Florida
corporation ("Synadyne III"), SYNADYNE IV, INC., a Florida corporation
("Synadyne IV"), SYNADYNE V, INC., a Florida corporation ("Synadyne V"), and
OUTSOURCE INTERNATIONAL OF AMERICA, INC., a Florida corporation ("OutSource
America") (sometimes hereinafter referred to each as an "Originator" and,
collectively, as the "Originators"), OutSource International, in its separate
capacity as "Servicer" (as defined below), EAGLEFUNDING CAPITAL CORPORATION, a
Delaware corporation ("EagleFunding"), and BANCBOSTON SECURITIES INC., a
Delaware corporation ("BSI"), individually and as the "Deal Agent" for
EagleFunding (in such capacity, the "Purchaser Agent").
W I T N E S S E T H:
WHEREAS, the Originators have agreed to sell, transfer and
assign to the Finco, and the Finco has agreed to purchase and assume from the
Originators, all of the right, title and interest of the Originators in the
"Receivables" and "Related Security" now existing or hereafter created until the
"Purchase Termination Date") (as each of such terms is hereinafter defined)
pursuant to that certain Receivables Purchase and Sale Agreement of even date
herewith (as amended, restated, supplemented or otherwise modified from time to
time, the "Originator Sale Agreement") among the Originators, the Finco and the
Servicer;
WHEREAS, OutSource International, the financial institutions
from time to time parties thereto as Lenders and the Lender Agent thereunder are
parties to that certain Third Amended and Restated Credit Agreement dated as of
July 27, 1998 (as amended, restated, supplemented or otherwise modified from
time to time, the "Revolving Credit Agreement");
WHEREAS, to secure the loans and other extensions of credit
made by the Lenders under the Revolving Credit Agreement, (i) OutSource
International pursuant to that certain Security Agreement dated as of February
21, 1997, as reaffirmed and amended (as amended, restated, supplemented or
otherwise modified from time to time, the "OutSource International Security
Agreement"), has granted to the Lender Agent for the benefit of the Lender Agent
and the ratable benefit of the Lenders a security interest in substantially all
of its personal property, including, its inventory, the Receivables and Related
Security, and all proceeds of the foregoing, and (ii) each of OutSource
Franchising, CSF, Synadyne I, Synadyne II, Synadyne III, Synadyne IV, Synadyne V
and OutSource America, among others, pursuant to that certain Security Agreement
dated as of February 21, 1997, as reaffirmed and amended (as amended,
1
<PAGE>
restated, supplemented or otherwise modified from time to time, the "Subsidiary
Security Agreement", and together with the OutSource International Security
Agreement, the "Security Agreements"), has granted to the Lender Agent for the
benefit of the Lender Agent and the ratable benefit of the Lenders a security
interest in substantially all of its personal property, including, its
inventory, the Receivables and Related Security, and all proceeds of the
foregoing;
WHEREAS, the Finco, EagleFunding, the Purchaser Agent and the
Servicer have entered into that certain Receivables Purchase Agreement of even
date herewith (as amended, restated, supplemented, or otherwise modified from
time to time, the "Investor Purchase Agreement") pursuant to which EagleFunding
has agreed to purchase from the Finco an undivided percentage ownership interest
in the Receivables and Related Security which the Finco purchases from the
Originators; and
WHEREAS, the parties hereto wish to set forth certain
agreements with respect to the Purchased Property and with respect to the
"Collateral" (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants contained herein, and for other good and valuable
consideration, receipt of which is hereby acknowledged, it is hereby agreed as
follows:
ARTICLE 1. DEFINITIONS.
1.1. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affiliate" when used with respect to a Person means any other
Person controlling, controlled by or under common control with such Person.
"Agent" means the Purchaser Agent or the Lender Agent, as
applicable, and "Agents" means both the Purchaser Agent and the Lender Agent.
"Claim" means the Lender Claim or the Purchaser Claim, as
applicable.
"Collateral" means all property and interests in property now
owned or hereafter acquired by the Originators or any of their Affiliates and in
which a security interest, lien or mortgage is granted by any such party to the
Lender Agent or the Lenders under any of the Loan Documents.
"Collection Date" has the meaning ascribed to such term in the
Investor Purchase Agreement.
2
<PAGE>
"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all cash proceeds of Related Security with respect to such
Receivable.
"Contract" means an agreement (including, but not limited to,
a written contract or an open account agreement evidenced by invoices) between
an Originator and an Obligor pursuant to which such Obligor shall be obligated
to pay for merchandise sold or services rendered from time to time.
"CSF Advance" has the meaning ascribed to such term in the
Originator Sale Agreement.
"Enforcement" means, collectively or individually, for (i)
EagleFunding, the Purchaser Agent and/or the Finco to declare an "Event of
Termination" under the Originator Sale Agreement or the Investor Purchase
Agreement and to cease the purchase of Receivables under the Originator Sale
Agreement; and/or (ii) the Lenders and/or the Lender Agent to declare an "Event
of Default" under the Revolving Credit Agreement and/or demand payment in full
of or accelerate the indebtedness of any Originator to the Lenders, and to
commence the judicial or nonjudicial enforcement of any of the rights and
remedies under the Loan Documents.
"Enforcement Notice" means a written notice delivered in
accordance with Section 2.5 which notice shall (i) if delivered by the Purchaser
Agent, state that an "Event of Termination" has occurred, specify the nature of
such event, and announce that an Enforcement Period has commenced and (ii) if
delivered by the Lender Agent, state that an "Event of Default" under the
Revolving Credit Agreement has occurred, specify the nature of such event, and
announce that an Enforcement Period has commenced.
"Enforcement Period" means the period of time following the
earlier of (x) two Business Days after receipt by the Deal Agent of an
Enforcement Notice delivered by the Lender Agent or (y) the receipt by the
Lender Agent of an Enforcement Notice delivered by the Deal Agent until the
earliest of the following: (1) the Collection Date shall have occurred; (2) the
Lender Claim has been satisfied in full; and (3) the parties hereto agree in
writing to terminate the Enforcement Period.
"Lender Claim" means all of the indebtedness, obligations and
other liabilities of any Originator and its Affiliates arising under, or in
connection with, the Loan Documents, including, but not limited to, all sums now
or hereafter loaned or advanced thereunder, any interest thereon, any
reimbursement or other obligations in respect of letters of credit issued
thereunder, any fees or expenses due thereunder, and any costs of collection or
enforcement.
"Lender Collateral" means all Collateral which does not
constitute Purchased Property.
3
<PAGE>
"Lenders" means the financial institutions party to the
Revolving Credit Agreement as "Lenders" from time to time, together with their
successors and assigns.
"Liquidity Agent" means the financial institution then acting
as "Liquidity Agent" under the Purchaser Documents.
"Liquidity Providers" has the meaning ascribed to such term in
the Investor Purchase Agreement.
"Loan Documents" means the Revolving Credit Agreement, the
Security Agreements and all other instruments, agreements or other documents
executed by any Originator or any Affiliate of the foregoing and delivered to
the Lenders and/or the Lender Agent in connection therewith, as any of the same
may be amended, supplemented, modified or restated from time to time.
"Lock-Box Account" has the meaning ascribed to such term in
the Originator Sale Agreement.
"Lock-Box Bank" has the meaning ascribed to such term in the
Originator Sale Agreement.
"Obligor" means a Person obligated to make payments pursuant
to a Contract.
"Originator Claim" means all of the indebtedness, obligations
and other liabilities of the Finco to any Originator or OutSource International
as Servicer arising under, or in connection with, the Originator Sale Agreement,
including, but not limited to, the purchase price owed for sales of Receivables,
any obligations evidenced by the Originator Notes and any fees owed to any
Originator or OutSource International as Servicer.
"Originator Note" has the meaning ascribed to such term in the
Originator Sale Agreement.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture, limited liability company or other entity, or a
government or any political subdivision or agency thereof.
"Purchase Termination Date" means the earliest to occur of (i)
the date on which the Finco ceases to purchase Receivables and Related Security
from the Originators and (ii) the commencement of an Enforcement Period.
"Purchased Property" means (i) the Purchased Receivables, (ii)
the Related Security and Collections related to such Purchased Receivables,
(iii) any Lock-Box Accounts to which any Collections of such Purchased
Receivables are sent and (iv) all other proceeds of the foregoing.
4
<PAGE>
"Purchased Receivables" means now owned or hereafter existing
Receivables sold, assigned, transferred or contributed or purported to be sold,
assigned, transferred or contributed to the Finco under the Originator Sale
Agreement.
"Purchaser" means any of (A) the Finco, as the purchaser of
Receivables under the Originator Sale Agreement; (B) EagleFunding or BSI, in
each case as assignee of the Finco's interests in the Purchased Property; (C)
the Purchaser Agent, as representative of EagleFunding or (D) the Liquidity
Agent or any Liquidity Provider as assignee of EagleFunding, in each case
together with their successors and assigns.
"Purchaser Claim" means all obligations of the Originators to
the Finco and of the Finco to the other Purchasers arising under the Purchaser
Documents, including, but not limited to, all right of the Purchasers to receive
the Collections of the Purchased Receivables and all recourse claims of the
Purchasers arising thereunder.
"Purchaser Documents" means the Originator Sale Agreement, the
Investor Purchase Agreement and any other agreements, instruments or documents
(i) executed by, among other Persons, the Originators and delivered to the Finco
or (ii) executed by, among other Persons, the Finco and delivered to any of the
other Purchasers, in each case pursuant to or in connection with the Originator
Sale Agreement or the Investor Purchase Agreement, as any of the same may be
amended, supplemented, modified or restated from time to time.
"Receivable" means the indebtedness of any Obligor under a
Contract whether constituting an account, chattel paper, instrument, general
intangible or any other type of property, (a) which arises from a sale of
merchandise or the performance of services by an Originator or (b) which is a
CSF Advance, and including the right to payment of any interest or finance
charges and other obligations of such Obligor with respect thereto.
"Records" means all Contracts and other documents, books,
records and other information (including without limitation, computer programs,
tapes, discs, punch cards, data processing software and related property and
rights) maintained with respect to Receivables and the related Obligors which
the applicable Originator has itself generated or in which such Originator has
otherwise obtained an interest.
"Related Security" means with respect to any Receivable, as
applicable:
(i) all of the Originators' right and title to and interest in
the merchandise (including Returned Goods) if any, relating to the sale
which gave rise to such Receivable;
(ii) all other security interests or liens and property
subject thereto from time to time purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such Receivable
or otherwise;
(iii) the assignment for the benefit of the Purchasers of all
UCC financing statements covering any collateral securing payment of
such Receivable; and
5
<PAGE>
(iv) all of the Originators' right and title to and interest
in, all guarantees, indemnities, warranties, letters of credit,
insurance policies and proceeds and premium refunds thereof and other
agreements or arrangements of whatever character from time to time
supporting or securing payment of such Receivable whether pursuant to
the Contract related to such Receivable or otherwise.
"Returned Goods" means all right, title and interest of the
Originators or the Purchasers, as applicable, in and to returned, repossessed or
foreclosed goods and/or merchandise.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the applicable jurisdiction.
"Unmatured Default" means:
(i) with respect to the Purchaser Documents (as in effect at
any time), (A) any event or condition which, with the giving of notice
or the passage of time or both, would then constitute an "Event of
Termination" under either the Originator Sale Agreement or the Investor
Purchase Agreement and (B) any such "Event of Termination" which is not
waived and with respect to which the Purchaser Agent has not commenced
Enforcement; and
(ii) with respect to the Loan Documents (as in effect at any
time), (A) any event or condition which, with the giving of notice or
the passage of time or both, would then constitute an "Event of
Default" thereunder and (B) any "Event of Default" thereunder which is
not waived and with respect to which the Lender Agent has not commenced
Enforcement.
"Unsold Receivables" means any Receivables which have arisen
on or after the Purchase Termination Date.
1.2. References to Terms Defined in the Purchaser Documents
and the Loan Documents. Whenever in Section 1.1 a term is defined by reference
to the meaning ascribed to such term in any of the Purchaser Documents or in any
of the Loan Documents, then, unless otherwise specified herein, such term shall
have the meaning ascribed to such term in the Purchaser Documents or Loan
Documents, respectively, as in existence on the date hereof, without giving
effect to any amendments of such term as may hereafter be agreed to by the
parties to such documents, unless such amendments have been consented to in
writing by all of the parties hereto.
6
<PAGE>
ARTICLE 2. INTERCREDITOR PROVISIONS.
------------------------
2.1. Priorities with Respect to Purchased Property.
(a) Notwithstanding any provision of the UCC, any applicable law or
decision or any of the Loan Documents or the Purchaser Documents, the Lender
Agent hereby agrees that, upon the sale, assignment, transfer or contribution or
purported sale, assignment, transfer or contribution of each Receivable and
Related Security by an Originator to the Finco, any lien, claim, encumbrance,
security interest or other interest acquired by the Lender Agent in such
Receivable, the Related Security and proceeds thereof shall automatically and
without further action cease and be released and the Lender Agent shall have no
lien, claim, encumbrance, security interest or other interest therein; provided,
however, that:
(i) nothing in this Section 2.1 shall be deemed to constitute
a release by the Lender Agent of: (A) its lien on and security interest
in the proceeds received or receivable by the Originators from the
Finco for the sale or purported sale of the Receivables (including,
without limitation, cash payments made by the Finco, payments made
under the Originator Notes and any indebtedness owed to the Originators
evidenced thereby); (B) any lien on, security interest in or assignment
of the Originator Claim; (C) any lien, claim, encumbrance or security
interest the Lender Agent may have in any Unsold Receivables and
Related Security therefor, including, without limitation, Collections
of Unsold Receivables which are at any time deposited in the Lock-Box
Accounts; (D) any lien, claim, encumbrance or security interest the
Lender Agent may have as against any interest of the Originators in
Returned Goods, provided, however, that any lien the Lender Agent has
against any interest of the Originators in such Returned Goods shall be
junior in interest to that of the Purchasers unless and until the
Originators shall have made all adjustments required to be made under
the Originator Sale Agreement on account of the reduction of the
outstanding balance of any Receivable related to such Returned Goods;
and (E) any lien on, security interest in or pledge or assignment the
Lender Agent may have on or in the capital stock of the Finco; and
(ii) if any goods or merchandise, the sale of which has given
rise to a Purchased Receivable, are returned to or repossessed by the
Originators, then such Returned Goods shall constitute Purchased
Property, provided, however, that upon payment by the Originators of
all adjustments required on account thereof under the Originator Sale
Agreement, the Purchaser's interest in such Returned Goods shall
automatically and without further action cease to exist and be released
and extinguished and such Returned Goods shall thereafter not
constitute Purchased Property for purposes of this Agreement unless and
until such Returned Goods have been resold so as to give rise to a
Receivable and such Receivable has been sold, assigned, transferred or
contributed or purported to be sold, assigned, transferred or
contributed to the Finco.
(b) The Lender Agent hereby acknowledges that the Originator
Notes and the indebtedness evidenced thereby are subordinated to the Purchaser
Claim pursuant to the terms of the Originator Notes and the Purchaser Documents.
7
<PAGE>
2.2 Respective Interests in Purchased Property and Collateral.
Except for (i) the specific interests in Purchased Property described in Section
2.1 above and (ii) all rights of access to and use of Records and related
Collateral described in Section 2.6 below, each Purchaser agrees that it does
not have and shall not have any security interest in, lien upon or interest in
the Collateral. Except for (i) the specific retained rights described in Section
2.1 above and (ii) all rights of access to and use of Records described in
Section 2.6 below, the Lender Agent agrees that it does not have and shall not
have any security interest in, lien upon or interest in the Purchased Property.
2.3. Distribution of Proceeds -- Enforcement Period. During
any Enforcement Period, all proceeds of Collateral and/or Purchased Property
shall be distributed in accordance with the following procedure:
(a) Except as otherwise provided in clause (c) or in Section
2.4 below, (i) all proceeds of the Lender Collateral shall be paid to
the Lender Agent for application on the Lender Claim; and (ii) any
remaining proceeds shall be paid to the Originators, their Affiliates
or as otherwise required by applicable law.
(b) Except as otherwise provided in clause (c) or Section 2.4
below, (i) all proceeds of the Purchased Property shall be paid to the
Purchasers for application against the Purchaser Claim; provided,
however, that all proceeds of the Purchased Property which, pursuant to
the Purchaser Documents, are to be paid to the Originators for
application against the Originator Claim shall be paid directly to the
Lender Agent (if and to the extent that the Lender Agent has retained a
lien against such Originator Claim pursuant to Section 2.1 above) for
application against the Lender Claim before being paid to the
Originators or the Finco; and (ii) any remaining proceeds shall be paid
to the Finco or as otherwise required by applicable law.
(c) If any inventory of the Originators has been commingled
with Returned Goods in which the Purchaser Agent continues to have an
interest as provided in Section 2.1 above, and any of the Lenders (or
the Lender Agent) receives any proceeds on account of such inventory
(whether by reason of sale or by reason of insurance payments on
account thereof) prior to release of such interest, then: (i) all
proceeds of such inventory received by a Lender shall be paid to the
Lender Agent and the Lender Agent shall, immediately upon receipt of
such proceeds, pay to the Purchaser Agent for application against the
Purchaser Claim a share of such proceeds equal to the dollar amount
thereof times a fraction, the numerator of which equals the book value
of the Returned Goods that had been so commingled and constituting
Purchased Property and the denominator of which equals the book value
of all of the commingled inventory on account of which the Lender Agent
has received such cash proceeds; and (ii) any remaining proceeds shall
be paid to the Lender Agent for application against the Lender Claim.
The Lender Agent agrees that it shall not, without the prior written
consent of the Purchaser Agent, sell any Returned Goods in which the
Purchaser Agent continues to have an interest at a price below book
value.
8
<PAGE>
2.4 Lock-Box Accounts.
------------------
(a) The Lender Agent, on behalf of itself and each of the
Lenders, hereby releases, relinquishes and disclaims any and all of its right,
title and interest in, to and under each of the Lock-Box Accounts, which release
shall become effective with respect to each such LockBox Account upon the
effectiveness of the corresponding "Lock-Box Agreement" (as such term is defined
in the Originator Sale Agreement) in favor of the Finco and the Deal Agent and
relating to such Lock-Box Account; provided, however, that each of the
Originators, the Purchasers and the Purchaser Agent hereby acknowledges that the
Lender Agent shall have a senior security interest in Collections of Unsold
Receivables which may be deposited in the Lock-Box Accounts. The Purchaser Agent
agrees, upon the Lender Agent's request from and after the Purchase Termination
Date, to notify the Lock-Box Banks of the Lender Agent's interest in and to such
Lock-Box Accounts in order to perfect the Lender Agent's interest in such
Lock-Box Accounts as against the Lock-Box Banks.
(b) Each of the Originators, the Purchasers and the Lender
Agent hereby acknowledges and agrees that the Purchasers own the Purchased
Receivables, and shall be entitled to Collections or other proceeds received on
account of the Purchased Receivables which may be deposited in the Lock-Box
Accounts.
(c) The Originators, the Purchasers and the Lender Agent
hereby agree that all Collections or other proceeds received on account of
Purchased Receivables shall be paid or delivered to the Purchasers for
application against the Purchaser Claim and all Collections or other proceeds
received on account of Unsold Receivables shall be paid or delivered to the
Lender Agent for application against the Lender Claim. For purposes of
determining whether specific Collections have been received on account of
Purchased Receivables or on account of Unsold Receivables, the parties hereto
agree as follows:
(i) All payments made by an Obligor which is
obligated to make payments on Purchased Receivables but is not
obligated to make any payments on Unsold Receivables shall be
conclusively presumed to be payments on account of Purchased
Receivables and all payments made by an Obligor which is
obligated to make payments on Unsold Receivables but is not
obligated to make any payments on Purchased Receivables shall
be conclusively presumed to be payments on account of Unsold
Receivables.
(ii) All payments made by an Obligor which is
obligated to make payments with respect to both Purchased
Receivables and Unsold Receivables shall be applied against
the specific Receivables, if any, which are designated by such
Obligor by reference to the applicable invoice as the
Receivables with respect to which such payments should be
applied. In the absence of such designation, such payments
shall be applied against the oldest outstanding Receivables
owed by such Obligor.
9
<PAGE>
(d) Subject to the second sentence of this Section 2.4(d),
each of the Finco and the Purchaser Agent agrees that it shall transfer prior
ownership and control over the Lock-Box Accounts to the Lender Agent upon the
Collection Date; provided, however, that any Collections of Purchased Property
which are then on deposit in the Lock-Box Account and are not required to be
paid to the Lender Agent pursuant to Section 2.3(b) above shall be delivered to
the Finco before the foregoing transfer of ownership and control of the Lock-Box
Accounts. Any such transfer shall be without representation, recourse or
warranty of any kind on the part of the Purchaser Agent. Notwithstanding any
such transfer, all Collections and other proceeds subsequently deposited into
the Lock-Box Accounts on account of the Purchased Property shall continue to be
delivered and applied as provided in Section 2.3(b) above.
(e) In order to effect more fully the provisions of this
Agreement, each Agent hereby agrees that neither Agent shall, without the
consent of the other Agent, send any notices to the Obligors directing them to
remit Collections of any Receivables other than to a Lock-Box Account except as
may be necessary in connection with the enforcement of any delinquent or
defaulted Receivable as against the Obligor thereof (in which case, the Agent
receiving such Collections shall deliver and apply such Collections in
accordance with the terms of Section 2.3).
(f) The Lender Agent agrees that it shall not, at any time
prior to the Collection Date, exercise any rights it may have under the Loan
Documents to send any notices to Obligors (i) informing them of the Lenders' or
the Lender Agent's interest in the Receivables, or (ii) directing such Obligors
to make payments in any particular manner of any amounts due under the
Receivables. The Lender Agent further agrees that, in the event it shall receive
payments directly from any Obligor on account of an Unsold Receivable, at any
time prior to the Collection Date, it shall immediately forward such payment to
the Purchaser Agent (or, if a successor Servicer has been appointed, to such
successor Servicer) in order that the Purchaser Agent or such successor
Servicer, as applicable, may determine whether such payment was, in fact,
properly allocated to such Unsold Receivable consistent with the terms of this
Section 2.4 and, if necessary pursuant to the terms hereof, re-allocate such
payment.
(g) The Finco and the Originators hereby irrevocably direct
EagleFunding, the Purchaser Agent, the Liquidity Providers and the Liquidity
Agent to pay directly to the Lender Agent, for application by the Lender Agent
in accordance with the Loan Documents, all proceeds of the Purchased Property
which, pursuant to the Purchaser Documents, are to be paid by the Finco to the
Originators, and until so paid to the Lender Agent all such amounts shall be
held in trust for the Lender Agent. The foregoing instruction shall not be
amended, modified or revoked without the prior written consent of the Lender
Agent.
2.5. Enforcement Actions. Each of the Lender Agent and the
Purchaser Agent agrees to use its best efforts to give an Enforcement Notice to
the other prior to commencement of Enforcement and further agrees, that, during
the period, if any, between the giving of such Enforcement Notice and the
commencement of Enforcement thereunder, the Agent receiving such notice shall
have the right (but not the obligation) to cure the "Event of Default" or "Event
of Termination" which has occurred under the Loan Documents or the Purchaser
Documents,
10
<PAGE>
respectively, and to which such Enforcement Notice relates. Subject to the
foregoing, the parties hereto agree that during an Enforcement Period:
(a) Subject to any applicable restrictions in the Purchaser
Documents, the Purchaser Agent may, at its option, take any action to
liquidate the investment of the Purchasers in the Purchased Property
and/or to foreclose or realize upon or enforce any of their rights with
respect to the Purchased Property without the prior written consent of
any Originator or the Lender Agent; provided, however, that the
Purchasers shall not take any action to foreclose or realize upon or to
enforce any rights they may have with respect to any Purchased Property
constituting Returned Goods which have been commingled with the Lender
Collateral, unless the Purchaser Agent, pursuant to the last sentence
of Section 2.3(c), has withheld consent to a sale or other disposition
of such inventory.
(b) Subject to any applicable restrictions in the Loan
Documents, the Lender Agent may, at its option and without the prior
written consent of the Purchasers, take any action to accelerate
payment of the Lender Claim and to foreclose or realize upon or enforce
any of its rights with respect to (i) the Lender Collateral and (ii)
except as otherwise provided in Section 2.3(c), with respect to any
Purchased Property constituting Returned Goods which have been
commingled with the Lender Collateral; provided, however, that the
Lender Agent shall not otherwise take any action to foreclose or
realize upon or to enforce any rights it may have with respect to any
of the Purchased Property without the Purchaser Agent's prior written
consent unless the Purchaser Claim shall have been first paid and
satisfied in full and the Lender Agent shall apply the proceeds of any
Purchased Property consisting of Returned Goods as provided in Section
2.3(c) above.
2.6 Access to and Use of Collateral and Purchased Property.
The Purchasers and the Lender Agent hereby agree that, notwithstanding the
priorities set forth in this Agreement, the Purchasers and the Lender Agent
shall have the following rights of access to and use of the Collateral and
Purchased Property respectively:
(a) Only to the extent such rights are granted in the
Purchaser Documents and subject to any applicable restrictions therein,
the Purchasers may enter one or more premises of the Originators,
whether leased or owned, at any time during reasonable business hours,
without force or process of law and without obligation to pay rent or
compensation to the Originators, the Finco, the Lender Agent or the
Lenders, whether before, during or after an Enforcement Period, and may
use any Lender Collateral constituting computer equipment located
thereon and may have access to and use of all books, records and
computer software located thereon (whether the same constitute Records)
and may have access to and use of any other property to which such
access and use are granted under the Purchaser Documents, in each case
provided that such use is for the purposes of enforcing the Purchasers'
rights with respect to the Purchased Property.
11
<PAGE>
(b) Only to the extent such rights are granted in the Loan
Documents and subject to any applicable restrictions therein, the
Lender Agent may enter one or more premises of the Originators or the
Finco, whether leased or owned, at any time during reasonable business
hours, without force or process of law and without obligation to pay
rent or compensation to the Originators, the Finco, the Purchasers or
the Purchaser Agent, whether before, during or after an Enforcement
Period, and may have access to and use of all Records located thereon,
provided that such use is for the purposes of enforcing the Lender
Agent's rights with respect to the Lender Collateral (including any
interests in Unsold Receivables and other interests in property
retained by the Lender Agent as described in Section 2.1 above).
(c) In order to facilitate the purposes of this Section 2.6,
the Lender Agent and the Purchasers hereby agree as follows: (1) any
mortgage of, assignment of, security interest in or lien upon any real
property and interests in real property of the Originators or their
Affiliates (whether leased or owned) and any of the Collateral in favor
of the Lender Agent shall be subject to the Purchasers' rights of
access and use described above; and (2) any ownership interest of the
Purchasers in the Records shall be subject to the Lender Agent's right
of access and use described above.
2.7. Accountings. The Lender Agent agrees to render statements
of the Lender Claim to the Purchaser Agent upon request, giving effect to the
application of proceeds of Purchased Property and Collateral as hereinbefore
provided. The Purchaser Agent agrees to render statements to the Lender Agent
upon request, which statements shall identify in reasonable detail the Purchased
Receivables and shall render an account of the Purchaser Claim, giving effect to
the application of proceeds of Purchased Property and Collateral as hereinbefore
provided.
2.8. Notice of Defaults. The Lender Agent agrees to use
reasonable efforts to give to the Purchaser Agent copies of any notice sent to
an Originator with respect to the occurrence or existence of an Unmatured
Default under the Loan Documents, and the Purchaser Agent agrees to use
reasonable efforts to give to the Lender Agent copies of any notice sent to the
Originators or the Finco with respect to the occurrence or existence of an
Unmatured Default under the Purchaser Documents, in each case simultaneously
with the sending of such notice to the Originators or the Finco as applicable;
provided, however, that any failure to give such notice shall not create a cause
of action against any party failing to give such notice or create any claim or
right on behalf of any third party. In each of the above cases, the Agent
receiving such notice shall have the right (but not the obligation) to cure the
Unmatured Default which gave rise to the sending of such notice.
2.9. Agency for Perfection. The Purchasers and the Lender
Agent hereby appoint each other as agent for purposes of perfecting by
possession their respective security interests and ownership interests and liens
on the Collateral and Purchased Property described hereunder. In the event that
any Purchaser obtains possession of any of the Lender Collateral (including
Collections of Unsold Receivables), such Purchaser shall notify the Lender Agent
of such fact, shall hold such Collateral in trust and shall deliver such
Collateral to the Lender Agent upon request. In the event that the Lender Agent
obtains possession of any of the Purchased Property
12
<PAGE>
(including Collections of Purchased Receivables), the Lender Agent shall notify
the Purchaser Agent of such fact, shall hold such Purchased Property in trust
and shall deliver such Purchased Property to the Purchaser Agent upon request.
2.10. UCC Notices. In the event that any party hereto shall be
required by the UCC or any other applicable law to give notice to the other of
intended disposition of Purchased Property or Collateral, respectively, such
notice shall be given in accordance with Section 3.1 hereof and ten (10) days'
notice shall be deemed to be commercially reasonable.
2.11. Independent Credit Investigations. Neither the
Purchasers nor the Lender Agent nor any of their respective directors, officers,
agents or employees shall be responsible to the other or to any other person,
firm or corporation for the solvency, financial condition or ability of the
Originators or the Finco to repay the Purchaser Claim or the Lender Claim, or
for the worth of the Purchased Property or the Collateral, or for statements of
any Originator or the Finco, oral or written, or for the validity, sufficiency
or enforceability of the Purchaser Claim, the Lender Claim, the Purchaser
Documents, the Loan Documents, the Purchaser's interest in the Purchased
Property or the Lender Agent's interest in the Collateral. Each of the Lender
Agent and the Purchasers has entered into its respective financing agreements
with the Originators and/or the Finco, as applicable, based upon its own
independent investigation, and makes no warranty or representation to the other
nor does it rely upon any representation of the other with respect to matters
identified or referred to in this Section 2.11.
2.12. Limitation on Obligations of Parties to Each Other.
Except as expressly provided in this Agreement, neither the Lenders nor the
Lender Agent shall have any duties to the Purchasers and the Purchasers shall
have no duties to the Lender Agent. Nothing in this Section 2.12 shall be deemed
to relieve the Finco from liability on any Originator Claim to the extent such
Originator Claim has been assigned to the Lender Agent (as Collateral or
otherwise).
2.13. Amendments to Financing Arrangements or to this
Agreement. The Lender Agent agrees to use reasonable efforts to, concurrently
with any written amendment or modification in the Loan Documents, give prompt
notice to the Purchaser Agent of the same and the Purchaser Agent agrees to use
reasonable efforts to, concurrently with any written amendment or modification
in the Purchaser Documents, notify the Lender Agent of the same; provided,
however, that the failure to do so shall not create a cause of action against
any party failing to give such notice or create any claim or right on behalf of
any third party. Notwithstanding the foregoing, each party hereto agrees not to
amend any of the Loan Documents or Purchaser Documents so as to materially alter
the rights and benefits intended hereunder to be enjoyed by the respective
Agents and the other parties hereto. Each party hereto shall, upon request of
any other party hereto, provide copies of all such modifications or amendments
and copies of all other documentation relevant to the Purchased Property or the
Collateral. All modifications or amendments of this Agreement must be in writing
and duly executed by an authorized officer of each party hereto to be binding
and enforceable.
2.14. Marshaling of Assets. Nothing in this Agreement will be
deemed to require either Agent (i) to proceed against certain property securing
the Lender Claim or the Purchaser
13
<PAGE>
Claim, as applicable, prior to proceeding against other property securing such
Claim or (ii) to marshall the Lender Collateral or the Purchased Property (as
applicable) upon the enforcement of such Agent's remedies under the Purchaser
Documents or Loan Documents, as applicable.
2.15. Relative Rights of Purchasers as Among Themselves. The
relative rights of the Purchasers, each as against the other, with respect to
the exercise of the rights and the receipt of the benefits granted by the Lender
Agent hereunder shall be determined by mutual agreement among such parties in
accordance with the terms of the Purchaser Documents. The Lender Agent shall be
entitled to rely on the power and authority of the Purchaser Agent to act on
behalf of all of the Purchasers. The Purchaser Agent shall be entitled to rely
on the power and authority of the Lender Agent to act on behalf of all of the
Lenders.
2.16. Effect Upon Loan Documents and Purchaser Documents. By
executing this Agreement, each of the Originators and the Finco agrees to be
bound by the provisions hereof (i) as they relate to the relative rights of the
Lender Agent, the Purchaser Agent and EagleFunding with respect to the property
of the Originators; (ii) as they relate to the relative rights of the
Originators, Purchaser Agent and EagleFunding with respect to the property of
the Finco; and (iii) as they relate to the relative rights of the Lender Agent
and the Finco as creditors of the Originators. Each Originator acknowledges
that, except as otherwise provided in Section 2.1, the provisions of this
Agreement shall not give it any substantive rights as against the Lender Agent
or the Lenders nor otherwise amend, modify, change or supersede the terms of the
Loan Documents as among the parties thereto. Each of the Originators and the
Finco acknowledges that, except as otherwise provided in Section 2.1, the
provisions of this Agreement shall not give the Originators any substantive
rights as against the Purchasers nor give the Finco any substantive rights as
against the other Purchasers nor otherwise amend, modify, change or supersede
the terms of the Purchaser Documents as among the parties thereto.
Notwithstanding the foregoing, each of EagleFunding and the Agents hereby
agrees, that, as among themselves and their successors and assigns, to the
extent the terms and provisions of the Loan Documents or the Purchaser Documents
are inconsistent with the terms and provisions of this Agreement, the terms and
provisions of this Agreement shall control.
2.17. Further Assurances. Each of the Agents hereto agrees (i)
to take such actions as may be reasonably requested by the other Agent, whether
before, during or after an Enforcement Period, in order to effect the rules of
distribution and allocation set forth above in this Article 2 and (ii) not to
amend the Loan Documents or the Purchaser Documents, as applicable, in any
manner which would materially alter such rules of distribution and allocation
set forth herein.
ARTICLE 3. MISCELLANEOUS.
-------------
3.1. Notices. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including
telecommunications and communication by facsimile copy) and mailed, telexed,
transmitted or delivered, as to each party hereto, at its address set forth
under its name on the signature pages hereof or at such other address as shall
be
14
<PAGE>
designated by such party in a written notice to the other parties hereto. All
such notices and communications shall be effective upon receipt, or, in the case
of notice by mail, five days after being deposited in the mails, postage
prepaid, or in the case of notice by telex, when telexed against receipt of the
answerback, or in the case of notice by facsimile copy, when verbal confirmation
of receipt is obtained, in each case addressed as aforesaid.
3.2. Agreement Absolute. Each of the Purchasers shall be
deemed to have entered into the Purchaser Documents in express reliance upon
this Agreement and the Lender Agent and the Lenders shall be deemed to have
entered into the Revolving Credit Agreement in express reliance upon this
Agreement. This Agreement shall be and remain absolute and unconditional under
any and all circumstances, and no acts or omissions on the part of any party to
this Agreement shall affect or impair the agreement of any party to this
Agreement, unless otherwise agreed to in writing by all of the parties hereto.
This Agreement shall be applicable both before and after the filing of any
petition by or against the Originators or the Finco under the Bankruptcy Code
and all references herein to the Originators or the Finco shall be deemed to
apply to a debtor-in-possession for such party and all allocations of payments
between the Lender Agent and the Purchasers shall, subject to any court order to
the contrary, continue to be made after the filing of such petition on the same
basis that the payments were to be applied prior to the date of the petition.
3.3. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of each of the parties hereto and their respective
successors and assigns. The successors and assigns for any Originator and/or the
Finco shall include a debtor-in-possession or trustee of or for such party. The
successors and assigns for the Agents shall include any successor Agents
appointed under the terms of the Loan Documents or the Purchaser Documents, as
applicable. Each of the Agents agrees not to transfer any interest it may have
in the Loan Documents or the Purchaser Documents unless such transferee has been
notified of the existence of this Agreement and has agreed to be bound hereby.
3.4. Third-Party Beneficiaries. The terms and provisions of
this Agreement shall be for the sole benefit of the Agents, the Purchasers and
the Lenders and their respective successors and assigns and no other Person
shall have any right, benefit, or priority by reason of this Agreement.
3.5. Governing Law. This Agreement shall be governed by and
construed in accordance with, the internal laws (as opposed to conflicts of law
provisions) of the State of New York.
3.6. Section Titles. The article and section headings
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
3.7. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such
15
<PAGE>
prohibition or unenforceability without invalidating the remaining provisions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
3.8. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
3.9. No Petition. Each party hereto (including each Lender, by
the Lender Agent on its behalf) hereby covenants and agrees that, prior to the
date which is one year and one day after the payment in full of all outstanding
senior indebtedness of EagleFunding, it will not institute against, or join any
other Person in instituting against, EagleFunding any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any state of the
United States. Each party hereto (including each Lender, by the Lender Agent on
its behalf) hereby covenants and agrees that prior to the date which is one year
and one day after the payment in full of all outstanding senior indebtedness of
the Finco, it will not institute against, or join any other Person in
instituting against, the Finco any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceeding under the laws
of the United States or any state of the United States. The Lenders and the
Lender Agent agree that, in the event they shall at any time have the right to
exercise or otherwise control, directly or indirectly, any voting rights in
respect of any person or entity owning voting capital of the Finco, the Lenders
and the Lender Agent shall cause such person or entity to comply with the terms
of this Section 3.9 as if such person or entity were a party to this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
OUTSOURCE FUNDING CORPORATION
By:/s/ Joseph C. Wasch
-----------------------------------
Name: Joseph C. Wasch
Title: Vice President
1144 E. Newport Center Drive
Suite 2A
Deerfield Beach, Florida 33442
Attn: Scott Francis
Telephone: (954) 418-6573
Telecopy: (954) 418-3365
OUTSOURCE INTERNATIONAL, INC.,
individually and as Servicer
By:/s/ Scott R. Francis
-----------------------------------
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attn: Scott Francis
Telephone: (954) 418-6573
Telecopy: (954) 418-3365
OUTSOURCE FRANCHISING, INC.
By:/s/ Scott R. Francis
-----------------------------------
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attn: Scott Francis
Telephone: (954) 418-6573
Telecopy: (954) 418-3365
Signature Page to the Intercreditor Agreement
17
<PAGE>
CAPITAL STAFFING FUND, INC.
By:/s/ Scott R. Francis
-----------------------------------
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attn: Scott Francis
Telephone: (954) 418-6573
Telecopy: (954) 418-3365
SYNADYNE I, INC.
By:/s/ Scott R. Francis
-----------------------------------
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attn: Scott Francis
Telephone: (954) 418-6573
Telecopy: (954) 418-3365
SYNADYNE II, INC.
By:/s/ Scott R. Francis
-----------------------------------
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attn: Scott Francis
Telephone: (954) 418-6573
Telecopy: (954) 418-3365
Signature Page to the Intercreditor Agreement
18
<PAGE>
SYNADYNE III, INC.
By:/s/ Scott R. Francis
-----------------------------------
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attn: Scott Francis
Telephone: (954) 418-6573
Telecopy: (954) 418-3365
SYNADYNE IV, INC.
By:/s/ Scott R. Francis
-----------------------------------
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attn: Scott Francis
Telephone: (954) 418-6573
Telecopy: (954) 418-3365
SYNADYNE V, INC.
By:/s/ Scott R. Francis
-----------------------------------
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attn: Scott Francis
Telephone: (954) 418-6573
Telecopy: (954) 418-3365
Signature Page to the Intercreditor Agreement
19
<PAGE>
OUTSOURCE INTERNATIONAL
OF AMERICA, INC.
By:/s/ Scott R. Francis
-----------------------------------
Name: Scott R. Francis
Title: Chief Financial Officer
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attn: Scott Francis
Telephone: (954) 418-6573
Telecopy: (954) 418-3365
EAGLEFUNDING CAPITAL CORPORATION,
By: BANCBOSTON SECURITIES INC., its
attorney-in-fact
By:/s/ Mark Gallivan
-----------------------------------
Name: Mark Gallivan
Title: Director
EagleFunding Capital Corporation
c/o BancBoston Securities Inc.
100 Federal Street
Boston, Massachusetts 02110
Attention: Mitchell Feldman
Telephone: 617-434-5760
Telecopy: 617-434-9591
c/o Lord Securities Corporation
Two Wall Street, 19th Floor
New York, New York 10005
Attention: Dwight Jenkins
Telephone: 212-346-9007
Telecopy: 212-346-9012
Signature Page to the Intercreditor Agreement
20
<PAGE>
BANKBOSTON, N.A.,
as the Lender Agent
By:/s/ Scott S. Barnett
-----------------------------------
Name: Scott S. Barnett
Title: Director
100 Pearl Street
Hartford, Connecticut 06103
Attn: Scott S. Barnett
Telephone: 860-727-6557
Telecopy: 860-7276576
BANCBOSTON SECURITIES INC.,
as Purchaser Agent
By:/s/ Mark Gallivan
-----------------------------------
Name: Mark Gallivan
Title: Director
100 Federal Street
Boston, Massachusetts 02110
Attn: Adam Cohen
Telephone: 617-434-4301
Telecopy: 617-434-1533
21
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1998 DEC-31-1997
<PERIOD-START> APR-01-1998 APR-01-1997 JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997 JUN-30-1998 JUN-30-1997
<CASH> 2,007,089 0 0 0
<SECURITIES> 0 0 0 0
<RECEIVABLES> 5,443,767 0 0 0
<ALLOWANCES> (1,666,686) 0 0 0
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 61,510,640 0 0 0
<PP&E> 22,221,314 0 0 0
<DEPRECIATION> (5,799,025) 0 0 0
<TOTAL-ASSETS> 147,407,640 0 0 0
<CURRENT-LIABILITIES> 37,189,393 0 0 0
<BONDS> 73,452,708 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 8,658 0 0 0
<OTHER-SE> 43,314,784 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 147,407,640 0 0 0
<SALES> 0 0 0 0
<TOTAL-REVENUES> 134,795,907 107,823,178 255,782,294 193,197,372
<CGS> 0 0 0 0
<TOTAL-COSTS> 113,519,631 91,599,151 216,467,878 165,838,360
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 1,437,758 2,186,055 2,517,276 3,512,885
<INCOME-PRETAX> 1,506,470 (3,134,561) 2,349,387 (1,934,109)
<INCOME-TAX> 411,389 (387,375) 581,150 (793,584)
<INCOME-CONTINUING> 1,095,081 (2,747,186) 1,768,237 (1,140,525)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 1,095,081 (2,747,186) 1,768,237 (1,140,525)
<EPS-PRIMARY> 0.13 (0.50) 0.21 (.26)
<EPS-DILUTED> 0.11 (0.50) 0.18 (.26)
</TABLE>
