SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
December 9, 1997 (November 26, 1997)
COMFORCE Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
1-6081 36-2262248
(Commission File Number) (I.R.S. Employer Identification No.)
2001 Marcus Avenue, Lake Success, NY 11042
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (516) 328-7300
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Description of the Uniforce Acquisition
On August 13, 1997, COMFORCE Corporation (the "Company"), COMFORCE
Columbus, Inc., an indirect wholly-owned subsidiary of the Company (the
"Subsidiary"), and Uniforce Services, Inc. ("Uniforce"), executed an Agreement
and Plan of Merger (the "Merger Agreement") which provides for the acquisition
of Uniforce by the Company. Pursuant to the Merger Agreement, the Company caused
the Subsidiary to commence a tender offer on October 27, 1997 (the "Tender
Offer") to acquire all of the outstanding Uniforce Common Stock for a per share
price of $28.00 in cash and 0.5217 shares of the Company's Common Stock
(collectively the "Per Share Consideration").
On November 26, 1997, following the close of the Tender Offer at midnight
on November 25, 1997, the Company accepted all 2,931,741 shares of Uniforce
Common Stock (representing approximately 96.5% of the issued and outstanding
shares of Uniforce Common Stock) that had been tendered in the Tender Offer. On
December 3, 1997, the Company completed the merger of Uniforce and the
Subsidiary (the "Merger"), and made available for payment to the holders of the
remaining 106,802 shares of Uniforce Common Stock (who did not tender their
stock) cash and stock equal in amount to the Per Share Consideration. In
addition, as required under the Merger Agreement, the Company made available for
payment to the holders of options to purchase an additional 370,010 shares of
Uniforce Common Stock cash in an amount equal to the difference between (i)
$32.00 per share and (ii) the per share exercise price of each such option.
Accordingly, subject to any Uniforce shareholder subsequently exercising
statutory appraisal rights, the total consideration paid by the Company to
acquire Uniforce was $93.6 million in cash and 1,585,000 shares of its Common
Stock. In addition, the Company estimates that it will incur an additional $8.5
million in fees, commissions and expenses in connection with the Tender Offer
and Merger and related financing and other transactions in connection therewith.
Uniforce is a supplemental staffing company focused in the areas of
information services, technology, office automation, medical office support and
light industrial. It supplies supplemental staffing services to businesses,
educational institutions, professional and service organizations, health care
facilities, federal, state and local governmental agencies and others in the
United States. In addition, Uniforce supplies payroll, billing and/or financial
support services to independently owned and operated supplemental staffing
firms. Uniforce also supplies supplemental laboratory staffing support to the
scientific community and provides confidential consulting and payrolling
services, permitting clients to utilize former independent contractors and
consultants.
The Company currently expects that it will incur a restructuring charge in
the fourth quarter of 1997, in connection with certain potential severance and
other costs related to the integration of the Company and Uniforce. Management
currently believes that such restructuring charge will be approximately $2.0
million; however, no assurance can be given that any such charge, if incurred,
will not exceed such amount.
Upon completion of the Merger, Uniforce became a wholly-owned subsidiary of
COMFORCE Operating, Inc. ("COI"), which is in turn a wholly-owned subsidiary of
the Company. Accordingly, Uniforce is an indirect wholly-owned subsidiary of the
Company.
Description of Terms of Financing
12% Senior Notes due 2007
The cash portion of the costs of acquiring Uniforce, including the payment
of certain of the fees and expenses payable upon the closing of the Tender
Offer, was financed through the private placement by COI of $110.0 million
original principal amount of 12% Senior Notes due 2007 (the "Notes"). The Notes
were issued on November 26,
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<PAGE>
1997. The Notes are senior unsecured obligations of COI and rank pari passu in
right of payment with all existing and future senior indebtedness of COI and
senior in right of payment to all existing and future subordinated indebtedness
of COI. The Notes provide for the payment of interest semi-annually at the rate
of 12% per annum and mature on December 1, 2007.
COI may redeem the Notes, in whole or in part, at any time on or after
December 1, 2002 at redemption prices of 106% for the 12 months commencing
December 1, 2002, 104% for the 12 months commencing December 1, 2003, 102% for
the 12 months commencing December 1, 2004 and 100% at any time on or after
December 1, 2005, together with accrued and unpaid interest to the date of
redemption. In addition, at any time prior to December 1, 2000, COI may, subject
to certain requirements, redeem up to 35% of the aggregate principal amount of
the Notes with the cash proceeds received from one or more equity offerings at a
redemption price equal to 112% of the principal amount to be redeemed, together
with accrued and unpaid interest to the date of redemption, provided that at
least 65% of the aggregate principal amount of the Notes issued through the date
of redemption remains outstanding immediately after each such redemption.
Upon the occurrence of certain specified events deemed to result in a
change of control of COI, it will be required to make an offer to repurchase the
Notes at a price equal to 101% of the principal amount thereof, together with
accrued and unpaid interest to the date of repurchase.
Subject to certain qualifications and exceptions, the Indenture under which
the Notes were issued (the "Notes Indenture") limits, inter alia, (i) the
incurrence of additional indebtedness by COI and its subsidiaries, (ii) the
payment of dividends on, and redemption of, capital stock of COI and the
redemption of certain subordinated obligations of COI, (iii) investments, (iv)
sales of assets and subsidiary stock, (v) transactions with affiliates, (vi)
consolidations, mergers and transfers of all or substantially all the assets of
COI and (vii) restrictions on distributions from subsidiaries.
COI has agreed to use its best efforts to file with and seek to cause to be
declared effective by the Securities and Exchange Commission a registration
statement with respect to an offer to exchange the Notes for a series of notes
of COI with terms substantially identical to the Notes, except for the
elimination of certain transfer restrictions. COI expects to file such
registration statement in December 1997. In the event that COI fails to meet
certain target dates in connection with the registration of the Notes,
additional interest of up to 2% per annum will be accrue on the Notes until the
required actions are completed.
Units Consisting of 15% Senior Secured PIK Debentures due 2009 and Warrants
On November 26, 1997, in connection with the completion of the Tender Offer
and the acquisition of Uniforce, the Company repaid (i) its then existing credit
facility with Fleet National Bank, as lender and agent, and U.S. Bank,
Washington, as lender, in the outstanding principal amount of $38.1 million and
(ii) Uniforce's then existing credit facility with Heller Financial, Inc. in the
outstanding principal amount of $36.1 million. These obligations were repaid
from proceeds available from (i) the Company's private placement of 20,000 Units
("Units") each consisting of $1,000 principal amount of 15% Senior Secured PIK
Debentures (the "Senior Debentures") and 8.45 Warrants ("Warrants"), each to
purchase one share of Common Stock, representing, in the aggregate, $20.0
million principal amount of Senior Debentures and Warrants to purchase 169,000
shares of the Company's Common Stock, and (ii) proceeds from a new credit
facility entered into with Heller Financial, Inc. (described below in this Item
2 under "--New Credit Facility").
The Senior Debentures constitute direct and unconditional senior secured
obligations of the Company and are secured by a pledge by the Company of all of
the issued and outstanding common stock of COI. The payment obligations of the
Company under the Senior Debentures must at all times rank at least equal in
priority of payment with all existing and future indebtedness of the Company.
The Senior Debentures are structurally subordinated to all indebtedness of the
Company's direct and indirect subsidiaries (including the Notes and the
Company's new credit
3
<PAGE>
facility (described below in this Item 2 under "--New Credit Facility") and
effectively subordinated to all future secured indebtedness of the Company.
The Senior Debentures bear interest at the rate of 15% per annum, subject
to increase in certain circumstances, payable semi-annually, and mature on
December 1, 2009. Prior to December 1, 2002, interest is payable in cash or in
additional Senior Debentures on each interest payment date, at the option of the
Company. Thereafter, interest is payable only in cash. To the extent that the
Company is prohibited pursuant to the terms of any credit facility or the Notes
Indenture from paying interest in cash subsequent to December 1, 2002, the
Company is required to pay interest equal to the interest rate then applicable
to the Senior Debentures plus 2%.
Subject to certain requirements, the Company may at any time redeem up to
100% of the aggregate principal amount of the Senior Debentures at the
redemption prices of 103% for the 12 months commencing December 1, 1997 and
107.5% at any time on or after December 1, 1998, together with accrued and
unpaid interest to the date of redemption.
Upon the occurrence of certain specified events deemed to result in a
change of control of the Company, it will be required to make an offer to
repurchase the Notes at a price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of repurchase.
Subject to certain qualifications and exceptions, the Indenture under which
the Senior Debentures were issued limits, inter alia, (i) the incurrence of
additional indebtedness by the Company and its subsidiaries, (ii) the payment of
dividends on, and redemption of, capital stock of the Company and the redemption
of certain subordinated obligations of the Company, (iii) investments, (iv)
sales of assets and subsidiary stock, (v) transactions with affiliates, (vi)
consolidations, mergers and transfers of all or substantially all the assets of
the Company and (vii) restrictions on distributions from subsidiaries.
Each Warrant entitles the holder to acquire, at any time prior to December
1, 2009, one share of Common Stock at a price per share equal to $7.55 (based on
a 10% premium above the average closing price for the Company's Common Stock the
five trading days ended November 18, 1997), subject to adjustment from time to
time upon the occurrence of certain events which are deemed dilutive to the
holders of the Warrants.
The Company has agreed to use its best efforts to file with and seek to
cause to be declared effective by the Securities and Exchange Commission
registration statements (i) with respect to an offer to exchange the Senior
Debentures for a series of senior debentures of the Company with terms
substantially identical to the Senior Debentures, except for the elimination of
certain transfer restrictions, and (ii) covering the resale of the shares of
Common Stock of the Company issuable upon the exercise of the Warrants. The
Company expects to file such registration statements in December 1997. In the
event that the Company fails to meet certain target dates in connection with the
registration of the Senior Debentures, additional interest of up to 2% per annum
will be accrue on the Senior Debentures until the required actions are
completed.
New Credit Facility
On November 26, 1997, COMFORCE Corporation and COI and certain subsidiaries
thereof, as guarantors (the "Guarantors"), and various other direct and indirect
active subsidiaries thereof, as borrowers (the "Borrowers") (COMFORCE
Corporation, the Guarantors and the Borrowers collectively referred to as the
"Company"), entered into a Loan and Security Agreement with Heller Financial,
Inc., as lender and agent for other participating lenders (collectively,
"Heller"), to provide to the Company a secured revolving credit facility (the
"New Credit Facility") providing for borrowings of up to $75.0 million based on
a specified percentage of the Company's eligible accounts receivable. At
closing, the Company borrowed $37.3 million under the New Credit Facility.
4
<PAGE>
From the date of the closing until Heller receives the Company's audited
financial statements for the year ended December 31, 1998 (the "Margin Date"),
borrowings under the New Credit Facility bear interest, at the Company's option,
at a per annum rate equal to either (i) the base rate as announced from time to
time by the Board of Governors of the Federal Reserve System as the "Bank Prime
Loan" rate (the "Base Rate") plus 0.50% or (ii) LIBOR plus 2.25%. Following the
Margin Date, the interest rate is subject to adjustment quarterly by a
percentage in excess of or less than the Base Rate or LIBOR as set forth below
based upon a specified leverage ratio:
Leverage Ratio Base Rate LIBOR
- -------------- --------- -----
Greater than 6.00 +.75 +2.50
Greater than 5.50 but less than +.50 +2.25
or equal to 6.00
Greater than 4.50 but less than +.25 +2.00
or equal to 5.50
Greater than 4.00 but less than +.00 +1.75
or equal to 4.50
Equal to or less than 4.00 -.25 +1.50
The obligations evidenced by the New Credit Facility are secured by a
pledge of the capital stock of the Borrowers and the Guarantors and security
interests in substantially all of the assets of the Borrowers and the
Guarantors. In addition, John Fanning, a former shareholder of Uniforce and the
current holder of approximately 5.9% of the issued and outstanding Common Stock
of the Company, provided cash collateral to Heller in the amount of $5.0
million. Under the terms of his agreement with Heller, $2.5 million of the
amount pledged is required to be released when the Company has unused borrowing
availability under the New Credit Facility of at least $15 million for 15
consecutive business days, with the balance to be released when the Company has
$17.5 million of unused borrowing availability for a like period. As of the date
of this Report, the Company has $15.0 million of unused borrowing availability
under the New Credit Facility. As consideration for this agreement, the Company
has agreed to pay to Mr. Fanning a 12% per annum yield on his cash collateral,
less the actual return thereon as invested.
The agreements evidencing the New Credit Facility contain various financial
and other covenants and conditions, including, but not limited to, limitations
on paying dividends, engaging in affiliate transactions, making acquisitions and
incurring additional indebtedness. The scheduled maturity date of the New Credit
Facility is November 26, 2002.
5
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
Included herein are the following financial statements of Uniforce
Services, Inc.:
Audited Consolidated Financial Statements of Uniforce Services, Inc.
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Earnings for years ended December 1, 1996, 1995
and 1994
Consolidated Statements of Stockholders' Equity for years ended December
31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for years ended December 31, 1996,
1995 and 1994
Notes to Consolidated Financial Statements
Unaudited Interim Financial Statements of Uniforce Services, Inc.
Unaudited Consolidated Condensed Balance Sheet as of September 30, 1997
Unaudited Consolidated Condensed Statements of Earnings for the nine months
ended September 30, 1997 and 1996
Unaudited Consolidated Condensed Statements of Cash Flows for the nine
months ended September 30, 1997 and 1996
Notes to Unaudited Consolidated Condensed Financial Statements
6
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Uniforce Services, Inc.:
We have audited the accompanying consolidated balance sheets of Uniforce
Services, Inc. and subsidiaries as of December 31, 1996 and 1995 and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Uniforce Services,
Inc. and subsidiaries at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Jericho, New York
March 7, 1997
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<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
<TABLE>
<CAPTION>
Assets 1996 1995
------ ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,283,422 6,444,859
Accounts receivable (net of allowance for doubtful accounts of
$68,000 and $167,000, in 1996 and 1995, respectively) 17,224,885 14,827,862
Funding and service fees receivable (net of allowance for doubtful
accounts of $212,000 and $402,000 in 1996 and 1995,
respectively) 18,759,814 20,918,753
Current maturities of notes receivable from licensees (net of
allowance for possible loss of $42,000 and $67,000 in 1996 and
1995, respectively) 87,051 132,258
Prepaid expenses and other current assets 1,710,969 1,270,268
Deferred income taxes 201,149 347,149
------------ ------------
Total current assets 43,267,290 43,941,149
------------ ------------
Notes receivable from licensees (net of current maturities and
allowance for possible loss of $64,000 and $92,000
in 1996 and 1995, respectively) 136,157 182,642
Fixed assets - net 3,775,661 2,125,413
Deferred costs and other assets (net of accumulated amortization of
$2,105,777 and $1,685,970 in 1996 and 1995, respectively) 1,402,032 821,244
Cost in excess of fair value of net assets acquired (net of accumulated
amortization of $681,601 and $335,954 in 1996 and 1995, respectively) 6,388,240 3,525,741
------------ ------------
$ 54,969,380 50,596,189
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Loan payable $ 1,000,000 750,000
Payroll and related taxes payable 6,372,319 7,540,947
Payable to licensees and clients 1,484,238 2,025,563
Income taxes payable -- 351,690
Accrued expenses and other liabilities 5,408,070 4,092,058
------------ ------------
Total current liabilities 14,264,627 14,760,258
------------ ------------
Loan payable - non-current 25,750,000 11,250,000
Capital lease obligation - non-current 732,658 426,109
Stockholders' equity:
Common stock $.01 par value, authorized 10,000,000 shares;
issued 5,109,788 and 4,991,213 shares in 1996 and 1995,
respectively 51,098 49,912
Additional paid-in capital 8,825,128 7,789,598
Retained earnings 27,296,463 23,990,043
------------ ------------
36,172,689 31,829,553
Treasury stock, at cost, 2,084,245 and 829,500 shares in
1996 and 1995, respectively (21,950,594) (7,669,731)
------------ ------------
Total stockholders' equity 14,222,095 24,159,822
------------ ------------
$ 54,969,380 50,596,189
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Sales of supplemental staffing services $ 134,437,421 126,267,842 108,485,992
Service revenues and fees 7,713,935 8,203,490 6,694,742
------------- ------------- -------------
Total revenues 142,151,356 134,471,332 115,180,734
Cost of supplemental staffing services 104,685,598 98,162,571 83,766,726
Licensees' share of gross margin 7,976,831 9,473,431 9,895,870
General and administrative 20,074,672 19,450,728 15,730,938
Litigation settlement 360,000 -- --
Depreciation and amortization 1,073,759 940,668 941,196
------------- ------------- -------------
Total costs and expenses 134,170,860 128,027,398 110,334,730
------------- ------------- -------------
Earnings from operations 7,980,496 6,443,934 4,846,004
Other income (expense):
Interest expense - net of interest and dividend
income of $105,389, $161,504 and $131,970 in
1996, 1995 and 1994, respectively (2,170,386) (727,980) (127,378)
Other income 44,621 29,439 7,125
------------- ------------- -------------
Earnings before provision for income taxes 5,854,731 5,745,393 4,725,751
Provision for income taxes 2,185,000 2,182,000 1,775,000
------------- ------------- -------------
Net earnings $ 3,669,731 3,563,393 2,950,751
============= ============= =============
Weighted average number of shares outstanding 3,257,685 4,311,358 4,553,303
============= ============= =============
Net earnings per share $ 1.13 .83 .65
============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
9
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Additional Total
Common stock paid-in Retained Treasury stockholders'
Shares Par value capital earnings stock equity
------ --------- ------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 4,721,443 $ 47,214 $ 5,842,145 $ 18,534,895 $ (3,716,141) $ 20,708,113
Common stock issued 225,370 2,254 1,399,303 -- -- 1,401,557
Cash dividend declared ($.12 per share) -- -- -- (533,052) -- (533,052)
Stock option compensation expense -- -- 18,000 -- -- 18,000
Tax benefit of disqualifying dispositions -- -- 152,124 -- -- 152,124
Treasury stock acquired -- -- -- -- (1,585,086) (1,585,086)
Net earnings -- -- -- 2,950,751 -- 2,950,751
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1994 4,946,813 49,468 7,411,572 20,952,594 (5,301,227) 23,112,407
Common stock issued 44,400 444 259,806 -- -- 260,250
Cash dividend declared ($.12 per share) -- -- -- (525,944) -- (525,944)
Stock option compensation expense -- -- 18,000 -- -- 18,000
Tax benefit of disqualifying dispositions -- -- 100,220 -- -- 100,220
Treasury stock acquired -- -- -- -- (2,368,504) (2,368,504)
Net earnings -- -- -- 3,563,393 -- 3,563,393
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1995 4,991,213 49,912 7,789,598 23,990,043 (7,669,731) 24,159,822
Common stock issued 118,575 1,186 870,908 -- -- 872,094
Cash dividend declared ($.12 per share) -- -- -- (363,311) -- (363,311)
Stock option compensation expense -- -- 18,000 -- -- 18,000
Tax benefit of disqualifying dispositions -- -- 146,622 -- -- 146,622
Treasury stock acquired -- -- -- -- (14,280,863) (14,280,863)
Net earnings -- -- -- 3,669,731 -- 3,669,731
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1996 5,109,788 $ 51,098 $ 8,825,128 $ 27,296,463 $(21,950,594) $ 14,222,095
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
10
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,669,731 3,563,393 2,950,751
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Depreciation and amortization 1,073,759 940,668 941,196
Deferred income taxes 146,000 32,622 175,000
Provision (recovery) for possible losses on
receivables (207,361) 583,998 140,651
Provision (recovery) for possible losses on notes
receivable and other assets (245,850) 247,165 (258,599)
Stock option compensation expense 18,000 18,000 18,000
(Increase) in accounts receivable (1,480,962) (3,137,221) (1,203,381)
(Increase) decrease in funding and service fees
receivable 2,294,726 (6,907,658) (5,164,472)
(Increase) in prepaids and other assets (431,020) (769,180) (44,131)
Increase (decrease) in payroll and related taxes
payable (1,168,628) 533,026 799,426
Increase (decrease) in payable to licensees and clients (541,325) 115,452 414,379
Increase (decrease) in income taxes payable (205,068) 451,910 (217,336)
Increase in accrued expenses and other liabilities 1,211,623 843,043 1,713,010
------------ ------------ ------------
Net cash provided (used) by operating activities 4,133,625 (3,484,782) 264,494
------------ ------------ ------------
Cash flows from investing activities:
Acquisition of certain assets in connection with
business combinations (3,783,655) -- (3,204,772)
Purchase of receivables in connection with
acquisitions (844,487) -- (1,301,595)
Notes receivable from licensees (100,325) (163,741) (391,557)
Repayments on notes receivable from licensees 244,018 548,748 638,749
(Increase) in deferred costs and other assets (178,027) (134,358) (121,950)
Purchases of fixed assets (1,464,477) (669,979) (591,796)
------------ ------------ ------------
Net cash (used) by investing activities (6,126,953) (419,330) (4,972,921)
------------ ------------ ------------
Cash flows from financing activities:
Principal payments on capital lease obligations (146,029) (15,654) --
Borrowings under loans payable 14,750,000 15,700,000 6,300,000
Principal payments on loans payable -- (10,000,000) --
Proceeds from issuance of common stock 872,094 260,250 670,307
Cash dividends paid (363,311) (525,944) (533,052)
Purchase of treasury stock (14,280,863) (2,368,504) (1,585,086)
------------ ------------ ------------
Net cash provided by financing activities 831,891 3,050,148 4,852,169
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (1,161,437) (853,964) 143,742
Cash and cash equivalents at beginning of year 6,444,859 7,298,823 7,155,081
------------ ------------ ------------
Cash and cash equivalents at end of year $ 5,283,422 6,444,859 7,298,823
============ ============ ============
Supplemental disclosures:
Cash paid for:
Interest $ 1,894,606 590,524 131,328
============ ============ ============
Income taxes, net of refunds $ 2,376,805 1,690,040 1,835,734
============ ============ ============
</TABLE>
Non-cash Investing and Financing Activities:
During 1994, 127,720 shares of the Company's Common Stock, with an aggregate
market value of $731,250 were issued in connection with the purchase of certain
assets of Brannon & Tully(R).
During 1996 and 1995, the Company entered into capital leases for software and
office equipment in the amounts of $556,967 and $524,909, respectively.
See accompanying notes to consolidated financial statements.
11
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(1) Description of Business
Uniforce Services, Inc., together with its subsidiaries (the "Company"),
provides supplemental personnel services to businesses, educational
institutions, professional and service organizations, federal, state and
local governmental agencies and others in the United States. The Company
has selected specialized product lines within several of its licensed and
company owned offices to provide skilled Information Services ("IS")
professional employees, office automation specialists and medical office
support. The Company also supplies financial, payroll and billing support
services to independent supplemental staffing services. In addition,
subsidiaries of the Company provide temporary laboratory staffing support
to the scientific community; and provide confidential employee conversion
and consulting services which enable client companies to utilize the
services of former independent contractors and consultants. One of the
Company's customers represented 10.2% of revenues in 1996.
(2) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of Uniforce
Services, Inc. and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
(b) Depreciation and Amortization
Depreciation and amortization of fixed assets is computed on a
straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized over the lesser of their
estimated useful lives or the respective lease periods.
Intangible assets, which include covenants not to compete and
territorial rights acquired, are being amortized over their estimated
useful lives ranging from five to ten years using the straight-line
method. The unamortized balance is included in deferred costs and
other assets in the accompanying consolidated balance sheets.
(c) Deferred Licensee Acquisition Costs
The Company has executed contracts for affiliation with existing
supplemental staffing service companies. Such contracts require the
Company to pay an affiliation fee which is amortized on a
straight-line method over the minimum terms of the affiliation
agreements which are generally five or ten years. In addition, the
Company has paid similar fees for existing supplemental staffing
service companies acquired by the Company's licensees. Under these
arrangements, the Company has agreed to pay, on behalf of its
licensees, one-half of the acquisition cost. Such costs are amortized
on a straight-line basis over five or ten years. Amortization of
deferred licensee acquisition costs amounted to $121,796, $129,530 and
$183,649 in 1996, 1995 and 1994, respectively.
(d) Income Taxes
The Company accounts for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No.
109 "Accounting for Income Taxes." SFAS 109 provides that income taxes
be accounted for using the asset and liability method which requires
the recognition of deferred income taxes for temporary differences
between the financial reporting basis and tax basis of assets and
liabilities.
12
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(e) Earnings Per Share
Earnings per share amounts are determined using the weighted average
number of common shares and dilutive common share equivalents
(options) outstanding.
(f) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(g) Financial Instruments
The fair values of all financial instruments classified as current
assets or liabilities approximate their respective carrying values
because of the short maturity of those instruments. The fair value of
the Company's loans approximates book value since the interest rates
are variable and accordingly are adjusted for market rate
fluctuations.
(h) Long-Lived Assets
In March 1995, SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," was
issued. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used or disposed of by an
entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable measured by comparing the carrying amount of an asset to
the future net cash flows expected to be generated by the asset.
During 1996, the Company adopted SFAS No. 121 and determined that no
impairment loss need be recognized for applicable assets and thus, it
did not have a material impact on the Company's financial position or
results of operations.
(i) Accounting for Stock-Based Compensation
The Company records compensation expense for stock options only if the
current market price of the underlying stock exceeds the exercise
price on the date of the grant. On January 1, 1996, the Company
adopted SFAS No. 123, "Accounting for Stock-Based Compensation." The
Company has elected not to implement the fair value based accounting
method for stock options, but has elected to disclose the pro forma
net earnings and pro forma earnings per share for employee and
director stock option and warrant grants made beginning in 1995 as if
such method had been used to account for stock-based compensation cost
as described in SFAS No. 123.
(j) Reclassifications
Certain reclassifications have been made to the 1994 financial
statements to conform to the 1995 and 1996 presentation.
(3) Acquisitions
On May 17, 1996, the Company acquired certain assets of Montare
International, a provider of Information Technology ("IT") contract
professionals. The purchase price was $3,600,000 in cash. Pursuant to a
separate agreement, the Company also acquired certain accounts receivable
for $844,487. The purchase price and the accounts receivable acquired were
financed through borrowings available under the Company's credit facility.
13
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
This acquisition has been accounted for as a purchase and accordingly, the
purchase price was allocated to assets based on the estimated fair value as of
the date of the acquisition. The excess of the consideration paid over the
estimated fair value of assets acquired in the amount of $3,158,022 has been
recorded as cost in excess of fair value of net assets acquired (goodwill) and
is being amortized over 20 years on the straight-line method. The Company
assesses the recoverability of unamortized goodwill using the undiscounted
projected future earnings from the related businesses. The operating results of
Montare International have been included in the consolidated statement of
earnings from the purchase date. The acquisition of Montare did not have a
material impact on the Company's results of operations.
On April 18, 1994, the Company acquired certain assets of Brannon & Tully, a
provider of IS contract professionals. The purchase price totaled $3,881,250 and
consisted of $3,150,000 in cash and the issuance of 127,720 shares of Common
Stock of the Company. Pursuant to a separate agreement, the Company also
acquired certain accounts receivable, with recourse, for $1,301,595. The cash
portion of the purchase price and the accounts receivable acquired were financed
through borrowings available under the Company's credit facility.
This acquisition has been accounted for as a purchase and accordingly, the
purchase price was allocated to assets based on the estimated fair value as of
the date of the acquisition. The excess of the consideration paid over the
estimated fair value of assets acquired in the amount of $3,781,925 has been
recorded as cost in excess of fair value of net assets acquired (goodwill) and
is being amortized over 20 years on the straight-line method.
The operating results of Brannon & Tully have been included in the consolidated
statements of earnings from the purchase date. The following unaudited pro forma
consolidated results of operations assume the acquisition of Brannon & Tully
occurred on January 1, 1994:
December 31,
1994
------------
Revenues $118,826,683
Net earnings 3,181,632
Earnings per share $ .69
============
The pro forma results of operations are not necessarily indicative of the actual
results of operations that would have occurred had the acquisition occurred at
the beginning of the period or of results which may occur in the future.
One of the former principals of Brannon & Tully entered into an employment
agreement with the Company. His employment agreement was for a term of five
years, but could be terminated by either party at any time after one year, upon
not less than 90 days notice. Beginning in 1995, the employment agreement
provided for incentive compensation based upon improvements in gross profits
relating to certain offices to which the officer rendered employment services
and provided active assistance. The amount of incentive compensation earned in
1995 under the agreement was $370,172. The employment agreement was terminated
during 1995.
14
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Fixed Assets
Fixed assets are stated at cost as follows:
<TABLE>
<CAPTION>
Dec. 31, Dec. 31, Estimated
1996 1995 useful life
---------- ---------- -----------
<S> <C> <C> <C>
Computer equipment $2,461,249 $2,050,173 8 years
Computer software 1,451,319 670,605 3-5 years
Furniture, fixtures, office
equipment and other 1,545,706 1,480,125 5-15 years
Leasehold improvements & signs 534,878 488,099 Life of lease
---------- ----------
5,993,152 4,689,002
Less accumulated depreciation and
amortization 2,217,491 2,563,589
---------- ----------
$3,775,661 $2,125,413
========== ==========
</TABLE>
Depreciation and amortization expense on fixed assets amounted to $403,952,
$364,025 and $291,751 for the years ended December 31, 1996, 1995 and 1994,
respectively.
15
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) Loan Payable
On December 8, 1995, the Company entered into an agreement with a financial
institution creating a three-year $35,000,000 credit facility (the "Credit
Facility"). The Credit Facility comprises a term loan in the amount of
$3,000,000 (the "Term Loan") to be paid in monthly installments of $62,500
in 1996, $83,333 in 1997 and $104,167 in 1998, with the balance outstanding
due on December 1, 1998 and a $32,000,000 revolving credit facility (the
"Revolving Facility") which expires on December 1, 1998. The Company may
borrow against the Revolving Facility up to 85% of eligible accounts
receivable and eligible service and funding fees receivable. The Term Loan
bears interest at the Company's election at either the lender's floating
base rate plus .25%, or LIBOR (London Interbank Offered Rate) plus 2.25%.
Borrowings under the Revolving Facility bear interest at the Company's
election at either the lender's floating base rate, or LIBOR plus 2.125%.
Borrowings under the Credit Facility are secured by a first priority
security interest in all owned and after-acquired real and personal
property of the Company.
At December 31, 1996, the Company had outstanding borrowings of $2,250,000
under the Term Loan bearing interest at an average rate of 7.8% and
$24,500,000 of borrowings under the Revolving Facility bearing interest at
an average rate of 7.7%.
The Credit Facility contains a variety of affirmative and negative
covenants of types customary in an asset-based lending facility including,
among other things, minimum net worth and profitability levels, with which
the Company is in compliance as of December 31, 1996.
The Credit Facility was used to repay existing indebtedness as described
below and to finance the offer to purchase the Company's Common Stock in
January 1996 as described in Note 9.
Prior to December 8, 1995, the Company maintained, with two banks, a
working capital credit facility and a revolving credit and term loan
facility. The working capital credit facility represented an open line of
credit of up to $12,000,000 (increased from $10,000,000, effective in
November 1995), borrowings under which were payable on demand. Outstanding
borrowings bore interest, at the Company's option, at the banks' prime rate
or at a rate 120 basis points above the banks' LIBOR Rate. This working
capital credit facility was terminated on December 8, 1995. In addition,
the Company maintained a revolving credit and term loan agreement which
provided for a two-year $6,000,000 facility, outstanding borrowings under
which, at the Company's option, could be converted at the maturity of the
revolving credit facility into a five-year term loan. Effective November
1995, in connection with the increase in the Company's working capital
facility described above, the revolving credit and term loan agreement
(under which there were no outstanding borrowings) was terminated.
6) Income Taxes
The components of the provision for Federal and state income taxes are as
follows:
1996 1995 1994
---------- ---------- ----------
Federal:
Current $1,756,500 $1,868,000 $1,384,000
Deferred 135,500 27,000 151,000
State:
Current 282,500 282,000 216,000
Deferred 10,500 5,000 24,000
---------- ---------- ----------
$2,185,000 $2,182,000 $1,775,000
========== ========== ==========
16
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Income tax expense differed from that which would have resulted by applying the
statutory Federal income tax rates to earnings before provision for income taxes
as a result of the following items:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Expected tax on pre-tax
earnings $ 1,991,000 34.0% $ 1,953,000 34.0% $ 1,607,000 34.0%
Tax-exempt interest and
qualified dividends -- -- (5,000) (.1) (13,000) (.3)
State taxes, net of Federal
income tax benefit 193,000 3.3 189,000 3.3 158,000 3.4
Other, net 1,000 -- 45,000 .8 23,000 .5
----------- ---- ----------- ---- ----------- ----
Income tax provision $ 2,185,000 37.3% $ 2,182,000 38.0% $ 1,775,000 37.6%
=========== ==== =========== ==== =========== ====
</TABLE>
The tax effect of temporary differences which give rise to significant portions
of deferred tax assets and liabilities are as follows:
Dec. 31, 1996 Dec. 31, 1995
------------- -------------
Notes receivable, due primarily to allowances
for possible loss $ 122,960 $ 142,356
Receivables, due primarily to allowances
for doubtful accounts 104,803 212,148
Accrued expenses not currently deductible 67,140 --
Accelerated depreciation and amortization for
tax purposes (164,094) (61,240)
Other 70,340 53,885
--------- ---------
$ 201,149 $ 347,149
========= =========
(7) Employment Agreements and Transactions
The Company has employment agreements with two of its officers providing
for, among other things, their continued employment through December 31,
1997. In addition, the agreements provide for incentive compensation which
is based upon the Company's pre-tax earnings. Incentive compensation earned
in 1996, 1995 and 1994, pursuant to such agreements, was $273,592, $221,298
and $263,677, respectively.
In January 1996, the Company entered into arrangements with two of its
officers. Under such arrangements, the executive officers are entitled to
receive cash bonuses aggregating $1,041,018 payable to the extent of 10%
thereof three years after consummation of the tender offer described in
Note 9, to the extent of 30% thereof four years after consummation of the
offer and as to the balance thereof five years after consummation of the
offer, provided that the recipient is then employed by the Company. The
executive officers were granted options to purchase an aggregate of 92,535
shares of Common Stock, such options to vest in installments through
January 1999. The exercise price of such options was $11.25 per share. The
cash bonus installments and option installments are subject to acceleration
in the event of death, merger of the Company, sale of all or substantially
all of the Company's assets or a change in control of the Company.
17
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) Stock Options
During 1991, the Board of Directors of the Company approved the 1991 Stock
Option Plan (the 1991 Plan) which provides for the issuance of up to
500,000 stock options to officers and employees of the Company. Each option
granted pursuant to the 1991 Plan shall be designated at the time of grant
as either an "incentive stock option" or as a "non-qualified stock option."
In addition, the Company maintains two employee stock option plans, and a
non-qualified stock option plan for its Licensees. The plans (except for
options designated as non-qualified stock options) provide for options to
be granted at 100% of the fair market value of the Company's Common Stock
and provide that the exercise price of options may not be less than 110% of
such fair market value in the case of an employee owning 10% or more of the
voting power of the Company's stock. At the time options are granted, the
Company may impose a waiting period before options can be exercised.
Non-qualified stock options may not be granted at less than 75% of the fair
market value of the Company's Common Stock at the date of grant.
During 1991, non-qualified stock options with respect to 90,000 shares were
granted under the 1991 Plan at 75% of the fair market value of the
Company's Common Stock on the date of the grant. The grant resulted in
compensation expense of $180,000 to be allocated to current and future
periods as earned. Additional paid-in capital has been credited to the
extent of aggregate compensation earned since the grant of $103,500.
In 1995 the Stockholders of the Company approved the Directors' Stock
Option Plan (the "Directors' Plan") which permits the granting of a maximum
of 100,000 stock options to its outside Directors. The purpose of the plan
is to secure for the Company and its stockholders the benefits arising from
stock ownership by its outside Directors.
At December 31, 1996, an aggregate of 507,538 shares of common stock has
been reserved for issuance under the plans. Activity in stock options is
summarized as follows:
Outstanding Weighted average
options exercise price
------- --------------
December 31, 1993 534,575 $7.16
Options granted 41,878 11.37
Options exercised (97,650) 6.86
Options lapsed/canceled (18,800) 11.02
-------
December 31, 1994 460,003 7.45
Options granted 2,500 8.25
Options exercised (44,400) 5.86
Options lapsed/canceled (89,553) 10.74
-------
December 31, 1995 328,550 6.77
Options granted 121,035 11.31
Options exercised (118,575) 7.35
Options lapsed/canceled (500) 11.50
-------
December 31, 1996 330,510 $8.22
=======
There are 199,060 options exercisable as of December 31, 1996 at a weighted
average exercise price of $7.85.
The per share weighted average fair value of stock options granted during
1996 was $4.06 on the date of the grant using the Black Scholes
option-pricing model with the following weighted average assumptions: risk
free interest
18
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
rate of 5.3%, expected stock volatility of 50% and an expected option life
of 3.5 years. The aggregate fair value of the options granted in 1995 was
not material.
The Company applies APB Opinion No. 25 in accounting for its stock option
grants and, accordingly, no compensation cost has been recognized in the
financial statements for its stock options which have an exercise price
equal to or greater than the fair value of the stock on the date of the
grant. Had the Company determined compensation cost based on the fair value
at the grant date for its stock options under SFAS No. 123, the Company's
net earnings and earnings per share would have been reduced to the pro
forma amounts indicated below:
1996
----
Net earnings:
As reported $3,669,731
Pro forma 3,523,089
Earnings per share:
As reported $1.13
Pro forma 1.08
Pro forma net earnings reflect only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net earnings
amounts presented above because compensation cost is reflected over the
options' vesting period and compensation cost for options granted prior to
January 1, 1995 was not considered.
Optionees have made disqualifying dispositions of common stock which had
been acquired through the exercise of incentive and non-qualified stock
options. As a result of the disqualifying dispositions, the Company
receives a tax benefit for the difference between the option price and the
fair market value of its common stock. The benefit of $146,622, $100,220
and $152,124 in 1996, 1995 and 1994, respectively, has been reflected in
the accompanying consolidated statements of stockholders' equity.
(9) Tender Offer
On December 11, 1995, the Company made an offer to purchase for cash up to
1,250,000 shares of its Common Stock at $11.25 net per share (the Offer).
The 1,250,000 shares that the Company offered to purchase represented
approximately 30% of the Shares outstanding. In January 1996, the Offer was
successfully completed. The total amount required to purchase the 1,250,000
shares was $14,062,500, exclusive of related fees and other expenses. The
purchase price and related expenses were funded with available borrowings
under the Credit Facility.
(10) Commitments and Contingencies
In April 1994, various prior insurance carriers and their not-for-profit
trade association filed a civil action against the Company, its officers
and various other parties. The Plaintiffs allege breach of contract and
tort causes of action for underpayment of premiums. The Company denies the
validity of the Plaintiffs' claims. The Company has asserted substantial
claims in opposition to the Plaintiffs' claims. Additionally, the Company
and its subsidiaries have filed suit against various prior worker
compensation carriers alleging claims mismanagement. Management regards as
unlikely that the outcome of those actions will have a material adverse
effect on the financial position of the Company.
19
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
UNIFORCE SERVICES, INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
In January 1996, various vendors of training films filed an action against
the Company. The plaintiffs alleged that the Company improperly used and/or
copied plaintiffs' tapes. In 1996 the Company settled this matter.
The Company is obligated under various leases for office space and
equipment through 2006. Net rental expense for the years ended December 31,
1996, 1995 and 1994 amounted to approximately $1,100,000, $871,000 and
$734,000, respectively.
Following is a schedule of total minimum lease payments under noncancelable
operating leases as of December 31, 1996:
1997 $1,153,272
1998 1,034,708
1999 857,584
2000 562,115
2001 534,847
Thereafter 2,596,140
----------
Total minimum lease payments $6,738,666
==========
20
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
UNIFORCE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
Current assets:
Cash and cash equivalents $ 6,555,275
Accounts receivable - net 20,677,331
Funding and service fees receivable - net 25,845,143
Prepaid expenses and other current assets 802,412
Deferred income taxes 201,149
------------
Total current assets 54,081,310
------------
Fixed assets - net 4,336,002
Deferred costs and other assets - net 1,252,509
Cost in excess of fair value of net assets acquired 6,122,188
------------
$ 65,792,009
============
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
Current liabilities:
Loan payable $ 2,000,000
Payroll and related taxes payable 7,220,332
Payable to licensees and clients 1,273,888
Income taxes payable 485,147
Accrued expenses and other liabilities 2,705,757
------------
Total current liabilities 13,685,124
------------
Loan payable - non-current 34,097,655
Capital lease obligation - non-current 577,175
Stockholders' equity:
Common stock $.01 par value 51,228
Additional paid-in capital 9,027,840
Retained earnings 30,303,581
------------
39,382,649
Treasury stock, at cost, 2,084,245 shares (21,950,594)
------------
Total stockholders' equity 17,432,055
------------
$ 65,792,009
============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
21
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
UNIFORCE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
Nine Months Ended
September 30,
-------------------------------
1997 1996
------------- -------------
Sales of supplemental staffing services $ 127,265,243 $ 97,804,122
Service revenues and fees 5,687,806 5,589,180
------------- -------------
Total revenues 132,953,049 103,393,302
------------- -------------
Costs and expenses:
Cost of supplemental staffing services 100,783,201 76,214,231
Licensees' share of gross margin 6,665,450 5,832,735
General and administrative 17,100,195 14,556,306
Merger transaction costs 225,000 --
Depreciation & amortization 952,779 783,419
------------- -------------
Total costs and expenses 125,726,625 97,386,691
------------- -------------
Earnings from operations 7,226,424 6,006,611
Other income (expense):
Interest - net (1,829,458) (1,563,728)
Other - net 9,170 18,954
------------- -------------
Earnings before provision for income taxes 5,406,136 4,461,837
Provision for income taxes 2,126,000 1,695,000
------------- -------------
NET EARNINGS $ 3,280,136 $ 2,766,837
============= =============
Weighted average number of shares outstanding:
Primary 3,231,505 3,273,265
Fully Diluted 3,286,096 3,293,492
NET EARNINGS PER SHARE:
Primary $ 1.02 $ .85
============= =============
Fully Diluted $ 1.00 $ .84
============= =============
See accompanying notes to consolidated condensed financial statements.
22
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
UNIFORCE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,280,136 $ 2,766,837
Adjustments to reconcile net earnings to net cash (used)
by operating activities:
Depreciation and amortization 952,779 783,419
(Increase) in receivables and prepaid expenses (9,542,167) (4,480,953)
Stock option compensation expense 13,500 13,500
(Decrease) in liabilities (1,424,021) (89,907)
------------ ------------
Net cash (used) by operating activities (6,719,773) (1,007,104)
------------ ------------
Cash flows from investing activities:
Purchases of fixed assets (1,084,964) (774,916)
(Increase) in deferred costs and other assets (31,906) (410,786)
Net assets acquired from Montare -- (4,628,142)
------------ ------------
Net cash (used) by investing activities (1,116,870) (5,813,844)
------------ ------------
Cash flows from financing activities:
Principal payments on capital lease obligations (155,483) (195,934)
Increase in loan payable 9,347,655 17,450,609
Cash dividends paid (273,018) (272,605)
Purchase of treasury stock -- (14,280,863)
Proceeds from issuance of common stock 189,342 1,034,716
------------ ------------
Net cash provided by financing activities 9,108,496 3,735,923
------------ ------------
Net increase (decrease) in cash and cash equivalents 1,271,853 (3,085,025)
Cash and cash equivalents at beginning of period 5,283,422 6,444,859
------------ ------------
Cash and cash equivalents at end of period $ 6,555,275 $ 3,359,834
============ ============
Supplemental disclosures:
Cash paid for:
Interest $ 1,666,718 $ 1,310,366
------------ ------------
Income taxes $ 1,433,048 $ 1,601,379
------------ ------------
</TABLE>
Non-cash financing activities:
During 1996, the Company entered into capital leases in the amount of $551,405.
See accompanying notes to consolidated condensed financial statements.
23
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
UNIFORCE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Principles of consolidation
The consolidated financial statements include the accounts of Uniforce
Services, Inc. and its wholly-owned subsidiaries ("Uniforce"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
2. Consolidated condensed financial statements
The consolidated condensed financial statements, as shown in the
accompanying index, have been prepared by Uniforce without audit. In the opinion
of management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows at September 30, 1997, and for all periods presented have been made.
Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed, reclassified or omitted. It is suggested that
these consolidated condensed financial statements be read in conjunction with
the consolidated financial statements and notes thereto included in Uniforce's
December 31, 1996 financial statements. The results of operations for the
periods ended September 30, 1997 are not necessarily indicative of the operating
results which may be achieved for the full year.
Tax accruals have been made based on estimated effective annual tax rates
for the periods presented.
3. Litigation Settlement
In April 1994, various insurance carriers and their not-for-profit trade
association filed an action against Uniforce, its officers and various other
parties; in May 1996, the Plaintiffs filed their Third Amended Complaint. The
Plaintiffs alleged breach of contract and tort causes of action for underpayment
of premiums. Uniforce denied liability and asserted substantial claims in
opposition to the Plaintiffs' claims. Additionally Uniforce and its subsidiaries
filed suit against various prior workers' compensation carriers alleging claims
mismanagement. In July 1997, both matters were settled. The terms of the
settlement are confidential by agreement. The settlement did not have a material
effect on Uniforce's financial condition or operating results.
4. Agreement and Plan of Merger
On August 13, 1997, Uniforce entered into an Agreement and Plan of Merger
(the "Merger Agreement") under which it will be acquired by COMFORCE Corporation
("COMFORCE"). Pursuant to the Merger Agreement a subsidiary of COMFORCE is to
make a tender offer (the "Tender Offer") to acquire all of the issued and
outstanding common stock of Uniforce for $28.00 in cash and .5217 shares of
COMFORCE common stock for each share of Uniforce common stock. The consummation
of the Tender Offer is contingent upon a number of conditions, including
COMFORCE obtaining debt financing sufficient to complete the purchase of
Uniforce's shares. The Merger Agreement provides that after the consummation of
the Tender Offer the COMFORCE subsidiary will be merged with and into Uniforce,
with Uniforce being the surviving corporation and becoming a wholly-owned
subsidiary of
24
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
COMFORCE. On October 27, 1997 a Joint Proxy Statement/Prospectus relating to the
Merger Agreement was declared effective by the Securities and Exchange
Commission and COMFORCE commenced the Tender Offer. The Tender Offer is expected
to remain open through November 24, 1997 unless extended.
25
<PAGE>
(b) Pro forma financial information.
Included herein is the following pro forma financial information of
COMFORCE Corporation:
Unaudited Pro Forma Combined Financial Statements of COMFORCE Corporation.
Introduction
Unaudited Pro Forma Combined Balance Sheet as of September 30, 1997
Unaudited Pro Forma Combined Statement of Operations for the nine months
ended September 30, 1997
Unaudited Pro Forma Combined Statement of Operations for the nine months
ended September 30, 1996
Unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1996
Notes to Unaudited Pro Forma Combined Financial Statements
26
<PAGE>
COMFORCE Corporation and Subsidiaries
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements of COMFORCE
Corporation (the "Company") reflect (i) the treatment of the operation of the
Company's jewelry business prior to January 1, 1996 as a discontinued operation;
(ii) the acquisition of business operating in the staffing industry, including
COMFORCE Telecom, Inc. ("COMFORCE Telecom") in 1995, Williams Communications
Services, Inc. ("Williams"), RRA, Inc., Project Staffing Support Team, Inc. and
DataTech Technical Services, Inc. (collectively, "RRA"), Force Five, Inc.
("Force Five"), Continental Field Services Corp. ("Continental"), and AZATAR
Computer Systems, Inc. ("AZATAR"), completed in 1996, RHO Company Incorporated
("Rhotech"), completed in 1997, and the proposed acquisition of Uniforce
Services, Inc. ("Uniforce") as if such acquisitions had occurred on January 1,
1996 (other than the unaudited pro forma balance sheet at September 30, 1997,
which has been prepared as if all such acquisitions were consummated as of such
date) (and accounted for by the purchase method); and (iii) the financing of
$167 million of debt contemplated by this transaction as if such debt were
outstanding for all periods presented and replaced all historical financing
arrangements. Prior to its acquisition by the Company, each of these acquired
businesses operated as a separate independent entity. Since the unaudited pro
forma combined financial statements set forth below show the combined financial
condition and operating results of these recently acquired businesses during
periods when they were not under common control or management, the information
presented may not be indicative of the results which would have actually been
obtained had such acquisitions been completed on the dates indicated, or the
Company's future financial or operating results. These unaudited pro forma
combined financial statements should be read in conjunction with the financial
statements of the respective entities included therein, and the related notes
thereto.
27
<PAGE>
COMFORCE Corporation
Unaudited Pro Forma Combined Balance Sheet
as of September 30, 1997
(in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
COMFORCE Uniforce Adjustments(1) (the Company)
-------- -------- -------------- -------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents ...................................... $ 2,670 $ 6,555 $ (7,151) $ 2,074
Restricted cash and equivalents ................................ 360 -- -- 360
Accounts receivable and Service fees receivable, net ........... 26,547 46,522 -- 73,069
Prepaid expenses ............................................... 1,050 803 -- 1,853
Deferred financing fees ........................................ 1,628 -- (1,628) --
Income tax receivable .......................................... 590 -- -- 590
Deferred income taxes .......................................... 2,028 201 3,000 5,229
Other assets ................................................... 243 -- -- 243
--------- --------- --------- ---------
Total current assets ..................................... 35,116 54,081 (5,779) 83,418
--------- --------- --------- ---------
Deferred financing fees ........................................ -- 324 7,676 8,000
Property and equipment, net of accumulated
depreciation ................................................ 1,449 4,336 -- 5,785
Intangible assets, net of accumulated amortization ............. 38,722 7,051 85,614 131,387
Other assets ................................................... 452 -- -- 452
--------- --------- --------- ---------
Total assets ............................................. $ 75,739 $ 65,792 $ 87,511 $ 229,042
========= ========= ========= =========
Current liabilities:
Borrowings under revolving line of credit ...................... $ 16,488 $ 2,000 $ (14,488) $ 4,000
Current portion of capitalized lease obligations ............... -- 204 -- 204
Accounts payable ............................................... 956 1,274 -- 2,230
Accrued expenses ............................................... 5,232 2,502 -- 7,734
Accrued payroll and payroll taxes .............................. 3,337 7,220 -- 10,557
Income taxes ................................................... -- 485 -- 485
--------- --------- --------- ---------
Total current liabilities ................................ 26,013 13,685 (14,488) 25,210
--------- --------- --------- ---------
Capitalized lease obligations .................................. -- 577 -- 577
Deferred income tax ............................................ 90 -- -- 90
Long-term bank debt ............................................ 20,000 34,098 (21,098) 33,000
Notes and Senior Debentures .................................... -- -- 130,000 130,000
Other .......................................................... 690 -- -- 690
Commitments and contingencies .................................. -- -- -- --
Stockholders' equity:
Series F Senior convertible preferred stock .................... 1 -- -- 1
Common stock ................................................... 137 51 (35) 153
Additional paid-in capital ..................................... 30,485 9,028 3,113 42,626
Retained deficit, since January 1, 1996 ........................ (1,677) -- (1,628) (3,305)
Retained earnings .............................................. -- 30,304 (30,304) --
Treasury stock ................................................. -- (21,951) 21,951 --
--------- --------- --------- ---------
Total stockholders' equity ............................... 28,946 17,432 (6,903) 39,475
--------- --------- --------- ---------
Total liabilities and stockholders' equity ..................... $ 75,739 $ 65,792 $ 87,511 $ 229,042
========= ========= ========= =========
</TABLE>
See notes to unaudited pro forma combined financial statements.
28
<PAGE>
COMFORCE CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997(2)
(in thousands except per share data)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
COMFORCE Rhotech Uniforce Adjustments(3) (the Company)
-------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues ........................................ $ 145,986 $ 15,416 $ 132,953 -- $ 294,355
Cost of revenues ................................ 127,227 14,411 107,449 -- 249,087
--------- --------- --------- --------- ---------
Gross profit ................................. 18,759 1,005 25,504 -- 45,268
Operating expenses:
Selling, general and administrative .......... 11,842 1,524 17,325 -- 30,691
Depreciation and amortization ................ 1,241 40 953 1,480 3,714
--------- --------- --------- --------- ---------
Income (loss) from operations ................... 5,676 (559) 7,226 (1,480) 10,863
Other (income) expense:
Bridge financing costs .......................... 5,822 -- -- -- 5,822
Other ........................................... (344) 384 (9) -- 31
Interest expense ................................ 2,151 207 1,829 11,091 15,278
--------- --------- --------- --------- ---------
7,629 591 1,820 11,091 21,131
--------- --------- --------- --------- ---------
Income (loss) before income taxes ............... (1,953) (1,150) 5,406 (12,571) (10,268)
Provision (credit) for income taxes ............. (646) -- 2,126 (4,721) (3,241)
--------- --------- --------- --------- ---------
Net income (loss) ............................... (1,307) $ (1,150) $ 3,280 $ (7,850) (7,027)
========= ========= =========
Dividends on preferred stock .................... 732 18
--------- ---------
Loss available for common stockholders .......... $ (2,039) $ (7,045)
========= =========
Loss per share from operations .................. $ (0.15) $ (0.45)
========= =========
Weighted average shares outstanding ............. 13,256 15,512(4)
========= =========
</TABLE>
See notes to unaudited pro forma combined financial statements.
29
<PAGE>
COMFORCE CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996(2)
(in thousands except per share data)
<TABLE>
<CAPTION>
FORCE
COMFORCE Williams RRA FIVE AZATAR Continental
-------- -------- --- ---- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues ................................... $33,514 $657 $22,799 $4,598 $5,781 $7,377
Cost of revenues ........................... 28,690 499 20,959 3,454 4,619 6,259
-------- -------- -------- -------- -------- --------
Gross profit ............................... 4,824 158 1,840 1,144 1,162 1,118
Operating expenses:
Selling, general and
administrative .......................... 2,891 64 1,375 1,274 555 802
Depreciation and
amortization ............................ 343 1 34 24 25 13
-------- -------- -------- -------- -------- --------
Income (loss) from
operations .............................. 1,590 93 431 (154) 582 303
Other expense (income) ..................... (29) -- -- -- (54) (23)
Interest expense (income) .................. 102 -- 34 7 29 5
-------- -------- -------- -------- -------- --------
73 -- 34 7 (25) (18)
-------- -------- -------- -------- -------- --------
Income (loss) before income
taxes ................................... 1,517 93 397 (161) 607 321
Provision (credit) for income
taxes ................................... 610 39 -- (49) 254 --
-------- -------- -------- -------- -------- --------
Net income (loss) .......................... 907 $54 $397 $112 $353 $321
======== ======== ======== ======== ======== ========
Less dividends on preferred
stock.................. 193
--------
Add dividends on common
stock equivalents...... 18
--------
Income (loss) available for
common stockholders.... $732
========
Income (loss) per share from
operations............. $0.06
========
Weighted average shares
outstanding............ 12,661
========
<CAPTION>
Pro Forma Pro Forma
Rhotech Uniforce MONTARE Adjustment(3) (the Company)
------- -------- ------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues .................................. $63,556 $103,393 $2,474 -- $244,149
Cost of revenues .......................... 56,656 82,047 1,671 -- 204,854
--------- --------- --------- --------- ---------
Gross profit .............................. 6,900 21,346 803 -- 39,295
Operating expenses:
Selling, general and
administrative ......................... 5,321 14,556 546 -- 27,384
Depreciation and
amortization ........................... 226 783 6 2,184 3,639
--------- --------- --------- --------- ---------
Income (loss) from
operations ............................. 1,353 6,007 251 (2,184) 8,272
Other expense (income) .................... 197 (19) (14) -- 58
Interest expense (income) ................. 984 1,564 -- 12,553 15,278
--------- --------- --------- --------- ---------
1,181 1,545 (14) 12,553 15,336
--------- --------- --------- --------- ---------
Income (loss) before income
taxes .................................. 172 4,462 265 (14,737) (7,064)
Provision (credit) for income
taxes .................................. -- 1,695 -- (4,509) (1,960)
--------- --------- --------- --------- ---------
Net income (loss) ......................... $172 $2,767 $265 $(10,228) (5,104)
========= ========= ========= ========= =========
Less dividends on preferred
stock ............................... 18(5)
---------
Add dividends on common
stock equivalents
---------
Income (loss) available for
common stockholders ................. $(5,122)
=========
Income (loss) per share from
operations .......................... $(0.40)
=========
Weighted average shares
outstanding ......................... 12,980(4)
=========
</TABLE>
See notes to unaudited pro forma combined financial statements.
30
<PAGE>
COMFORCE CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 (2)
(in thousands except per share data)
<TABLE>
<CAPTION>
FORCE
COMFORCE Williams RRA FIVE AZATAR Continental Rhotech
-------- -------- --- ---- ------ ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues ............. $55,867 $657 $22,799 $4,598 $6,403 $8,368 $85,746
Cost of revenues ..... 47,574 499 20,959 3,454 5,054 7,017 76,457
--------- --------- --------- --------- --------- --------- ---------
Gross profit ......... 8,293 158 1,840 1,144 1,349 1,351 9,289
Operating expenses:
Selling, general and
administrative .... 5,266 64 1,375 1,274 612 898 7,215
Depreciation and
amortization ...... 614 1 34 14 28 13 297
--------- --------- --------- --------- --------- --------- ---------
Income(loss) from
operations ........ 2,413 93 431 (144) 709 440 1,777
Other (income) expense (40) -- (54) (25) 260
Interest expense
(income) .......... 201 -- 34 7 29 5 1,317
--------- --------- --------- --------- --------- --------- ---------
161 -- 34 7 (25) (20) 1,577
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before
income taxes ...... 2,252 93 397 (151) 734 460 200
Provision (credit) for
income taxes ...... 900 39 -- (49) 301 -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) .... 1,352 $54 $397 $(102) $433 $460 $200
========= ========= ========= ========= ========= =========
Dividends on preferred
stock.............. 325
Accretive dividend on
Series F Preferred
Stock.............. 665
--------
Income (loss) available
for common
stockholders....... $362
========
Income (loss) per share
from operations.... $0.03
========
Weighted average
shares outstanding. 12,991
========
<CAPTION>
Pro Forma Pro Forma
Uniforce MONTARE Adjustments(3) (the Company)
-------- ------- ------------ -------------
<S> <C> <C> <C>
Revenues ............. $142,151 $2,474 -- $329,063
Cost of revenues ..... 112,663 1,671 -- 275,348
--------- --------- --------- ---------
Gross profit ......... 29,488 803 -- 53,715
Operating expenses:
Selling, general and
administrative .... 20,434 546 -- 37,684
Depreciation and
amortization ...... 1,074 6 2,769 4,850
--------- --------- --------- ---------
Income(loss) from
operations ........ 7,980 251 (2,769) 11,181
Other (income) expense (45) (14) -- 82
Interest expense
(income) .......... 2,170 -- 16,607 20,370
--------- --------- --------- ---------
2,125 (14) 16,607 20,452
--------- --------- --------- ---------
Income (loss) before
income taxes ...... 5,855 265 (19,376) (9,271)
Provision (credit) for
income taxes ...... 2,185 -- (5,937) (2,561)
--------- --------- --------- ---------
Net income (loss) .... $3,670 $265 $(13,439) $(6,710)
========= ========= ========= =========
Dividends on preferred
stock.............. $25(5)
Accretive dividend on
Series F Preferred
Stock.............. $100
---------
Income (loss) available
for common
stockholders....... $(6,835)
=========
Income (loss) per share
from operations.... $(0.51)
=========
Weighted average
shares outstanding. 13,527(4)
=========
</TABLE>
See notes to unaudited pro forma combined financial statements.
31
<PAGE>
COMFORCE Corporation
Notes to Unaudited Pro Forma Combined Financial Statements
(1) Adjustment to record the acquisition of Uniforce and related financing as
follows (based on balance sheet data as of September 30, 1997):
Source of Funds: (in thousands)
Notes ................................................... $110,000
Units ................................................... 20,000
Borrowings under New Credit Facility .................... 37,000
Existing cash balances .................................. 7,151
--------
Total Sources ................................................. $174,151
========
Use of Funds:
Refinance Existing Credit Facility ...................... $36,488
Refinance Uniforce Credit Facility ...................... 36,098
Purchase of Uniforce shares ............................. 93,565
Transaction Costs ....................................... 8,000
--------
Total Uses .................................................... $174,151
========
In addition, the Company will issue approximately 1,585,000 shares of the
Company's common stock with a value of $12,157,000, which, together with
the cash portion of the purchase price of $93,565,000, will result in
additional intangibles, principally goodwill, of approximately $85,614,000.
In addition, the Company will write off $1,628,000 of deferred financing
fees associated with Uniforce's previous financing arrangements, which
amount has not been recorded as an expense in the pro forma statement of
operations.
(2) The unaudited pro forma statements of operations include the statements of
operations for the companies listed for the periods prior to their
acquisition by COMFORCE. The unaudited pro forma statement of operations
for the period ended September 30, 1997 presents the financial statements
of COMFORCE and Uniforce for their respective 1997 nine month periods and
the results of operations for Rhotech (which was acquired on February 28,
1997 for a purchase price of $14.8 million and a contingent payout not to
exceed $3.3 million) from January 1, 1997 to February 28, 1997. The
unaudited pro forma statement of operations for the period ended September
30, 1996 presents the financial statements of COMFORCE, Uniforce (to be
acquired for a purchase price of $105.7 million), Rhotech, Force Five
(which was acquired for a purchase price of $2 million and contingent
payouts not to exceed $2 million), AZATAR (which was acquired for a
purchase price of $5.15 million and a contingent payout not to exceed $1.2
million) and Continental (which was acquired for a purchase price of $5
million and contingent payout not to exceed $1.02 million) for their
respective 1996 nine month periods and the results of operations for
companies acquired during the nine month period ended September 30, 1996 as
follows: Williams (which was acquired for a purchase price of $2 million
and a contingent payout not to exceed $2 million) (January 1 through March
3, 1996), RRA (which was acquired for a purchase price of $5.1 million and
a contingent payout not to exceed $650,000) (January 1 through May 10,
1996) and Montare International ("Montare") January 1, 1996 through May 17,
1996. Montare was acquired by Uniforce on May 17, 1996. The acquisition of
Montare did not have a material impact on Uniforce results of operations.
The unaudited pro forma statement of operations for the year ended December
31, 1996 includes the annual 1996 results of operations for COMFORCE,
Uniforce, and Rhotech and the results of operations for companies acquired
during the period as follows: Williams (January 1 through March 3, 1996),
RRA (January 1 through May 10, 1996), Force Five (January 1 through July
31, 1996), AZATAR (January 1 through November 3, 1996), Continental
(January 1 through November 17, 1996) and Montare (January 1, 1996 through
May 17, 1996). The pro forma results of operations are presented as if
these companies
32
<PAGE>
COMFORCE Corporation
Notes to Unaudited Pro Forma Combined Financial Statements (Continued)
were acquired on January 1, 1996 (and accounted for by the purchase method)
and do not purport to be an indication of the results of operations had
these acquisitions been made as of that date or of results which may occur
in the future.
(3) Pro forma adjustments include the following:
Nine Months Ended Year Ended
September 30, December 31,
----------------
1997 1996 1996
---- ---- ----
(in thousands)
Additional amortization of intangibles (a).. $(1,480) $(2,184) $(2,769)
(Increase) in interest expense (b) ......... (11,091) (12,553) (16,607)
Decrease in provision for income taxes (c).. 4,721 4,509 5,937
-------- -------- --------
Total pro forma adjustments ................ $(7,850) $(10,228) $(13,439)
======== ======== ========
(a) Amortization of intangibles assumes all of the acquisitions and
proposed acquisitions occurred on January 1, 1996. The table below reflects the
amortization of intangibles with lives ranging from 5 to 40 years, including
Uniforce goodwill amortized over 40 years:
Nine Months Ended Year ended
September 30, December 31,
-------------
1997 1996 1996
---- ---- ----
(In thousands)
Pro forma amortization:
Telecom ........................ $194 $194 $258
Williams ....................... 39 39 52
RRA ............................ 127 127 169
Force Five ..................... 39 39 52
Continental .................... 100 100 133
AZATAR ......................... 168 168 224
Rhotech ........................ 268 268 357
Uniforce ....................... 2,028 2,028 2,704
Less: historical amortization ........ (1,483) (779) (1,180)
------- ------- -------
forma adjustment ..................... $1,480 $2,184 $2,769
======= ======= =======
The allocation of excess purchase price over the fair value of the assets
acquired has not been finalized and management believes that any change to the
allocation will not have a material effect on the pro forma financial statements
of COMFORCE.
(b) The pro forma adjustment to interest expense reflects interest expense
on the placement of the Notes and Senior Debentures, borrowings under the New
Credit Facility and capital lease obligations aggregating $167.8 million. Pro
forma interest expense has been calculated using interest rates of 8.25%, 12.0%
and 15% per annum for the New Credit Facility, Notes and Senior Debentures,
respectively plus the amortization of debt financing costs. Financing costs do
not include the effects of the warrants.
33
<PAGE>
COMFORCE Corporation
Notes to Unaudited Pro Forma Combined Financial Statements (Continued)
(c) The pro forma adjustment for income taxes reflects the tax effect of
the proforma adjustments (excluding non-deductible amortization), the tax effect
of S Corporation earnings treated as C Corporation earnings and the tax benefit
of losses by other entities within the pro forma combined group.
(4) Pro forma weighted average shares outstanding are calculated as follows:
<TABLE>
<CAPTION>
Nine months ended Year ended
September 30, December 31,
-------------
1997 1996 1996
---- ---- ----
(In thousands of shares)
<S> <C> <C> <C>
Historical weighted average shares outstanding ..................... 13,256 12,661 12,991
Shares issued-Uniforce acquisition ................................. 1,585 1,585 1,585
Shares issued as compensation ...................................... * * *
Shares issued-Telecom acquisition .................................. * * *
Shares issued-Force Five acquisition ............................... * * *
Shares issued-AZATAR acquisition ................................... * 243 *
Shares issued-Continental acquisition .............................. * 37 *
Common stock sold to fund Continental acquisition .................. * 460 *
Common stock equivalents Series D and E preferred stock ............ 671 1,107 893
Common stock equivalents on Series F preferred stock ............... ** ** **
Warrants issued in connection with the Continental acquisition ..... ** ** **
Warrants issued in connection with the Telecom acquisition ......... ** ** **
Shares issued to certain shareholders .............................. * ** **
Common stock equivalents which have become anti-dilutive ........... ** (3,113) (1,942)
Contingent shares .................................................. ** ** **
------ ------ ------
Total Pro Forma Shares ........................................... 15,512 12,980 13,527
====== ====== ======
</TABLE>
- ----------
* Included in historical weighted average shares outstanding.
** Excluded as the effect would be anti-dilutive.
(5) Pro forma dividends for all periods presented represent dividends and
accretive dividends on $500,000 of Series F preferred stock remaining
outstanding as of September 30, 1997 and deemed outstanding for all periods
presented. Proceeds from this transaction of $167 million have been deemed
to be fully outstanding on a pro forma basis for all periods presented.
Accordingly, Series D preferred stock, the proceeds of which were utilized
for working capital purposes, and Series E preferred stock, the proceeds of
which were utilized to acquire RRA, have been deemed to have been converted
to common stock effective January 1, 1996, with the effects of such common
shares included in weighted average shares outstanding for all periods
presented.
34
<PAGE>
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated as of August 13, 1997, by and
among COMFORCE Corporation, COMFORCE Columbus, Inc. and Uniforce
Services, Inc. (included as Appendix A in the Registration Statement
on Form S-4 of COMFORCE Corporation, Registration No. 333-35451,
originally filed with the Commission on September 11, 1997, and
incorporated herein by reference).
99.1 Loan and Security Agreement dated as of November 26, 1997 among
COMFORCE Corporation and specified subsidiaries thereof and Heller
Financial, Inc., as lender and agent for other lenders.
99.2 Indenture dated as of November 26, 1997 with respect to 12% Senior
Notes due 2007 between COMFORCE Operating, Inc., as issuer, and
Wilmington Trust Company, as trustee.
99.3 Indenture dated as of November 26, 1997 with respect to 15% Senior
Secured PIK Debentures due 2009 between COMFORCE Corporation, as
issuer, and The Bank of New York, as trustee.
35
<PAGE>
SIGNATURE
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 hereunto duly authorized.
COMFORCE Corporation
(Registrant)
By /s/ Andrew Reiben
----------------------------------
Andrew Reiben, Vice President of Finance
Dated: December 5, 1997
36
Exhibit 99.1
LOAN AND SECURITY AGREEMENT
DATED AS OF NOVEMBER 26, 1997
among
COMFORCE CORPORATION,
COMFORCE OPERATING, INC.,
as Guarantor,
COMFORCE COLUMBUS, INC.,
as Guarantor,
UNIFORCE SERVICES, INC.,
as Guarantor,
RHOTECH ACQUISITION CORP.,
as Guarantor,
THE DIRECT AND INDIRECT SUBSIDIARIES OF SUCH GUARANTORS NAMED
HEREIN,
as Borrowers and Guarantors,
THE LENDERS NAMED HEREIN,
as Lenders
and
HELLER FINANCIAL, INC.,
as Agent and as Lender
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS.....................................................2
1.1 Certain Defined Terms.....................................2
1.2 Accounting Terms.........................................17
1.3 Other Definitional Provisions............................18
SECTION 2. LOANS AND COLLATERAL...........................................18
2.1 Loans....................................................18
(A) Revolving Loan..................................18
(B) Eligible Accounts...............................19
(C) Borrowing Mechanics.............................21
(D) Notes...........................................22
(E) Evidence of Revolving Loan Obligations..........22
(F) Letters of Credit...............................22
(1) Maximum Amount.........................22
(2) Reimbursement..........................22
(3) Conditions of Issuance.................23
(4) Request for Letters of Credit..........23
(G) Other Letter of Credit Provisions...............23
(1) Obligations Absolute...................23
(2) Nature of Lender's Duties..............24
(3) Liability..............................24
(H) Appointment of Borrower Representative..........25
2.2 Interest.................................................25
(A) Rate of Interest................................25
(B) Interest Periods................................25
(C) Computation and Payment of Interest.............26
(D) Interest Laws...................................26
(E) Conversion or Continuation......................27
2.3 Fees.....................................................28
(A) Unused Line Fee.................................28
(B) Letter of Credit Fees...........................28
(C) Audit Fees......................................28
(D) Other Fees and Expenses.........................28
2.4 Payments and Prepayments.................................28
(A) Manner and Time of Payment......................28
(B) Mandatory Prepayments...........................29
(1) Overadvance............................29
(2) Proceeds of Asset Dispositions.........29
(C) Voluntary Prepayments and Repayments............29
(D) Payments on Business Days.......................30
2.5 Term of this Agreement...................................30
2.6 Statements...............................................30
i
<PAGE>
2.7 Grant of Security Interest................................30
2.8 Capital Adequacy and Other Adjustments....................31
2.9 Taxes.....................................................31
(A) No Deductions....................................31
(B) Changes in Tax Laws..............................31
(C) Foreign Lenders..................................32
2.10 Required Termination and Prepayment.......................33
2.11 Optional Prepayment/Replacement of Agent or
Lenders in Respect of IncreasedCosts......................33
2.12 Compensation..............................................33
2.13 Booking of LIBOR Loans....................................34
2.14 Assumptions Concerning Funding of LIBOR Loans.............34
2.15 Fanning Cash Pledge Agreement.............................34
SECTION 3. CONDITIONS TO LOANS....................................34
3.1 Conditions to Loans.......................................34
(A) Closing Deliveries...............................34
(B) Security Interests...............................34
(C) Closing Date Availability........................35
(D) Representations and Warranties...................35
(E) Fees.............................................35
(F) No Default.......................................35
(G) Performance of Agreements........................35
(H) No Prohibition...................................35
(I) No Litigation....................................35
(J) Consummation of the Uniforce Acquisition. ......35
(K) Uniforce Acquisition Documents. ................36
3.2 Additional Conditions to Loans to Fund
Permitted Acquisitions....................................36
4.1 Organization, Powers, Capitalization......................36
(A) Organization and Powers..........................36
(B) Capitalization...................................36
4.2 Authorization of Borrowing, No Conflict...................37
4.3 Financial Condition.......................................37
4.4 Indebtedness and Liabilities..............................38
4.5 Account Warranties........................................38
4.6 Names.....................................................38
4.7 Locations; FEIN...........................................38
4.8 Title to Properties; Liens................................38
4.9 Litigation; Adverse Facts.................................38
4.10 Payment of Taxes..........................................39
4.11 Performance of Agreements.................................39
4.12 Employee Benefit Plans....................................39
4.13 Intellectual Property.....................................39
4.14 Broker's Fees.............................................39
4.15 Environmental Compliance..................................39
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4.16 Solvency..................................................39
4.17 Disclosure................................................40
4.18 Insurance.................................................40
4.19 Compliance with Laws......................................40
4.20 Bank Accounts.............................................40
4.21 Subsidiaries..............................................40
4.22 Employee Matters..........................................41
4.23 Governmental Regulation...................................41
4.24 Uniforce Acquisition. ...................................41
4.25 Amendments to Schedules. ................................41
SECTION 5. AFFIRMATIVE COVENANTS...........................................41
5.1 Financial Statements and Other Reports....................41
(A) Monthly Financials...............................42
(B) Quarterly Financials.............................42
(C) Year-End Financials..............................42
(D) Accountants' Certification and Reports...........43
(E) Compliance Certificate...........................43
(F) Borrowing Base Certificates, Registers
and Journals.....................................43
(G) Reconciliation Reports and Listings and Agings...44
(H) Management Report................................44
(I) Government Notices...............................44
(J) Events of Default, etc...........................44
(K) Trade Names......................................44
(L) Locations........................................45
(M) Bank Accounts....................................45
(N) Litigation.......................................45
(O) Projections......................................45
(P) Other Indebtedness Notices.......................45
(Q) Other Information................................45
(R) Opening Balance Sheet............................45
(S) Public Filings...................................45
5.2 Access to Accountants and Management......................46
5.3 Inspection................................................46
5.4 Collateral Records........................................46
5.5 Account Covenants; Verification...........................46
5.6 Collection of Accounts and Payments; Cash Management
Arrangements..............................................46
5.7 Endorsement...............................................47
5.8 Corporate Existence.......................................47
5.9 Payment of Taxes..........................................48
5.10 Maintenance of Properties; Insurance......................48
5.11 Compliance with Laws......................................48
5.12 Further Assurances........................................48
5.13 Collateral Locations......................................49
5.14 Instruments; Chattel Paper................................49
5.15 Account Agreements........................................49
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5.16 Use of Proceeds and Margin Security........................49
SECTION 6. FINANCIAL COVENANTS..............................................49
6.1 Minimum EBITDA.............................................50
6.2 Fixed Charge Coverage......................................51
SECTION 7. NEGATIVE COVENANTS...............................................51
7.1 Indebtedness and Liabilities...............................51
7.2 Guaranties.................................................52
7.3 Transfers, Liens and Related Matters.......................52
(A) Transfers.........................................52
(B) Liens.............................................52
(C) No Negative Pledges...............................52
(D) No Restrictions on Subsidiary Distributions to
any Holding Party or any Borrower.................53
7.4 Investments and Loans......................................53
7.5 Restricted Junior Payments.................................53
7.6 Restriction on Fundamental Changes.........................54
7.7 Transactions with Affiliates...............................56
7.8 Environmental Liabilities..................................56
7.9 Conduct of Business........................................57
7.10 Compliance with ERISA......................................57
7.11 Tax Consolidations.........................................57
7.12 Subsidiaries...............................................57
7.13 Fiscal Year................................................57
7.14 Press Release; Public Offering Materials...................57
7.15 Bank Accounts..............................................57
7.16 Changes Relating to Senior Notes and Senior PIK Notes......57
SECTION 8. DEFAULT, RIGHTS AND REMEDIES.....................................58
8.1 Event of Default...........................................58
(A) Payment...........................................58
(B) Default in Other Agreements.......................58
(C) Breach of Certain Provisions......................58
(D) Breach of Warranty................................58
(E) Other Defaults Under Loan Documents...............58
(F) Change in Control.................................58
(G) Involuntary Bankruptcy; Appointment of
Receiver, etc.....................................59
(H) Voluntary Bankruptcy; Appointment of
Receiver, etc.....................................59
(I) Liens.............................................59
(J) Judgment and Attachments..........................59
(K) Dissolution.......................................59
(L) Solvency..........................................60
(M) Injunction........................................60
(N) Invalidity of Loan Documents......................60
(O) Failure of Security...............................60
(P) Damage, Strike, Casualty..........................60
(Q) Licenses and Permits..............................60
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(R) Forfeiture......................................60
(S) CC or COI Activities. .........................60
(T) Inactive Subsidiaries' Activities. .............61
8.2 Suspension of Commitments................................61
8.3 Acceleration.............................................61
8.4 Remedies.................................................61
8.5 Appointment of Attorney-in-Fact..........................62
8.6 Limitation on Duty of Agent with Respect to Collateral...62
8.7 Application of Proceeds..................................62
8.8 License of Intellectual Property.........................63
8.9 Waivers, Non-Exclusive Remedies..........................63
SECTION 9. ASSIGNMENT AND PARTICIPATION...................................63
9.1 Assignments and Participations in Loans..................63
9.2 Agent....................................................64
(A) Appointment.....................................64
(B) Nature of Duties................................65
(C) Rights, Exculpation, Etc........................65
(D) Reliance........................................66
(E) Indemnification.................................66
(F) Heller Individually.............................66
(G) Successor Agent.................................66
(1) Resignation............................66
(2) Appointment of Successor...............67
(3) Successor Agent........................67
(H) Collateral Matters..............................67
(1) Release of Collateral..................67
(2) Confirmation of Authority; Execution
of Releases...........................67
(3) Absence of Duty........................68
(I) Agency for Perfection...........................68
(J) Exercise of Remedies............................68
9.3 Consents.................................................68
9.4 Set Off and Sharing of Payments..........................69
9.5 Disbursement of Funds....................................69
9.6 Settlements, Payments and Information....................70
(A) Revolving Advances and Payments; Fee Payments...70
(B) Availability of Lender's Pro Rata Share.........70
(C) Return of Payments..............................71
9.7 Dissemination of Information.............................72
9.8 Discretionary Advances...................................72
SECTION 10. MISCELLANEOUS.................................................72
10.1 Expenses and Attorneys' Fees.............................72
10.2 Indemnity................................................73
10.3 Amendments and Waivers...................................73
10.4 Notices..................................................74
10.5 Survival of Warranties and Certain Agreements............75
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10.6 Indulgence Not Waiver.....................................75
10.7 Marshaling; Payments Set Aside............................75
10.8 Entire Agreement..........................................76
10.9 Independence of Covenants.................................76
10.10 Severability..............................................76
10.11 Lenders' Obligations Several; Independent Nature of
Lenders' Rights...........................................76
10.12 Headings..................................................76
10.13 APPLICABLE LAW............................................76
10.14 Successors and Assigns....................................77
10.15 No Fiduciary Relationship; Limitation of Liabilities......77
10.16 CONSENT TO JURISDICTION...................................77
10.17 WAIVER OF JURY TRIAL......................................77
10.18 Construction..............................................78
10.19 Counterparts; Effectiveness...............................78
10.20 No Duty...................................................78
10.21 Confidentiality...........................................78
SECTION 11. GUARANTIES.....................................................79
11.1 Guaranty..................................................79
11.2 Contribution with Respect to Guaranty Obligations.........79
11.3 Obligations Absolute. ...................................80
11.4 WAIVER....................................................80
11.5 Recovery..................................................81
11.6 Liability Cumulative......................................81
vi
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LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is dated as of November 26, 1997, and
entered into among:
COMFORCE CORPORATION, a Delaware corporation ("CC"),
COMFORCE OPERATING, INC., a Delaware corporation ("COI"),
COMFORCE COLUMBUS, INC., a New York corporation ("CCI"),
RHO ACQUISITION COMPANY, a Delaware corporation,
UNIFORCE SERVICES, INC., a New York corporation ("USI"),
(each a "Holding Party" and, collectively, "Holding Parties");
BRENTWOOD SERVICE GROUP, INC., a New York corporation ("Brentwood"),
COMFORCE INFORMATION TECHNOLOGIES, INC., a Delaware corporation,
COMFORCE IT ACQUISITION CORP., a Delaware corporation,
COMFORCE TECHNICAL SERVICES, INC., a Delaware corporation,
COMFORCE TELECOM, INC., a Delaware corporation,
COMPUTER CONSULTANTS FUNDING & SUPPORT, INC., a New York corporation,
FORCE FIVE, INC., a Texas corporation,
LABFORCE OF AMERICA, INC., a New York corporation,
PROFESSIONAL STAFFING FUNDING & SUPPORT, INC., a New York corporation,
PROJECT STAFFING SUPPORT TEAM, INC., an Arizona corporation,
PRO N.E., INC., a New York corporation,
PRO UNLIMITED, INC., a New York corporation,
RHO COMPANY INCORPORATED, a Washington corporation,
TEMPORARY HELP INDUSTRY SERVICING COMPANY, INC., a New York corporation
("THISCO"),
UNIFORCE INFORMATION SERVICES OF TEXAS, INC., a New York corporation,
UNIFORCE MIS SERVICES OF GEORGIA, INC., a Georgia corporation,
UNIFORCE PAYROLLING SERVICES, INC., a New York corporation,
UNIFORCE STAFFING SERVICES, INC., a New York corporation,
USSI-NE CORP., a New York corporation,
UTS OF DELAWARE, INC., a Delaware corporation,
(each a "Borrower" and, collectively, "Borrowers");
BRANNON & TULLY, INC., a Georgia corporation,
E.O. OPERATIONS CORP., a New York corporation,
E.O. SERVICING CO., INC., a New York corporation,
MONTARE INTERNATIONAL, INC., a Texas corporation,
STAFFING INDUSTRY FUNDING & SUPPORT, INC., a New York corporation,
SUMTEC CORPORATION, a Delaware corporation,
TEMPFUNDS INTERNATIONAL, INC., a New York corporation,
THISCO OF CANADA, INC., a New York corporation,
UNIFORCE INFORMATION SERVICES, INC., a New York corporation,
UNIFORCE MEDICAL OFFICE SUPPORT, INC., a New York corporation,
USI INC. OF CALIFORNIA, a California corporation,
corporation,
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UTS CORP. OF MINNESOTA, a Minnesota corporation,
(each an "Inactive Subsidiary" and, collectively, "Inactive Subsidiaries");
The financial institution(s) listed on the signature pages hereof and their
respective successors and assigns (each a "Lender" and, collectively,
"Lenders"); and
HELLER FINANCIAL, INC., a Delaware corporation (in its individual capacity,
"Heller"), with offices at 500 West Monroe, Chicago, Illinois 60661, for itself
as a Lender and as Agent.
WHEREAS, all capitalized terms used herein are defined in Section 1 of this
Agreement;
WHEREAS, Holding Parties and Borrowers desire that Lenders extend a credit
facility to Borrowers to refinance certain indebtedness of Holding Parties and
Borrowers, to provide working capital financing and to provide funds for
Permitted Acquisitions (other than the Uniforce Acquisition) and other general
corporate purposes; and
WHEREAS, Borrowers desire to secure their obligations under the Loan
Documents by granting to Agent, for the benefit of Lenders, a security interest
in and lien upon certain of their property; and
WHEREAS, Holding Parties (other than CC), all Borrowers and all Inactive
Subsidiaries (each referred to herein individually as a "Corporate Guarantor"
and collectively as "Corporate Guarantors") are willing to guaranty all of the
obligations of Borrowers to Agent and Lenders under the Loan Documents and to
grant to Agent, for benefit of Lenders, a security interest in and lien upon
certain property of the Corporate Guarantors to secure such guaranties;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Holding Parties, Borrowers, the
Corporate Guarantors, Agent and Lenders agree as follows:
SECTION 1. DEFINITIONS
1.1 Certain Defined Terms. The following terms used in this Agreement shall
have the following meanings:
"Account Agreements" means all agreements pursuant to which Purchased
Accounts are purchased or Service Fee Accounts are generated.
"Accounts" means all "accounts" (as defined in the UCC), accounts
receivable, contract rights and general intangibles relating thereto, notes,
drafts and other forms of obligations owed to or owned by any Borrower arising
or resulting from the sale of goods or the rendering of services.
2
<PAGE>
"Account Seller" means, in the case of any Purchased Account, the Person
from whom such Purchased Account was purchased and, in the case of any Service
Fee Account, means the independent supplemental staffing firm which provided the
services creating such Service Fee Account.
"Acquisition Costs" means the price, cost and expenses payable in
connection with a Permitted Acquisition (including all transaction costs and all
Indebtedness, liabilities and contingent obligations incurred or assumed in
connection therewith).
"Adjustment Date" means, beginning on March 1, 1999, the first day of each
March, June, September or December next succeeding the date on which Agent
received the financial statements required to be delivered pursuant to
subsection 5.1(B) for the most recently completed Fiscal Quarter, together with
the Compliance Certificate and the Applicable Margin Report required to be
delivered pursuant to subsection 5.1(E) with such financial statement; provided
that if CC shall on or prior to September 30, 1998 consummate an offering for
cash of its common stock, or options, warrants or rights with respect to its
common stock, and shall concurrently apply the cash proceeds of such transaction
(less discounts and expenses related thereto) to the reduction of outstanding
Indebtedness of CC, COI or any Borrower, then the first Adjustment Date shall be
the first to occur of the first day of June, September or December of 1998
immediately following the later of (i) May 31, 1998 or (ii) the date of
consummation of such offering, provided that the Agent shall have received
financial statements for the Fiscal Quarter in which such consummation occurred
that are required to be delivered pursuant to subsection 5.1(B), together with
the Compliance Certificate and Applicable Margin Report required to be delivered
pursuant to subsection 5.1(E) with such financial statements; and, provided
further, that if the occurrence of the first Adjustment Date pursuant to the
terms of the preceding proviso would result in a higher Applicable Base Rate
Margin or Applicable LIBOR Margin than was in effect immediately prior thereto,
then, notwithstanding the definitions thereof set forth below, the Applicable
Base Rate Margin or Applicable LIBOR Margin shall remain in effect (it being
understood and agreed that, in the event of the applicability of the preceding
proviso, the first Adjustment Date on which the Applicable Base Rate Margin or
the Applicable LIBOR Margin may be increased, is March 1, 1999).
"Affected Lender" has the meaning assigned to such term in subsection 2.11.
"Affiliate" means any Person (other than Agent or Lender): (a) directly or
indirectly controlling, controlled by, or under common control with, any Loan
Party; (b) directly or indirectly owning or holding five percent (5%) or more of
any equity interest in any Holding Party or any Borrower; (c) five percent (5%)
or more of whose stock or other equity interest having ordinary voting power for
the election of directors or the power to direct or cause the direction of
management, is directly or indirectly owned or held by any Holding Party or any
Borrower; or (d) which has a senior executive officer who is also a senior
executive officer of any Holding Party or any Borrower. For purposes of this
definition, "control" (including with correlative meanings, the terms
"controlling", "controlled by" and "under common control with") means the
possession directly or indirectly of the power to direct or cause the direction
of the management and policies of a Person, whether through the ownership of
voting securities or other equity interest, or by contract or otherwise.
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<PAGE>
"Agent" means Heller in its capacity as agent for Lenders under the Loan
Documents and any successor in such capacity appointed pursuant to subsection
9.2.
"Agent's Account" means ABA No. 0710-0001-3, Account No. 52-98695 at First
National Bank of Chicago, One First National Plaza, Chicago, IL 60670,
Reference: Heller Business Credit for the benefit of Comforce.
"Agreement" means this Loan and Security Agreement as it may be amended,
restated, supplemented or otherwise modified from time to time.
"Allocable Amount" has the meaning assigned to such term in subsection
11.2(B).
"Applicable Base Rate Margin" means, at any date, the applicable percentage
set forth below opposite the Level of Leverage Ratio as of such date:
Level of Leverage Ratio Applicable Base Rate Margin
----------------------- ---------------------------
Level I: Leverage Ratio is equal to or less -.25%
than 4.00 to 1
Level II: Leverage Ratio is greater than 4.00 to
1 but less than or equal to 4.50 to 1 .00%
Level III: Leverage Ratio is greater than 4.50
to 1 but less than or equal to 5.50 to 1 .25%
Level IV: Leverage Ratio is greater than 5.50 to .50%
1 but less than or equal to 6.00 to 1
Level V: Leverage Ratio is greater than 6.00 to .75%
1
; provided that (a) the Applicable Base Rate Margin shall be that set forth
above opposite Level IV from the Closing Date until the first Adjustment Date
occurring after the Closing Date, (b) the Applicable Base Rate Margin determined
for any Adjustment Date shall remain in effect until a subsequent Adjustment
Date for which the Leverage Ratio falls within a different Level, and (c) if the
financial statements, the related Compliance Certificate and the Applicable
Margin Report for any fiscal period are not delivered by the date due pursuant
to subsections 5.1(B), 5.1(C) and 5.1(E), the Applicable Base Rate Margin shall
be that set forth above opposite Level V until the next subsequent Adjustment
Date.
"Applicable LIBOR Margin" means, at any date, the applicable percentage set
forth below opposite the Level of Leverage Ratio as of such date:
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Level of Leverage Ratio Applicable LIBOR Margin
----------------------- -----------------------
Level I: Leverage Ratio is equal to or less 1.50%
than 4.00 to 1
Level II: Leverage Ratio is greater than 4.00 to 1
but less than or equal to 4.50 to 1 1.75%
Level III: Leverage Ratio is greater than 4.50 to 1
but less than or equal to 5.50 to 1 2.00%
Level IV: Leverage Ratio is greater than 5.50 to 1 2.25%
but less than or equal to 6.00 to 1
Level V: Leverage Ratio is greater than 6.00 to 1 2.50%
; provided that (a) the Applicable LIBOR Margin shall be that set forth above
opposite Level IV from the Closing Date until the first Adjustment Date
occurring after the Closing Date, (b) the Applicable LIBOR Margin determined for
any Adjustment Date shall remain in effect until a subsequent Adjustment Date
for which the Leverage Ratio falls within a different Level, and (c) if the
financial statements, the related Compliance Certificate and Applicable Margin
Report for any fiscal period are not delivered by the date due pursuant to
subsections 5.1(B), 5.1(C) and 5.1(E), the Applicable LIBOR Margin shall be that
set forth above opposite Level V until the next subsequent Adjustment Date.
"Applicable Margin Report" has the meaning assigned to such term in
subsection 5.1(E).
"Asset Disposition" means the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise, of any or all of
the assets of any Holding Party, any Borrower or any of their respective
Subsidiaries.
"Assignment and Assumption Agreement" means an agreement among Agent, a
Lender and such Lender's assignee regarding their respective rights and
obligations with respect to assignments of the Loans, the Commitments and other
interests under this Agreement and the other Loan Documents substantially in the
form of Exhibit A.
"Availability Trigger Event" shall be deemed to have occurred on each day,
if any, after the Closing Date on which the Unused Availability shall have been
less than $12,500,000 for the five consecutive days immediately preceding such
day.
"Bank Letter of Credit" means each letter of credit issued by a bank
acceptable to and approved by Agent for the account of any Borrower and
supported by a Risk Participation Agreement.
"Base Rate" means a variable rate of interest per annum equal to the higher
of (a) the rate of interest from time to time published by the Board of
Governors of the Federal Reserve System as the "Bank Prime Loan" rate in Federal
Reserve Statistical Release H.15(519) entitled "Selected Interest Rates" or any
successor publication of the Federal Reserve System reporting the Bank Prime
5
<PAGE>
Loan rate or its equivalent, or (b) the Federal Funds Effective Rate plus
one-half of one percent (.50%). The statistical release generally sets forth a
Bank Prime Loan rate for each Business Day. In the event the Board of Governors
of the Federal Reserve System ceases to publish a Bank Prime Loan rate or its
equivalent, the term "Base Rate" shall mean a variable rate of interest per
annum equal to the highest of the "prime rate", "reference rate", "base rate",
or other similar rate announced from time to time by any of Bankers Trust
Company, The Chase Manhattan Bank, or their successors (with the understanding
that any such rate may merely be a reference rate and may not necessarily
represent the lowest or best rate actually charged to any customer by any such
bank).
"Base Rate Loans" means Loans bearing interest at rates determined by
reference to the Base Rate.
"Blocked Accounts" has the meaning assigned to that term in subsection 5.6
"Blocked Account Agreements" has the meaning assigned to such term in
subsection 5.6.
"Borrower" and "Borrowers" have the meanings assigned to such terms in the
preamble to this Agreement.
"Borrowing Base" has the meaning assigned to such term in subsection
2.1(A)(2).
"Borrowing Base Certificate" means a certificate and assignment schedule
duly executed by an officer of Borrower Representative appropriately completed
and in substantially the form of Exhibit B.
"Borrower Representative" has the meaning assigned to such term in
subsection 2.1(H).
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of Illinois or Pennsylvania or
is a day on which banking institutions located in either such state are closed,
or for the purposes of LIBOR Loans only, a day on which commercial banks are
open for dealings in Dollar deposits in the London, England (U.K.) market.
"Capital Expenditures" means all expenditures (including deposits) for, or
contracts for expenditures (excluding contracts for expenditures under or with
respect to Capital Leases, but including cash down payments for assets acquired
under Capital Leases) with respect to any fixed assets or improvements, or for
replacements, substitutions or additions thereto, which have a useful life of
more than one year, including the direct or indirect acquisition of such assets
by way of increased product or service charges, offset items or otherwise.
"Capital Lease" means any lease of any property (whether real, personal or
mixed) that, in conformity with GAAP, should be accounted for as a capital
lease.
"Cash Equivalents" means: (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full
6
<PAGE>
faith and credit of the United States, in each case maturing within six (6)
months from the date of acquisition thereof; (b) commercial paper maturing no
more than six (6) months from the date issued and, at the time of acquisition,
having a rating of at least A-1 from Standard & Poor's Corporation or at least
P-1 from Moody's Investors Service, Inc.; (c) certificates of deposit or
bankers' acceptances maturing within six (6) months from the date of issuance
thereof issued by, or overnight reverse repurchase agreements from, any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia having combined capital and surplus of
not less than $250,000,000 and not subject to setoff rights in favor of such
bank; and (d) compensating balances with and deposits in banks to the extent
required to maintain payroll accounts with such banks.
"Closing Date" means November 26, 1997.
"Collateral" has the meaning assigned to that term in subsection 2.7.
"Collecting Banks" has the meaning assigned to that term in subsection 5.6.
"Commitment" or "Commitments" means the commitment or commitments of
Lenders to make Loans as set forth in subsection 2.1(A) and to provide Lender
Letters of Credit as set forth in subsection 2.1(F).
"Compliance Certificate" means a certificate duly executed by the chief
executive officer or chief financial officer of Holding Parties and Borrowers
appropriately completed and in substantially the form of Exhibit C.
"Corporate Guarantor" and "Corporate Guarantors" have the meanings assigned
to such terms in the preamble to this Agreement.
"Corporate Overhead" means payments made in cash by CC or COI in connection
with the supervision and management of the businesses and operations of
Borrowers including, without limitation, in respect of compensation for
executive officers and other employees of CC and/or COI who participate in such
supervision and management, and financial, accounting, legal, computer service,
insurance and other similar payments made in cash relating thereto, in all such
cases being reasonable in amount.
"Default" means a condition, act or event that, after notice or lapse of
time or both, would constitute an Event of Default if that condition or event
were not cured or removed within any applicable grace or cure period.
"Defaulted Amount" means, with respect to any Lender at any time, any
amount required to be paid by such Lender to Agent or any other Lender hereunder
or under any other Loan Document at or prior to such time which has not been so
paid as of such time, including, without limitation, any amount required to be
paid by such Lender to (a) the issuer of a Lender Letter of Credit to purchase
any participation in such Lender Letter of Credit, and (b) Agent to reimburse
Agent for the amount of any Loan made by Agent for the account of such Lender.
7
<PAGE>
"Defaulting Lender" means, at any time, any Lender that, at such time, owes
a Defaulted Amount.
"Default Rate" has the meaning assigned to that term in subsection 2.2.
"EBITDA" means, for any period, without duplication, the total of the
following for Holding Parties, Borrowers and their respective Subsidiaries on a
consolidated basis, each calculated for such period: (1) net income determined
in accordance with GAAP; plus, to the extent included in the calculation of net
income, (2) the sum of (a) income and franchise taxes paid or accrued; (b)
Interest Expenses, net of interest income (but excluding service revenues and
fees relating to the financing of the accounts receivable of third-party,
non-affiliated entities engaged in the provision of temporary personnel
services), paid or accrued; (c) interest paid in kind; (d) amortization and
depreciation and (e) other non-cash charges (excluding accruals for cash
expenses made in the ordinary course of business); less, to the extent included
in the calculation of net income, (3) the sum of (a) the income of any Person
(other than wholly-owned Subsidiaries of Holding Parties) in which Holding
Parties or Borrowers or a wholly owned Subsidiary of a Holding Party or a
Borrower has an ownership interest except to the extent such income is received
by a Holding Party or a Borrower or such wholly-owned Subsidiary in a cash
distribution during such period; (b) gains or losses from sales or other
dispositions of assets (other than Inventory in the normal course of business);
and (c) extraordinary or non-recurring gains, but not net of extraordinary or
non-recurring "cash" losses.
"Eligible Accounts" has the meaning assigned to that term in subsection
2.1(B).
"Employee Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained for employees of any Loan Party
or any ERISA Affiliate or (b) has at any time within the preceding six (6) years
been maintained for the employees of any Loan Party or any current or former
ERISA Affiliate.
"Environmental Claims" means claims, liabilities, investigations,
litigation, administrative proceedings, judgments or orders relating to
Hazardous Materials.
"Environmental Laws" means any present or future federal, state or local
law, rule, regulation or order relating to pollution, waste, disposal or the
protection of human health or safety, plant life or animal life, natural
resources or the environment.
"Equipment" means all "equipment" (as defined in the UCC), including,
without limitation, all furniture, furnishings, fixtures, machinery, motor
vehicles, trucks, trailers, vessels, aircraft and rolling stock and all parts
thereof and all additions and accessions thereto and replacements therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.
"ERISA Affiliate", as applied to any Loan Party, means any Person who is a
member of a group which is under common control with any Loan Party, who
together with any Loan Party is treated as a single employer within the meaning
of Section 414(b) and (c) of the IRC.
8
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"Event of Default" means each of the events set forth in subsection 8.1.
"Fanning Cash Pledge Agreement" means that certain cash collateral pledge
agreement between John Fanning and Agent, dated of even date herewith.
"Federal Funds Effective Rate" means, for any day, 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 on the
immediately following Business Day by the Federal Reserve Bank of New York or,
if such rate is not published for any Business Day, the average of the
quotations for the day of the requested Loan received by Agent from three
Federal funds brokers of recognized standing selected by Agent.
"Fee Letter" means that certain letter agreement between COI and Agent,
dated of even date herewith relating to fees.
"Fiscal Quarter" has the meaning assigned to such term in the definition of
Fiscal Year.
"Fiscal Year" means each twelve month period ending on the last day of
December in each year (with quarterly accounting periods ending on or about
March 31, June 30, September 30 and December 31 of each Fiscal Year (each a
"Fiscal Quarter").
"Fixed Charge Coverage" means, for any period, Operating Cash Flow divided
by Fixed Charges.
"Fixed Charges" means, for any period, and each calculated for such period
(without duplication), (a) Interest Expenses paid or accrued by Holding Parties,
Borrowers and their respective Subsidiaries; plus (b) scheduled payments of
principal with respect to all Indebtedness of Holding Parties, Borrowers and
their respective Subsidiaries; plus (c) any provision for (to the extent it is
greater than zero) income or franchise taxes included in the determination of
net income, excluding any provision for deferred taxes; plus (d) payment of
deferred taxes accrued in any prior period; plus (e) Restricted Junior Payments
made during such period (to the extent not added to net income for the purposes
of calculating EBITDA for such period).
"Funded Debt" means Indebtedness which matures more than one year from the
date of its creation or matures within one year from such date but is renewable
or extendible, at the option of the debtor, to a date more than one year from
such date or arises under a revolving credit or similar agreement which
obligates the lender or lenders to extend credit during a period of more than
one year from such date including, without limitation, all amounts of Funded
Debt required to be paid or prepaid within one year from the date of
determination.
"Funding Date" means the date of each funding of a Loan or issuance of a
Lender Letter of Credit.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public
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Accountants and statements and pronouncements of the Financial Accounting
Standards Board that are applicable to the circumstances as of the date of
determination.
"Guarantor Payment" has the meaning assigned to such term in subsection
11.2(A).
"Hazardous Material" means all or any of the following: (a) substances that
are defined or listed in, or otherwise classified pursuant to, any Environmental
Laws or regulations as "hazardous substances", "hazardous materials", "hazardous
wastes", "toxic substances" or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, or toxicity; (b) oil, petroleum or
petroleum derived substances, natural gas, natural gas liquids or synthetic gas
and drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (c) any flammable substances or explosives or any radioactive
materials; and (d) asbestos in any form or electrical equipment which contains
any oil or dielectric fluid containing polychlorinated biphenyls.
"Inactive Subsidiary" and "Inactive Subsidiaries" have the meanings
assigned to such terms in the preamble to this Agreement.
"Indebtedness", as applied to any Person, means without duplication: (a)
all indebtedness for borrowed money; (b) obligations under leases which in
accordance with GAAP constitute Capital Leases; (c) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six months from the date the obligation is incurred or is evidenced by
a note or similar written instrument; (e) all indebtedness secured by any Lien
on any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is non
recourse to the credit of that Person; (f) obligations in respect of letters of
credit; and (g) any advances under any factoring arrangement.
"Intangible Assets" means all intangible assets (determined in conformity
with GAAP) including, without limitation, goodwill, Intellectual Property,
licenses, organizational costs, deferred amounts, covenants not to compete,
unearned income and restricted funds.
"Intellectual Property" means all present and future designs, patents,
patent rights and applications therefor, trademarks and registrations or
applications therefor, trade names, inventions, copyrights and all applications
and registrations therefor, software or computer programs, license rights, trade
secrets, methods, processes, know-how, drawings, specifications, descriptions,
and all memoranda, notes and records with respect to any research and
development, whether now owned or hereafter acquired, all goodwill associated
with any of the foregoing, and proceeds of all of the foregoing, including,
without limitation, proceeds of insurance policies thereon.
"Intellectual Property Assignment" means the intellectual property
assignment to be executed and delivered by each Loan Party, in a form reasonably
acceptable to Agent, as such
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agreement may hereafter be amended, restated, supplemented or otherwise modified
from time to time.
"Intercompany Indebtedness" means, with respect to any Holding Party, any
Borrower or any of their respective Subsidiaries, all assets and liabilities
howsoever arising, which are due to such Person from, or which are due from such
Person to, or which may otherwise arise from any transactions by such Person
with a Holding Party, a Borrower or a Subsidiary.
"Interest Expenses" means, without duplication, for any period, the
following, for Holding Parties, Borrowers and their respective Subsidiaries each
calculated for such period: interest expenses deducted in the determination of
net income (excluding (i) the amortization of fees and costs with respect to the
transactions contemplated by this Agreement, the Senior Notes Indenture and the
Senior PIK Notes which have been capitalized as transaction costs in accordance
with the provisions of subsection 1.2; and (ii) interest paid in kind).
"Interest Period" has the meaning assigned to such term in subsection
2.2(B).
"Interest Rate" has the meaning assigned to such term in subsection 2.2(A).
"Inventory" means all "inventory" (as defined in the UCC), including,
without limitation, finished goods, raw materials, work in process and other
materials and supplies used or consumed in a Person's business, and goods which
are returned or repossessed.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute and all rules and regulations promulgated
thereunder.
"Lender" or "Lenders" has the meaning assigned to such term in the preamble
to this Agreement.
"Lender Letter of Credit" has the meaning assigned to such term in
subsection 2.1(F).
"Letter of Credit Liability" means, all reimbursement and other liabilities
of Borrowers with respect to each Lender Letter of Credit, whether contingent or
otherwise, including: (a) the amount available to be drawn or which may become
available to be drawn; (b) all amounts which have been paid or made available by
any Lender issuing a Lender Letter of Credit or any bank issuing a Bank Letter
of Credit to the extent not reimbursed; and (c) all unpaid interest, fees and
expenses related thereto.
"Letter of Credit Reserve" means, at any time, an amount equal to (a) the
aggregate amount of Letter of Credit Liability with respect to all Lender
Letters of Credit outstanding at such time plus, without duplication, (b) the
aggregate amount theretofore paid by Agent or any Lender under Lender Letters of
Credit and not debited to the Loan Account pursuant to subsection 2.1(F)(2) or
otherwise reimbursed by Borrowers.
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"Leverage Ratio" means, for any Adjustment Date or other date of
determination, the ratio of (a) Funded Debt on the last day of the Fiscal
Quarter most recently ended for which financial statements have been delivered
(or were required to be delivered) pursuant to subsection 5.1(B) or 5.1(C) to
(b) EBITDA for the four Fiscal Quarters most recently ended for which financial
statements have been delivered (or were required to be delivered) pursuant to
subsection 5.1(B) or 5.1(C); provided, however, that, for purposes of this
definition: (i) "Funded Debt" shall exclude the Senior PIK Notes until such date
as any interest shall for the first time be paid in cash thereon; and (ii) for
any such period of four Fiscal Quarters ending prior to December 31, 1998, the
EBITDA of USI and its Subsidiaries for the portion of such period that preceded
the Closing Date shall be included in the calculation of EBITDA for such period.
"Liabilities" shall have the meaning given that term in accordance with
GAAP and shall include Indebtedness.
"LIBOR" means, for each Interest Period, a rate of interest equal to:
(a) the rate of interest determined by Agent at which deposits in Dollars
for the relevant Interest Period are offered based on information presented on
the Reuters Screen LIBOR Page as of 11:00 A.M. (London time) on the day which is
two (2) Business Days prior to the first day of such Interest Period; provided
that if at least two such offered rates appear on the Reuters Screen LIBOR Page
in respect of such Interest Period, the arithmetic mean of all such rates (as
determined by Agent) will be the rate used; provided further that if Reuters
ceases to provide LIBOR quotations, such rate shall be the average rate of
interest determined by Agent at which deposits in Dollars are offered for the
relevant Interest Period by Bankers Trust Company, The Chase Manhattan Bank, or
its successors to prime banks in the London interbank market as of 11:00 A.M.
(London time) on the applicable interest rate determination date, divided by
(b) a number equal to 1.0 minus the aggregate (but without duplication) of
the rates (expressed as a decimal fraction) of reserve requirements in effect on
the day which is two (2) Business Days prior to the beginning of such Interest
Period (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, as now and from time to time in effect) for Eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of
such Board) which are required to be maintained by a member bank of the Federal
Reserve System:
(such rate to be adjusted to the nearest one sixteenth of one percent (1/16 of
1%) or, if there is not a nearest one sixteenth of one percent (1/16 of 1%), to
the next higher one sixteenth of one percent (1/16 of 1%).
"LIBOR Loans" means at any time that portion of the Loans bearing interest
at rates determined by reference to LIBOR.
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"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"Loan" or "Loans" means an advance or advances under the Revolving Loan
Commitment.
"Loan Documents" means this Agreement, the Notes, the Intellectual Property
Assignment, the Pledge Agreement, the Fanning Cash Pledge Agreement, and all
other instruments, documents and agreements executed by or on behalf of any Loan
Party and delivered concurrently herewith or at any time hereafter to or for
Agent or any Lender in connection with the Loans, any Lender Letter of Credit,
and other transactions contemplated by this Agreement, all as amended, restated,
supplemented or modified from time to time.
"Loan Party" means each of Holding Parties, Borrowers, their respective
Subsidiaries, Corporate Guarantors, and any other Person (other than Agent or
any Lender) which is or becomes a party to any Loan Document (collectively,
referred to as the "Loan Parties").
"Loan Year" means each period of twelve (12) consecutive months commencing
on the Closing Date and on each anniversary thereof.
"Material Adverse Effect" means a material adverse effect upon (a) the
business, operations, prospects, properties, assets or condition (financial or
otherwise) of any Loan Party on an individual basis or taken as a whole or (b)
the ability of any Loan Party to perform its obligations under any Loan Document
to which it is a party or of Agent or any Lender to enforce or collect any of
the Obligations.
"Maximum Revolving Loan Amount" has the meaning assigned to that term in
subsection 2.1(A)(1).
"Net Worth" means, as of any date, the sum of the capital stock and
additional paid-in capital plus retained earnings (or minus accumulated deficit)
calculated in conformity with GAAP.
"Notes" means the Revolving Notes.
"Notice of Borrowing" has the meaning assigned to such term in subsection
2.1(C).
"Obligations" means all obligations, liabilities and indebtedness of every
nature of each Loan Party from time to time owed to Agent or to any Lender under
the Loan Documents including the principal amount of all debts, claims and
indebtedness (whether incurred before or after the Termination Date), accrued
and unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable including, without limitation, all
interest, fees, cost and expenses accrued or incurred after the filing of any
petition under any bankruptcy or insolvency law.
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"Operating Cash Flow" means, for any period, (a) EBITDA less (b) Capital
Expenditures and less (c) the aggregate amount of contingent and "earnout"
payments for which any Loan Party is obligated as of the Closing Date and, in
addition, in respect of any Permitted Acquisition, that are paid in cash during
such period; provided that any such payments referred to in this clause (c) made
after the Closing Date and prior to October 1, 1998 shall be deemed made in the
Fiscal Quarter ending December 31, 1998.
"Permitted Acquisition" has the meaning assigned to such term in subsection
7.6(B).
"Permitted Encumbrances" means the following types of Liens: (a) Liens
(other than Liens relating to Environmental Claims or ERISA) for taxes,
assessments or other governmental charges: (x) not yet due and payable; or (y)
due and payable that are being contested in good faith by appropriate
proceedings, provided that, in the case of Liens under this clause (y), a
reserve against the Borrowing Base shall have been established in the amount of
the claims for any such taxes, assessments or other governmental charges; (b)
statutory Liens of landlords, carriers, warehousemen, mechanics, materialmen and
other similar liens imposed by law, which are incurred in the ordinary course of
business for sums not more than thirty (30) days delinquent; (c) Liens (other
than any Lien imposed by ERISA) incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance and
other types of social security, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, trade contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); (d) easements, rights-of-way, restrictions,
and other similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of any Loan Party or any of
its Subsidiaries; (e) Liens for purchase money obligations, provided that (i)
the Indebtedness secured by any such Lien is permitted under subsection 7.1 and
(ii) such Lien encumbers only the asset so purchased; (f) Liens in favor of
Agent, on behalf of Lenders; and (g) Liens set forth on Schedule 1.1(B).
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Pledge Agreement" means each stock pledge agreement executed and delivered
by each Loan Party (other than CC) that has a Subsidiary in favor of Agent, on
behalf of Lenders, in form and substance satisfactory to Agent.
"Pro Forma" means the unaudited consolidated and consolidating balance
sheet of CC, COI and USI as of the Closing Date after giving effect to the
transactions contemplated by this Agreement. The Pro Forma is annexed hereto as
Schedule 1.1(B).
"Pro Rata Share" means (a) with respect to matters relating to a particular
Commitment of a Lender, the percentage obtained by dividing (i) such Commitment
of that Lender by (ii) all such Commitments of all Lenders and (b) with respect
to all other matters, the percentage obtained by dividing (i) the Total Loan
Commitment of a Lender by (ii) the Total Loan Commitments of all
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Lenders, in either case as such percentage may be adjusted by assignments
permitted pursuant to subsection 9.1; provided, however, if any Commitment is
terminated pursuant to the terms hereof, then "Pro Rata Share" means the
percentage obtained by dividing (x) the aggregate amount of such Lender's
outstanding Loans related to such Commitment by (y) the aggregate amount of all
outstanding Loans related to such Commitment.
"Projections" means the Holding Parties' and the Borrowers' forecasted: (a)
consolidated balance sheets; (b) consolidated and consolidating profit and loss
statements; (c) consolidated cash flow statements; (d) capitalization
statements; and (e) consolidated and consolidating schedule of Indebtedness, all
prepared on a division by division and Subsidiary by Subsidiary basis and
otherwise consistent with such Holding Party's and such Borrower's financial
statements, together with appropriate supporting details and a statement of
underlying assumptions.
"Purchased Accounts" means those Accounts of Persons engaged in the
business of providing temporary employment personnel to clients, which Accounts
have been purchased by Borrowers from such Persons in the ordinary course of
Borrowers' business.
"Reconciliation Report" means a report duly executed by the chief executive
officer or chief financial officer of Borrower Representative appropriately
completed and in substantially the form of Exhibit 1.1(C).
"Requisite Lenders" means Lenders holding or being responsible for
fifty-one percent (51%) or more of the sum of (a) outstanding Loans, (b)
outstanding Letter of Credit Liability and (c) unutilized Commitments; provided,
that at any time during which there are only two (2) Lenders, "Requisite
Lenders" shall mean both Lenders; provided, however, that solely for purposes of
subsection 10.3(A), with respect to any amendment, modification, termination or
waiver of any provision of subsection 7.6(B) or (C) or any consent to any
departure by any Loan Party therefrom to be signed by "Requisite Lenders", this
definition of Requisite Lenders shall be deemed modified to the extent that such
51% shall increase to sixty-six and two-thirds percent (66.66%).
"Restricted Junior Payment" means: (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of a Holding
Party, a Borrower or any of its Subsidiaries now or hereafter outstanding,
except a dividend payable solely with shares of the class of stock on which such
dividend is declared; (b) any payment or prepayment of principal of, premium, if
any, or interest on, or any redemption, conversion, exchange, retirement,
defeasance, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any Indebtedness subordinated in right of payment
to the Obligations or any shares of any class of stock of a Holding Party, a
Borrower or any of its Subsidiaries now or hereafter outstanding, or the
issuance of a notice of an intention to do any of the foregoing; (c) any payment
made to retire, or to obtain the surrender of, any outstanding warrants, options
or other rights to acquire shares of any class of stock of a Holding Party, a
Borrower or any of its Subsidiaries now or hereafter outstanding; and (d) any
payment by a Holding Party, a Borrower or any of its Subsidiaries of any
management fees, consulting fees or similar fees to any Affiliate, whether
pursuant to a management agreement or otherwise.
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"Revolving Advance" means each advance made by Lender(s) pursuant to
subsection 2.1(A).
"Revolving Loan" means the outstanding balance of all Revolving Advances
and any amounts added to the principal balance of the Revolving Loan pursuant to
this Agreement.
"Revolving Loan Commitment" means (a) as to any Lender, the commitment of
such Lender to make Revolving Advances pursuant to subsection 2.1(A), and to
purchase participations in Lender Letters of Credit pursuant to subsection
2.1(F) in the aggregate amount set forth on the signature page of this Agreement
(or any amendment to this Agreement) opposite such Lender's signature or in the
most recent Assignment and Assumption Agreement, if any, executed by such Lender
and (b) as to all Lenders, the aggregate commitment of all Lenders to make
Revolving Advances and to purchase participations in Lender Letters of Credit.
"Revolving Note" means each promissory note of Borrowers in a form
reasonably acceptable to Agent, issued pursuant to subsection 2.1(D).
"Risk Participation Agreement" has the meaning assigned to that term in
subsection 2.1(F).
"Senior Debentures Indenture" means the Indenture dated as of November 26,
1997, by and between CC and The Bank of New York, as Trustee, executed and
delivered by the parties thereto in connection with the issuance of the Senior
PIK Notes.
"Senior Notes" means COI's 12% Senior Notes due 2007 in the aggregate
principal amount of $110,000,000 issued under and pursuant to the Senior Notes
Indenture.
"Senior Notes Indenture" means the Indenture dated as of November 26, 1997,
by and between COI and Wilmington Trust Company, as Trustee, executed and
delivered by the parties thereto in connection with the issuance of the Senior
Notes.
"Senior PIK Notes" means CC's 15% Senior Secured PIK Notes due 2009 in the
aggregate principal amount of $20,000,000 issued under and pursuant to the
Senior Debentures Indenture.
"Service Fee Accounts" means those Accounts of Borrowers arising under
service agreements entered into by Borrowers with independent supplemental
staffing firms in the ordinary course of business.
"Settlement Date" has the meanings assigned to that term in subsection
9.6(A)(2).
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than fifty percent (50%) of
the total voting power of shares of stock (or equivalent ownership or
controlling interest) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other subsidiaries of that Person or a combination thereof.
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"Target" means, with respect to any Permitted Acquisition, any Person whose
assets and business are being acquired pursuant to such Permitted Acquisition.
"Termination Date" means November 26, 2002.
"Total Loan Commitment" means as to any Lender the aggregate commitments of
such Lender with respect to its Revolving Loan Commitment.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of New York, as amended from time to time, and any successor statute.
"Uniforce Acquisition" means the transactions contemplated by the Uniforce
Acquisition Documents.
"Uniforce Acquisition Agreement" means the Agreement and Plan of Merger
dated as of August 13, 1997, by and among CC, CCI, and USI.
"Uniforce Acquisition Documents" means, collectively, the Uniforce
Acquisition Agreement and all documents, instruments and agreements delivered in
connection therewith.
"Unused Availability" means, as of any date, the amount (if any) by which
the Maximum Revolving Loan Amount exceeds the Revolving Loan.
1.2 Accounting Terms. For purposes of this Agreement, all accounting terms
not otherwise defined herein shall have the meanings assigned to such terms in
conformity with GAAP. Financial statements and other information furnished to
Agent or any Lender pursuant to subsection 5.1 shall be prepared in accordance
with GAAP (as in effect at the time of such preparation) on a consistent basis.
In the event any "Accounting Changes" (as defined below) shall occur and such
changes affect financial covenants, standards or terms in this Agreement, then
Holding Parties, Borrowers and Lenders agree to enter into negotiations in order
to amend such provisions of this Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating the
financial condition of Holding Parties, Borrowers and their respective
Subsidiaries shall be the same after such Accounting Changes as if such
Accounting Changes had not been made, and until such time as such an amendment
shall have been executed and delivered by Holding Parties, Borrowers and the
other Loan Parties and Requisite Lenders, (A) all financial covenants, standards
and terms in this Agreement shall be calculated and/or construed as if such
Accounting Changes had not been made, and (B) Holding Parties and Borrowers
shall prepare footnotes to each Compliance Certificate and the financial
statements required to be delivered hereunder that show the differences between
the financial statements delivered (which reflect such Accounting Changes) and
the basis for calculating financial covenant compliance (without reflecting such
Accounting Changes). "Accounting Changes" means: (a) changes in accounting
principles required by GAAP and implemented by Holding Parties, Borrowers and
their respective Subsidiaries; (b) changes in accounting principles recommended
by Holding Parties' or Borrowers' certified public accountants; and (c) changes
in carrying value of any Holding Parties', any Borrowers' or any of their
respective Subsidiaries' assets, liabilities or equity accounts resulting from
(i) the application of purchase
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accounting principles (A.P.B. 16 and/or 17 and EITF 88-16 and FASB 109) to the
Uniforce Acquisition or any other Permitted Acquisitions or (ii) any other
adjustments in excess of $350,000 in the aggregate that, in each case, were
applicable to, but not included in, the Pro Forma. All such adjustments
resulting from expenditures made subsequent to the Closing Date (including, but
not limited to, capitalization of costs and expenses or payment of pre-Closing
Date liabilities) shall be treated as expenses in the period the expenditures
are made and deducted as part of the calculation of EBITDA in such period.
1.3 Other Definitional Provisions. References to "Sections", "subsections",
"Exhibits" and "Schedules" shall be to Sections, subsections, Exhibits and
Schedules, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference. In this Agreement, words importing any gender include the other
genders; the words "including," "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to agreements and other
contractual instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the extent such
amendments, assignments and other modifications are not prohibited by the terms
of this Agreement or any other Loan Document; references to Persons include
their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.
SECTION 2. LOANS AND COLLATERAL
2.1 Loans.
(A) Revolving Loan. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Holding Parties,
Borrowers and the other Loan Parties set forth herein and in the other Loan
Documents, each Lender, severally, agrees to lend to Borrowers from time to time
its Pro Rata Share of each Revolving Advance. The aggregate amount of all
Revolving Loan Commitments shall not exceed at any time $75,000,000 to all
Borrowers less any reductions pursuant to subsection 2.4(B). Notwithstanding the
foregoing, the portion of the Revolving Loan attributable to any Borrower at any
time plus the Letter of Credit Liability of such Borrower at such time, but only
in respect of any Letter of Credit issued on behalf of such Borrower (together
with the aggregate amount theretofore paid by Agent or any Lender in respect of
any Letter of Credit issued on behalf of such Borrower and not debited to the
Loan Account or otherwise reimbursed by such Borrower) shall not exceed that
portion of the Borrowing Base attributable to such Borrower. Amounts borrowed
under this subsection 2.1(A) may be repaid and reborrowed at any time prior to
the earlier of (i) the termination of the Revolving Loan Commitment pursuant to
subsection 8.3 or (ii) the Termination Date. Except as otherwise provided
herein, no Lender shall have any obligation to make an advance under this
subsection 2.1(A) to the extent such advance would cause the Revolving Loan
(after giving effect to any immediate application of the proceeds thereof) to
exceed the Maximum Revolving Loan Amount.
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(1) "Maximum Revolving Loan Amount" means, as of any date of
determination, the lesser of (a) the Revolving Loan Commitment(s) of all
Lenders minus the Letter of Credit Reserve and (b) the Borrowing Base minus
the Letter of Credit Reserve.
(2) "Borrowing Base" means, as of any date of determination, an amount
equal to eighty-five (85%) of Eligible Accounts less such reserves as Agent
in its reasonable discretion may elect to establish.
(B) Eligible Accounts.
"Eligible Accounts" means, as at any date of determination, the aggregate
of all Accounts that Agent, in its reasonable judgment, deems to be eligible for
borrowing purposes (provided, that Agent shall give Borrower Representative
reasonably prompt notice following any determination by Agent to exclude any
Accounts from Eligible Accounts based on criteria other than those set forth
below, which notice shall include, subject to confidentiality constraints as
determined by Agent in its sole discretion, the basis for such determination by
Agent). Without limiting the generality of the foregoing, unless otherwise
agreed by Agent, the following Accounts are not Eligible Accounts:
(1) Accounts which, at the date of issuance of the respective invoice
therefor, were payable more than forty-five (45) days after the date of
issuance of such invoice;
(2) Accounts which (x), in the case of Accounts other than Accounts
owing by those customers identified on Schedule 2.1(B), remain unpaid for
more than ninety (90) days after the date of issuance of the original
invoice, and (y) in the case of Accounts identified on Schedule 2.1(B),
remain unpaid for more than one hundred twenty (120) days after the date of
issuance of the original invoice; it being understood that Agent may, in
its sole discretion, add account debtors requested by either Borrower
Representative to, or delete account debtors from, Schedule 2.1(B);
(3) Accounts which are otherwise eligible with respect to which the
account debtor is owed a credit by any Borrower, but only to the extent of
such credit;
(4) Accounts due from a customer whose principal place of business is
located outside the United States of America or Canada unless such Account
is backed by a letter of credit, in form and substance acceptable to Agent
and issued or confirmed by a bank that is organized under the laws of the
United States of America or a State thereof, that is acceptable to Agent;
provided that such letter of credit has been delivered to Agent as
additional collateral;
(5) Accounts due from a customer which Agent has notified Borrower
Representative does not have a satisfactory credit standing;
(6) Accounts in excess of an aggregate face amount of $500,000 with
respect to which the customer is the United States of America, any state or
any municipality, or any
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department, agency or instrumentality thereof unless the applicable
Borrower has, with respect to such Accounts, complied with the Federal
Assignment of Claims Act (31 U.S.C. Section 3727) or any applicable statute
or municipal ordinance of similar purpose and effect;
(7) Accounts with respect to which the customer is an Affiliate of any
Borrower or a director, officer, agent, stockholder or employee of any
Borrower or any of its Affiliates;
(8) Accounts due from a customer if (x) in the case of any account
debtor other than those account debtors identified on Schedule 2.1(B), more
than fifty percent (50%) of the aggregate amount of Accounts of such
customer owing to any Borrower or in the aggregate to all Borrowers have at
the time remained unpaid for more than ninety (90) days after the date of
issuance of the original invoice date; and (y) in the case of those account
debtors identified on Schedule 2.1(B), more than twenty-five percent (25%)
of the aggregate amount of the Accounts of such account debtor owing to any
Borrower or in the aggregate to all Borrowers have at the time remained
unpaid for more than one hundred twenty (120) days after the date of the
issuance of the original invoice.
(9) Accounts with respect to which there is any unresolved dispute
with the respective customer (but only to the extent of such dispute);
(10) Accounts evidenced by an "instrument" or "chattel paper" (as
defined in the UCC) not in the possession of Agent, on behalf of Lenders;
(11) Accounts with respect to which Agent, on behalf of Lenders, does
not have a valid, first priority and fully perfected security interest;
(12) Accounts subject to any Lien except those in favor of Agent, on
behalf of Lenders;
(13) Accounts with respect to which any Holding Party or any Borrower
has received notice that the customer is the subject of any bankruptcy or
other insolvency proceeding;
(14) Accounts due from a customer to the extent that such Accounts
exceed in the aggregate an amount equal to fifteen percent (15%) of the
aggregate of all Accounts at said date;
(15) Accounts with respect to which the customer's obligation to pay
is conditional or subject to a repurchase obligation or right to return or
with respect to which the goods or services giving rise to such Account
have not been delivered (or performed, as applicable) and accepted by such
account debtor, including progress billings, bill and hold sales,
guarantied sales, sale or return transactions, sales on approval or
consignment sales;
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(16) From and after the date which is thirty (30) days after the
Closing Date, any Account with respect to which the customer is located in
New Jersey or Minnesota, or any other state denying creditors access to its
courts in the absence of a Notice of Business Activities Report or other
similar filing, unless the Borrower holding such Account has either
qualified as a foreign corporation authorized to transact business in such
state or has filed a Notice of Business Activities Report or similar filing
with the applicable state agency for the then current year;
(17) Accounts with respect to which the customer is a creditor of any
Borrower; provided, however, that any such Account shall only be ineligible
as to that portion of such Account which is less than or equal to the
amount owed by Borrowers to such Person;
(18) Purchased Accounts and Service Fee Accounts in which a first
priority perfected security interest has not been obtained (and
continuously maintained) by any Borrower to evidence and perfect its
ownership of such Accounts;
(19) Purchased Accounts and Service Fee Accounts with respect to which
any portion thereof has been charged back to the applicable Account Seller;
and
(20) Purchased Accounts and Service Fee Accounts with respect to which
Agent has not received copies of lien search results indicating the
applicable Borrower as having a first priority perfected ownership interest
in each such Account, subject to no Liens except those in favor of Agent,
on behalf of Lenders.
(C) Borrowing Mechanics. (1) LIBOR Loans made on any Funding Date shall be
in an aggregate minimum amount of $500,000 and integral multiples of $100,000 in
excess of such amount. (2) On any day when any Borrower desires an advance under
this subsection 2.1, Borrower Representative shall give Agent telephonic notice
of the proposed borrowing by 11:00 a.m. Central time on the Funding Date of a
Base Rate Loan and three (3) Business Days in advance of the Funding Date of a
LIBOR Loan, which notice shall also specify the proposed Funding Date (which
shall be a Business Day), whether such Loans shall consist of Base Rate Loans or
LIBOR Loans, and for LIBOR Loans the Interest Period applicable thereto, and the
name(s) of Borrower(s) on whose behalf such Loans are being requested. Any such
telephonic notice shall be confirmed in writing on the same day by delivery by
one or both of the Borrower Representatives of a Notice of Borrowing in the form
of Exhibit E annexed hereto. Neither Agent nor Lender shall incur any liability
to any Borrower for acting upon any telephonic notice Agent believes in good
faith to have been given by a duly authorized officer or other Person authorized
to convey such notice on behalf of a Borrower or for otherwise acting in good
faith under this subsection 2.1(C). Neither Agent nor Lender will make any
advance pursuant to any telephonic notice unless Agent has also received the
most recent Borrowing Base Certificate and all other documents required under
subsection 5.1 by 11:00 a.m. Central time. Each Revolving Advance shall be
deposited by wire transfer in immediately available funds in such account as
Borrower Representative may from time to time designate to Agent in writing. The
becoming due of any amount required to be paid under this Agreement or any of
the other Loan Documents as principal, accrued interest and fees shall be deemed
irrevocably to be a request by Borrowers or Borrower Representative for a Base
Rate
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Revolving Loan on the due date of, and in the amount required to pay, such
principal, accrued interest and fees, and the proceeds of each such Revolving
Advance if made by Agent or any Lender shall be disbursed by Agent or such
Lender by way of direct payment of the relevant obligation.
(D) Notes. Borrowers shall jointly and severally execute and deliver to
each Lender with appropriate insertions a Revolving Note to evidence such
Lender's Revolving Loan Commitment. In the event of an assignment under
subsection 9.1, Borrowers shall, upon surrender of the assigning Lender's Note,
issue new Notes to reflect the interest held by the assigning Lender and its
assignee.
(E) Evidence of Revolving Loan Obligations. Each Revolving Advance shall be
evidenced by this Agreement, the Revolving Note, and notations made from time to
time by Agent in its books and records, including computer records. Agent shall
record in its books and records, including computer records, the principal
amount of the Revolving Loan owing to each Lender from time to time. Agent's
books and records shall constitute presumptive evidence, absent manifest error,
of the accuracy of the information contained therein. Failure by Agent to make
any such notation or record shall not affect the obligations of Borrowers to
Lenders with respect to the Revolving Loans.
(F) Letters of Credit. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Holding
Parties, Borrowers and the other Loan Parties, the Revolving Loan Commitments
may, in addition to Revolving Advances, be utilized, upon the request of
Borrower Representative, for (i) the issuance of letters of credit by Agent; or
with Agent's consent any Lender, or (ii) the issuance by Agent of risk
participations (a "Risk Participation Agreement") to banks to induce such banks
to issue letters of credit for the account of any Borrower (each of (i) and (ii)
above a "Lender Letter of Credit"). Each Lender shall be deemed to have
purchased a participation in each Lender Letter of Credit issued on behalf of
any Borrower in an amount equal to its Pro Rata Share thereof. In no event shall
any Lender Letter of Credit be issued to the extent that the issuance of such
Lender Letter of Credit would cause the sum of the Letter of Credit Reserve
(after giving effect to such issuance) plus the Revolving Loan to exceed the
lesser of (x) the Borrowing Base and (y) the Revolving Loan Commitment.
Notwithstanding the foregoing, in no event shall any Lender Letter of Credit be
issued on behalf of any Borrower to the extent that the issuance of such Lender
Letter of Credit would cause the sum of the Revolving Loan outstanding to such
Borrower plus the Letter of Credit Liability of such Borrower (together with the
aggregate amount theretofore paid by Agent or any Lender in respect of any
Letter of Credit issued on behalf of such Borrower and not debited to the Loan
Account or otherwise reimbursed by such Borrower) to exceed that portion of the
Borrowing Base attributable to such Borrower.
(1) Maximum Amount. The aggregate amount of Letter of Credit Liability
with respect to all Lender Letters of Credit outstanding at any time shall
not exceed $10,000,000.
(2) Reimbursement. Borrowers shall be irrevocably and unconditionally
obligated forthwith without presentment, demand, protest or other
formalities of any kind, to
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reimburse Agent or the issuer for any amounts paid with respect to a Lender
Letter of Credit including all fees, costs and expenses paid to any bank
that issues a Bank Letter of Credit. Borrowers hereby authorize and direct
Agent, at Agent's option, to debit each Borrower's account (by increasing
the principal balance of the Revolving Loan) in the amount of any payment
made with respect to any Lender Letter of Credit issued for the account of
such Borrower. All amounts paid with respect to any Lender Letter of Credit
that are not immediately repaid by Borrowers with the proceeds of a
Revolving Advance or otherwise shall bear interest at the Default Rate
applicable to Base Rate Revolving Loans. In the event that Borrowers shall
fail to reimburse Agent on the date of any payment under a Lender Letter of
Credit in an amount equal to the amount of such payment, Agent shall
promptly notify each Lender of the unreimbursed amount of such payment
together with accrued interest thereon and each Lender, on the next
Business Day, shall deliver to Agent an amount equal to its respective
participation in same day funds. The obligation of each Lender to deliver
to Agent an amount equal to its respective participation pursuant to the
foregoing sentence shall be absolute and unconditional and such remittance
shall be made notwithstanding the occurrence or continuation of an Event of
Default or Default or the failure to satisfy any condition set forth in
Section 3. In the event any Lender fails to make available to Agent the
amount of such Lender's participation in such Lender Letter of Credit,
Agent shall be entitled to recover such amount on demand from such Lender
together with interest at the Base Rate.
(3) Conditions of Issuance. In addition to all other terms and
conditions set forth in this Agreement, the issuance of any Lender Letter
of Credit shall be subject to the satisfaction of all conditions applicable
to Revolving Advances, and the conditions that the letter of credit be in
such form, be for such amount, contain such terms and support such
transactions as are reasonably satisfactory to Agent. The expiration date
of each Lender Letter of Credit shall be on a date which is at least thirty
(30) days prior to the Termination Date.
(4) Request for Letters of Credit. Borrower Representative shall give
Agent at least three (3) Business Days prior notice specifying the date a
Lender Letter of Credit is to be issued, identifying the beneficiary and
describing the nature of the transactions proposed to be supported thereby.
The notice shall be accompanied by the form of the letter of credit being
requested.
(G) Other Letter of Credit Provisions.
(1) Obligations Absolute. The obligation of Borrowers to reimburse
Agent or any Lender for payments made under, and other amounts payable in
connection with, any Lender Letter of Credit shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including the following circumstances:
(a) any lack of validity or enforceability of any Lender Letter
of Credit, Bank Letter of Credit or any other agreement;
(b) the existence of any claim, set-off, defense or other right
which any Borrower, any of its Affiliates, Agent or any Lender, on the
one hand, may at any time have
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against any beneficiary or transferee of any Lender Letter of Credit
or Bank Letter of Credit (or any Persons for whom any such transferee
may be acting), Agent, any Lender or any other Person, on the other
hand, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any
underlying transaction between any Borrower or any of its Affiliates
and the beneficiary of the letter of credit);
(c) any draft, demand, certificate or any other document
presented under any Lender Letter of Credit or Bank Letter of Credit
is alleged to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;
(d) payment under any Lender Letter of Credit or Bank Letter of
Credit against presentation of a demand, draft or certificate or other
document which does not comply with the terms of such letter of
credit; provided that, in the case of any payment by Agent or a Lender
under any Lender Letter of Credit, Agent or such Lender has not acted
with gross negli gence or willful misconduct (as determined by a court
of competent jurisdiction) in determining that the demand for payment
under such Lender Letter of Credit complies on its face with any
applicable requirements for a demand for payment under such Lender
Letter of Credit;
(e) any other circumstance or happening whatsoever, which is
similar to any of the foregoing; or
(f) the fact that a Default or an Event of Default shall have
occurred and be continuing.
(2) Nature of Lender's Duties. As between Agent and Lenders, on the
one hand, and Borrowers, on the other hand, Borrowers assume all risks of
the acts and omissions of, or misuse of any Lender Letter of Credit by the
beneficiary thereof. In furtherance and not in limitation of the foregoing,
neither Agent nor any Lender shall be responsible: (a) for the form,
validity, sufficiency, accuracy, genuineness or legal effect of any
document by any party in connection with the application for and issuance
of any Lender Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or
forged; (b) for the validity or sufficiency of any instrument transferring
or assigning or purporting to transfer or assign any Lender Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole
or in part, which may prove to be invalid or ineffective for any reason;
(c) for failure of the beneficiary of any Lender Letter of Credit to comply
fully with conditions required in order to demand payment thereunder;
provided that, in the case of any payment by Agent or any Lender under any
Lender Letter of Credit, Agent or Lender has not acted with gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction) in determining that the demand for payment under such Lender
Letter of Credit complies on its face with any applicable requirements for
a demand for payment thereunder; (d) for errors, omissions, interruptions
or delays in transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in cipher; (e) for
errors in interpretation of technical terms; (f) for any loss or delay in
the transmission or otherwise of any document required in order to make a
payment under any Lender Letter of Credit; (g) for the credit of the
proceeds of any drawing under any Lender Letter of Credit; and (h) for any
consequences arising from causes beyond the control of Agent or any Lender
as the case may be. None of the
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above shall affect, impair, or prevent the vesting of any of Agent's or any
Lender's rights or powers hereunder.
(3) Liability. In furtherance and extension of and not in limitation
of, the specific provisions herein above set forth, any action taken or
omitted by Agent or any Lender under or in connection with any Lender
Letter of Credit, if taken or omitted in good faith, shall not put Agent or
any Lender under any resulting liability to any Borrower.
(H) Appointment of Borrower Representative. Each Borrower hereby designates
each of COI and USI, each acting singly or together with the other as its
representative and agent (each a "Borrower Representative") for the purposes of
initiating borrowing requests, requesting Lender Letters of Credit, selecting
interest rate options and giving and receiving notices and consents hereunder or
under any of the other Loan Documents. Agent and each Lender may regard any
notice or other communication pursuant to any Loan Document from either Borrower
Representative as a notice or communication from Borrowers. Each Borrower hereby
covenants and agrees that each representation and warranty, covenant, agreement
and undertaking made in its name or on its behalf by either Borrower
Representative shall be deemed for all purposes to have been made by such
Borrower and shall be binding upon and enforceable against such Borrower to the
same extent as if the same had been made directly by such Borrower.
2.2 Interest.
(A) Rate of Interest. The Loans and all other Obligations shall bear
interest from the date such Loans are made or such other Obligations become due
to the date paid at a rate per annum equal to (i) in the case of Base Rate Loans
and other Obligations for which no other interest rate is specified, the Base
Rate plus the Applicable Base Rate Margin, and (ii) in the case of LIBOR Loans,
LIBOR plus the Applicable LIBOR Margin (the "Interest Rate"). The applicable
basis for determining the rate of interest shall be selected by Borrower
Representative initially at the time a Notice of Borrowing is given pursuant to
subsection 2.1(C). The basis for determining the interest rate with respect to
any Loan or a portion of any Loan may be changed from time to time pursuant to
subsection 2.2(E). If on any day a Loan or a portion of any Loan is outstanding
with respect to which notice has not been delivered to Agent in accordance with
the terms of this Agreement specifying the basis for determining the rate of
interest, then for that day that Loan or portion thereof shall bear interest
determined by reference to the Base Rate.
After the occurrence and during the continuance of an Event of Default (i)
the Loans and all other Obligations shall, at the option of Requisite Lenders,
bear interest at a rate per annum equal to two percent (2%) plus the applicable
Interest Rate (the "Default Rate"), (ii) each LIBOR Loan shall automatically
convert to a Base Rate Loan at the end of any applicable Interest Period and
(iii) no Loans may be converted to LIBOR Loans.
(B) Interest Periods. In connection with each LIBOR Loan, Borrower
Representative shall elect an interest period (each an "Interest Period") to be
applicable to such Loan, which Interest Period shall be either a one, two, three
or six month period; provided that:
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(1) the initial Interest Period for any LIBOR Loan shall commence on
the Funding Date of such Loan;
(2) in the case of successive Interest Periods, each successive
Interest Period shall commence on the day on which the immediately
preceding Interest Period expires;
(3) if an Interest Period expiration date is not a Business Day, such
Interest Period shall expire on the next succeeding Business Day; provided
that if any Interest Period expiration date is not a Business Day but is a
day of the month after which no further Business Day occurs in such month,
such Interest Period shall expire on the immediately preceding Business
Day;
(4) any Interest Period that 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 Interest Period) shall,
subject to part (5) below, end on the last Business Day of a calendar
month;
(5) no Interest Period shall extend beyond the Termination Date;
(6) no Interest Period may extend beyond a scheduled principal payment
date unless the sum of (a) the aggregate principal amount of Loans that are
Base Rate Loans or that have Interest Periods expiring on or before such
date and (b) the available, unused Revolving Loan Commitment or Borrowing
Base equals or exceeds the principal amount required to be paid on the
Loans on such date; and
(7) there shall be no more than five (5) Interest Periods relating to
LIBOR Loans outstanding at any time.
(C) Computation and Payment of Interest. Interest on the Loans and all
other Obligations shall be computed on the daily principal balance on the basis
of a 360 day year for the actual number of days elapsed in the period during
which it accrues. In computing interest on any Loan, the date of funding of the
Loan or the first day of an Interest Period applicable to such Loan or, with
respect to a Base Rate Loan being converted from a LIBOR Loan, the date of
conversion of such LIBOR Loan to such Base Rate Loan, shall be included; and the
date of payment of such Loan or the expiration date of an Interest Period
applicable to such Loan, or with respect to a Base Rate Loan being converted to
a LIBOR Loan, the date of conversion of such Base Rate Loan to such LIBOR Loan,
shall be excluded; provided that if a Loan is repaid on the same day on which it
is made, one day's interest shall be paid on that Loan. Interest on Base Rate
Loans and all other Obligations other than LIBOR Loans shall be payable to Agent
for benefit of Lenders monthly in arrears on the first day of each month, on the
date of any prepayment of Loans, and at maturity, whether by acceleration or
otherwise. Interest on LIBOR Loans shall be payable to Agent for benefit of
Lenders on the last day of the applicable Interest Period for such Loan, on the
date of any prepayment of the Loans, and at maturity, whether by acceleration or
otherwise. In addition, for each LIBOR Loan having an Interest Period longer
than three (3) months, interest accrued on such Loan shall also be payable on
the last day of each three (3) month interval during such Interest Period.
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(D) Interest Laws. Notwithstanding any provision to the contrary contained
in this Agreement or any other Loan Document, Borrowers shall not be required to
pay, and neither Agent nor any Lender shall be permitted to collect, any amount
of interest in excess of the maximum amount of interest permitted by applicable
law ("Excess Interest"). If any Excess Interest is provided for or determined by
a court of competent jurisdiction to have been provided for in this Agreement or
in any other Loan Document, then in such event: (1) the provisions of this
subsection shall govern and control; (2) neither any Borrower nor any other Loan
Party shall be obligated to pay any Excess Interest; (3) any Excess Interest
that Agent or any Lender may have received hereunder shall be, at such Lender's
option, (a) applied as a credit against the outstanding principal balance of the
Obligations or accrued and unpaid interest (not to exceed the maximum amount
permitted by law), (b) refunded to the payor thereof, or (c) any combination of
the foregoing; (4) the interest rate(s) provided for herein shall be
automatically reduced to the maximum lawful rate allowed from time to time under
applicable law (the "Maximum Rate"), and this Agreement and the other Loan
Documents shall be deemed to have been and shall be, reformed and modified to
reflect such reduction; and (5) neither any Borrower nor any other Loan Party
shall have any action against Agent or any Lender for any damages arising out of
the payment or collection of any Excess Interest. Notwithstanding the foregoing,
if for any period of time interest on any Obligations is calculated at the
Maximum Rate rather than the applicable rate under this Agreement, and
thereafter such applicable rate becomes less than the Maximum Rate, the rate of
interest payable on such Obligations shall remain at the Maximum Rate until each
Lender shall have received the amount of interest which such Lender would have
received during such period on such Obligations had the rate of interest not
been limited to the Maximum Rate during such period.
(E) Conversion or Continuation. Subject to the provisions of subsection
2.2(A) Borrower Representative shall have the option to (1) convert at any time
all or any part of outstanding Loans equal to $500,000 and integral multiples of
$100,000 in excess of that amount from Base Rate Loans to LIBOR Loans or (2)
upon the expiration of any Interest Period applicable to a LIBOR Loan, to (a)
continue all or any portion of such LIBOR Loan equal to $500,000 and integral
multiplies of $100,000 in excess of that amount as a LIBOR Loan or (b) convert
all or any portion of such LIBOR Loan to a Base Rate Loan. The succeeding
Interest Period(s) of such continued or converted Loan commence on the last day
of the Interest Period of the Loan to be continued or converted; provided that
no outstanding Loan may be continued as, or be converted into, a LIBOR Loan,
when any Event of Default or Default has occurred and is continuing.
Borrower Representative shall deliver a notice of conversion/continuation
to Agent no later than noon (New York time) at least three (3) Business Days in
advance of the proposed conversion/continuation date ("Notice of
Conversion/Continuation"). A Notice of Conversion/Continuation shall certify:
(1) the proposed conversion/continuation date (which shall be a Business Day);
(2) the amount of the Loan to be converted/continued; (3) the nature of the
proposed conversion/continuation; (4) in the case of conversion to, or a
continuation of, a LIBOR Loan, the requested Interest Period; and (5) that no
Default or Event of Default has occurred and is continuing or would result from
the proposed conversion/continuation.
In lieu of delivering the Notice of Conversion/Continuation, Borrower
Representative may give Agent telephonic notice by the required time of any
proposed conversion/continuation
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under this subsection 2.2(E); provided that such notice shall be promptly
confirmed in writing by delivery of a Notice of Conversion/Continuation to Agent
on or before the proposed conversion/continuation date.
Neither Agent nor any Lender shall incur any liability to Borrowers in
acting upon any telephonic notice referred to above that Agent believes in good
faith to have been given by a duly authorized officer or other person authorized
to act on behalf of Borrower or for otherwise acting in good faith under this
subsection 2.2(E) and upon conversion/continuation by Lenders in accordance with
this Agreement pursuant to any telephonic notice, Borrower Representative shall
have effected such conversion or continuation, as the case may be, hereunder.
2.3 Fees.
(A) Unused Line Fee. Borrowers shall pay to Agent, for the benefit of
Lenders, a fee in an amount equal to the Revolving Loan Commitment less the sum
of the average daily balance of the Revolving Loan plus the average daily face
amount of the Lender Letter of Credit Reserve during the preceding month
multiplied by three eighths of one percent (.375%) percent per annum, such fee
to be calculated on the basis of a 360 day year for the actual number of days
elapsed and to be payable monthly in arrears on the first day of the first month
following the Closing Date and the first day of each month thereafter.
(B) Letter of Credit Fees. Borrowers shall pay to Agent for the account of
Lenders, a fee with respect to the Lender Letters of Credit in the amount of (i)
for the account of Lenders the average daily amount of Letter of Credit
Liability outstanding during such month multiplied by one and one-half percent
(1.50%) per annum. Such fees will be calculated on the basis of a 360 day year
for the actual number of days elapsed and will be payable monthly in arrears on
the first day of each month. Borrowers shall also reimburse Agent for any and
all fees and expenses, if any, paid by Agent or any Lender to the issuer of any
Bank Letter of Credit.
(C) Audit Fees. Borrowers agree to pay to Agent for its own account an
audit fee for each inspection equal to $750.00 per auditor per day or any
portion thereof, together with all out-of-pocket expenses, and Borrowers agree
to reimburse Agent for all fees, costs and expenses paid by Agent to third party
auditors.
(D) Other Fees and Expenses. Borrowers shall pay to Agent, for its own
account, all charges for returned items and all other bank charges incurred by
Agent, as well as Agent's standard wire transfer charges for each wire transfer
made under this Agreement.
(E) Fee Letter. COI shall pay or cause to be paid to Agent for Agent's own
account all payments due under and pursuant to the Fee Letter.
2.4 Payments and Prepayments.
(A) Manner and Time of Payment. In its sole discretion, Agent may charge
interest and other amounts payable hereunder to the Revolving Loan, all as set
forth on Agent's
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books and records. If Agent elects to bill Borrowers for any amount due
hereunder, such amount shall be immediately due and payable with interest
thereon as provided herein. All payments made by Borrowers with respect to the
Obligations shall be made without deduction, defense, setoff or counterclaim.
All payments to Agent hereunder shall, unless otherwise directed by Agent, be
made to Agent's Account or in accordance with subsection 5.6. Proceeds remitted
to Agent's Account shall be credited to the Obligations on the Business Day such
proceeds were received; provided, however, that, for the purpose of calculating
interest on the Obligations, such proceeds shall be deemed received on the first
Business Day thereafter, unless such proceeds were remitted by transfer of
immediately available funds, in which case, for the purpose of calculating
interest on the Obligations, such proceeds shall be deemed received on the
Business Day received.
(B) Mandatory Prepayments.
(1) Overadvance. At any time that the Revolving Loan exceeds the
Maximum Revolving Loan Amount, Borrowers shall, immediately repay the
Revolving Loan to the extent necessary to reduce the principal balance to
an amount equal to or less than the Maximum Revolving Loan Amount. At any
time that the sum of the Revolving Credit Loan outstanding to any Borrower
plus the Letter of Credit Liability of such Borrower at such time, but only
in respect of any Letter of Credit issued on behalf of such Borrower
(together with the aggregate amount theretofore paid by Agent or any Lender
in respect of any Lender Letter of Credit issued on behalf of such Borrower
and not debited to the Loan Account or otherwise reimbursed by such
Borrower) exceeds that portion of the Borrowing Base attributable to such
Borrower, then such Borrower shall immediately repay the Revolving Loan to
eliminate such excess.
(2) Proceeds of Asset Dispositions. At such time that the sum of all
proceeds of all Asset Dispositions received by Borrowers and their
respective Subsidiaries exceeds $10,000,000, then any proceeds received
above such amount ("Excess Proceeds") shall be subject to this subsection
2.4(B)(2). The Borrowers shall, immediately upon receipt of such Excess
Proceeds, prepay the Obligations in an amount equal to such Excess
Proceeds, and the Revolving Loan Commitment shall thereupon be deemed
permanently reduced by the amount of such Excess Proceeds; provided,
however, that, if Borrowers reasonably expect such Excess Proceeds to be
reinvested within 270 days after receipt thereof to repair or replace such
assets with like assets, then, immediately upon receipt of such Excess
Proceeds, Borrower shall deliver to Agent a written notice to such effect
and shall deliver such Excess Proceeds to Agent, and Agent, upon receipt
thereof, shall apply the amount thereof to the Revolving Loans and
concurrently establish a reserve against the Maximum Revolving Loan Amount
in such amount. The amount of such reserve shall, provided that under all
other terms and conditions of this Agreement Borrowers are then entitled to
obtain a Revolving Loan in such amount, be available to be borrowed by
Borrowers solely to finance the purchase or investment in such like assets
within such 270 day period. If Borrowers fail to obtain a Revolving Loan in
the amount of all or any portion of such reserve within such 270 day period
for such purpose, then the balance of such reserve shall be eliminated at
the end of such period and the Revolving Loan Commitment shall thereupon be
deemed permanently reduced by such amount.
(C) Voluntary Prepayments and Repayments. Borrowers may, at any time upon
not less than three (3) Business Days' prior notice to Agent, terminate the
Revolving Loan
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Commitment and thereupon shall pay in full all of the Obligations and shall
cause Agent and each Lender to be released from all liability under any Lender
Letters of Credit or, at Agent's option, Borrowers will deposit cash collateral
with Agent in an amount equal to 105% of the Letter of Credit Liability that
will remain outstanding after prepayment or repayment, all under and pursuant to
such instruments and documents in form and substance satisfactory to Agent.
(D) Payments on Business Days. Whenever any payment to be made hereunder
shall be stated to be due on a day that is not a Business Day, the payment may
be made on the next succeeding Business Day and such extension of time shall be
included in the computation of the amount of interest or fees due hereunder.
2.5 Term of this Agreement. The Commitments shall (unless earlier
terminated pursuant to this Agreement) terminate upon the earlier of (i) the
occurrence of an event specified in subsection 8.3 or (ii) the Termination Date.
Upon termination in accordance with subsection 8.3 or on the Termination Date,
all Obligations shall become immediately due and payable without notice or
demand. Notwithstanding any termination, until all Obligations have been fully
paid and satisfied, Agent, on behalf of Lenders, shall be entitled to retain
security interests in and liens upon all Collateral (all of which shall be
released at Borrowers' expense upon termination of this Agreement and the
Commitments and the payment and satisfaction in full of all Obligations), and
even after payment of all Obligations hereunder, Holding Parties' and Borrowers'
obligation to indemnify Agent and each Lender in accordance with the terms
hereof shall continue.
2.6 Statements. Agent shall render a monthly statement of account to
Borrower Representative within twenty (20) days after the end of each month.
Such statement of account shall constitute an account stated unless Borrower
Representative makes written objection thereto within thirty (30) days from the
date such statement is mailed to Borrower Representative. Borrowers promise to
pay all of their Obligations as such amounts become due or are declared due
pursuant to the terms of this Agreement.
2.7 Grant of Security Interest. To secure the payment and performance of
the Obligations, including all renewals, extensions, restructurings and
refinancings of any or all of the Obligations, each Loan Party (other than CC)
hereby grants to Agent, on behalf of Lenders, a continuing security interest,
lien and mortgage in and to all right, title and interest of such Loan Party in
the following property of such Loan Party, whether now owned or existing or
hereafter acquired or arising and regardless of where located (all being
collectively referred to as the "Collateral"): (A) Accounts, and all guaranties
and security therefor, and all goods and rights represented thereby or arising
therefrom including the rights of stoppage in transit, replevin and reclamation;
(B) Inventory; (C) general intangibles (as defined in the UCC), including the
Account Agreements; (D) documents (as defined in the UCC) or other receipts
covering, evidencing or representing goods; (E) instruments (as defined in the
UCC); (F) chattel paper (as defined in the UCC); (G) Equipment; (H) Intellectual
Property; (I) all deposit accounts of each Loan Party maintained with any bank
or financial institution; (J) all cash and other monies and property of such
Borrower and such Holding Party in the possession or under the control of Agent,
any Lender or any participant; (K) all books, records, ledger cards, files,
correspondence, computer programs, tapes, disks and related data processing
software that at any time evidence or contain information relating to any of the
property described
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above or are otherwise necessary or helpful in the collection thereof or
realization thereon; and (L) proceeds of all or any of the property described
above, including, without limitation, the proceeds of any insurance policies
covering any of the above described property.
2.8 Capital Adequacy and Other Adjustments. In the event Agent or any
Lender shall have determined that the adoption after the date hereof of any law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar requirements
or compliance by Agent or such Lender or any corporation controlling Agent or
such Lender with any request or directive regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) from any central
bank or governmental agency or body having jurisdiction does or shall have the
effect of increasing the amount of capital, reserves or other funds required to
be maintained by Agent or such Lender or any corporation controlling Agent or
such Lender and thereby reducing the rate of return on Agent's or such Lender's
or such corporation's capital as a consequence of its obligations hereunder,
then Borrowers shall from time to time within fifteen (15) days after notice and
demand from such Lender (with a copy to Agent) or Agent (together with the
certificate referred to in the next sentence) pay to Agent or such Lender
additional amounts sufficient to compensate Agent or such Lender for such
reduction. A certificate as to the amount of such cost and showing the basis of
the computation thereof submitted by Agent or any Lender to Borrower
Representative shall, absent manifest error, be final, conclusive and binding
for all purposes.
2.9 Taxes.
(A) No Deductions. Any and all payments or reimbursements made hereunder or
under the Notes shall be made free and clear of and without deduction for any
and all taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto; excluding, however, the following: taxes
imposed on the net income of any Lender or Agent by the jurisdiction under the
laws of which Agent or such Lender is organized or doing business or any
political subdivision thereof and taxes imposed on its net income by the
jurisdiction of Agent's or such Lender's applicable lending office or any
political subdivision thereof (all such taxes, levies, imposts, deductions,
charges or withholdings and all liabilities with respect thereto excluding such
taxes imposed on net income, herein "Tax Liabilities"). If any Loan Party shall
be required by law to deduct any such Tax Liabilities from or in respect of any
sum payable hereunder to Agent or any Lender, then the sum payable hereunder
shall be increased as may be necessary so that, after making all required
deductions, Agent or such Lender receives an amount equal to the sum it would
have received had no such deductions been made.
(B) Changes in Tax Laws. In the event that, subsequent to the Closing Date,
(i) any changes in any existing law, regulation, treaty or directive or in the
interpretation or application thereof, (ii) any new law, regulation, treaty or
directive enacted or any interpretation or application thereof, or (iii)
compliance by Lender with any request or directive (whether or not having the
force of law) from any governmental authority, agency or instrumentality:
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(1) does or shall subject Agent or any Lender to any tax of any kind
whatsoever with respect to this Agreement, the other Loan Documents or any
Loans made or Lender Letters of Credit issued hereunder, or change the
basis of taxation of payments to Agent or such Lender of principal, fees,
interest or any other amount payable hereunder (except for net income
taxes, or franchise taxes imposed in lieu of net income taxes, imposed
generally by federal, state or local taxing authorities with respect to
interest or commitment or other fees payable hereunder or changes in the
rate of tax on the overall net income of Agent or such Lender); or
(2) does or shall impose on Agent or any Lender any other condition or
increased cost in connection with the transactions contemplated hereby or
participations herein; and the result of any of the foregoing is to
increase the cost to Agent or such Lender of issuing any Lender Letter of
Credit or making or continuing any Loan hereunder, as the case may be, or
to reduce any amount receivable hereunder,
then, in any such case, Loan Parties shall promptly pay to Agent or such Lender,
upon its demand, any additional amounts necessary to compensate Agent or such
Lender, on an after-tax basis, for such additional cost or reduced amount
receivable, as determined by Agent or such Lender with respect to this Agreement
or the other Loan Documents. If Agent or any Lender becomes entitled to claim
any additional amounts pursuant to this subsection 2.9(B)(2), it shall promptly
notify Borrower Representative of the event by reason of which Agent or such
Lender has become so entitled. A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by Agent or any Lender to
Borrower Representative shall, absent manifest error, be final, conclusive and
binding for all purposes.
(C) Foreign Lenders. Each Lender organized under the laws of a jurisdiction
outside the United States (a "Foreign Lender") as to which payments to be made
under this Agreement or under the Notes are exempt from United States
withholding tax or are subject to United States withholding tax at a reduced
rate under an applicable statute or tax treaty shall provide to Borrower
Representative and Agent (i) a properly completed and executed Internal Revenue
Service Form 4224 or Form 1001 or other applicable form, certificate or document
prescribed by the Internal Revenue Service of the United States certifying as to
such Foreign Lender's entitlement to such exemption or reduced rate of
withholding with respect to payments to be made to such Foreign Lender under
this Agreement and under the Notes (a "Certificate of Exemption"), or (ii) a
letter from any such Foreign Lender stating that it is not entitled to any such
exemption or reduced rate of withholding (a "Letter of Non-Exemption"). Prior to
becoming a Lender under this Agreement and within fifteen (15) days after a
reasonable written request of Borrower Representative or Agent from time to time
thereafter, each Foreign Lender that becomes a Lender under this Agreement shall
provide a Certificate of Exemption or a Letter of Non-Exemption to Borrower
Representative and Agent.
If a Foreign Lender is entitled to an exemption with respect to payments to
be made to such Foreign Lender under this Agreement (or to a reduced rate of
withholding) and does not provide a Certificate of Exemption to Borrower
Representative and Agent within the time periods set forth in the preceding
paragraph, Borrowers shall withhold taxes from payments to such Foreign Lender
at the applicable statutory rates and Borrowers shall not be required to pay any
additional
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amounts as a result of such withholding; provided, however, that all such
withholding shall cease upon delivery by such Foreign Lender of a Certificate of
Exemption to Borrower Representative and Agent.
2.10 Required Termination and Prepayment. If on any date any Lender shall
have reasonably determined (which determination shall be final and conclusive
and binding upon all parties) that the making or continuation of its LIBOR Loans
has become unlawful or impossible by compliance by Lender in good faith with any
law, governmental rule, regulation or order (whether or not having the force of
law and whether or not failure to comply therewith would be unlawful), then, and
in any such event, that Lender shall promptly give notice (by telephone
confirmed in writing) to Borrower Representative and Agent of that
determination. Subject to prior withdrawal of a Notice of Borrowing or a Notice
of Conversion/Continuation or prepayment of LIBOR Loans as contemplated by
subsection 2.11, the obligation of Lender to make or maintain its LIBOR Loans
during any such period shall be terminated at the earlier of the termination of
the Interest Period then in effect or when required by law and Borrowers shall
no later than the termination of the Interest Period in effect at the time any
such determination pursuant to this subsection 2.10 is made or, earlier when
required by law, repay or prepay LIBOR Loans together with all interest accrued
thereon or convert LIBOR Loans to Base Rate Loans.
2.11 Optional Prepayment/Replacement of Agent or Lenders in Respect of
Increased Costs. Within fifteen (15) days after receipt by Borrower
Representative from Agent or any Lender (an "Affected Lender") of (1) written
notice and demand for payment pursuant to subsection 2.8 or subsection 2.9 or
(2) written notice of the inability to make or continue LIBOR Loans pursuant to
subsection 2.10, Borrowers may, at its option, notify Agent and such Affected
Lender of its intention to do one of the following:
(A) Borrowers may obtain, at Borrowers' expense, a replacement Lender
("Replacement Lender") for such Affected Lender, which Replacement Lender
shall be reasonably satisfactory to Agent. In the event Borrowers obtain a
Replacement Lender within ninety (90) days following notice of its
intention to do so, the Affected Lender shall sell and assign its Loans and
Commitments to such Replacement Lender, provided that Borrowers have
reimbursed such Affected Lender for its increased costs for which it is
entitled to reimbursement under this Agreement through the date of such
sale and assignment; or
(B) Borrowers may prepay in full all outstanding Obligations owed to
such Affected Lender and terminate such Affected Lender's Commitments.
Borrowers shall, within ninety (90) days following notice of their
intention to do so, prepay in full all outstanding Obligations owed to such
Affected Lender (including such Affected Lender's increased costs for which
it is entitled to reimbursement under this Agreement through the date of
such prepayment) and terminate such Affected Lender's Commitments.
2.12 Compensation. Borrowers shall compensate Lender, upon written request
by Lender (which request shall set forth in reasonable detail the basis for
requesting such amounts and which shall, absent manifest error, be conclusive
and binding upon all parties hereto), for all reasonable losses, expenses and
liabilities including, without limitation, any loss sustained by Lender in
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connection with the re-employment of such funds: (i) if for any reason (other
than a default by Lender) a borrowing of any LIBOR Loan does not occur on a date
specified therefor in a Notice of Borrowing, a Notice of Conversion/Continuation
or a telephonic request for borrowing or Conversion/Continuation; (ii) if any
prepayment of any of its LIBOR Loans occurs on a date that is not the last day
of an Interest Period applicable to that Loan; (iii) if any prepayment of any of
its LIBOR Loans is not made on any date specified in a notice of prepayment
given by Borrower Representative; or (iv) as a consequence of any other default
by Borrowers to repay their LIBOR Loans when required by the terms of this
Agreement; provided that during the period while any such amounts have not been
paid, Lender shall reserve an equal amount from amounts otherwise available to
be borrowed under the Revolving Loan.
2.13 Booking of LIBOR Loans. Each Lender may make, carry or transfer LIBOR
Loans at, to, or for the account of, any of its branch offices or the office of
an affiliate of Lender.
2.14 Assumptions Concerning Funding of LIBOR Loans. Calculation of all
amounts payable to Lender under subsection 2.12 shall be made as though each
Lender had actually funded its relevant LIBOR Loan through the purchase of a
LIBOR deposit bearing interest at LIBOR in an amount equal to the amount of that
LIBOR Loan and having maturity comparable to the relevant Interest Period and
through the transfer of such LIBOR deposit from an offshore office to a domestic
office in the United States of America; provided, however, that each Lender may
fund each of its LIBOR Loans in any manner it sees fit and the foregoing
assumption shall be utilized only for the calculation of amounts payable under
subsection 2.12.
2.15 Fanning Cash Pledge Agreement. In accordance with the Fanning Cash
Pledge Agreement: (i) $2,500,000 of the $5,000,000 pledged thereunder shall be
released if the amount of the Unused Availability shall be not less than
$15,000,000 for fifteen (15) consecutive Business Days; and (ii) the remaining
$2,500,000 pledged thereunder shall be released, and the Fanning Cash Pledge
Agreement shall be terminated, if, subsequent to the date on which the release
under clause (i) shall have occurred, the amount of the Unused Availability
shall be not less than $17,500,000 for fifteen (15) consecutive Business Days;
provided that no such release or termination shall occur unless the Cash
Dominion Arrangement (as defined in Section 5.6) is then in effect.
SECTION 3. CONDITIONS TO LOANS
3.1 Conditions to Loans. The obligations of Agent and each Lender to make
Loans and the obligation of Agent or any Lender to issue Lender Letters of
Credit on the Closing Date and on each Funding Date are subject to satisfaction
of all of the conditions set forth below.
(A) Closing Deliveries. Agent shall have received, in form and
substance satisfactory to Agent and Lenders, all documents, instruments and
information identified on Schedule 3.1(A) and all other agreements, notes,
certificates, orders, authorizations, financing statements, mortgages and
other documents which Agent may at any time reasonably request.
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(B) Security Interests. Agent and Lenders shall have received
satisfactory evidence that all security interests and liens granted to
Agent for the benefit of Lenders pursuant to this Agreement or the other
Loan Documents have been duly perfected and constitute first priority liens
on the Collateral, subject only to Permitted Encumbrances.
(C) Closing Date Availability. After giving effect to the consummation
of the transactions contemplated hereunder on the Closing Date and the
payment by Borrowers of all costs, fees and expenses relating thereto, the
Maximum Revolving Loan Amount on the Closing Date shall exceed the
Revolving Loan plus the Letter of Credit Reserve by at least $12,000,000.
(D) Representations and Warranties. The representations and warranties
contained herein and in the Loan Documents shall be true, correct and
complete in all material respects on and as of that Funding Date to the
same extent as though made on and as of that date, except for any
representation or warranty limited by its terms to a specific date and
taking into account any amendments to the Schedules or Exhibits as a result
of any disclosures made by Holding Parties and Borrowers to Agent after the
Closing Date and approved by Agent.
(E) Fees. With respect to Loans or Lender Letters of Credit to be made
or issued on the Closing Date, Borrowers shall have paid the fees payable
on the Closing Date referred to in subsection 2.3.
(F) No Default. No event shall have occurred and be continuing or
would result from the consummation of the requested borrowing or notice
requesting issuance of a Lender Letter of Credit that would constitute an
Event of Default or a Default.
(G) Performance of Agreements. Each Loan Party shall have performed in
all material respects all agreements and satisfied all conditions which any
Loan Document provides shall be performed by it on or before that Funding
Date.
(H) No Prohibition. No order, judgment or decree of any court,
arbitrator or governmental authority shall purport to enjoin or restrain
Agent or any Lender from making any Loans or issuing any Lender Letters of
Credit.
(I) No Litigation. There shall not be pending or, to the knowledge of
Holding Parties or Borrowers, threatened, any action, charge, claim,
demand, suit, proceeding, petition, governmental investigation or
arbitration by, against or affecting any Loan Party or any of its
Subsidiaries or any property of any Loan Party or any of its Subsidiaries
that has not been disclosed to Agent by Borrowers in writing, and there
shall have occurred no development in any such action, charge, claim,
demand, suit, proceeding, petition, governmental investigation or
arbitration that, in the opinion of Agent, would reasonably be expected to
have a Material Adverse Effect.
(J) Consummation of the Uniforce Acquisition. Either: (x) the Uniforce
Acquisition (i) shall be concurrently consummated on the Closing Date
pursuant to the terms and conditions of the Uniforce Acquisition Documents
(and none of the terms and conditions of the Uniforce Acquisition Documents
shall have been waived or modified except with the prior written
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consent of Agent and Lenders) and (ii) shall be consummated in compliance
with all applicable laws and with all necessary consents and approvals; or
(y) Agent and Lenders shall be satisfied in their sole and absolute
discretion that the tender offer by CCI for shares of USI referred to and
provided for in the Uniforce Acquisition Documents shall have been
consummated, that CCI shall have concurrently obtained control of USI and
each of USI's Subsidiaries and that the final consummation of the Uniforce
Acquisition shall occur not later than ten (10) Business Days thereafter;
provided, that if, as a result of the consummation of such tender offer,
COI shall hold ninety percent (90%) or more of the outstanding shares of
USI, then CCI shall cause the Uniforce Acquisition to be consummated not
later than three (3) Business Days after the Closing Date through the use
of a so-called "short-form merger" under applicable law of the State of New
York. Agent shall in any event be satisfied that there are no state or
federal takeover laws and no super-majority charter provisions applicable
to the Uniforce Acquisition, or that any conditions to avoiding such
restrictions have been satisfied and that all conditions precedent to
closing under the Uniforce Acquisition Agreement and the other Uniforce
Acquisition Documents have been met.
(K) Uniforce Acquisition Documents. Agent shall have received
certified copies of the Uniforce Acquisition Agreement and the other
Uniforce Acquisition Documents, each of which shall be satisfactory to
Agent and Lenders and in full force and effect.
3.2 Additional Conditions to Loans to Fund Permitted Acquisitions. The
obligations of Agent and each Lender to make Loans to fund Permitted
Acquisitions are subject to satisfaction of all of the conditions set forth in
subsection 7.6, in addition to those conditions set forth in subsection 3.1.
SECTION 4. THE HOLDING PARTIES' AND BORROWERS'
REPRESENTATIONS AND WARRANTIES
To induce Agent and each Lender to enter into this Agreement, and to make
Loans and to issue Lender Letters of Credit, each Loan Party represents and
warrants to Agent and each Lender that the following statements are and will be
true, correct and complete:
4.1 Organization, Powers, Capitalization.
(A) Organization and Powers. Each of the Loan Parties is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and qualified to do business in all states
where such qualification is required except where failure to be so
qualified could not be reasonably expected to have a Material Adverse
Effect. Each of the Loan Parties has all requisite corporate power and
authority to own and operate its properties, to carry on its business as
now conducted and proposed to be conducted and to enter into each Loan
Document.
(B) Capitalization. Except as set forth on Schedule 4.1(B), all issued
and outstanding shares of capital stock of each of the Loan Parties are
duly authorized and validly issued, fully paid, nonassessable, and are free
and clear of all Liens other than those in favor of Agent for
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the benefit of Lenders, and all such shares were issued in compliance with
all applicable state and federal laws concerning the issuance of
securities. The capital stock of each of the Loan Parties is owned by the
stockholders and in the amounts set forth on Schedule 4.1(B) (in the case
of CC with shares held by the public being specified in the aggregate). To
the best knowledge of Holding Parties, each Person or group having
beneficial ownership of more than five percent (5%) of the capital stock of
any of the Holding Parties is identified on Schedule 4.1(B) (the terms
"group" and "beneficial ownership", as used herein, having the meanings
given in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, and Rule 13d-3 promulgated thereunder). No shares of the capital
stock of any Loan Party, other than those described above, are issued and
outstanding. Except as set forth on Schedule 4.1(B), there are no
preemptive or other outstanding rights, options, warrants, conversion
rights or similar agreements or understandings for the purchase or
acquisition from any Loan Party, of any shares of capital stock or other
securities of any such entity.
4.2 Authorization of Borrowing, No Conflict. Each Borrower, each Holding
Party and each of the other Loan Parties has the corporate power and authority
to incur the Obligations and to grant security interests in the Collateral. On
the Closing Date, the execution, delivery and performance of the Loan Documents
by each Loan Party signatory thereto will have been duly authorized by all
necessary corporate and shareholder action. The execution, delivery and
performance by each Loan Party of each Loan Document to which it is a party and
the consummation of the transactions contemplated by this Agreement and the
other Loan Documents by each Loan Party do not contravene and will not be in
contravention of any applicable law, the corporate charter or bylaws of any Loan
Party or any agreement or order by which any Loan Party or any Loan Party's
property is bound. This Agreement is, and the other Loan Documents, including
the Notes when executed and delivered will be, the legally valid and binding
obligations of the applicable Loan Parties respectively, each enforceable
against the Loan Parties, as applicable, in accordance with their respective
terms.
4.3 Financial Condition. All financial statements concerning Holding
Parties, Borrowers and their respective Subsidiaries which have been or will
hereafter be furnished by Holding Parties, Borrowers and their respective
Subsidiaries to Agent or any Lender pursuant to this Agreement have been or will
be prepared in accordance with GAAP consistently applied throughout the periods
involved (except as disclosed therein) and do or will present fairly the
financial condition of the corporations covered thereby as at the dates thereof
and the results of their operations for the periods then ended. The Pro Forma
was prepared by Holding Parties and Borrowers based on the unaudited
consolidated balance sheet of Holding Parties, Borrowers and their respective
Subsidiaries dated September 30, 1997 and, during the period from such date
through the Closing Date, there has been no material change in the business,
operations or financial condition of Holding Parties, Borrowers and their
respective Subsidiaries which would be required to be reflected on the
consolidated financial statements of Holding Parties, Borrowers and their
respective Subsidiaries on the Closing Date in accordance with GAAP. The
Projections delivered and to be delivered have been and will be prepared by
Holding Parties and Borrowers in light of the past operations of the business of
Holding Parties, Borrowers and their respective Subsidiaries, and such
Projections represent and will represent the good faith estimate of Holding
Parties and Borrowers and their respective senior management concerning the most
probable course of its business as of the date such Projections are prepared and
delivered.
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4.4 Indebtedness and Liabilities. As of the Closing Date, no Loan Party has
(a) any Indebtedness except as reflected on Schedule 4.4 and the Pro Forma or
(b) any Liabilities other than as reflected on the Pro Forma or as incurred in
the ordinary course of business following the date of the Pro Forma.
4.5 Account Warranties. As to each existing Account: (a) at the time of its
creation, such Account was a valid, bona fide account, representing an
undisputed indebtedness incurred by the named account debtor for goods actually
sold and delivered or for services completely rendered; (b) except to the extent
of Accounts not exceeding $100,000 outstanding at any time in the aggregate
(which $100,000 amount shall be deducted by Agent as a reserve from the
Borrowing Base), to the best of each of their knowledge, there are no setoffs,
offsets or counterclaims, genuine or otherwise, against such Account; (c) such
Account does not represent a sale to an Affiliate or a consignment, sale or
return or a bill and hold transaction; (d) no agreement exists permitting any
deduction or discount (other than the discount stated on the invoice); (e) the
Loan Party that holds such Account is the lawful owner of the Account and has
the right to assign the same to Agent, for the benefit of Lenders; (f) such
Account is free of all security interests, liens and encumbrances other than
those in favor of Agent, on behalf of Lenders; and (g) such Account is due and
payable in accordance with its terms.
4.6 Names. Schedule 4.6 sets forth all names, trade names, fictitious names
and business names under which any Loan Party currently conducts business or has
at any time during the past five years conducted business.
4.7 Locations; FEIN. Schedule 4.7 sets forth the location of each Loan
Party's principal place of business, chief executive office, the location of
each Loan Party's books and records, the location of all other offices of such
Loan Party and all Collateral locations, and such locations are such Loan
Party's sole locations for its business and the Collateral. Each Loan Party's
federal employer identification number is also set forth on Schedule 4.7.
4.8 Title to Properties; Liens. Each Loan Party and each of its
Subsidiaries has good, sufficient and legal title, subject to Permitted
Encumbrances, to all its respective material properties and assets. Except for
Permitted Encumbrances, all such properties and assets are free and clear of
Liens. To the best knowledge of any Holding Party or any Borrower after due
inquiry, there are no actual, threatened or alleged defaults with respect to any
leases of real property under which any Holding Party, any Borrower or any of
their respective Subsidiaries is lessee or lessor which would have a Material
Adverse Effect.
4.9 Litigation; Adverse Facts. Except as set forth on Schedule 4.9, there
are no judgments outstanding against any Loan Party or affecting any property of
any Loan Party nor is there any action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration now pending or, to the best
knowledge of any Holding Party or any Borrower after due inquiry, threatened
against or affecting any Loan Party or any property of any Loan Party which
could reasonably be expected to result in any Material Adverse Effect. No Loan
Party has received any opinion or memorandum or legal advice from legal counsel
to the effect that it is exposed to any liability which could reasonably be
expected to result in any Material Adverse Effect.
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4.10 Payment of Taxes. All material tax returns and reports of any Loan
Party and each of its Subsidiaries required to be filed by any of them have been
timely filed, and all taxes, assessments, fees and other governmental charges
upon such Persons and upon their respective properties, assets, income and
franchises which are shown on such returns as due and payable have been paid
when due and payable or are being contested in good faith by appropriate
proceedings and appropriate reserves therefor have been established in
accordance with GAAP. Except as set forth on Schedule 4.10, as. As of the
Closing Date, none of the United States income tax returns of any Loan Party or
any of its Subsidiaries are under audit. No tax liens have been filed and no
claims (except as otherwise permitted by Section 5.9) are being asserted with
respect to any such taxes. The charges, accruals and reserves on the books of
any Loan Party and each of its Subsidiaries in respect of any taxes or other
governmental charges are in accordance with GAAP.
4.11 Performance of Agreements. None of the Loan Parties and none of their
respective Subsidiaries is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
contractual obligation of any such Person, and no condition exists that, with
the giving of notice or the lapse of time or both, would constitute such a
default.
4.12 Employee Benefit Plans. Each Loan Party, each of its Subsidiaries and
each ERISA Affiliate is in compliance in all material respects with all
applicable provisions of ERISA, the IRC and all other applicable laws and the
regulations and interpretations thereof with respect to all Employee Benefit
Plans. No material liability has been incurred by any Loan Party, any of its
Subsidiaries or any ERISA Affiliate which remains unsatisfied for any funding
obligation, taxes or penalties with respect to any Employee Benefit Plan.
4.13 Intellectual Property. Each Loan Party and each of its Subsidiaries
owns, is licensed to use or otherwise has the right to use, all Intellectual
Property used in or necessary for the conduct of its business as currently
conducted, and all such Intellectual Property is identified on Schedule 4.13.
4.14 Broker's Fees. No broker's or finder's fee or commission will be
payable with respect to any of the transactions contemplated hereby.
4.15 Environmental Compliance. Each Loan Party has been and is currently in
compliance with all applicable Environmental Laws, including obtaining and
maintaining in effect all permits, licenses or other authorizations required by
applicable Environmental Laws. There are no claims, liabilities, investigations,
litigation, administrative proceedings, whether pending or threatened, or
judgments or orders relating to any Hazardous Materials asserted or, to the best
knowledge of each Loan Party, threatened against any Loan Party or relating to
any real property currently or formerly owned, leased or operated by any Loan
Party.
4.16 Solvency. After giving effect to the transactions contemplated by the
Loan Documents, and as of, from and after the date of this Agreement, each Loan
Party (after taking into consideration all rights of contribution and indemnity
such Loan Party has against the other Loan Party): (a) owns and will own assets
the fair salable value of which are (i) greater than the total
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amount of its liabilities (including contingent liabilities) and (ii) greater
than the amount that will be required to pay the probable liabilities of such
Loan Party as they mature; (b) has capital that is not unreasonably small in
relation to its business as presently conducted or any contemplated or
undertaken transaction; and (c) does not intend to incur and does not believe
that it will incur debts beyond its ability to pay such debts as they become
due. There is no material fact known to any Holding Party or any Borrower that
has or could have a Material Adverse Effect and that has not been fully
disclosed herein or in such other documents, certificates and statements
furnished to Agent or Lenders for use in connection with the transactions
contemplated hereby.
4.17 Disclosure. No representation or warranty of any Loan Party or any of
its Subsidiaries contained in this Agreement, the financial statements, the
other Loan Documents, or any other document, certificate or written statement
furnished to Agent or any Lender by or on behalf of any such Person for use in
connection with the Loan Documents contains any untrue statement of a material
fact or omitted, omits or will omit to state a material fact necessary in order
to make the statements contained herein or therein not misleading in light of
the circumstances in which the same were made. The Projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by such Persons to be reasonable at the time
made, it being recognized by Agent and Lenders that such projections as to
future events are not to be viewed as facts and that actual results during the
period or periods covered by any such projections may differ from the projected
results. There is no material fact known to any Loan Party that has had or will
have a Material Adverse Effect and that has not been disclosed herein or in such
other documents, certificates and statements furnished to Agent or any Lender
for use in connection with the transactions contemplated hereby.
4.18 Insurance. Each Loan Party and each of its Subsidiaries maintains
adequate insurance policies for public liability, workers compensation, employee
benefit liability, fidelity liability, directors' and officers' liability,
errors and omissions, property damage for its business and properties, product
liability, and business interruption in amounts customarily carried or
maintained by corporations of established reputation engaged in similar
businesses. Such policies are in full force and effect. No notice of
cancellation has been received with respect to such policies and such Loan Party
and each of its Subsidiaries is in compliance with all conditions contained in
such policies.
4.19 Compliance with Laws. Neither any Loan Party nor any of its
Subsidiaries is in violation of any law, ordinance, rule, regulation, order,
policy, guideline or other requirement of any domestic or foreign government or
any instrumentality or agency thereof, having jurisdiction over the conduct of
its business or the ownership of its properties, including, without limitation,
any violation relating to any use, release, storage, transport or disposal of
any Hazardous Material, which violation would subject such Loan Party or any of
its Subsidiaries, or any of its respective officers to criminal liability or
have a Material Adverse Effect and no such violation has been alleged.
4.20 Bank Accounts. Schedule 4.20 sets forth the account numbers and
locations of all bank accounts of each Loan Party.
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4.21 Subsidiaries. Neither any Holding Party nor any Borrower has any
Subsidiaries other than as set forth on Schedule 4.1(B).
4.22 Employee Matters. Except as set forth on Schedule 4.22, (a) no Loan
Party nor any of such Loan Party's employees is subject to any collective
bargaining agreement, (b) no petition for certification or union election is
pending with respect to the employees of any Loan Party and no union or
collective bargaining unit has sought such certification or recognition with
respect to the employees of any Loan Party and (c) there are no strikes,
slowdowns, work stoppages or controversies pending or, to the best knowledge of
any Loan Party after due inquiry, threatened between any Loan Party and its
respective employees, other than employee grievances arising in the ordinary
course of business which could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. Except as set forth
on Schedule 4.22, no Loan Party nor any of its Subsidiaries is subject to an
employment contract.
4.23 Governmental Regulation. None of the Loan Parties is, or after giving
effect to any loan will be, subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act or the Investment Company Act
of 1940 or to any federal or state statute or regulation limiting its ability to
incur indebtedness for borrowed money.
4.24 Uniforce Acquisition. The Uniforce Acquisition Documents have been
duly executed and delivered and are in full force and effect. The
representations and warranties contained in the Uniforce Acquisition Documents
are true and correct in all respects on the date hereof and will be true and
correct in all respects on the Closing Date, as if made on such date, and Agent
and Lenders shall be entitled to rely upon such representations and warranties
with the same force and effect as if they were incorporated in this Agreement
and made to Agent and each Lender directly as of the date hereof and the Closing
Date. The Uniforce Acquisition shall have been consummated in accordance with
and pursuant to the terms and conditions of the Uniforce Acquisition Documents
(without any waiver or amendment of any term or condition therein not consented
to by Agent and Lenders) and in compliance with all applicable laws and all
necessary approvals.
4.25 Amendments to Schedules. The Loan Parties may, at any time and from
time to time and subject to subsection 5.13, amend any one or more of the
Schedules referred in this Section 4 and any representation or warranty
contained herein which refers to any such Schedule shall from and after the date
of any such amendment refer to such Schedule as so amended; provided, however,
that in no event may the Loan Parties amend any such Schedule if such amendment
would reflect or evidence a Default or Event of Default.
SECTION 5. AFFIRMATIVE COVENANTS
Each Loan Party covenants and agrees that, so long as any of the
Commitments hereunder shall be in effect and until payment in full of all
Obligations and termination of all Lender Letters of Credit, unless Requisite
Lenders shall otherwise give their prior written consent, each Loan Party shall
perform, and shall cause each of its Subsidiaries to perform, all covenants in
this Section 5 applicable to such Person or Persons.
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5.1 Financial Statements and Other Reports. The Holding Parties and
Borrowers will maintain, and cause each of their respective Subsidiaries to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
conformity with GAAP. Borrowers will deliver to Agent and each Lender (unless
specified to be delivered solely to Agent) the financial statements and other
reports described below.
(A) Monthly Financials. As soon as available, and in any event within
forty-five (45) days after the end of each month, Borrowers will deliver
(1) the consolidated balance sheet of Holding Parties, Borrowers and their
respective Subsidiaries as at the end of such month and the related
consolidated and consolidating statement of income and consolidated
statement of cash flow for such month and for the period from the beginning
of the then current Fiscal Year to the end of such month, and (2) a
schedule of the outstanding Indebtedness for borrowed money of each Loan
Party and its Subsidiaries describing in reasonable detail each such debt
issue or loan outstanding and the principal amount and amount of accrued
and unpaid interest with respect to each such debt issue or loan.
(B) Quarterly Financials. (i) As soon as available, and in any event
within one (1) Business Day after CC files its quarterly report on Form
10-Q with the Securities and Exchange Commission for each of its first
three Fiscal Quarters in each Fiscal Year, Borrowers will deliver, or will
cause to be delivered, to Agent, such report; and (ii) in respect of the
fourth Fiscal Quarter in each Fiscal Year, as soon as available, and in any
event within forty-five (45) days after the end of such Fiscal Quarter,
Borrowers will deliver to the Agent financial statements that are
equivalent in format to the financial statements that would have been
included in a quarterly report on Form 10- Q made by CC for such Fiscal
Quarter.
(C) Year-End Financials. As soon as available, and in any event not
later than one hundred five (105) days after the end of each Fiscal Year
or, if earlier, the date on which CC files its annual report on Form 10-K
with the Securities and Exchange Commission in respect of such Fiscal Year,
Borrowers will deliver: (1) the consolidated balance sheet of Holding
Parties, Borrowers and their respective Subsidiaries as at the end of such
year and the related consolidated statements of income, stockholders'
equity and cash flow for such Fiscal Year; (2) a schedule of the
outstanding Indebtedness of Holding Parties, Borrowers and their respective
Subsidiaries describing in reasonable detail each such debt issue or loan
outstanding and the principal amount and amount of accrued and unpaid
interest with respect to each such debt issue or loan; (3) a report with
respect to the financial statements from a firm of independent certified
public accountants selected by Holding Parties and Borrowers and acceptable
to Agent, which report shall be unqualified as to going concern and scope
of audit of Holding Parties, Borrowers and their respective Subsidiaries
and shall state that (a) such consolidated financial statements present
fairly the consolidated financial position of Holding Parties, Borrowers
and their respective Subsidiaries as at the dates indicated and the results
of their operations and cash flow for the periods indicated in conformity
with GAAP and (b) that the examination by such accountants in connection
with such consolidated financial statements has been made in accordance
with generally accepted auditing standards; and (4) copies of the
consolidating financial statements of Holding Parties, Borrowers and their
respective Subsidiaries, including (a) consolidating balance sheets of
Holding Parties, Borrower and their
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respective Subsidiaries as at the end of such Fiscal Year showing
intercompany eliminations and (b) related consolidating statements of
earnings of Holding Parties, Borrowers and their respective Subsidiaries
showing intercompany eliminations.
(D) Accountants' Certification and Reports. Together with each
delivery of consolidated financial statements of Holding Parties, Borrowers
and their respective Subsidiaries pursuant to subsection 5.1(C), Borrowers
will deliver (1) a written statement by their independent certified public
accountants (a) stating that the examination has included a review of the
terms of this Agreement as same relate to accounting matters and (b)
stating whether, in connection with the examination, any condition or event
that constitutes a Default or an Event of Default has come to their
attention and, if such a condition or event has come to their attention,
specifying the nature and period of existence thereof and (2) a copy of a
letter addressed to such accountants from CC informing such accountants
that a primary intent of Holding Parties and Borrowers was to have the
professional services such accountants provided to Holding Parties and
Borrowers in preparing their audit report and the letter referred to in
this subsection 5.1(D) benefit or influence Agent and Lenders, and
identifying Agent and Lenders as parties that Holding Parties and Borrowers
have indicated intend to rely on such professional services provided to
Holding Parties and Borrowers by such accountants. Promptly upon receipt
thereof, Holding Parties and Borrowers will deliver copies of all
significant reports submitted to Holding Parties and Borrowers by
independent public accountants in connection with each annual, interim or
special audit of the financial statements of Holding Parties, Borrowers and
their respective Subsidiaries made by such accountants, including the
comment letter submitted by such accountants to management in connection
with their annual audit.
(E) Compliance Certificate. Together with the delivery of each set of
financial statements referenced in subparts (A), (B) and (C) of this
subsection 5.1, Borrowers will deliver a Compliance Certificate, together
with (i) copies of the calculations and work-up employed to determine
Holding Parties' and Borrowers' compliance or noncompliance with the
financial covenants set forth in Section 6 and subsection 7.1 and (ii) a
report showing in reasonable detail the calculation of the Applicable Base
Rate Margin and the Applicable LIBOR Margin as at the effective date of
such financial statements (the "Applicable Margin Report").
(F) Borrowing Base Certificates, Registers and Journals. On each
Business Day from and after the Closing Date and through the later of
December 31, 1997 or the date on which the Cash Dominion Arrangement (as
defined in Section 5.6 hereof) becomes effective, and, thereafter, once
during each week, on the specific day in each week specified from time to
time by the Agent (or on each Business Day if requested by Agent following
the occurrence of a Default or when Unused Availability is less than
$5,000,000) Borrowers shall deliver to Agent: a Borrowing Base Certificate
updated to reflect the most recent sales and collections of each Borrower
through the immediately preceding week (or, if requested by Agent on a
daily basis pursuant hereto, on the immediately preceding Business Day) and
an assignment schedule of all Accounts created or acquired by each Borrower
during such week or, if applicable, on such day, together with a summary
aging of all such Accounts. Within ten (10) Business Days after the end of
each month, Borrowers shall deliver to Agent (a) an invoice register or
sales journal describing all sales of each
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Borrower for such month, in form and substance reasonably satisfactory to
Agent, and, if Agent so requests, copies of invoices evidencing such sales
and proofs of delivery relating thereto, (b) a cash receipts journal for
such month, (c) a schedule of each customer which is owed a credit or other
amount in excess of $25,000 (which amount shall be deducted by Agent as a
reserve from the Borrowing Base) by any Borrower and listing each such
amount and (d) a schedule of all charge-backs relating to any Purchased
Account or Service Fee Account and listing each such amount.
(G) Reconciliation Reports and Listings and Agings. Within fifteen
(15) Business Days after the last day of each month and from time to time
upon the request of Agent, Borrowers will deliver to Agent: (i) an aged
trial balance of all then existing Accounts of each Borrower; (2) an aged
trial balance of all then existing accounts payable; and (3) from and after
the delivery by Agent to the Collecting Banks of the direction referred to
in Section 5.6, a Reconciliation Report as at the last day of such period.
All such reports shall be in form and substance reasonably satisfactory to
Agent.
(H) Management Report. Together with each delivery of financial
statements of Holding Parties, Borrowers and their respective Subsidiaries
pursuant to subdivisions (A) (on a quarterly basis only), and (B) of this
subsection 5.1, Borrowers will deliver a copy of the complete management's
discussions and analysis of financial condition and results of operations
included in CC's Form 10-K or Form 10-Q, as applicable, filed with the
Securities and Exchange Commission for the period covered by such financial
statements. The information above shall be presented in reasonable detail
and shall be certified by the chief financial officer of CC and each
Borrower to the effect that such information fairly presents the results of
operations and financial condition of CC and its Subsidiaries as at the
dates and for the periods indicated.
(I) Government Notices. Loan Parties will deliver to Agent promptly
after receipt copies of all notices, requests, subpoenas, inquiries or
other writings received from any governmental agency concerning any
Employee Benefit Plan, the violation or alleged violation of any
Environmental Laws, the storage, use or disposal of any Hazardous Material,
the violation or alleged violation of the Fair Labor Standards Act or a
Loan Party's payment or non-payment of any taxes including any tax audit.
(J) Events of Default, etc. Promptly upon (but in any event within
five (5) Business Days after) any officer of any Loan Party obtaining
knowledge of any of the following events or conditions, such Loan Party
shall deliver a certificate of such Loan Party's chief executive officer
specifying the nature and period of existence of such condition or event
and what action such Loan Party has taken, is taking and proposes to take
with respect thereto: (1) any condition or event that constitutes an Event
of Default or Default; (2) any notice of default that any Person has given
to any Loan Party or any of its Subsidiaries or any other action taken with
respect to a claimed default; or (3) any Material Adverse Effect.
(K) Trade Names. Borrowers will give Agent at least ten (10) days
advance written notice of any change of name or of any new trade name or
fictitious business name by any Loan Party or any of its Subsidiaries. Each
Loan Party's use of any trade name or fictitious business name will be in
compliance with all laws regarding the use of such names.
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(L) Locations. Borrowers will give Agent at least thirty (30) days
advance written notice of any change in any Loan Party's principal place of
business or any change in the location of its books and records or the
Collateral or of any new location for its books and records or the
Collateral.
(M) Bank Accounts. Loan Parties will give Agent prompt notice of any
new bank accounts any Loan Party intends to establish prior to its opening
same.
(N) Litigation. Promptly upon (but in any event within five (5)
Business Days after) any officer or any Loan Party obtaining knowledge of
(1) the institution of any action, suit, proceeding, governmental
investigation or arbitration against or affecting any Loan Party or any
property of any Loan Party not previously disclosed by a Loan Party to
Agent or (2) any material development in any action, suit, proceeding,
governmental investigation or arbitration at any time pending against or
affecting any Loan Party or any property of any Loan Party which could
reasonably be expected to have a Material Adverse Effect, Loan Parties will
promptly give notice thereof to Agent and provide such other information as
may be reasonably available to them to enable Agent and its counsel to
evaluate such matter.
(O) Projections. As soon as available and in any event no later than
the end of each Fiscal Year of a Holding Party, or Borrower or any other
Loan Party, Borrowers will deliver preliminary Projections of Holding
Parties, Borrowers and their respective Subsidiaries for the forthcoming
three Fiscal Years, year by year, and for the forthcoming Fiscal Year,
month by month, and shall deliver the final Projections for such periods as
soon as available and in any event no later than January 31 in the first of
such three Fiscal Years.
(P) Other Indebtedness Notices. Borrowers shall promptly deliver
copies of all notices given or received by (but in any event with five (5)
Business Days after receipt from) any Loan Party and any of its
Subsidiaries with respect to noncompliance with any term or condition
related to any Indebtedness in excess of $250,000 either individually or in
the aggregate, and shall promptly notify Lenders and Agent of any potential
or actual event of default with respect to any such Indebtedness.
(Q) Other Information. With reasonable promptness, Borrowers will
deliver such other information and data with respect to any Loan Party, any
Subsidiary of any Loan Party or the Collateral as Agent or any Lender may
reasonably request from time to time.
(R) Opening Balance Sheet. As soon as available and in any event
within ninety (90) days after the Closing Date, Borrowers will deliver a
consolidated and consolidating Closing Date balance sheet, certified by the
chief financial officer of CC and each Borrower as fairly presenting the
consolidated and consolidating financial condition of CC and its
Subsidiaries in accordance with GAAP, subject to year-end audit
adjustments.
(S) Public Filings. Within one (1) Business Day after the filing or
release thereof, Borrowers will deliver a copy of each registration
statement (and amendment and supplement thereto), report, press release,
prospectus, proxy statement or other filing or disclosure
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made with any securities commission, exchange or association or under the
Securities Act of 1933, the Securities Exchange Act of 1934, any related
laws or regulations or any comparable state acts, laws or regulations.
5.2 Access to Accountants and Management. The Loan Parties authorize Agent
and Lenders to discuss the financial condition and financial statements of any
Loan Party and its Subsidiaries with such Loan Party's independent public
accountants upon reasonable notice to Borrower Representative of its intention
to do so, and authorizes such accountants to respond to all of Agent's and
Lenders' inquiries. Each Lender may, with the consent of Agent, which will not
be unreasonably denied, confer with any Loan Party's management directly
regarding such Loan Party's business, operations and financial condition.
5.3 Inspection. The Loan Parties shall permit Agent and any authorized
representatives designated by Agent to visit and inspect any of the properties
of any Loan Party or any of its Subsidiaries, including their financial and
accounting records, and in conjunction with such inspection, to make copies and
take extracts therefrom, and to discuss their affairs, finances and business
with their officers and independent public accountants, at such reasonable times
during normal business hours and as often as may be reasonably requested. Each
Lender may, with the consent of Agent, which consent will not be unreasonably
denied, accompany Agent on any such visit or inspection.
5.4 Collateral Records. The Loan Parties shall keep full and accurate books
and records relating to the Collateral and shall mark such books and records to
indicate Agent's security interests in the Collateral, for the benefit of
Lenders.
5.5 Account Covenants; Verification. Borrowers shall, at their own expense:
(a) cause all invoices evidencing Accounts and all copies thereof to bear a
notice that such invoices are payable to the lockboxes established in accordance
with subsection 5.6 and (b) use their best efforts to assure prompt payment of
all amounts due or to become due under the Accounts. Discounts, credits or
allowances will be issued, granted or allowed by any Borrower to customers and
returns will be accepted solely in accordance with the ordinary course of such
Borrower's business and consistent with past practices, provided that, upon
written notice to such effect given by Agent at any time during the existence of
any Event of Default, such practice shall cease. Borrowers will immediately
notify Agent in the event that a customer alleges any dispute or claim with
respect to an Account if the amount in dispute is, or the claim involves an
amount, in excess of $50,000 or of any other circumstances known to any Borrower
that may impair the validity or collectibility of such an amount in respect of
any Account. Agent shall have the right, at any time or times hereafter, to
verify the validity, amount or any other matter relating to an Account, by mail,
telephone or in person. After the occurrence of a Default or an Event of
Default, Borrowers shall not, without the prior consent of Agent, adjust, settle
or compromise the amount or payment of any Account, or release wholly or partly
any customer or obligor thereof, or allow any credit or discount thereon.
5.6 Collection of Accounts and Payments; Cash Management Arrangements. (a)
Within forty-five (45) days after the Closing Date, Borrowers shall establish
lockboxes and blocked accounts (collectively, "Blocked Accounts") in Borrowers'
names or, by separate agreement with
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Agent, in Agent's name, with such banks ("Collecting Banks") as are acceptable
to Agent (subject to irrevocable instructions acceptable to Agent as hereinafter
set forth and contained in agreements in form and substance acceptable to Agent
among the applicable Borrowers and Collecting Banks and Agent ("Blocked Account
Agreement")) to which all account debtors shall directly remit all payments on
Accounts and in which Borrowers will immediately deposit all payments
constituting proceeds of Collateral in the identical form in which such payment
was made, whether by cash or check. The Collecting Banks shall acknowledge and
agree, in a manner satisfactory to Agent, that all payments made to the Blocked
Accounts are the sole and exclusive property of Agent, for the benefit of
Lenders, and that the Collecting Banks have no right of setoff against the
Blocked Accounts and that all such payments received will, upon written
direction from Agent to the Collecting Banks, be promptly transferred to Agent's
Account. Borrowers hereby agree that all payments received by Agent, whether by
cash, check, wire transfer or any other instrument, made to such Blocked
Accounts or otherwise received by Agent and whether on the Accounts or as
proceeds of other Collateral or otherwise will be the sole and exclusive
property of Agent, for the benefit of Lenders. Borrowers shall irrevocably
instruct each Collecting Bank, upon notice from Agent, immediately to transfer
all payments or deposits to the Blocked Accounts into Agent's Account. Borrowers
and any of their Affiliates, employees, agents or other Persons acting for or in
concert with any Borrower, shall, acting as trustee for Agent, receive, as the
sole and exclusive property of Agent, any monies, checks, notes, drafts or any
other payments relating to and/or proceeds of Accounts or other Collateral which
come into the possession or under the control of any Borrower or any of such
Borrower's Affiliates, employees, agents or other Persons acting for or in
concert with any Borrower, and immediately upon receipt thereof, Borrowers or
such Persons shall remit the same or cause the same to be remitted, in kind, to
the Blocked Accounts or, upon written direction from Agent, to Agent at its
address set forth in subsection 10.4 below.
(b) Within forty-five (45) days after the Closing Date, Borrowers shall, in
addition to the matters referred to in (a) above, establish a cash management
arrangement pursuant to such instruments and documents and with such bank or
banks as shall be satisfactory to Agent. The arrangements referred to in (a)
above and the cash management arrangement referred to in this clause (b) are
herein referred to collectively as the "Cash Dominion Arrangement."
5.7 Endorsement. Each Borrower hereby constitutes and appoints Agent and
all Persons designated by Agent for that purpose as such Borrower's true and
lawful attorney-in-fact, with power to endorse such Borrower's name to any of
the items of payment or proceeds described in subsection 5.6 above and all
proceeds of Collateral that come into Agent's possession or under Agent's
control. Both the appointment of Agent as such Borrower's attorney and Agent's
rights and powers are coupled with an interest and are irrevocable until payment
in full and complete performance of all of the Obligations.
5.8 Corporate Existence. Except as permitted pursuant to subsection 7.6,
each Loan Party will, and will cause each of their respective Subsidiaries to,
at all times preserve and keep in full force and effect its corporate existence
and all rights and franchises material to its business. Each Holding Party and
each Borrower will promptly notify Agent of any change in its or their
respective Subsidiaries' ownership or corporate structure.
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5.9 Payment of Taxes. Each Loan Party will, and will cause each other Loan
Party and each of their respective Subsidiaries to, pay all taxes, assessments
and other governmental charges imposed upon it or any of its properties or
assets or with respect to any of its franchises, business, income or property
before any penalty accrues thereon; provided, however, that no such tax need be
paid if such Loan Party or one of its Subsidiaries is contesting same in good
faith by appropriate proceedings promptly instituted and diligently conducted
and if such Loan Party or such Subsidiary has established appropriate reserves
as shall be required in conformity with GAAP.
5.10 Maintenance of Properties; Insurance. Each Loan Party will maintain or
cause to be maintained in good repair, working order and condition all material
properties used in the business of any Loan Party and its Subsidiaries and will
make or cause to be made all appropriate repairs, renewals and replacements
thereof. Each Loan Party will maintain or cause to be maintained, with
financially sound and reputable insurers, public liability insurance, workers
compensation, employee benefit liability insurance, fidelity insurance, errors
and omissions insurance, directors' and officers' liability insurance, and
property damage insurance with respect to each Loan Party's business and
properties and the business and properties of its Subsidiaries against loss or
damage of the kinds customarily carried or maintained by corporations of
established reputation engaged in similar businesses and in amounts acceptable
to Agent in its reasonable credit judgement. Each Loan Party shall cause Agent,
for the benefit of Lenders, to be named as loss payee on all insurance policies
relating to any Collateral and as additional insured under all liability
policies, in each case pursuant to appropriate endorsements in form and
substance satisfactory to Agent and shall collaterally assign to Agent, for the
benefit of Lenders, as security for the payment of the Obligations all business
inter ruption insurance of the Loan Parties. Loan Parties shall apply any
proceeds received from any policies of insurance relating to any Collateral to
the Obligations as set forth in subsection 2.4(B). Each Loan Party will, and
will cause each other Loan Party and each of their respective Subsidiaries to,
deliver to Agent, within ten (10) Business Days prior to the expiration or
termination of any such insurance policy, a certificate of renewal or
replacement of such insurance policy, as issued by the applicable insurance
company or its duly authorized agent.
5.11 Compliance with Laws. Each Loan Party will, and will cause each other
Loan Party and each of their respective Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority as now in effect and which may be imposed in the future
in all jurisdictions in which such Holding Party, Borrower, other Loan Party or
Subsidiary is now doing business or may hereafter be doing business, other than
those laws the noncompliance with which would not have a Material Adverse
Effect.
5.12 Further Assurances. Each Loan Party shall, and shall cause each other
Loan Party and each of their respective Subsidiaries to, from time to time,
execute such guaranties, financing or continuation statements, documents,
security agreements, reports and other documents or deliver to Agent such
instruments, certificates of title or other documents as Agent at any time may
reasonably request to evidence, perfect or otherwise implement the guaranties
and security for repayment of the Obligations provided for in the Loan
Documents. At Agent's request, each Loan Party shall cause any newly created or
acquired Subsidiary of a Borrower or a Loan Party promptly to become a Borrower
and/or Corporate Guarantor hereunder and to grant to Agent, on behalf of
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Lenders, security interests in the real, personal and mixed property of such
Subsidiary to secure the Obligations.
5.13 Collateral Locations. Each Loan Party will keep the Collateral at the
locations specified on Schedule 4.7. With respect to any new location (which in
any event shall be within the continental United States), each Loan Party will
execute such documents and take such actions as Agent deems necessary to perfect
and protect the security interests of Agent, on behalf of Lenders, in the
Collateral prior to the transfer or removal of any Collateral to such new
location.
5.14 Instruments; Chattel Paper. Except to the extent Indebtedness
evidenced thereby does not exceed $50,000 outstanding at any time in the
aggregate, Loan Parties will deliver and pledge to Agent all notes and
instruments (as defined in the UCC) duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and substance
satisfactory to Agent. The Loan Parties will mark conspicuously all chattel
paper with a legend, in form and substance satisfactory to Agent, indicating
that such chattel paper is subject to the security interest of Agent, for the
benefit of itself and Lenders. Without limiting the generality of the foregoing,
Loan Parties will mark conspicuously all Account Agreements with the legend
referred to in the preceding sentence.
5.15 Account Agreements. Borrower Representative will deliver to Agent a
copy of each Account Agreement, or material amendment to any Account Agreement,
entered into after the Closing Date, each certified as being a complete,
accurate and correct copy thereof by Borrower Representative's chief financial
officer, together with, in the case of any Account Agreement entered into after
the Closing Date, copies of lien search results indicating the applicable Loan
Party as having a first priority perfected ownership interest in each applicable
Account, subject to no Liens except those in favor of Agent on behalf of
Lenders.
5.16 Use of Proceeds and Margin Security. Borrowers shall use the proceeds
of all Loans for proper business purposes (as described in the recitals to this
Agreement) consistent with all applicable laws, statutes, rules and regulations.
No portion of the proceeds of any Loan shall be used by any Borrower or any
other Loan Party for the purpose of purchasing or carrying margin stock within
the meaning of Regulation G or Regulation U, or in any manner that might cause
the borrowing, the application of such proceeds, or the transactions
contemplated hereby or by the other Loan Documents to violate Regulation T or
Regulation X or any other regulation of the Board of Governors of the Federal
Reserve System or to violate the Securities Exchange Act of 1934 or the rules
and regulations thereunder.
SECTION 6. FINANCIAL COVENANTS
Each Holding Party and each Borrower covenants and agrees that so long as
any of the Commitments remain in effect and until payment in full of all
Obligations and termination of all Lender Letters of Credit, unless Borrowers
have received the prior written consent of Requisite
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Lenders, each Holding Party and each Borrower shall comply with, and shall cause
each of their respective Subsidiaries to comply with, all covenants in this
Section 6.
6.1 Minimum EBITDA. The Holding Parties, Borrowers and their respective
Subsidiaries shall maintain EBITDA in at least the amount set forth below
opposite each period specified if an Availability Trigger Event shall have
occurred during the last two calendar months of such period or after the end of
such period and up to and including the date of delivery to Agent of the
financial statements required to be delivered in respect of the Fiscal Quarter
or Fiscal Year ending on the last day of such period, under Section 5.1(B) or
(C), as the case may be:
Period Minimum EBITDA
------ --------------
Fiscal Quarter Ending
March 31, 1998 $ 4,800,000
Two Fiscal Quarters Ending
June 30, 1998 10,200,000
Three Fiscal Quarters Ending
September 30, 1998 16,400,000
Four Fiscal Quarters Ending:
December 31, 1998 22,800,000
March 31, 1999 23,800,000
June 30, 1999 25,200,000
September 30, 1999 26,500,000
December 31, 1999 27,900,000
March 31, 2000 29,200,000
June 30, 2000 30,900,000
September 30, 2000 32,600,000
December 31, 2000 34,400,000
March 31, 2001 36,000,000
June 30, 2001 38,000,000
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September 30, 2001 40,200,000
December 31, 2001 42,500,000
March 31, 2002 44,200,000
June 30, 2002 46,300,000
September 30, 2002 48,600,000
December 31, 2002 50,900,000
6.2 Fixed Charge Coverage. The Holding Parties and Borrowers shall not
permit their Fixed Charge Coverage to be less than 1.0 to 1.0 for the Fiscal
Quarter ending March 31, 1998, for the two Fiscal Quarters ending June 30, 1998,
for the three Fiscal Quarters ending September 30, 1998, or for any of the four
Fiscal Quarters ending December 31, 1998 or on the last day of each Fiscal
Quarter thereafter.
SECTION 7. NEGATIVE COVENANTS
Each Loan Party covenants and agrees that so long as any of the Commitments
remain in effect and until payment in full of all Obligations and termination of
all Lender Letters of Credit, unless such Loan Party has received the prior
written consent of Requisite Lenders, each Loan Party shall not, and shall not
permit any of their respective Subsidiaries to:
7.1 Indebtedness and Liabilities. Directly or indirectly create, incur,
assume, guaranty, or otherwise become or remain directly or indirectly liable,
on a fixed or contingent basis, with respect to any Indebtedness except: (a) the
Obligations; (b) Intercompany Indebtedness (i) among Borrowers and (ii) provided
that no Default or Event of Default shall have occurred and be continuing at the
time of the incurrence thereof or would result therefrom, Indebtedness owing by
a Holding Party to a Borrower and incurred by a Holding Party to permit such
Holding Party to make payments in cash then due under and pursuant to the Senior
Notes and the Senior PIK Notes, pay expenses incurred in the ordinary course of
business and to make Restricted Junior Payments permitted under subsection 7.5;
provided that, in each case, such Indebtedness shall be unsecured and
subordinated in right of payment to the Obligations (and by its execution and
delivery hereof, each Holding Party and each Borrower agrees that any such
Indebtedness shall be so unsecured and subordinated) and shall not be evidenced
by any note or other instrument, unless the same is pledged to Agent and Lenders
pursuant to subsection 5.14; (c) Indebtedness (excluding Capital Leases) not to
exceed $250,000 in the aggregate at any time outstanding secured by purchase
money Liens; (d) Indebtedness under Capital Leases not to exceed $2,500,000
outstanding at any time in the aggregate; (e) Indebtedness existing on the
Closing Date and identified on Schedule 4.4; (f) Indebtedness incurred by any
Borrower in connection with Permitted Acquisitions permitted under subsection
7.6(B); provided that (1) such Indebtedness (A) shall be unsecured and
subordinated in right of payment to the Obligations, (B) shall not exceed
$5,000,000 outstanding at any time in the
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aggregate with respect to any individual Permitted Acquisition and (C) shall be
on terms and conditions acceptable to Agent and (2) all such Indebtedness
incurred by Borrowers shall not exceed $20,000,000 outstanding in the aggregate
at any time; (g) Indebtedness under the Senior Notes; and (h) Indebtedness under
the Senior PIK Notes. Except for Indebtedness permitted in the preceding
sentence, Holding Parties and Borrowers will not, and will not permit any of
their Subsidiaries to, incur any Liabilities except for trade payables and
normal accruals in the ordinary course of business not yet due and payable or
with respect to which any Borrower or any of its Subsidiaries is contesting in
good faith the amount or validity thereof by appropriate proceedings and then
only to the extent such Borrower or any of its Subsidiaries has established
adequate reserves therefor, if appropriate under GAAP.
7.2 Guaranties. Except for the guaranties of the Obligations provided
hereunder and under the other Loan Document and except for (a) endorsements of
instruments or items of payment for collection in the ordinary course of
business and (b) the agreements of THISCO and Brentwood in their respective
Account Agreements to fund the payroll of Account Sellers in respect of Service
Fee Accounts consistent with current practices at the Closing Date, guaranty,
endorse, or otherwise in any way become or be responsible for any obligations of
any other Person, whether directly or indirectly by agreement to purchase the
indebtedness of any other Person or through the purchase of goods, supplies or
services, or maintenance of working capital or other balance sheet covenants or
conditions, or by way of stock purchase, capital contribution, advance or loan
for the purpose of paying or discharging any indebtedness or obligation of such
other Person or otherwise.
7.3 Transfers, Liens and Related Matters.
(A) Transfers. Sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to any of the Collateral or the
assets of such Person, except that Borrowers and their Subsidiaries may (i) sell
inventory in the ordinary course of business; and (ii) make Asset Dispositions
if all of the following conditions are met: (1) the market value of assets sold
or otherwise disposed of in any single transaction or series of related
transactions does not exceed $125,000 and the aggregate market value of assets
sold or otherwise disposed of in any Fiscal Year does not exceed $500,000; (2)
the consideration received is at least equal to the fair market value of such
assets, as determined in good faith by such Borrower's or Subsidiary's board of
directors; (3) the sole consideration received is cash; (4) the net proceeds of
such Asset Disposition are applied as required by subsection 2.4(B); (5) after
giving effect to the sale or other disposition of the assets included within the
Asset Disposition and the repayment of the Obligations with the proceeds
thereof, Holding Parties and Borrowers are in compliance on a pro forma basis
with the covenants set forth in Section 6 recomputed for the most recently ended
month for which information is available and are in compliance with all other
terms and conditions contained in this Agreement; and (6) no Default or Event of
Default shall then exist or result from such sale or other disposition.
(B) Liens. Except for Permitted Encumbrances, directly or indirectly
create, incur, assume or permit to exist any Lien on or with respect to any of
the Collateral or the assets of such Person or any proceeds, income or profits
therefrom.
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(C) No Negative Pledges. Enter into or assume any agreement (other than the
Loan Documents) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired.
(D) No Restrictions on Subsidiary Distributions to any Holding Party or any
Borrower. Except as provided herein, directly or indirectly create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any Borrower or any Subsidiary of any
Borrower to: (1) pay dividends or make any other distribution on any of such
Subsidiary's capital stock owned by a Borrower or any Subsidiary of such
Borrower; (2) subject to subordination provisions, pay any indebtedness owed to
any Holding Party, any Borrower or any other Subsidiary of such Holding Party or
such Borrower; (3) make loans or advances to any Holding Party, any Borrower or
any other Subsidiary of such Holding Party or such Borrower; or (4) transfer any
of its property or assets to any Holding Party, any Borrower or any other
Subsidiary of such Holding Party or such Borrower.
7.4 Investments and Loans. Make or permit to exist investments in or loans
to any other Person, except: (a) Cash Equivalents; (b) loans and advances to
employees for moving, entertainment, travel and other similar expenses in the
ordinary course of business in an aggregate outstanding amount not in excess of
$250,000 at any time; (c) Intercompany Indebtedness permitted under subsection
7.1; (d) Permitted Acquisitions permitted under subsection 7.6(B); (e) advances
made in the ordinary course of business consistent with current practices at the
Closing Date by THISCO and Brentwood to independent supplemental staffing firms
to induce such firms to enter into Account Agreements; provided, that such
advances are secured by a first priority perfected security interest in the
Accounts under such Account Agreements in favor of THISCO or Brentwood, as the
case may be, subject to no Liens other than Permitted Encumbrances; and (f) in
addition to advances made pursuant to clause (e) above, advances not to exceed
$500,000 outstanding at any time in the aggregate made by Borrowers in the
ordinary course of business consistent with current practices at the Closing
Date to Persons engaged in the business of providing temporary employment
personnel to clients to induce such Persons to enter into, or remain party to,
Account Agreements or Licensing Agreements.
7.5 Restricted Junior Payments. Directly or indirectly declare, order, pay,
make or set apart any sum for any Restricted Junior Payment, except that, so
long as no Default or Event of Default shall have occurred and be continuing or
would result therefrom (other than in the case of Restricted Junior Payments
made pursuant to clauses (iv) and (vi) below, which may be made whether or not a
Default or Event of Default shall have occurred and is continuing or would
result therefrom), a Borrower or any Subsidiary of a Borrower or COI may make
Restricted Junior Payments with respect to its common stock to the extent
necessary (i) to permit Borrowers to pay the Obligations; (ii) to permit COI to
make scheduled payments (but not prepayments) of interest in cash then due under
and pursuant to the Senior Notes; (iii) to permit CC to make scheduled payments
(but not prepayments) of interest in cash then due under and pursuant to the
Senior PIK Notes; (iv) to permit CC to make payments in cash directly related to
compliance by it with laws and regulations applicable to it by virtue of its
status as a publicly-held corporation; (v) to permit CC and/or COI to make
optional prepayments or purchases of the Senior Notes and/or Senior PIK Notes,
and related payments of interest and reasonable fees, costs and expenses related
thereto, but solely
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directly out of the proceeds of the concurrent consummation of an issuance by CC
for cash of its common stock, or options, warrants or rights with respect to its
common stock; (vi) to permit CC and COI to make payments in cash in respect of
Corporate Overhead; (vii) to permit CC to pay dividends in respect of (but not
to effect any redemption or purchase of) its outstanding shares of Series F
preferred stock, in an amount not in excess of $25,000 in any Fiscal Year; and
(viii) to permit any Borrower to pay expenses incurred in the ordinary course of
business.
7.6 Restriction on Fundamental Changes.
(A)(i) Enter into any transaction of merger or consolidation; (ii)
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution); (iii) convey, sell, lease, sublease, transfer or otherwise dispose
of, in one transaction or a series of transactions, all or any substantial part
of its business or assets, or the capital stock of any of its Subsidiaries,
whether now owned or hereafter acquired; provided, however, that (1) any
Borrower may merge or consolidate with, or convey, sell or transfer all or
substantially all of its assets to, any other Borrower; (2) any Inactive
Subsidiary may be liquidated, wound-up or dissolved into any other Subsidiary of
a Holding Party or a Borrower; and (3) the Uniforce Acquisition shall be
consummated in accordance with and subject to the terms and conditions of the
Uniforce Acquisition Documents on the Closing Date or within ten (10) Business
Days thereafter in accordance with the condition set forth in Section 3.1(J)
(or, if applicable, within three (3) Business Days thereafter in accordance with
the proviso set forth therein).
(B) Acquire by purchase or otherwise, all or any substantial part of the
business or assets of, or stock or other evidence of beneficial ownership of,
any Person; provided, however, that so long as: (i) no Default or Event of
Default has occurred and is continuing before and after giving effect thereto;
(ii) the Fanning Cash Pledge Agreement has been terminated and the amount
pledged thereunder released in full; and (iii) the Cash Dominion Arrangement (as
defined in Section 5.6) is in effect, any Borrower (or any Holding Party, so
long as contemporaneously therewith, all assets so acquired are transferred to
one or more Borrowers), may acquire all or substantially all of the assets of
any Person (in each case, a "Permitted Acquisition"); provided that each
Permitted Acquisition shall be subject to the satisfaction of the condition
precedent that the Unused Availability shall be not less than $15,000,000
without giving effect to the proposed Permitted Acquisition for the ninety (90)
day period preceding the consummation thereof (but not less than $12,500,000 at
any time during such period) and to the satisfaction of each of the following
additional conditions precedent:
(1) Agent shall receive not less than fifteen (15) Business Days'
prior written notice of such proposed Permitted Acquisition, which notice
shall include a reasonably detailed description of such proposed Permitted
Acquisition;
(2) such Permitted Acquisition shall only be of those assets of a
Target which are located solely in the United States and comprising a
business, or those assets of a business, of the type engaged in by
Borrowers as of the Closing Date, including, without limitation, the
temporary personal services business, the consulting placement business and
the
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staffing services business, and which business would not subject Agent or
any Lender to regulatory or third party approvals in connection with the
exercise of its rights and remedies under this Agreement or any other Loan
Documents;
(3) such Permitted Acquisition shall be consensual and shall have been
approved by the Target's board of directors;
(4) the business and assets of the Target acquired in such Permitted
Acquisition shall be acquired free and clear of all Liens (other than
Permitted Encumbrances);
(5) no Indebtedness, contingent obligations or other liabilities shall
be incurred or assumed in connection with such Permitted Acquisition,
except (x) Loan advances, (y) ordinary course trade payables, accrued
expenses and Indebtedness of Target assumed in connection therewith to the
extent permitted to be incurred by Borrowers pursuant to subsection 7.1 and
(z) Indebtedness incurred in connection therewith to the extent permitted
to be incurred by Borrowers pursuant to subsection 7.1;
(6) on or prior to the date thereof, Agent will be granted a first and
prior perfected security interest (subject to Permitted Encumbrances) in
all assets being acquired pursuant to such Permitted Acquisition, and
Holdings and Borrowers shall have executed such documents and taken such
actions as may be required by Agent in connection therewith;
(7) Borrowers shall have delivered to Agent, in form and substance
satisfactory to Agent:
(i) pro forma balance sheets of Holding Parties, Borrowers and
their respective Subsidiaries (the "Acquisition Pro Forma") on a
consolidated basis, based on financial data as of a recent date, which
shall be complete and shall accurately and fairly represent the
assets, liabilities, financial condition and results of operations of
Holding Parties, Borrowers and their respective Subsidiaries in
accordance with GAAP consistently applied, but taking into account
such Permitted Acquisition and the funding of all Loans in connection
therewith, and the Acquisition Projections (as hereinafter defined)
shall reflect that Unused Availability for the 90-day period following
the consummation of such Permitted Acquisition will exceed $15,000,000
on a pro forma basis (giving effect to such Permitted Acquisition and
the Eligible Accounts [to the extent the Accounts to be acquired have
been audited by Agent to confirm their status as Eligible Accounts]
that would be acquired in connection therewith, and all Loans funded
in connection therewith as if made on the first day of such period);
(ii) updated versions of the most recently delivered projections
covering the one (1) year period commencing on the date of such
Permitted Acquisition and otherwise prepared in accordance with
subsections 4.3 and 4.17 (the "Acquisition Projections") and based
upon historical financial data of a recent date satisfactory to Agent,
taking into account such Permitted Acquisition; provided, that
Acquisition Projections for any Permitted Acquisition for which the
total consideration therefor does not exceed $500,000 may be limited
to projected revenues and EBITDA for such one year period; and
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(iii) a certificate of the chief financial officer of each
Holding Party and each Borrower to the effect that: (I) each Borrower
(after taking into consideration all rights of contribution and
indemnity such Borrower has against each Holding Party and each other
Subsidiary of Holding Parties) will be solvent (as represented by
Borrowers in subsection 4.17) upon the consummation of the transaction
contemplated by the Permitted Acquisition; (II) the Acquisition Pro
Forma fairly presents the financial condition of Holding Party and
Borrowers (on a consolidated basis) as of the date hereof after giving
effect to the transactions contemplated by such Permitted Acquisition;
(III) the Acquisition Projections are good faith estimates, based on
assumptions believed at the date of such certificate in good faith to
be reasonable, of the future financial performance of Holding Parties
and Borrowers subsequent to the date thereof based upon the historical
performance and the projected future financial performance of Holding
Parties and Borrowers; and (IV) Holding Parties and Borrowers have
completed their due diligence investigation with respect to the Target
and such Permitted Acquisition, which investigation was conducted in a
manner similar to that which would have been conducted by a prudent
purchaser of a comparable business and the results of which
investigation were acceptable to Holding Parties and Borrowers;
(8) on or prior to the date of such Permitted Acquisition, Agent shall
have received, in form and substance satisfactory to Agent, all collateral
and security documents, opinions, certificates, lien search results and
other documents reasonably requested by Agent to evidence compliance with
the foregoing provisions of this subsection 7.6(B); and
(9) the total Acquisition Costs payable in connection with such
Permitted Acquisition plus the sum of all Acquisition Costs paid in
connection with previous Permitted Acquisitions shall not exceed
$60,000,000.
(C) Should Borrower Representative request Agent's consent to an
acquisition which would not otherwise qualify as a Permitted Acquisition, Agent
agrees to use its best efforts to communicate its response to Borrower
Representative in a reasonably prompt manner, it being understood that Agent
shall have no obligation to consent to any such acquisition and no failure or
delay on the part of Agent in the delivery of such response shall be construed
to be a consent to such acquisition.
7.7 Transactions with Affiliates. Directly or indirectly, enter into or
permit to exist any transaction (including the purchase, sale or exchange of
property or the rendering of any service) with any Affiliate or with any
officer, director or employee of any Loan Party, except for transactions in the
ordinary course of and pursuant to the reasonable requirements of Borrowers'
business and upon fair and reasonable terms which, except for transactions which
are expressly permitted pursuant to the terms of this Agreement, are fully
disclosed to Agent and Lenders and which are no less favorable to Borrowers than
they would obtain in comparable arm's length transactions with unaffiliated
Persons provided that the foregoing shall not prohibit the execution, delivery
and performance of the letter agreement dated the Closing Date between COI and
John Fanning relating to the Fanning Cash Pledge Agreement.
7.8 Environmental Liabilities. (a) Violate any applicable Environmental
Law; (b) dispose of any Hazardous Materials (except in accordance with
applicable law) into or onto or from, any real
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property owned, leased or operated by any Loan Party; or (c) permit any Lien
imposed pursuant to any Environmental Law to be imposed or to remain on any real
property owned, leased or operated by any Loan Party, if any such event or
circumstance could reasonably be expected to have a Material Adverse Effect.
7.9 Conduct of Business. From and after the Closing Date, engage in any
business other than businesses of the type engaged in by Borrowers or any
Subsidiary on the Closing Date. The Holding Parties shall not engage in any type
of business activity other than ownership of their respective Subsidiaries'
capital stock and activities incidental to the maintenance of its corporate
existence.
7.10 Compliance with ERISA. Establish any new Employee Benefit Plan or
amend any existing Employee Benefit Plan if the liability or increased liability
resulting from such establishment or amendment is material. Neither any Loan
Party nor any of its Subsidiaries shall fail to establish, maintain and operate
each Employee Benefit Plan in compliance in all material respects with the
provisions of ERISA, the IRC and all other applicable laws and the regulations
and interpretations thereof.
7.11 Tax Consolidations. File or consent to the filing of any consolidated
income tax return with any Person other than Holding Parties, Borrowers or any
of their respective Subsidiaries; provided that in the event any Borrower files
a return with a Corporate Guarantor, such Borrower's contribution with respect
to taxes as a result of the filing of such consolidated return shall not be
greater, nor the receipt of tax benefits less, than they would have been had
such Borrower not filed a consolidated return with such Corporate Guarantor.
7.12 Subsidiaries. Except to the extent permitted by subsection 7.6(B),
establish, create or acquire any new Subsidiaries.
7.13 Fiscal Year. Change its Fiscal Year.
7.14 Press Release; Public Offering Materials. Disclose the name of Agent
or any Lender in any press release or in any prospectus, proxy statement or
other materials filed with any governmental entity relating to a public offering
of the capital stock of any Loan Party except as may be required by law.
7.15 Bank Accounts. Establish any new bank accounts, or amend or terminate
any Blocked Account or lockbox agreement, without Agent's prior written consent;
provided, that Borrowers may establish additional bank accounts so long as in
each case (a) Borrower Representative provides Agent with at least ten (10)
Business Days' prior written notice thereof and (b) each such bank account which
is a depository account is subject to an effective Blocked Account Agreement
prior to the establishment thereof.
7.16 Changes Relating to Senior Notes and Senior PIK Notes. Change or
amend, or agree to change or amend, any of the terms of the Senior Notes, the
Senior PIK Notes, the Senior Notes
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Indenture, the Senior Debentures Indenture, or any related documents, if the
effect of such change or amendment is or would be to: (a) increase the interest
rate on the Indebtedness covered thereby; (b) change the dates upon which
payments of principal or interest are due on such Indebtedness; (c) modify or
add any event of default or add any covenant of the obligor of such
Indebtedness; (d) change the payment provisions of such Indebtedness; or (e)
change or amend any other term thereof if such change or amendment would
materially increase the obligations of COI or CC or confer additional material
rights on the holder of such Indebtedness in a manner adverse to the interests
of any Holding Party, any Borrower, any of their respective Subsidiaries, Agent
or any Lender.
SECTION 8. DEFAULT, RIGHTS AND REMEDIES
8.1 Event of Default. "Event of Default" shall mean the occurrence or
existence of any one or more of the following:
(A) Payment. Failure to make payment of any of the Obligations when
due and in the case of interest, such failure shall not be cured within
five (5) days of the applicable due date; or
(B) Default in Other Agreements. (A) (1) Failure of any Loan Party to
pay when due any principal or interest on any Indebtedness (other than the
Obligations) or (2) breach or default of any Loan Party with respect to any
Indebtedness (other than the Obligations); if such failure to pay, breach
or default entitles the holder to cause such Indebtedness having an
individual principal amount in excess of $250,000 or having an aggregate
principal amount in excess of $500,000 to become or be declared due prior
to its stated maturity; or (B) default under the Senior Notes Indenture or
Senior Debentures Indenture, including any breach of any covenant
thereunder regardless of whether such covenant is more restrictive than, or
conflicts with, or covers the same or similar matters as the covenants set
forth in this Agreement or any other Loan Documents; or
(C) Breach of Certain Provisions. Failure of any Loan Party to perform
or comply with any term or condition contained in subsections 5.1 (A), (B)
and (C), 5.3, 5.5 or 5.6 or contained in Section 6 or Section 7; or
(D) Breach of Warranty. Any representation, warranty, certification or
other statement made by any Loan Party in any Loan Document or in any
statement or certificate at any time given by such Person in writing
pursuant or in connection with any Loan Document is false in any material
respect on the date made; or
(E) Other Defaults Under Loan Documents. Any Loan Party defaults in
the performance of or compliance with any term contained in this Agreement
or the other Loan Documents and such default is not remedied or waived
within ten (10) days after receipt by Borrower Representative of notice
from Agent, or Requisite Lenders of such default (other than occurrences
described in other provisions of this subsection 8.1 for which a different
grace or cure period is specified or which constitute immediate Events of
Default); or
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(F) Change in Control. (1) CC ceases to beneficially own and control,
directly or indirectly, at least one hundred percent (100%) of the issued
and outstanding shares of each class of capital stock of COI entitled
(without regard to the occurrence of any contingency) to vote for the
election of a majority of the members of COI's board of directors; or (2)
COI ceases to beneficially own and control, directly or indirectly, at
least one hundred percent (100%) of the issued and outstanding shares of
each class of capital stock of each Borrower entitled (without regard to
the occurrence of any contingency) to vote for the election of a majority
of the members of such Borrower's board of directors.
(G) Involuntary Bankruptcy; Appointment of Receiver, etc. (1) A court
enters a decree or order for relief with respect to any Loan Party in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, which decree or order is not stayed
or other similar relief is not granted under any applicable federal or
state law; or (2) the continuance of any of the following events for sixty
(60) days unless dismissed, bonded or discharged: (a) an involuntary case
is commenced against any Loan Party, under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect; or (b) a decree
or order of a court for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers
over any Loan Party, or over all or a substantial part of their respective
property, is entered; or (c) an interim receiver, trustee or other
custodian is appointed without the consent of any Loan Party, for all or a
substantial part of the property of any Loan Party; or
(H) Voluntary Bankruptcy; Appointment of Receiver, etc. (1) An order
for relief is entered with respect to any Loan Party commences a voluntary
case under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or consents to the entry of an order for relief in
an involuntary case or to the conversion of an involuntary case to a
voluntary case under any such law or consents to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or (2) any Loan Party makes any
assignment for the benefit of creditors; or (3) the board of directors of
any Loan Party adopts any resolution or otherwise authorizes action to
approve any of the actions referred to in this subsection 8.1(H); or
(I) Liens. Any lien, levy or assessment is filed or recorded with
respect to or otherwise imposed upon all or any part of (i) any assets of
the Loan Parties not constituting Collateral and having a value at any time
in excess of $250,000 in the aggregate or (ii) any Collateral, in any case
by the United States or any department or instrumentality thereof or by any
state, county, municipality or other governmental agency (other than
Permitted Encumbrances) and such lien, levy or assessment is not stayed,
vacated, paid or discharged within thirty (30) days; or
(J) Judgment and Attachments. Any money judgment, writ or warrant of
attachment, or similar process involving (1) an amount in any individual
case in excess of $250,000 or (2) an amount in the aggregate at any time in
excess of $1,000,000 (in either case not adequately covered by insurance as
to which the insurance company has acknowledged coverage) is entered or
filed against any Loan Party or any of its Subsidiaries or any of its
assets and remains undischarged, unvacated, unbonded or unstayed for a
period of thirty (30) days or in any event later than five (5) days prior
to the date of any proposed sale thereunder; or
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(K) Dissolution. Any order, judgment or decree is entered against
Borrower or any Loan Party decreeing the dissolution or split up of such
Loan Party and such order remains undischarged or unstayed for a period in
excess of thirty (30) days; or
(L) Solvency. Any Loan Party ceases to be solvent (as represented by a
Holding Party or a Borrower in subsection 4.17) or any Loan Party admits in
writing its present or prospective inability to pay its debts as they
become due; or
(M) Injunction. Any Loan Party is enjoined, restrained or in any way
prevented by the order of any court or any administrative or regulatory
agency from conducting all or any material part of its business and such
order continues for more than thirty (30) days, if any such event or
circumstance could reasonably be expected to have a Material Adverse
Effect; or
(N) Invalidity of Loan Documents. Any of the Loan Documents for any
reason, other than a partial or full release in accordance with the terms
thereof, ceases to be in full force and effect or is declared to be null
and void, or any Loan Party denies that it has any further liability under
any Loan Documents to which it is party, or gives notice to such effect; or
(O) Failure of Security. Agent, on behalf of Lenders, does not have or
ceases to have a valid and perfected first priority security interest in
the Collateral (subject to Permitted Encumbrances), in each case, for any
reason other than the failure of Agent or any Lender to take any action
within its control; or
(P) Damage, Strike, Casualty. Any material damage to, or loss, theft
or destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy,
or other casualty which causes, for more than sixty (60) consecutive days
beyond the coverage period of any applicable business interruption
insurance, the cessation or substantial curtailment of revenue producing
activities at any facility of any Loan Party if any such event or
circumstance could reasonably be expected to have a Material Adverse
Effect; or
(Q) Licenses and Permits. The loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by
any Loan Party, if such loss, suspension, revocation or failure to renew
could reasonably be expected to have a Material Adverse Effect; or
(R) Forfeiture. There is filed against any Loan Party, any civil or
criminal action, suit or proceeding under any federal or state racketeering
statute (including, without limitation, the Racketeer Influenced and
Corrupt Organization Act of 1970), which action, suit or proceeding (1) is
not dismissed within one hundred twenty (120) days; and (2) could
reasonably be expected result in the confiscation or forfeiture of any
material portion of the Collateral; or
(S) CC or COI Activities. CC or COI shall engage in any business
activities, other than activities solely related to ownership of the stock
of COI (in the case of CC) and of the stock of Borrowers (in the case of
COI), compliance with the Senior Notes Indenture and the Senior
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Debentures Indenture, Corporate Overhead activities, and activities related
to compliance with laws and regulations applicable to CC as a
publicly-owned corporation; or
(T) Inactive Subsidiaries' Activities. Any Inactive Subsidiary shall
hold any assets, incur any liabilities (other than corporate franchise
taxes and other similar charges incidental to the maintenance of its
corporate existence and intercompany loans incurred in accordance with
subsection 7.1(b)(ii) solely for the purpose of paying such taxes and
charges) or engage in any business activity, unless, within ten (10) days
after the first to occur of any such activity, such entity shall have
executed and delivered to Agent such instruments and documents as shall be
satisfactory in form and substance to Agent and as shall provide for such
entity being a Borrower under this Agreement.
8.2 Suspension of Commitments. Upon the occurrence of any Default or Event
of Default, notwithstanding any grace period or right to cure, Agent may or upon
demand by Requisite Lenders shall, without notice or demand, immediately cease
making additional Loans and the Commitments shall be suspended; provided that,
in the case of a Default, if the subject condition or event is waived or cured
within any applicable grace or cure period, the Commitments shall be reinstated.
8.3 Acceleration. Upon the occurrence of any Event of Default described in
the foregoing subsections 8.1(G) or 8.1(H), all Obligations shall automatically
become immediately due and payable, without presentment, demand, protest or
other requirements of any kind, all of which are hereby expressly waived by any
Loan Party, and the Commitments shall thereupon terminate. Upon the occurrence
and during the continuance of any other Event of Default, Agent may, and upon
demand by Requisite Lenders shall, by written notice to Borrower Representative,
(a) declare all or any portion of the Obligations to be, and the same shall
forthwith become, immediately due and payable and the Commitments shall
thereupon terminate and (b) demand that Borrowers immediately deposit with Agent
an amount equal to one hundred five percent (105%) of the Letter of Credit
Reserve to enable Lender to make payments under the Lender Letters of Credit
when required and such amount shall become immediately due and payable.
8.4 Remedies. If any Event of Default shall have occurred and be
continuing, in addition to and not in limitation of any other rights or remedies
available to Agent and Lenders at law or in equity, Agent may and shall upon the
request of Requisite Lenders exercise in respect of the Collateral, in addition
to all other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the UCC
(whether or not the UCC applies to the affected Collateral) and may also (a)
notify any or all obligors on the Accounts to make all payments directly to
Agent; (b) require Loan Parties to, and Loan Parties hereby agree that they
will, at their expense and upon request of Agent forthwith, assemble all or part
of the Collateral as directed by Agent and make it available to Agent at a place
to be designated by Agent which is reasonably convenient to both parties; (c)
withdraw all cash in the Blocked Accounts and apply such monies in payment of
the Obligations in the manner provided in subsection 8.7; (d) without notice or
demand or legal process, enter upon any premises of Loan Parties and take
possession of the Collateral; and (e) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of Agent's offices or elsewhere, at such time
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or times, for cash, on credit or for future delivery, and at such price or
prices and upon such other terms as Agent may deem commercially reasonable. Loan
Parties agree that, to the extent notice of sale shall be required by law, at
least ten (10) days notice to Borrower Representative of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. At any sale of the Collateral, if permitted
by law, Agent or any Lender may bid (which bid may be, in whole or in part, in
the form of cancellation of indebtedness) for the purchase of the Collateral or
any portion thereof for the account of Agent or such Lender. Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. Loan Parties shall remain liable for any deficiency. Agent may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. To the extent permitted by law,
Loan Parties hereby specifically waive all rights of redemption, stay or
appraisal which they have or may have under any law now existing or hereafter
enacted. Agent shall not be required to proceed against any Collateral but may
proceed against Loan Parties directly.
8.5 Appointment of Attorney-in-Fact. Each Loan Party hereby constitute and
appoint Agent as such Loan Party's attorney-in-fact with full authority in the
place and stead of such Loan Party and in the name of such Loan Party, Agent or
otherwise, from time to time in Agent's discretion while an Event of Default is
continuing to take any action and to execute any instrument that Agent may deem
necessary or advisable to accomplish the purposes of this Agreement, including:
(a) to ask, demand, collect, sue for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral; (b) to adjust, settle or compromise the amount or payment
of any Account, or release wholly or partly any customer or obligor thereunder
or allow any credit or discount thereon; (c) to receive, endorse, and collect
any drafts or other instruments, documents and chattel paper, in connection with
clause (a) above; (d) to file any claims or take any action or institute any
proceedings that Agent may deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of Agent and Lenders with
respect to any of the Collateral; and (e) to sign and endorse any invoices,
freight or express bills, bills of lading, storage or warehouse receipts,
assignments, verifications and notices in connection with Accounts and other
documents relating to the Collateral. The appointment of Agent as each Loan
Party's attorney and Agent's rights and powers are coupled with an interest and
are irrevocable until payment in full and complete performance of all of the
Obligations.
8.6 Limitation on Duty of Agent with Respect to Collateral. Beyond the safe
custody thereof, Agent and each Lender shall have no duty with respect to any
Collateral in its possession or control (or in the possession or control of any
agent or bailee) or with respect to any income thereon or the preservation of
rights against prior parties or any other rights pertaining thereto. Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which Agent accords its own property. Neither Agent
nor any Lender shall be liable or responsible for any loss or damage to any of
the Collateral, or for any diminution in the value thereof, by reason of the act
or omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by Agent in good faith.
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8.7 Application of Proceeds. Upon the occurrence and during the continuance
of an Event of Default, (a) Loan Parties irrevocably waive the right to direct
the application of any and all payments at any time or times thereafter received
by Agent from or on behalf of any Loan Party, and Loan Parties hereby
irrevocably agree that Agent shall have the continuing exclusive right to apply
and to reapply any and all payments received at any time or times after the
occurrence and during the continuance of an Event of Default against the
Obligations in such manner as Agent may deem advisable notwithstanding any
previous entry by Agent upon any books and records and (b) the proceeds of any
sale of, or other realization upon, all or any part of the Collateral shall be
applied: first, to all fees, costs and expenses incurred by Agent or any Lender
with respect to this Agreement, the other Loan Documents or the Collateral;
second, to all fees due and owing to Agent and Lenders; third, to accrued and
unpaid interest on the Obligations; fourth, to the principal amounts of the
Obligations outstanding; and fifth, to any other indebtedness or obligations of
Loan Parties owing to Agent or any Lender.
8.8 License of Intellectual Property. Each Loan Party hereby assigns,
transfers and conveys to Agent, for the benefit Lenders, effective upon the
occurrence of any Event of Default hereunder, the non-exclusive right and
license to use all Intellectual Property owned or used by such Loan Party
together with any goodwill associated therewith, all to the extent necessary to
enable Agent to realize on the Collateral and any successor or assign to enjoy
the benefits of the Collateral. This right and license shall inure to the
benefit of all successors, assigns and transferees of Agent and its successors,
assigns and transferees, whether by voluntary conveyance, operation of law,
assignment, transfer, foreclosure, deed in lieu of foreclosure or otherwise.
Such right and license is granted free of charge, without requirement that any
monetary payment whatsoever be made to any Loan Party by Agent.
8.9 Waivers, Non-Exclusive Remedies. No failure on the part of Agent or any
Lender to exercise, and no delay in exercising and no course of dealing with
respect to, any right under this Agreement or the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise by Agent
or any Lender of any right under this Agreement or any other Loan Document
preclude any other or further exercise thereof or the exercise of any other
right. The rights in this Agreement and the other Loan Documents are cumulative
and are not exclusive of any other remedies provided by law.
SECTION 9. ASSIGNMENT AND PARTICIPATION
9.1 Assignments and Participations in Loans.
(A) Each Lender may assign its rights and delegate its obligations under
this Agreement to another Person; provided, that (a) such Lender shall first
obtain the written consent of Agent and Borrower Representative, which shall not
be unreasonably withheld, (b) the amount of Commitments and Loans of the
assigning Lender being assigned shall in no event be less than the lesser of (i)
$5,000,000 or (ii) the entire amount of the Commitments and Loans of such
assigning Lender and (c)(i) each such assignment shall be of a pro rata portion
of all such assigning Lender's Loans and Commitments hereunder, and (ii) the
parties to such assignment shall execute and deliver
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to Agent for acceptance and recording an Assignment and Assumption Agreement
together with (x) a processing and recording fee of $2,500 payable to Agent and
(y) the Notes originally delivered to the assigning Lender. Upon receipt of all
of the foregoing, Agent shall notify Borrower of such assignment and Borrowers
shall comply with their obligations under the last sentence of subsection
2.1(D). In the case of an assignment authorized under this subsection 9.1, the
assignee shall have, to the extent of such assignment, the same rights, benefits
and obligations as it would if it were a Lender hereunder. The assigning Lender
shall be relieved of its obligations hereunder with respect to its Commitment or
assigned portion thereof. The Loan Parties hereby acknowledge and agree that any
assignment will give rise to a direct obligation of Borrower to the assignee and
that the assignee shall be considered to be a "Lender".
(B) Each Lender may sell participations in all or any part of any Loans
made by it to another Person; provided, that any such participation shall be in
a minimum amount of $5,000,000, and provided, further, that all amounts payable
by Borrowers hereunder shall be determined as if that Lender had not sold such
participation and the holder of any such participation shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly effecting (a) any reduction in the principal amount, interest rate or
fees payable with respect to any Loan in which such holder participates; (b) any
extension of the Termination Date or the date fixed for any payment of
principal, interest or fees payable with respect to any Loan in which such
holder participates; and (c) any release of substantially all of the Collateral
(other than in accordance with the terms of this Agreement or the Loan
Documents). The Loan Parties hereby acknowledge and agree that any participation
will give rise to a direct obligation of Borrowers to the participant, and the
participant under each participation shall for purposes of subsections 2.8, 2.9,
2.10, 9.4 and 10.2 be considered to be a "Lender".
(C) Except as otherwise provided in this subsection 9.1 no Lender shall, as
between Borrowers and that Lender, be relieved of any of its obligations
hereunder as a result of any sale, assignment, transfer or negotiation of, or
granting of participation in, all or any part of the Loans or other Obligations
owed to such Lender. Each Lender may furnish any information concerning any
Holding Party, any Borrower and any of their respective Subsidiaries in the
possession of that Lender from time to time to assignees and participants
(including prospective assignees and participants) provided that the Persons
obtaining such information agrees to maintain the confidentiality of such
information to the extent required by subsection 10.21.
(D) Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time create a security interest in all or any portion of its
rights under this Agreement (including, without limitation, the Loans owing to
it and the Note held by it in favor of any Federal Reserve Bank in accordance
with Regulation A of the Board of Governors of the Federal Reserve System).
9.2 Agent.
(A) Appointment. Each Lender hereby designates and appoints Heller as its
agent under this Agreement and the Loan Documents, and each Lender hereby
irrevocably authorizes Agent to take such action or to refrain from taking such
action on its behalf under the provisions of
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this Agreement and the Loan Documents and to exercise such powers as are set
forth herein or therein, together with such other powers as are reasonably
incidental thereto. Agent is authorized and empowered to amend, modify, or waive
any provisions of this Agreement or the other Loan Documents on behalf of
Lenders subject to the requirement that certain of Lenders' consent be obtained
in certain instances as provided in subsection 9.3. Agent agrees to act as such
on the express conditions contained in this subsection 9.2. The provisions of
this subsection 9.2 are solely for the benefit of Agent and Lenders and neither
any Holding Party, nor any Borrower nor any other Loan Party shall have any
rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, Agent shall act solely
as an administrative representative of Lenders and does not assume and shall not
be deemed to have assumed any obligation toward or relationship of agency or
trust with or for Lenders, any Holding Party, any Borrower or any other Loan
Party. Agent may perform any of its duties hereunder, or under the Loan
Documents, by or through its agents or employees.
(B) Nature of Duties. Agent shall have no duties, obligations or
responsibilities except those expressly set forth in this Agreement or in the
Loan Documents. The duties of Agent shall be mechanical and administrative in
nature. Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender. Each Lender shall make its own
independent investigation of the financial condition and affairs of Borrowers in
connection with the extension of credit hereunder and shall make its own
appraisal of the credit worthiness of Borrowers, and Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information with respect thereto, whether coming into
its possession before the Closing Date or at any time or times thereafter. If
Agent seeks the consent or approval of any Lenders to the taking or refraining
from taking any action hereunder, then Agent shall send notice thereof to each
Lender. Agent shall promptly notify each Lender any time that the applicable
percentage of Lenders have instructed Agent to act or refrain from acting
pursuant hereto.
(C) Rights, Exculpation, Etc. Neither Agent nor any of its officers,
directors, employees or agents shall be liable to any Lender for any action
taken or omitted by them hereunder or under any of the Loan Documents, or in
connection herewith or therewith, except that Agent shall be obligated on the
terms set forth herein for performance of its express obligations hereunder, and
except that Agent shall be liable with respect to its own gross negligence or
willful misconduct. Agent shall not be liable for any apportionment or
distribution of payments made by it in good faith and if any such apportionment
or distribution is subsequently determined to have been made in error the sole
recourse of any Lender to whom payment was due but not made, shall be to recover
from other Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them). In performing its
functions and duties hereunder, Agent shall exercise the same care which it
would in dealing with loans for its own account, but Agent shall not be
responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility, or sufficiency of this Agreement or any of the
Loan Documents or the transactions contemplated thereby, or for the financial
condition of any Loan Party. Agent shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement or any of the Loan Documents or the financial
condition of any Loan Party, or the existence or possible existence of any
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Default or Event of Default. Agent may at any time request instructions from
Lenders with respect to any actions or approvals which by the terms of this
Agreement or of any of the Loan Documents Agent is permitted or required to take
or to grant, and Agent shall be absolutely entitled to refrain from taking any
action or to withhold any approval and shall not be under any liability
whatsoever to any Person for refraining from any action or withholding any
approval under any of the Loan Documents until it shall have received such
instructions from the applicable percentage of Lenders. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against Agent as
a result of Agent acting or refraining from acting under this Agreement or any
of the other Loan Documents in accordance with the instructions of the
applicable percentage of Lenders and notwithstanding the instructions of
Lenders, Agent shall have no obligation to take any action if it, in good faith
believes that such action exposes Agent to any liability.
(D) Reliance. Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents or any telephone message or
other communication (including any writing, telex, telecopy or telegram)
believed by it in good faith to be genuine and correct and to have been signed,
sent or made by the proper Person, and with respect to all matters pertaining to
this Agreement or any of the Loan Documents and its duties hereunder or
thereunder, upon advice of counsel selected by it. Agent shall be entitled to
rely upon the advice of legal counsel, independent accountants, and other
experts selected by Agent in its sole discretion.
(E) Indemnification. Each Lender, severally, agrees to reimburse and
indemnify Agent for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, advances or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against Agent in any way relating to or arising out of this
Agreement or any of the Loan Documents or any action taken or omitted by Agent
under this Agreement for any of the Loan Documents, in proportion to each
Lender's Pro Rata Share; provided, however, that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, advances or disbursements resulting
from Agent's gross negligence or willful misconduct. The obligations of Lenders
under this subsection 9.2(E) shall survive the payment in full of the
Obligations and the termination of this Agreement.
(F) Heller Individually. With respect to its Commitments and the Loans made
by it, and the Notes issued to it, Heller shall have and may exercise the same
rights and powers hereunder and is subject to the same obligations and
liabilities as and to the extent set forth herein for any other Lender. The
terms "Lenders" or "Requisite Lenders" or any similar terms shall, unless the
context clearly otherwise indicates, include Heller in its individual capacity
as a Lender or one of the Requisite Lenders. Heller may lend money to, and
generally engage in any kind of banking, trust or other business with any Loan
Party as if it were not acting as Agent pursuant hereto.
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(G) Successor Agent.
(1) Resignation. Agent may resign from the performance of all its
functions and duties hereunder at any time by giving at least thirty (30)
Business Days' prior written notice to Borrower Representative and Lenders.
Such resignation shall take effect upon the acceptance by a successor Agent
of appointment pursuant to clause (2) below or as otherwise provided below.
(2) Appointment of Successor. Upon any such notice of resignation
pursuant to clause (G)(1) above, Requisite Lenders shall, upon receipt of
Borrower Representative's prior consent, which consent shall not
unreasonably be withheld, appoint a successor Agent. If a successor Agent
shall not have been so appointed within said thirty (30) Business Day
period, the retiring Agent, upon notice to Borrower Representative, shall
then appoint a successor Agent who shall serve as Agent until such time, as
Requisite Lenders, upon receipt of Borrower Representative's prior consent,
which consent shall not be unreasonably withheld, appoint a successor Agent
as provided above.
(3) Successor Agent. Upon the acceptance of any appointment as Agent
under the Loan Documents by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall
be discharged from its duties and obligations under the Loan Documents.
After any retiring Agent's resignation as Agent under the Loan Documents,
the provisions of this subsection 9.2 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under the
Loan Documents.
(H) Collateral Matters.
(1) Release of Collateral. Lenders hereby irrevocably authorize Agent,
at its option and in its discretion, to release any Lien granted to or held
by Agent upon any property covered by this Agreement or the Loan Documents
(i) upon termination of the Commitments and payment and satisfaction of all
Obligations; (ii) constituting property being sold or disposed of if
Borrower Representative certifies to Agent that the sale or disposition is
made in compliance with the provisions of this Agreement or, as applicable,
the other Loan Documents (and Agent may rely in good faith conclusively on
any such certificate, without further inquiry); or (iii) constituting
property leased to any Loan Party under a lease which has expired or been
terminated in a transaction permitted under this Agreement or, as
applicable, the other Loan Documents, or is about to expire and which has
not been, and is not intended by such Loan Party to be, renewed or
extended. In addition during any Fiscal Year (x) Agent may release
Collateral having a value (as determined by Agent in its sole discretion)
of no more than $500,000 in the aggregate and (y) Agent, with the consent
of Requisite Lenders, may release Collateral having a value (as determined
by Agent in its sole discretion) in excess of $500,000 in the aggregate.
(2) Confirmation of Authority; Execution of Releases. Without in any
manner limiting Agent's authority to act without any specific or further
authorization or consent by Lenders (as set forth in subsection 9.2(H)(1)),
each Lender agrees to confirm in writing, upon request
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by Agent, the authority to release any property covered by this Agreement
or the Loan Documents conferred upon Agent under subsection 9.2(H)(1). So
long as no Event of Default is then continuing, upon receipt by Agent of
confirmation from the requisite percentage of Lenders, of its authority to
release any particular item or types of property covered by this Agreement
or the Loan Documents, and upon at least five (5) Business Days prior
written request by Borrower Representative, Agent shall (and is hereby
irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the Liens granted to Agent for the
benefit of Lenders herein or pursuant hereto upon such Collateral;
provided, however, that (i) Agent shall not be required to execute any such
document on terms which, in Agent's opinion, would expose Agent to
liability or create any obligation or entail any consequence other than the
release of such Liens without recourse or warranty, and (ii) such release
shall not in any manner discharge, affect or impair the Obligations or any
Liens upon (or obligations of any Loan Party, in respect of), all interests
retained by any Loan Party, including, without limitation, the proceeds of
any sale, all of which shall continue to constitute part of the property
covered by this Agreement or the Loan Documents.
(3) Absence of Duty. Agent shall have no obligation whatsoever to any
Lender or any other Person to assure that the property covered by this
Agreement or the Loan Documents exists or is owned by any Loan Party or is
cared for, protected or insured or has been encumbered or that the Liens
granted to Agent on behalf of Lenders herein or pursuant hereto have been
properly or sufficiently or lawfully created, perfected, protected or
enforced or are entitled to any particular priority, or to exercise at all
or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and
powers granted or available to Agent in this subsection 9.2(H) or in any of
the Loan Documents, it being understood and agreed that in respect of the
property covered by this Agreement or the Loan Documents or any act,
omission or event related thereto, Agent may act in any manner it may deem
appropriate, in its discretion, given Agent's own interest in property
covered by this Agreement or the Loan Documents as one of Lenders and that
Agent shall have no duty or liability whatsoever to any of the other
Lenders; provided, that Agent shall exercise the same care which it would
in dealing with loans for its own account.
(I) Agency for Perfection. Each Lender hereby appoints each other Lender as
agent for the purpose of perfecting Lenders' security interest in Collateral
which, in accordance with Article 9 of the Uniform Commercial Code in any
applicable jurisdiction, can be perfected only by possession. Should any Lender
(other than Agent) obtain possession of any such Collateral, such Lender shall
notify Agent thereof, and, promptly upon Agent's request therefor, shall deliver
such Collateral to Agent or in accordance with Agent's instructions.
(J) Exercise of Remedies. Each Lender agrees that it will not have any
right individually to enforce or seek to enforce this Agreement or any Loan
Document or to realize upon any collateral security for the Loans, it being
understood and agreed that such rights and remedies may be exercised only by
Agent.
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9.3 Consents.
(A) In the event Agent requests the consent of a Lender and does not
receive a written denial thereof within ten (10) Business Days after such
Lender's receipt of such request, then such Lender will be deemed to have given
such consent.
(B) In the event Agent requests the consent of a Lender and such consent is
denied, then Heller may, at its option, require such Lender to assign its
interest in the Loans to Heller for a price equal to the then outstanding
principal amount thereof plus accrued and unpaid interest and fees due such
Lender, which interest and fees will be paid when collected from Borrowers. In
the event that Heller elects to require any Lender to assign its interest to
Heller, Heller will so notify such Lender in writing within forty-five (45) days
following such Lender's denial, and such Lender will assign its interest to
Heller no later than five (5) days following receipt of such notice.
9.4 Set Off and Sharing of Payments. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
each Lender is hereby authorized by Loan Parties at any time or from time to
time, with reasonably prompt subsequent notice to Borrower Representative or to
any other Person (any prior or contemporaneous notice being hereby expressly
waived) to set off and to appropriate and to apply any and all (A) balances held
by such Lender or such holder at any of its offices for the account of any Loan
Party (regardless of whether such balances are then due to such Loan Party, and
(B) other property at any time held or owing by such Lender or such holder to or
for the credit or for the account of any Loan Party against and on account of
any of the Obligations which are not paid when due; except that no Lender or any
such holder shall exercise any such right without the prior written consent of
Agent. Any Lender which has exercised its right to set off shall, to the extent
the amount of any such set off exceeds its Pro Rata Share of the Obligations,
purchase for cash (and the other Lenders or holders shall sell) participations
in each such other Lender's or holder's Pro Rata Share of the Obligations as
would be necessary to cause such Lender to share such excess with each other
Lender or holder in accordance with their respective Pro Rata Shares. The
Holding Parties and Borrowers agree, to the fullest extent permitted by law,
that (a) any Lender or holder may exercise its right to set off with respect to
amounts in excess of its Pro Rata Share of the Obligations and may sell
participations in such excess to other Lenders and holders, and (b) any Lender
or holder so purchasing a participation in the Loans made or other Obligations
held by other Lenders or holders may exercise all rights of set-off, bankers'
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender or holder were a direct holder of Loans and other Obligations
in the amount of such participation.
9.5 Disbursement of Funds. Agent may, on behalf of Lenders, disburse funds
to Borrowers for Loans requested. Each Lender shall reimburse Agent on demand
for all funds disbursed on its behalf by Agent, or if Agent so requests, each
Lender will remit to Agent its Pro Rata Share of any Loan before Agent disburses
same to Borrowers. If Agent elects to require that funds be made available prior
to disbursement to Borrowers, Agent shall advise each Lender by telephone, telex
or telecopy of the amount of such Lender's Pro Rata Share of such requested Loan
no later than (a) two (2) Business Days prior to the Funding Date applicable
thereto for LIBOR Loans and (b) by 1:00 p.m. Central time on the Funding Date
for Base Rate Loans, and each such
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Lender shall pay Agent such Lender's Pro Rata Share of such requested Loan, in
same day funds, by wire transfer to Agent's account not later than 10:00 a.m.
Central time on such Funding Date for LIBOR Loans and 3:00 p.m. Central time for
Base Rate Loans. If any Lender fails to pay the amount of its Pro Rata Share
forthwith upon Agent's demand, Agent shall promptly notify Borrower
Representative, and Borrowers shall immediately repay such amount to Agent. Any
repayment required pursuant to this subsection 9.5 shall be without premium or
penalty. Nothing in this subsection 9.5 or elsewhere in this Agreement or the
other Loan Documents, including without limitation the provisions of subsection
9.6, shall be deemed to require Agent to advance funds on behalf of any Lender
or to relieve any Lender from its obligation to fulfill its Commitments
hereunder or to prejudice any rights that Agent or Borrowers may have against
any Lender as a result of any default by such Lender hereunder.
9.6 Settlements, Payments and Information.
(A) Revolving Advances and Payments; Fee Payments.
(1) The Revolving Loan may fluctuate from day to day through Agent's
disbursement of funds to, and receipt of funds from, Borrowers. In order to
minimize the frequency of transfers of funds between Agent and each Lender
notwithstanding terms to the contrary set forth in Section 2 and subsection
9.5, Revolving Advances and repayments may be settled according to the
procedures described in subsection 9.6(A)(2) and 9.6(A)(3) of this
Agreement. Notwithstanding these procedures, each Lender's obligation to
fund its Pro Rata Share of any advances made by Agent to Borrowers will
commence on the date such advances are made by Agent. Such payments will be
made by such Lender without set-off, counterclaim or reduction of any kind.
(2) Once each week, or more frequently (including daily), if Agent so
elects (each such day being a "Settlement Date"), Agent will advise each
Lender by 1 p.m. Central time by telephone, telex, or telecopy of the
amount of each such Lender's Pro Rata Share of the Revolving Loan. In the
event payments are necessary to adjust the amount of such Lender's share of
the Revolving Loan to such Lender's Pro Rata Share of the Revolving Loan,
the party from which such payment is due will pay the other, in same day
funds, by wire transfer to the other's account not later than 3:00 p.m.
Central time on the Business Day following the Settlement Date.
(3) On the first Business Day of each month ("Interest Settlement
Date"), Agent will advise each Lender by telephone, telefax or telecopy of
the amount of interest and fees charged to and collected from Borrowers for
the proceeding month. Provided that such Lender has made all payments
required to be made by it under this Agreement, Agent will pay to such
Lender, by wire transfer to such Lender's account (as specified by such
Lender on the signature page of this Agreement as amended by such Lender
from time to time after the date hereof pursuant to the notice provisions
contained herein or in the applicable Assignment and Assumption Agreement)
not later than 3 p.m. Central time on the next Business Day following the
Interest Settlement Date such Lender's share of such interest and fees.
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(B) Availability of Lender's Pro Rata Share.
(1) Unless Agent has been notified by a Lender prior to a Funding Date
of such Lender's intention not to fund its Pro Rata Share of the Loan
amount requested by Borrower Representative, Agent may assume that such
Lender will make such amount available to Agent on the Funding Date or the
Business Day following the next Settlement Date, as applicable, and Agent
may (but shall not be so required), in reliance upon such assumption, make
available to Borrowers on such date a corresponding amount.
(2) Nothing contained in this subsection 9.6(B) will be deemed to
relieve a Lender of its obligation to fulfill its Commitments or to
prejudice any rights Agent or Borrowers may have against such Lender as a
result of any default by such Lender under this Agreement, but no Lender
shall be responsible for the failure of any other Lender to make such other
Lender's Pro Rata Share of the Loan to be made by such other Lender on any
Funding Date.
(3) Without limiting the generality of the foregoing, each Lender
shall be obligated to fund its Pro Rata Share of any Revolving Advance made
with respect to any draw on a Lender Letter of Credit.
(4) If and to the extent that there is a Defaulted Amount, and Agent
has made available to Borrowers such amount, the Defaulting Lender shall,
on the Business Day following (i) such Funding Date or (ii) the first
Business Day following the next Settlement Date, as applicable, make such
Defaulted Amount available to Agent, together with interest at the Federal
Funds Effective Rate plus one half of one percent (0.50%) for each day the
Defaulted Amount is outstanding until the date such Lender makes such
amount available to Agent. A notice from Agent submitted to any Lender with
respect to amounts owing under this subsection shall be conclusive, absent
manifest error. If such amount is not made available to Agent, Agent shall
promptly notify the applicable Borrowers of such failure to fund (a
"Defaulting Lender Notice"). Any payments received by Agent thereafter
shall be applied first to reduce Agent's overfunding resulting from the
default by such Defaulting Lender, and any Revolving Advances made at the
request of Borrowers thereafter shall first be applied by Agent to reduce
such overfunding, and to the extent any such payments or advances are
insufficient to reduce the entire Defaulted Amount, then Agent may, on or
after the tenth day following its delivery of the Defaulting Lender Notice,
make demand upon Borrowers and Borrowers shall immediately pay such amount
to Agent for Agent's account, together with interest thereon for each day
elapsed since the date of such borrowing, at a rate per annum equal to the
interest rate applicable at the time to the Loan made by the other Lenders
on such Funding Date.
(5) Agent shall not transfer to a Defaulting Lender any payment made
by Borrowers to Agent or any amount otherwise received by Agent for
application to the Obligations, nor shall a Defaulting Lender be entitled
to the sharing of any fees or payments hereunder.
(6) For purposes of voting or consenting to matters with respect to
the Loan Documents and determining Pro Rata Shares and the Revolving Loan
Commitment, a
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Defaulting Lender shall be deemed not to be a "Lender" and such Lender's
Revolving Loan Commitments shall be deemed to be zero (0).
(C) Return of Payments.
(1) If Agent pays an amount to a Lender under this Agreement in the
belief or expectation that a related payment has been or will be received
by Agent from a Loan Party and such related payment is not received by
Agent, then Agent will be entitled to recover such amount from such Lender
without set-off, counterclaim or deduction of any kind.
(2) If Agent determines at any time that any amount received by Agent
under this Agreement must be returned to Borrowers or paid to any other
person pursuant to any solvency law or otherwise, then, notwithstanding any
other term or condition of this Agreement, Agent will not be required to
distribute any portion thereof to any Lender. In addition, each Lender will
repay to Agent on demand any portion of such amount that Agent has
distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to Borrowers or such other Person, without
set-off, counterclaim or deduction of any kind.
9.7 Dissemination of Information. Agent will provide Lenders with any
information received by Agent from Loan Parties which is required to be provided
to a Lender hereunder; provided, however, that Agent shall not be liable to
Lenders for any failure to do so, except to the extent that such failure is
attributable to Agent's gross negligence or willful misconduct.
9.8 Discretionary Advances. Agent may, in its sole discretion, make
Revolving Advances on behalf of Lenders in an aggregate amount of not more than
$3,000,000 in excess of the limitations set forth in subsection 2.1(A)(1)(b) but
not in excess of the limitations set forth in subsection 2.1 (A)(1)(a) for the
purpose of preserving, protecting, collecting or enforcing the Collateral
(including, without limitation, the preservation of the perfection and priority
of Agent's Lien thereon) and/or rights and remedies of Agent and Lenders under
the Loan Documents or applicable law.
SECTION 10. MISCELLANEOUS
10.1 Expenses and Attorneys' Fees. Whether or not the transactions
contemplated hereby shall be consummated, Loan Parties agree to promptly pay all
fees, costs and expenses incurred by Agent in connection with any matters
contemplated by or arising out of this Agreement or the other Loan Documents
including the following, and all such fees, costs and expenses shall be part of
the Obligations, payable on demand and secured by the Collateral: (a) fees,
costs and expenses (including reasonable attorneys' fees, allocated costs of
internal counsel and fees of environmental consultants, accountants and other
professionals retained by Agent) incurred in connection with the examination,
review, due diligence investigation, documentation and closing of the financing
arrangements evidenced by the Loan Documents; (b) fees, costs and expenses
(including reasonable attorneys' fees, allocated costs of internal counsel and
fees of environmental consultants, accountants and other professionals retained
by Agent) incurred in connection with the review, negotiation,
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preparation, documentation, execution, syndication, and administration of the
Loan Documents, the Loans, and any amendments, waivers, consents, forbearances
and other modifications relating thereto or any subordination or intercreditor
agreements; (c) fees, costs and expenses incurred by Agent in creating,
perfecting and maintaining perfection of Liens in favor of Agent, on behalf of
Lenders; (d) fees, costs and expenses incurred by Agent in connection with
forwarding to Borrowers the proceeds of Loans including Agent's or any Lenders'
standard wire transfer fee; (e) fees, costs, expenses and bank charges,
including bank charges for returned checks, incurred by Agent or any Lender in
establishing, maintaining and handling lock box accounts, blocked accounts or
other accounts for collection of the Collateral; (f) fees, costs, expenses
(including reasonable attorneys' fees and allocated costs of internal counsel)
of Agent or any Lender and costs of settlement incurred in collecting upon or
enforcing rights against the Collateral or incurred in any action to enforce
this Agreement or the other Loan Documents or to collect any payments due from
Borrowers or any other Loan Party under this Agreement or any other Loan
Document or incurred in connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement, whether in the nature of a
"workout" or in connection with any insolvency or bankruptcy proceedings or
otherwise.
10.2 Indemnity. In addition to the payment of expenses pursuant to
subsection 10.1, whether or not the transactions contemplated hereby shall be
consummated, each Loan Party jointly and severally agrees to indemnify, pay and
hold Agent and each Lender and any holder of the Notes and the officers,
directors, employees, agents, consultants, auditors, persons engaged by and of
Agent or any Lender and any holder of any of the Notes to evaluate or monitor
the Collateral, affiliates and attorneys of Agent, Lender and such holders
(collectively called the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including the fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto) that may be imposed on, incurred by, or asserted against that
Indemnitee, in any manner relating to or arising out of this Agreement or the
other Loan Documents, the consummation of the transactions contemplated by this
Agreement, the statements contained in the commitment letters, if any, delivered
by Agent or any Lender, Agent's and each Lender's agreement to make the Loans
hereunder, the use or intended use of the proceeds of any of the Loans or the
exercise of any right or remedy hereunder or under the other Loan Documents (the
"Indemnified Liabilities"); provided that Loan Parties shall have no obligation
to an Indemnitee hereunder with respect to Indemnified Liabilities arising from
the gross negligence or willful misconduct of that Indemnitee as determined by a
court of competent jurisdiction.
10.3 Amendments and Waivers.
(A) Except as otherwise provided herein, no amendment, modification,
termination or waiver of any provision of this Agreement or any Loan Document,
or consent to any departure by any Loan Party therefrom, shall in any event be
effective unless the same shall be in writing and signed by Requisite Lenders or
Agent, as applicable; provided, that no amendment, modification, termination or
waiver shall, unless in writing and signed by all Lenders, do any of the
following: (i) increase the Commitment of any Lender; (ii) reduce the principal
of, rate of interest
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on or fees payable with respect to any Loan; (iii) extend the scheduled due date
of any installment of principal of the Loans; (iv) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Loans, or the
percentage of Lenders which shall be required for Lenders or any of them to take
any action hereunder; (v) amend or waive this subsection 10.3 or the definitions
of the terms used in this subsection 10.3 insofar as the definitions affect the
substance of this subsection 10.3; (vi) consent to the assignment or other
transfer by any Loan Party of any of its rights and obligations under any Loan
Document; and (vii) increase the percentages contained in the definition of
Borrowing Base and provided, further, that no amendment, modification,
termination or waiver affecting the rights or duties of Agent under any Loan
Document shall in any event be effective, unless in writing and signed by Agent,
in addition to Lenders required herein above to take such action.
(B) Each amendment, modification, termination or waiver shall be effective
only in the specific instance and for the specific purpose for which it was
given. No amendment, modification, termination or waiver shall be required for
Agent to take additional Collateral pursuant to any Loan Document.
(C) No amendment, modification or waiver of any provision of any Lender
Letter of Credit shall be applicable without the written concurrence of the
issuer of such Lender Letter of Credit. No notice to or demand on any Holding
Party, any Borrower or any other Loan Party in any case shall entitle any
Holding Party, any Borrower or any other Loan Party to any other or further
notice or demand in similar or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this subsection 10.3
shall be binding upon each Lender, and, if signed by a Loan Party, on such Loan
Party.
(D) In the event Agent waives (1) any Default arising under subsection
8.1(E) as a result of the breach of any of the provisions of Section 5 of this
Agreement (other than any such breach which constitutes an Event of Default) or
(2) any Default constituting a condition to the funding of any Revolving Advance
or issuance of any Lender Letter of Credit, such waiver shall expire on the date
upon which the Default which was the subject of such waiver matures into an
Event of Default pursuant to the terms of this Agreement.
10.4 Notices. Unless otherwise specifically provided herein, all notices
shall be in writing addressed to the respective party as set forth below and may
be personally served, telecopied or sent by overnight courier service or United
States mail and shall be deemed to have been given: (a) if delivered in person,
when delivered; (b) if delivered by telecopy, on the date of transmission if
transmitted on a Business Day before 4:00 p.m. Central time or, if not, on the
next succeeding Business Day; (c) if delivered by overnight courier, two (2)
days after delivery to such courier properly addressed; or (d) if by U.S. Mail,
four (4) Business Days after depositing in the United States mail, with postage
prepaid and properly addressed.
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If to any Borrower,
Corporate Guarantor
or Holding Party: Comforce Corporation
2001 Marcus Avenue
Lake Success, New York 11042
Attention: Chief Financial Officer
Telecopy No.: (516) 352-1953
With a copy to: DOEPKEN KEEVICAN & WEISS
58th Floor, USX Tower
600 Grant Street
Pittsburgh, Pennsylvania 15219
Attention: David K. Edwards, Esq.
Telecopy No.: (412) 355-2609
If to Agent or to Heller: HELLER FINANCIAL, INC.
500 West Monroe
Chicago, Illinois, 60661
Attn: HBC Portfolio Manager
Telecopy No.: (312) 441-6133
With a copy to: HELLER FINANCIAL, INC.
500 West Monroe
Chicago, Illinois 60661
Attn: Legal Department/HBC
Telecopy No.: (312) 441-6876
If to any Lender: Its address indicated on the signature page hereto, in an
Assignment and Assumption Agreement or in a notice to Agent and Borrower
Representative or to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this subsection 10.4.
10.5 Survival of Warranties and Certain Agreements. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the making of the Loans hereunder.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Loan Parties set forth in subsections 10.1 and 10.2 shall
survive the payment of the Loans and the termination of this Agreement.
10.6 Indulgence Not Waiver. No failure or delay on the part of Agent, any
Lender or any holder of any Notes in the exercise of any power, right or
privilege hereunder or under the Notes shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.
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10.7 Marshaling; Payments Set Aside. Neither Agent nor any Lender shall be
under any obligation to marshal any assets in favor of any Loan Party or any
other party or against or in payment of any or all of the Obligations. To the
extent that any Loan Party makes a payment or payments to Agent and/or any
Lender or Agent and/or any Lender enforces its security interests or exercise
its rights of setoff, and such payment or payments or the proceeds of such
enforcement or setoff or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, then to the extent of such recovery, the
Obliga tions or part thereof originally intended to be satisfied, and all Liens,
rights and remedies therefor, shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or setoff had
not occurred.
10.8 Entire Agreement. This Agreement, the Notes and the other Loan
Documents referred to herein embody the final, entire agreement among the
parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto. There are no oral agreements among the parties hereto.
10.9 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
condition exists.
10.10 Severability. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Agreement or the other
Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
or the other Loan Documents or of such provision or obligation in any other
jurisdiction.
10.11 Lenders' Obligations Several; Independent Nature of Lenders' Rights.
The obligation of each Lender hereunder is several and not joint and neither
Agent nor any Lender shall be responsible for the obligation or commitment of
any other Lender hereunder. In the event that any Lender at any time should fail
to make a Loan as herein provided, Lenders, or any of them, at their sole
option, may make the Loan that was to have been made by Lender so failing to
make such Loan. Nothing contained in any Loan Document and no action taken by
Agent or any Lender pursuant hereto or thereto shall be deemed to constitute
Lenders to be a partnership, an association, a joint venture or any other kind
of entity. The amounts payable at any time hereunder to each Lender shall be a
separate and independent debt, and, provided Agent fails or refuses to exercise
any remedies against any Holding Party, any Borrower or any other Loan Party
after receiving the direction of the Requisite Lenders, each Lender shall be
entitled to protect and enforce its rights arising out of this Agreement and it
shall not be necessary for any other Lender to be joined as an additional party
in any proceeding for such purpose.
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10.12 Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
10.13 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
10.14 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns except that no Loan Party may assign its rights or obligations hereunder
without the prior written consent of Lenders.
10.15 No Fiduciary Relationship; Limitation of Liabilities.
(A) No provision in this Agreement or in any of the other Loan Documents
and no course of dealing between the parties shall be deemed to create any
fiduciary duty by Agent or any Lender to any Holding Party, any Borrower or any
other Loan Party.
(B) Neither Agent nor any Lender, nor any affiliate, officer, director,
shareholder, employee, attorney, or agent of Agent or any Lender shall have any
liability with respect to, and Loan Parties hereby waive, release, and agree not
to sue any of them upon, any claim for any special, indirect, incidental, or
consequential damages suffered or incurred by any Loan Party in connection with,
arising out of, or in any way related to, this Agreement or any of the other
Loan Documents, or any of the transactions contemplated by this Agreement or any
of the other Loan Documents. The Loan Parties hereby waive, release, and agree
not to sue Agent or any Lender or any of Agent's or any Lender's affiliates,
officers, directors, employees, attorneys, or agents for punitive damages in
respect of any claim in connection with, arising out of, or in any way related
to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or any of the transactions
contemplated hereby.
10.16 CONSENT TO JURISDICTION. EACH LOAN PARTY HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE BOROUGH OF
MANHATTAN STATE OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT'S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH
COURTS. EACH LOAN PARTY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT, THE NOTES, THE OTHER LOAN DOCUMENTS OR THE OBLIGATIONS.
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10.17 WAIVER OF JURY TRIAL. EACH LOAN PARTY, AGENT AND EACH LENDER HEREBY
WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS. EACH LOAN
PARTY, AGENT AND EACH LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED
ON THE WAIVER IN ENTERING INTO THIS AGREEMENT, THE NOTES AND THE OTHER LOAN
DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. EACH LOAN PARTY, AGENT AND EACH LENDER FURTHER WARRANTS AND
REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.
10.18 Construction. Each Loan Party, Agent and each Lender each acknowledge
that it has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement and the other Loan Documents
with its legal counsel and that this Agreement and the other Loan Documents
shall be construed as if jointly drafted by each Loan Party, Agent and each
Lender.
10.19 Counterparts; Effectiveness. This Agreement and any amendments,
waivers, consents, or supplements 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, but all of which
counterparts together shall constitute but one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto. Delivery of an executed counterpart of a signature
page to this Agreement, any amendments, waivers, consents or supplements, or to
any other Loan Document by telecopier shall be as effective as delivery of a
manually executed counterpart thereof.
10.20 No Duty. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by Agent or any Lender shall have
the right to act exclusively in the interest of Agent or such Lender and shall
have no duty of disclosure, duty of loyalty, duty of care, or other duty or
obligation of any type or nature whatsoever to any Holding Party, any Borrower,
any of the other Loan Parties, or any of the Loan Parties' shareholders or any
other Person.
10.21 Confidentiality. Agent and Lenders shall hold all nonpublic
information obtained pursuant to the requirements hereof and identified as such
by any Loan Party in accordance with such Person's customary procedures for
handling confidential information of this nature and in accordance with safe and
sound business practices and in any event may make disclosure to such of its
respective Affiliates, officers, directors, employees, agents and
representatives as need to know such information in connection with the Loans.
If any Lender is otherwise a creditor of a Loan Party, such Lender may use the
information in connection with its other credits. Agent and Lenders may also
make disclosure reasonably required by a bona fide offeree or assignee (or
participation), or as required or requested by any Governmental Authority or
representative thereof, or pursuant to legal process, or to its accountants,
lawyers and other advisors, and shall require any such offeree or assignee (or
participant) to agree (and require any of its offerees, assignees or
participants to
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agree) to comply with this subsection 10.21. In no event shall Agent or any
Lender be obligated or required to return any materials furnished by a Loan
Party; provided, however, each offeree shall be required to agree that if it
does not become a assignee (or participant) it shall return all materials
furnished to it by any Loan Party in connection herewith.
SECTION 11. GUARANTIES
11.1 Guaranty. Each Corporate Guarantor hereby jointly and severally
absolutely and unconditionally guaranties to Agent and Lenders the full and
prompt payment of all Obligations owed or hereafter owing to Agent and Lenders
by each Borrower. Each Borrower hereby absolutely and unconditionally guarantees
to Agent and Lenders the full and prompt payment of all Obligations owed or
hereafter owing to Agent and each Lender by each other Borrower. Notwithstanding
any provision herein contained to the contrary, each Borrower's liability under
this Section 11 (which liability is in any event in addition to amounts for
which such Borrower is primarily liable under the other Sections of this
Agreement and the other Loan Documents) shall be limited to an amount not to
exceed as of any date of determination the greater of:
(A) the net amount of all Loans advanced to any other Borrower under
this Agreement and then re-loaned or otherwise transferred to such
Borrower; or
(B) the amount which could be claimed by Agent and Lenders from such
Borrower under this Section 11 without rendering such claim voidable or
avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under
any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent
Conveyance Act or similar statute or common law after taking into account,
among other things, such Borrower's right of contribution and
indemnification from the other Borrowers under subsection 11.2 hereof.
Until all Obligations have been paid in full, this guaranty is and is intended
to be a continuing, unconditional guaranty of payment of the Obligations,
independent of and in addition to any other guaranty, endorsement, collateral or
other agreement now or hereafter held by Agent or any Lender therefor or with
respect thereto, whether or not furnished by Borrowers and/or any Corporate
Guarantor.
11.2 Contribution with Respect to Guaranty Obligations.
(A) To the extent that any Borrower shall make a payment under this Section
11 of all or any of the Obligations for which such Borrower is not primarily
liable (a "Guarantor Payment") which, taking into account all other Guarantor
Payments then previously or concurrently made by the other Borrowers, exceeds
the amount which such Borrower would otherwise have paid if each Borrower had
paid the aggregate Obligations satisfied by such Guarantor Payment in the same
proportion that such Borrower's "Allocable Amount" (as defined below) (in effect
immediately prior to such Guarantor Payment) bore to the aggregate Allocable
Amounts of all Borrowers in effect immediately prior to the making of such
Guarantor Payment, then such Borrower shall be entitled to received contribution
and indemnification payments from, and be reimbursed by, each of the other
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Borrowers for the amount of such excess, pro rata based upon their respective
Allocable Amounts in effect immediately prior to such Guarantor Payment.
(B) As of any date of determination, the "Allocable Amount" of any Borrower
shall be equal to the maximum amount of the claim which could then be recovered
from such Borrower under this subsection 11 without rendering such claim
voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or
under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent
Conveyance Act or similar statute or common law.
(C) This subsection 11.2 is intended only to define the relative rights of
Borrowers and nothing set forth in this subsection 11.2 is intended to or shall
impair the obligations of Borrowers, jointly and severally, to pay any amounts
as and when the same shall become due and payable in accordance with the terms
of this Agreement, including, without limitation, Section 2 hereof, and nothing
contained in this subsection 11.2 shall limit the liability of any Borrower to
pay the Obligations for which it is primarily liable. Accordingly, the right of
any Borrower to receive any contribution and indemnification payment from, or to
be reimbursed by, any other Borrower under this Section 11 shall be unsecured
and subordinated in right of payment to such other Borrower's indebtedness and
liability in respect of the Obligations.
(D) The parties hereto acknowledge that the rights of contribution and
indemnification hereunder shall constitute assets of any Borrower to which such
contribution and indemnification is owing.
11.3 Obligations Absolute. The liability of each Corporate Guarantor and
each Borrower to Agent and Lenders under this Section 11 shall not be affected
or impaired by any of the following acts by Agent or any Lender: (i) any
acceptance of collateral security, guarantors, accommodation parties or sureties
for any or all Obligations; (ii) one or more extensions or renewals of any
Obligations (whether or not for longer than the original period) or any
modification of the interest rates, fees, maturities or principal amount of, or
other contractual terms applicable to, any Obligations; (iii) any waiver or
indulgence granted to any Borrower or any other Loan Party, any delay or lack of
diligence in the enforcement of Obligations, or any failure to institute
proceedings, file a claim, give any required notices or otherwise protect any
Obligations; (iv) any full or partial release of, compromise or settlement with,
or agreement not to sue any Borrower or any other Loan Party, or any guarantor
or other person liable in respect of any Obligations; (v) the acceptance of any
instrument in renewal or substitution of any Obligation; (vi) any failure to
obtain collateral security (including rights of setoff) for any Obligations, or
to obtain or maintain the proper or sufficient creation and perfection thereof,
or to establish the priority thereof, or to preserve, protect, insure, care for,
exercise or enforce any collateral security; or any modification, alteration,
substitution, exchange, surrender, cancellation, termination, release or other
change, impairment, limitation, loss or discharge of any collateral security;
(vii) any assignment, pledge or other transfer of any Obligations or any
evidence thereof; or (viii) any manner, order or method of application of any
payments or credits upon Obligations. Each Corporate Guarantor and each Borrower
hereby waives any and all defenses and discharges available to a surety,
guarantor, or accommodation co-obligor, other than payment in full in cash of
the Obligations and termination of the Commitments pursuant thereto.
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11.4 WAIVER. EACH CORPORATE GUARANTOR AND EACH BORROWER HEREBY WAIVES
PRESENTMENT, DEMAND FOR PAYMENT, NOTICE OF DISHONOR OR NONPAYMENT, AND PROTEST
OF ANY INSTRUMENT EVIDENCING LIABILITIES.
11.5 Recovery. If any payment is applied by Agent or any Lender to the
Obligations and is hereafter set aside, recovered, rescinded or required to be
returned for any reason (including, without limitation, the bankruptcy,
insolvency or reorganization of any Borrower or any other obligor), the
Obligations to which such payment was applied shall for the purposes of this
Section 11 be deemed to have continued in existence, notwithstanding such
payment and application and this guaranty shall be enforceable as to such
Obligations as fully as if such payment and application had never been made.
11.6 Liability Cumulative. The liability of the Corporate Guarantors and
Borrowers under this Section 11 is in addition to and shall be cumulative with
all liabilities of each Corporate Guarantor and each Borrower to Agent or any
Lender under this Agreement and the other Loan Documents to which any such
Borrower or Corporate Guarantor is a party or in respect of any Obligations of
the other Borrowers or Corporate Guarantors, without any limitation as to
amount, unless the instrument or agreement evidencing or creating such other
liability specifically provides to the contrary.
[SIGNATURE PAGE FOLLOWS]
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WITNESS the due execution of this Agreement by the respective duly
authorized officers of the undersigned as of the date first written above.
Holding Parties: COMFORCE CORPORATION
COMFORCE OPERATING, INC.
COMFORCE COLUMBUS, INC.
RHO ACQUISITION COMPANY
UNIFORCE SERVICES, INC.
Borrowers: BRENTWOOD SERVICE GROUP, INC.
COMFORCE INFORMATION
TECHNOLOGIES, INC.
COMFORCE IT ACQUISITION CORP.
COMFORCE TECHNICAL SERVICES, INC.
COMFORCE TELECOM, INC.
COMPUTER CONSULTANTS FUNDING
& SUPPORT, INC.
FORCE FIVE, INC.
LABFORCE OF AMERICA, INC.
PROFESSIONAL STAFFING FUNDING &
SUPPORT, INC.
PROJECT STAFFING SUPPORT TEAM,
INC.
PRO N.E., INC.
PRO UNLIMITED, INC.
RHO COMPANY INCORPORATED
TEMPORARY HELP INDUSTRY
SERVICING COMPANY, INC.
UNIFORCE INFORMATION SERVICES OF
TEXAS, INC.
UNIFORCE MIS SERVICES OF GEORGIA,
INC.
UNIFORCE PAYROLLING SERVICES, INC.
UNIFORCE STAFFING SERVICES, INC.
USSI-NE CORP.
UTS OF DELAWARE, INC.
Inactive Subsidiaries: BRANNON & TULLY, INC.
E.O. OPERATIONS CORP.
E.O. SERVICING CO., INC.
MONTARE INTERNATIONAL, INC.
STAFFING INDUSTRY FUNDING &
SUPPORT, INC.
SUMTEC CORPORATION
[Signatures Continued of Following Page]
[Signature page to Loan Agreement]
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<PAGE>
TEMPFUNDS INTERNATIONAL, INC.
THISCO OF CANADA, INC.
UNIFORCE INFORMATION SERVICES,
INC.
UNIFORCE MEDICAL OFFICE SUPPORT,
INC.
USI INC. OF CALIFORNIA
UTS CORP. OF MINNESOTA
For each of the foregoing corporations:
By: /s/ Paul Grillo
------------------------------
Paul J. Grillo, Vice President
HELLER FINANCIAL, INC.
By: /s/ Andrew G. Jakubek
------------------------------
Title: Vice President
Revolving Loan Commitment:
$75,000,000
[Signature page to Loan Agreement]
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<PAGE>
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
I, _______________________, a Notary Public in and for said County, in the
State aforesaid, DO HEREBY CERTIFY that _______________, personally known to me
to be the _________________ of Heller Financial, Inc., the person who executed
the foregoing instrument, who being by me duly sworn, did depose and say he is
the officer of such corporation described in and which executed the foregoing
instrument; that said instrument is signed on behalf of such corporation by
order of its Board of Directors; and that he acknowledged said instrument to be
the free act and deed of such corporation.
GIVEN under my hand and notarial seal this ____ day of November, 1997.
____________________________________
Notary Public
My commission expires:
____________________________________
<PAGE>
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
I, ________________, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that Paul J. Grillo, personally known to me to be a
Vice President of each of COMFORCE Corporation, COMFORCE Operating, Inc.,
COMFORCE Columbus, Inc., RHO Acquisition Company, Uniforce Services, Inc.,
Brentwood Service Group, Inc., COMFORCE Information Technologies, Inc., COMFORCE
IT Acquisition Corp., COMFORCE Technical Services, Inc., COMFORCE Telecom, Inc.,
Computer Consultants Funding & Support, Inc., Force Five, Inc., LabForce of
America, Inc., Professional Staffing Funding & Support, Inc., Project Staffing
Support Team, Inc., PrO N.E., Inc., PrO Unlimited, Inc., RHO Company
Incorporated, Temporary Help Industry Servicing Company, Inc., Uniforce
Information Services of Texas, Inc., Uniforce MIS Services of Georgia, Inc.,
Uniforce Payrolling Services, Inc., Uniforce Staffing Services, Inc., USSI-NE
Corp., UTS of Delaware, Inc., Brannon & Tully, Inc., E.O. Operations Corp., E.O.
Servicing Co., Inc., Montare International, Inc., Staffing Industry Funding &
Support, Inc., SUMTEC Corporation, Tempfunds International, Inc., Thisco of
Canada, Inc., Uniforce Information Services, Inc., Uniforce Medical Office
Support, Inc., USI Inc. of California, and UTS Corp. of Minnesota, the person
who executed the foregoing instrument, who being by me duly sworn, did depose
and say he is a Vice President of each such corporation described in and which
executed the foregoing instrument; that said instrument is signed on behalf of
each such corporation by order of its respective Board of Directors; and that he
acknowledged said instrument to be the free act and deed of each such
corporation.
GIVEN under my hand and notarial seal this ___ day of November, 1997.
____________________________________
Notary Public
My commission expires:
____________________________________
<PAGE>
EXHIBITS
A. Assignment and Assumption Agreement
B. Borrowing Base Certificate
C. Compliance Certificate
D. Reconciliation Report
E. Notice of Borrowing
<PAGE>
SCHEDULES
1.1(A) Other Liens
1.1(B) Pro Forma
2.1(B) Account Debtors
3.1(A) List of Closing Documents
4.1(B) Capitalization of Loan Parties
4.4 Other Indebtedness
4.6 Trade Names (Present and Past Five Years)
4.7 Location of Principal Place of Business, Books and Records and
Collateral; FEIN
4.9 Litigation
4.10 Audits
4.13 Intellectual Property
4.20 Bank Accounts
4.22 Employee Matters
Exhibit 99.2
COMFORCE OPERATING, INC.
as Issuer,
and
WILMINGTON TRUST COMPANY
as Trustee
$200,000,000
12% SENIOR NOTES DUE 2007, SERIES A
12% SENIOR NOTES DUE 2007, SERIES B
----------------------------
INDENTURE
Dated as of November 26, 1997
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
310(a)(1) ..................... 7.10
(a)(2) ..................... 7.10
(a)(3) ..................... N.A.
(a)(4) ..................... N.A.
(b) ..................... 7.8; 7.10
(c) ..................... N.A.
311(a) ..................... 7.11
(b) ..................... 7.11
(c) ..................... N.A.
312(a) ..................... 2.5
(b) ..................... 10.3
(c) ..................... 10.3
313(a) ..................... 7.6
(b)(1) ..................... N.A.
(b)(2) ..................... 7.6
(c) ..................... 7.6
(d) ..................... 7.6
314(a) ..................... 4.2; 4.10; 10.2
(b) ..................... N.A.
(c)(1) ..................... 10.4
(c)(2) ..................... 10.4
(c)(3) ..................... N.A.
(d) ..................... N.A.
(e) ..................... 10.5
(f) ..................... 4.9
315(a) ..................... 7.1
(b) ..................... 7.5; 10.2
(c) ..................... 7.1
(d) ..................... 7.1
(e) ..................... 6.11
316(a)(last sentence) ..................... 10.6
(a)(1)(A) ..................... 6.5
(a)(1)(B) ..................... 6.4
(a)(2) ..................... N.A.
(b) ..................... 6.7
317(a)(1) ..................... 6.8
(a)(2) ..................... 6.9
(b) ..................... 2.4
318(a) ..................... 12.1
N.A. means Not Applicable.
- ----------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE>
INDENTURE dated as of November 26, 1997, between COMFORCE Operating, Inc.,
a Delaware corporation (as further defined below, the "Company"), and Wilmington
Trust Company, a Delaware banking corporation, as Trustee (the "Trustee").
The Company has duly authorized the creation and issuance of up to
$110,000,000 aggregate principal amount of 12% Senior Notes due 2007 (the
"Initial Securities") and $110,000,000 aggregate principal amount of 12% Senior
Notes due 2007 (the "Exchange Securities", and together with the Initial
Securities, (the "Securities") and, to provide therefor, the Company has duly
authorized the execution and delivery of this Indenture. All things necessary to
make the Securities, when duly issued and executed by the Company, and
authenticated and delivered hereunder, the valid obligations of the Company, and
to make this Indenture a valid and binding agreement of the Company have been
done.
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the Securities:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Permitted Business; (ii) the Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the acquisition
of such Capital Stock by the Company or a Restricted Subsidiary of the Company;
(iii) Capital Stock constituting a minority interest in any Person that at such
time is a Restricted Subsidiary of the Company; or (iv) Permitted Investments of
the type and in the amounts described in clause (viii) of the definition
thereof; provided, however, that, in the case of clauses (ii) and (iii), such
Restricted Subsidiary is primarily engaged in a Permitted Business.
"Additional Exchange Securities" means an additional series of 12% Senior
Notes due 2007, to be issued in exchange for Additional Securities in accordance
with the terms of any exchange and registration rights agreement applicable
thereto.
"Additional Private Exchange Note" shall mean any Private Exchange Note
issued in respect of an Additional Security.
"Additional Securities" has the meaning set forth in Section 2.2(d).
"Affiliate" of any specified person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any 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 meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Disposition" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of
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<PAGE>
shares of Capital Stock of (or any other equity interests in) a Restricted
Subsidiary (other than directors' qualifying shares) or of any other property or
other assets (each referred to for the purposes of this definition as a
"disposition") by the Company or any of its Restricted Subsidiaries (including
any disposition by means of a merger, consolidation or similar transaction)
other than (i) a disposition by a Restricted Subsidiary to the Company or by the
Company or a Restricted Subsidiary to a Wholly-Owned Subsidiary, (ii) a
disposition of inventory in the ordinary course of business, (iii) a disposition
of obsolete or worn out equipment or equipment that is no longer useful in the
conduct of the business of the Company and its Restricted Subsidiaries and that
is disposed of in each case in the ordinary course of business, (iv)
dispositions of property for net proceeds which, when taken collectively with
the net proceeds of any other such dispositions under this clause (iv) that were
consummated since the beginning of the calendar year in which such disposition
is consummated, do not exceed $1.0 million, and (v) transactions permitted
pursuant to Section 5.1 of this Indenture. Notwithstanding anything to the
contrary contained above, a Restricted Payment made in compliance with Section
4.4 of this Indenture shall not constitute an Asset Disposition except for
purposes of determinations of the Consolidated Coverage Ratio.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Securities, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the product of
the numbers of years (rounded upwards to the nearest month) from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption multiplied by the amount of such payment by (ii)
the sum of all such payments.
"Bankruptcy Law" means Title 11, United States Code, as amended, or any
similar United States federal or state law relating to bankruptcy, insolvency,
receivership, winding-up, liquidation, reorganization or relief of debtors or
any amendment to, succession to or change in any such law.
"Board of Directors" means the Board of Directors of any Person or any
committee thereof duly authorized to act on behalf of such Board of Directors.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means each day which is not a Legal Holiday.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations, rights in or other equivalents
of or interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified
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<PAGE>
and accounted for as a capitalized lease for financial reporting purposes in
accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP, and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date such lease may be terminated without penalty.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof, (iii) certificates of deposit, time
deposits and eurodollar time deposits with maturities of one year or less from
the date of acquisition, bankers' acceptances with maturities not exceeding one
year and overnight bank deposits, in each case with any commercial bank having
capital and surplus in excess of $500 million, (iv) repurchase obligations for
underlying securities of the types described in clauses (ii) and (iii) entered
into with any financial institution meeting the qualifications specified in
clause (iii) above, (v) commercial paper rated A-1 or the equivalent thereof by
Moody's or S&P and in each case maturing within one year after the date of
acquisition, (vi) investment funds investing 95% of their assets in securities
of the types described in clauses (i)-(v) above, (vii) readily marketable direct
obligations issued by any state of the United States of America or any political
subdivision thereof having one of the two highest rating categories obtainable
from either Moody's or S&P and (viii) Indebtedness or preferred stock issued by
Persons with a rating of "A" or higher from S&P or "A2" or higher from Moody's.
"Cedel Bank" has the meaning set forth in Section 2.1.
"Change of Control" means the occurrence of any of the following events:
(a) any sale, lease, exchange or other transfer (collectively, a "Transfer") (in
one transaction or a series of related transactions) of all or substantially all
of the assets of the Company and its Subsidiaries; or (b) a majority of the
Board of Directors of the Company or of any direct or indirect holding company
thereof shall consist of Persons who are not Continuing Directors of the
Company; (c) the acquisition by any Person or Group (other than the Management
Group) of the power, directly or indirectly, to vote or direct the voting of
securities having more than 35% of the ordinary voting power for the election of
directors of the Company or of any direct or indirect holding company thereof;
provided that no Change of Control shall be deemed to occur pursuant to this
clause (c), so long as the Management Group owns an amount of securities
representing a greater portion of such ordinary voting power than such Person or
Group; (d) the acquisition by any Person or Group (including, but not limited
to, the Management Group) of the power, directly or indirectly, to vote or
direct the voting of securities having more than 49.9% of the ordinary voting
power for the election of directors of the Company or any direct or indirect
holding company thereof; or (e) COMFORCE Corporation ceases to own all of the
outstanding Voting Stock of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means COMFORCE Operating, Inc., a Delaware corporation until a
successor replaces it and, thereafter, means the successor.
"Commission" or "SEC" means the U.S. Securities and Exchange Commission or
its successor.
"Consolidated Cash Flow" for any period means the Consolidated Net Income
for such period, plus the following to the extent deducted in calculating such
Consolidated Net Income:
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<PAGE>
(i) income tax expense, (ii) Consolidated Interest Expense, (iii) depreciation
expense, (iv) amortization expense, (v) exchange or translation losses on
foreign currencies, and (vi) all other non-cash items reducing Consolidated Net
Income (excluding any non-cash item to the extent it represents an accrual of or
reserve for cash disbursements for any subsequent period prior to the stated
maturity of the Notes) and less, (x) the aggregate amount of contingent and
"earnout" payments in respect of any Permitted Business acquired by the Company
or any Restricted Subsidiary that are paid in cash during such period and (y) to
the extent added in calculating Consolidated Net Income, (A) exchange or
translation gains on foreign currencies and (B) non-cash items (excluding such
non-cash items to the extent they represent an accrual for cash receipts
reasonably expected to be received prior to the Stated Maturity of the
Securities), in each case for such period. Notwithstanding the foregoing, the
income tax expense, depreciation expense and amortization expense of a
Subsidiary of the Company shall be included in Consolidated Cash Flow only to
the extent (and in the same proportion) that the net income of such Subsidiary
was included in calculating Consolidated Net Income.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated Cash Flow for the period of
the most recent four consecutive fiscal quarters ending prior to the date of
such determination and as to which financial statements are available, to (ii)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
that (A) if the Company or any of its Restricted Subsidiaries has incurred any
Indebtedness since the beginning of such period and through the date of
determination of the Consolidated Coverage Ratio that remains outstanding or if
the transaction giving rise to the need to calculate Consolidated Coverage Ratio
is an incurrence of Indebtedness, or both, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to (1) such Indebtedness as if such Indebtedness had
been incurred on the first day of such period (provided that if such
Indebtedness is incurred under a revolving credit facility (or similar
arrangement or under any predecessor revolving credit or similar arrangement)
only that portion of such Indebtedness that constitutes the one year projected
average balance of such Indebtedness (as determined in good faith by the Board
of Directors of the Company) shall be deemed outstanding for purposes of this
calculation), and (2) the discharge of any other Indebtedness repaid,
repurchased, defeased or otherwise discharged with the proceeds of such new
Indebtedness as if such discharge had occurred on the first day of such period,
(B) if since the beginning of such period any Indebtedness of the Company or any
of its Restricted Subsidiaries has been repaid, repurchased, defeased or
otherwise discharged (other than Indebtedness under a revolving credit or
similar arrangement unless such revolving credit Indebtedness has been
permanently repaid and the underlying commitment terminated and has not been
replaced), Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto as if such Indebtedness had been repaid,
repurchased, defeased or otherwise discharged on the first day of such period,
(C) if since the beginning of such period the Company or any of its Restricted
Subsidiaries shall have made any Asset Disposition or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Asset
Disposition, Consolidated Cash Flow for such period shall be reduced by an
amount equal to the Consolidated Cash Flow (if positive) attributable to the
assets which are the subject of such Asset Disposition for such period or
increased by an amount equal to the Consolidated Cash Flow (if negative)
attributable thereto for such period, and Consolidated Interest Expense for such
period shall be (i) reduced by an amount equal to the Consolidated Interest
Expense attributable to any Indebtedness of the Company or any of its Restricted
Subsidiaries repaid, repurchased, defeased or otherwise discharged with respect
to the Company and its continuing Restricted Subsidiaries in connection with
such Asset Disposition for such period (or,
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if the Capital Stock of any Restricted Subsidiary of the Company is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale) and (ii) increased by interest income attributable to the
assets which are the subject of such Asset Disposition for such period, (D) if
since the beginning of such period the Issuer or any of its Restricted
Subsidiaries (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary of the Company (or any Person which becomes a Restricted
Subsidiary of the Company as a result thereof) or an acquisition of assets
occurring in connection with a transaction causing a calculation to be made
hereunder which constitutes all or substantially all of an operating unit of a
business, Consolidated Cash Flow and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto (including the
incurrence of any Indebtedness) as if such Investment or acquisition occurred on
the first day of such period and (E) if since the beginning of such period any
Person (that subsequently became a Restricted Subsidiary of the Company or was
merged with or into the Company or any Restricted Subsidiary of the Company
since the beginning of such period) shall have made any Asset Disposition,
Investment or acquisition of assets that would have required an adjustment
pursuant to clause (C) or (D) above if made by the Company or a Restricted
Subsidiary of the Company during such period, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or acquisition
occurred on the first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of assets, the amount
of income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness incurred in connection therewith, the
pro forma calculations shall be determined in good faith by a responsible
financial or accounting officer of the Issuer. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the interest
expense on such Indebtedness shall be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
consolidated interest expense of the Company and its Restricted Subsidiaries
determined in accordance with GAAP, plus, to the extent not included in such
interest expense (i) interest expense attributable to Capitalized Lease
Obligations, (ii) capitalized interest, (iii) amortization of original issue
discount, (iv) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, (v) interest
actually paid by the Company or any such Restricted Subsidiary under any
Guarantee of Indebtedness or other obligation of any other Person, (vi) net
payments (whether positive or negative) pursuant to Interest Rate Agreements,
(vii) the cash contributions to any employee stock ownership plan or similar
trust to the extent such contributions are used by such plan or trust to pay
interest or fees to any Person (other than the Company) in connection with
Indebtedness Incurred by such plan or trust and (viii) cash and Disqualified
Stock dividends in respect of all Preferred Stock of Subsidiaries and
Disqualified Stock of the Company held by Persons other than the Company or a
Wholly-Owned Subsidiary and less (a) to the extent included in such interest
expense, the amortization of capitalized debt issuance costs, (b) interest
income and (c) non-cash interest expense. Notwithstanding the foregoing, the
Consolidated Interest Expense with respect to any Restricted Subsidiary of the
Company, that was not a Wholly-Owned Subsidiary, shall be included only to the
extent (and in the same proportion) that the net income of such Restricted
Subsidiary was included in calculating Consolidated Net Income.
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"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of the Company and its consolidated Subsidiaries determined in
accordance with GAAP; provided, however, that there shall not be included in
such Consolidated Net Income: (i) any net income (loss) of any person acquired
by the Company or any of its Restricted Subsidiaries in a pooling of interests
transaction for any period prior to the date of such acquisition, (ii) any net
income of any Restricted Subsidiary of the Company if such Restricted Subsidiary
is subject to restrictions, directly or indirectly, on the payment of dividends
or the making of distributions by such Restricted Subsidiary, directly or
indirectly, to the Company (other than restrictions in effect on the Issue Date
with respect to a Restricted Subsidiary of the Company and other than
restrictions that are created or exist in compliance with Section 4.10 of this
Indenture), (iii) any gain or loss realized upon the sale or other disposition
of any assets of the Company or its consolidated Restricted Subsidiaries
(including pursuant to any Sale/Leaseback Transaction) which are not sold or
otherwise disposed of in the ordinary course of business and any gain or loss
realized upon the sale or other disposition of any Capital Stock of any Person,
(iv) any extraordinary gain or loss, (v) the cumulative effect of a change in
accounting principles, (vi) the net income of any Person, other than a
Restricted Subsidiary, except to the extent of the lesser of (A) cash dividends
or distributions actually paid to the Company or any of its Restricted
Subsidiaries by such Person and (B) the net income of such Person (but in no
event less than zero), and the net loss of such Person (other than an
Unrestricted Subsidiary) shall be included only to the extent of the aggregate
Investment of the Company or any of its Restricted Subsidiaries in such Person
and (viii) any non-cash expenses attributable to grants or exercises of employee
stock options. Notwithstanding the foregoing, for the purpose of Section 4.4 of
this Indenture only, there shall be excluded from Consolidated Net Income any
dividends, repayments of loans or advances or other transfers of assets from
Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the
extent such dividends, repayments or transfers increase the amount of Restricted
Payments permitted pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of the Company ending prior to the taking of any
action for the purpose of which the determination is being made and for which
financial statements are available (but in no event ending more than 135 days
prior to the taking of such action), as (i) the par or stated value of all
outstanding Capital Stock of the Company plus (ii) paid in capital or capital
surplus relating to such Capital Stock plus (iii) any retained earnings or
earned surplus less (A) any accumulated deficit and (B) any amounts attributable
to Disqualified Stock.
"Continuing Director" of any Person means, as of the date of determination,
any Person who (i) was a member of the Board of Directors of such Person on the
date of the Notes Indenture or (ii) was nominated for election or elected to the
Board of Directors of such Person with the affirmative vote of a majority of the
Continuing Directors of such Person who were members of such Board of Directors
at the time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 10.2 or such other address as to which the Trustee
may give notice to the Company.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
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"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and their
respective successors and assigns, or such other depository institution
hereinafter appointed by the Company.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under the Indenture, a member of
the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions.
"Disqualified Stock" means any Capital Stock which by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event (other than an event which
would constitute a Change of Control), (i) matures (excluding any maturity as
the result of an optional redemption by an issuer thereof) or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of a holder thereof, in whole or in part, on or prior to the final
stated maturity of the Notes, or (ii) is convertible into or exchangeable
(unless at the sole option of the issuer thereof) for (a) debt securities or (b)
any Capital Stock referred to in (i) above, in each case at any time prior to
the final Stated Maturity of the Notes.
"Equity Offering" means an offering for cash by COMFORCE Corporation of its
common stock, or options, warrants or rights with respect to its common stock.
"Euroclear" has the meaning set forth in Section 2.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"Exchange Offer" means the registration by the Company under the Securities
Act pursuant to a registration statement of the offer by the Company to each
Securityholder of the Initial Securities to exchange all the Initial Securities
held by such Securityholder for the Exchange Securities in an aggregate
principal amount equal to the aggregate principal amount of the Initial
Securities held by such Securityholder, all in accordance with the terms and
conditions of the Registration Rights Agreement.
"Exchange Securities" means the 12% Senior Notes due 2007, Series B, to be
issued in exchange for the Initial Securities pursuant to the Registration
Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company or its Restricted
Subsidiaries in existence on the Issue Date, plus interest accrued, thereon,
after application of the net proceeds of the New Credit Facility, the Securities
and the 15% Senior Secured PIK Debentures due 2009 of COMFORCE Corporation as
described in the Offering Memorandum.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the
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transaction. Fair market value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
Board Resolution of the Board of Directors of the Company delivered to the
Trustee.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of this Indenture, including those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
this Indenture shall be computed in conformity with GAAP.
"Group" shall mean any "group" for purposes of Section 13(d) of the
Exchange Act.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Holder" or "Securityholder" means the Person in whose name a Security is
registered on the Registrar's books.
"Incur" means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be incurred
by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (ii) the principal
of and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto) (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in clauses (i), (ii) and (v) ) entered into in the
ordinary course of business of such Person to the extent that such letters of
credit are not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the third business day following receipt by such Person
of a demand for reimbursement following payment on the letter of credit), (iv)
all obligations of such Person to pay the deferred and unpaid purchase price of
property or services (except (x) trade payables and accrued expenses incurred in
the ordinary course of business and (y) contingent or "earnout" payment
obligations in respect of any Permitted Business acquired by the Company or any
Restricted Subsidiary), which purchase price is due more than six months after
the date of placing such property in service or taking delivery and title
thereto or the
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completion of such services, (v) all Capitalized Lease Obligations and all
Attributable Indebtedness of such Person, (vi) all Indebtedness of other Persons
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person, (vii) all Indebtedness of other Persons to the extent
Guaranteed by such Person, (viii) the amount of all obligations of such Person
with respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Restricted Subsidiary of the Company,
any Preferred Stock of such Restricted Subsidiary to the extent such obligation
arises on or before the Stated Maturity of the Securities (but excluding, in
each case, accrued dividends) with the amount of Indebtedness represented by
such Disqualified Stock or Preferred Stock, as the case may be, being equal to
the greater of its voluntary or involuntary liquidation preference and its
maximum fixed repurchase price; provided that, for purposes hereof the "maximum
fixed repurchase price" of any Disqualified Stock or Preferred Stock, as the
case may be, which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Stock or Preferred Stock, as the
case may be, as if such Disqualified Stock or Preferred Stock, as the case may
be, were purchased on any date on which Indebtedness shall be required to be
determined pursuant to this Indenture, and if such price is based on the fair
market value of such Disqualified Stock or Preferred Stock, as the case may be,
such fair market value shall be determined in good faith by the Board of
Directors of the Company and (ix) to the extent not otherwise included in this
definition, obligations under Currency Agreements and Interest Rate Agreements.
Unless specifically set forth above, the amount of Indebtedness of any Person at
any date shall be the outstanding principal amount of all unconditional
obligations as described above, as such amount would be reflected on a balance
sheet prepared in accordance with GAAP, and the maximum liability of such
Person, upon the occurrence of the contingency giving rise to the obligation, of
any contingent obligations described above at such date.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Initial Securities" has the meaning set forth in the preamble to this
Indenture.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Securities.
"Interest Rate Agreement" means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts payable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or similar arrangement, but
excluding any debt or extension of credit represented by a bank deposit other
than a time deposit) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person. For purposes of
Section 4.3 of this Indenture, (i) "Investment" shall include the portion
(proportionate to the Company's equity interest in a Restricted Subsidiary to be
designated as an
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Unrestricted Subsidiary) of the fair market value of the net assets of such
Restricted Subsidiary of the Company at the time that such Restricted Subsidiary
is designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) the Company's "Investment" in
such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time that such
Subsidiary is so redesignated a Restricted Subsidiary; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined in good
faith by the Board of Directors and evidenced by a resolution of such Board of
Directors certified in an Officers' Certificate to the Trustee.
"Issue Date" means the date the Securities are originally issued.
"Legal Holiday" has the meaning ascribed in Section 10.8.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Group" means James L. Paterek, Christopher P. Franco and
Michael Ferrentino.
"Maturity" means, with respect to any security, the date on which any
principal of such security becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal, by
sinking fund payment or by declaration of acceleration, call for redemption or
purchase or otherwise.
"Maturity Date" means December 1, 2007.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets subject to such Asset Disposition) therefrom in each
case net of (i) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all Federal, state, foreign and local
taxes required to be paid or accrued as a liability under GAAP, as a consequence
of such Asset Disposition, (ii) all payments made on any Indebtedness which is
secured by any assets subject to such Asset Disposition, in accordance with the
terms of any Lien upon such assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Disposition or by applicable law, be
repaid out of the proceeds from such Asset Disposition, (iii) all distributions
and other payments required to be made to any Person owning a beneficial
interest in assets subject to sale or minority interest holders in Subsidiaries
or joint ventures as a result of such Asset Disposition, (iv) the deduction of
appropriate amounts to be provided by the seller as a reserve, in accordance
with GAAP, against any liabilities associated with the assets disposed of in
such Asset Disposition, provided, however, that upon any reduction in such
reserves (other than to the extent resulting from payments of the respective
reserved liabilities), Net
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Available Cash shall be increased by the amount of such reduction to reserves,
and retained by the Company or any Restricted Subsidiary of the Company after
such Asset Disposition and (v) any portion of the purchase price from an Asset
Disposition placed in escrow (whether as a reserve for adjustment of the
purchase price, for satisfaction of indemnities in respect of such Asset
Disposition or otherwise in connection with such Asset Disposition) provided,
however, that upon the termination of such escrow, Net Available Cash shall be
increased by any portion of funds therein released to the Company or any
Restricted Subsidiary.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result of such issuance or sale.
"New Credit Facility" means the Credit Agreement, to be dated as of
November 26, 1997, among the Company, COMFORCE Corporation and its indirect
Subsidiaries, Heller Financial, Inc., and any other financial institutions from
time to time party thereto, together with the related documents thereto
(including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including by way of adding Subsidiaries of
the Company as additional borrowers or guarantors thereunder) all or any portion
of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any Restricted Subsidiary (a) provides any guarantee or credit support of
any kind (including any undertaking, guarantee, indemnity, agreement or
instrument that would constitute Indebtedness) or (b) is directly or indirectly
liable (as a guarantor, general partner or otherwise) and (ii) no default with
respect to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default under such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"Non-U.S. Person" means any Person who is not a U.S. Person.
"Offering Memorandum" means the Offering Memorandum dated November 19,
1997, pursuant to which the Initial Securities were offered, and any supplements
thereto;
"Officer" means the Chairman of the Board, the Vice-Chairman of the Board,
the Chief Executive Officer, the Chief Financial Officer, the President, any
Vice-President, the Treasurer or the Secretary of the Company.
"Officer's Certificate" shall mean a certificate signed by two Officers of
the Company, at least one of whom shall be the principal executive, financial or
accounting officer of the Company.
"Opinion of Counsel" means a written opinion, in form and substance
acceptable to
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the Trustee, from legal counsel who is acceptable to the Trustee and which
complies, if applicable, with Section 10.5.
"Paying Agent" has the meaning provided in Section 2.3.
"Permitted Business" means any business which is the same as or related,
ancillary or complementary to any of the businesses of the Company and its
Restricted Subsidiaries on the date of this Indenture, as reasonably determined
by the Company's Board of Directors.
"Permitted Investment" means an Investment by the Company or any of its
Restricted Subsidiaries in (i) a Wholly-Owned Subsidiary of the Company;
provided, however, that the primary business of such Wholly-Owned Subsidiary is
a Permitted Business; (ii) another Person if as a result of such Investment such
other Person becomes a Wholly-Owned Subsidiary of the Company or is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Company or a Wholly-Owned Subsidiary of the Company; provided,
however, that in each case such Person's primary business is a Permitted
Business; (iii) Temporary Cash Investments; (iv) receivables owing to the
Company or any of its Restricted Subsidiaries, created or acquired in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms; (v) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary course of
business; (vi) loans and advances to employees made in the ordinary course of
business consistent with past practices of the Company or such Restricted
Subsidiary in an aggregate amount outstanding at any one time not to exceed
$250,000 to any one employee or $1.0 million in the aggregate; (vii) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any of its Restricted
Subsidiaries or in satisfaction of judgments or claims; (viii) a Person engaged
in a Permitted Business or a loan or advance by the Company the proceeds of
which are used solely to make an investment in a Person engaged in a Permitted
Business or a Guarantee by the Company of Indebtedness of any Person in which
such Investment has been made provided, however, that no Permitted Investments
may be made pursuant to this clause (viii) to the extent the amount thereof
would, when taken together with all other Permitted Investments made pursuant to
this clause (viii), exceed $5.0 million in the aggregate (plus, to the extent
not previously reinvested, any return of capital realized on Permitted
Investments made pursuant to this clause (viii), or any release or other
cancellation of any Guarantee constituting such Permitted Investment); (ix)
Persons to the extent such Investment is received by the Company or any
Restricted Subsidiary as consideration for asset dispositions effected in
compliance with the covenant described under "Limitations on Sales of Assets and
Subsidiary Stock"; (x) prepayments and other credits to suppliers made in the
ordinary course of business consistent with the past practices of the Company
and its Restricted Subsidiaries; and (xi) Investments in connection with
pledges, deposits, payments or performance bonds made or given in the ordinary
course of business in connection with or to secure statutory, regulatory or
similar obligations, including obligations under health, safety or environmental
obligations.
"Permitted Liens" means: (i) pledges or deposits by the Company or any
Restricted Subsidiary under workmen's compensation laws, unemployment insurance
laws, other types of social security benefits or similar legislation, or good
faith deposits in connection with bids, tenders or contracts (other than for the
payment of Indebtedness) or leases to which the Company or any Restricted
Subsidiary is a party, or deposits to secure public or statutory obligations or
deposits of cash or United States government bonds to secure surety or appeal
bonds to which the Company or
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any Restricted Subsidiary is a party, or deposits as security for contested
taxes or import duties or for the payment of rent, in each case incurred by the
Company or any Restricted Subsidiary in the ordinary course of business
consistent with past practice; (ii) Liens imposed by law, such as carriers',
warehousemen's and mechanics' Liens, in each case for sums not yet due from the
Company or any Restricted Subsidiary or being contested in good faith by
appropriate proceedings by the Company or any Restricted Subsidiary, as the case
may be, or other Liens arising out of judgments or awards against the Company or
any Restricted Subsidiary with respect to which the Company or such Restricted
Subsidiary, as the case may be, will then be prosecuting an appeal or other
proceedings for review; (iii) Liens for property taxes or other taxes,
assessments or governmental charges of the Company or any Restricted Subsidiary
not yet due or payable or subject to penalties for nonpayment or which are being
contested by the Company or such Restricted Subsidiary, as the case may be, in
good faith by appropriate proceedings; (iv) Liens in favor of issuers of
performance bonds and surety bonds issued pursuant to clause (vi) under Section
4.3 of this Indenture; (v) survey exceptions, encumbrances, easements or,
reservations of, or rights of others for, licenses, rights-of-way, sewers,
electric lines, telegraph and telephone lines and other similar purposes or
zoning or other restrictions as to the use of real property of the Company or
any Restricted Subsidiary incidental to the ordinary course of conduct of the
business of the Company or such Restricted Subsidiary or as to the ownership of
properties of the Company or any Restricted Subsidiary, which, in either case,
were not incurred in connection with Indebtedness and which do not in the
aggregate materially adversely affect the value of said properties or materially
impair their use in the operation of the business of the Company or any
Restricted Subsidiary; (vi) Liens to secure Indebtedness permitted under clauses
(a)(ii) and (b)(i) under Section 4.3 of this Indenture; (vii) Liens outstanding
immediately after the Issue Date as set forth on Schedule II to this Indenture
(and not otherwise permitted by clause (vi)); (viii) Liens on property, assets
or shares of stock of any Restricted Subsidiary at the time such Restricted
Subsidiary became a Subsidiary of the Company; provided, however, that (A) if
any such Lien has been Incurred in anticipation of such transaction, such
property, assets or shares of stock subject to such Lien will have a fair market
value at the date of the acquisition thereof not in excess of the lesser of (1)
the aggregate purchase price paid or owed by the Company in connection with the
acquisition of such Restricted Subsidiary and (2) the fair market value of all
property and assets of such Restricted Subsidiary and (B) any such Lien will not
extend to any other assets owned by the Company or any Restricted Subsidiary;
(ix) Liens on property or assets at the time the Company or any Restricted
Subsidiary acquired such assets, including any acquisition by means of a merger
or consolidation with or into the Company or such Restricted Subsidiary;
provided, however, that (A) if any such Lien is Incurred in anticipation of such
transaction, such property or assets subject to such Lien will have a fair
market value at the date of the acquisition thereof not in excess of the lesser
of (1) the aggregate purchase price paid or owed by the Company or such
Restricted Subsidiary in connection with the acquisition thereof and of any
other property and assets acquired simultaneously therewith and (2) the fair
market value of all such property and assets acquired by the Company or such
Restricted Subsidiary and (B) any such Lien will not extend to any other
property or assets owned by the Company or any Restricted Subsidiary; (x) Liens
securing Indebtedness or other obligations of a Restricted Subsidiary owing to
the Company or a Wholly Owned Subsidiary; (xi) Liens to secure any extension,
renewal, refinancing, replacement or refunding (or successive extensions,
renewals, refinancings, replacements or refundings), in whole or in part, of any
Indebtedness secured by Liens referred to in any of clauses (vii), (viii) and
(ix); provided, however, that any such Lien will be limited to all or part of
the same property or assets that secured the original Lien (plus improvements on
such property) and the aggregate principal amount of Indebtedness that is
secured by such Lien will not be increased to an amount greater than the sum of
(A) the outstanding principal amount, or, if greater, the committed amount, of
the Indebtedness
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described under clauses (vii), (viii) and (ix) at the time the original Lien
became a Permitted Lien under this Indenture and (B) an amount necessary to pay
any premiums, fees and other expenses Incurred by the Company in connection with
such refinancing, refunding, extension, renewal or replacement; (xii) Liens on
property or assets of the Company securing Interest Rate Agreements and Currency
Agreements so long as the related Indebtedness is, and is permitted under
Section 4.3 of this Indenture, secured by a Lien on the same property securing
the relevant Interest Rate Agreement or Currency Agreement; (xiii) Liens
securing Indebtedness incurred under (1) the Senior Debentures and (2) the New
Credit Facility or any Guarantee thereof by any Restricted Subsidiary; and (xiv)
Liens on property or assets of the Company or any Restricted Subsidiary securing
Indebtedness (1) under purchase money obligation or Capitalized Lease
Obligations permitted under clause (b)(ii) under Section 4.3 of this Indenture
or (2) under Sale/Leaseback Transactions permitted under Section 4.11 of this
Indenture; provided, that (A) the amount of Indebtedness Incurred in any
specific case does not, at the time such Indebtedness is Incurred, exceed the
lesser of the cost or fair market value of the property or asset acquired or
constructed in connection with such purchase money obligation or Capitalized
Lease Obligation or subject to such Sale/Leaseback Transaction, as the case may
be, (B) such Lien will attach to such property or asset upon acquisition of such
property or asset and or upon commencement of such Sale/Leaseback Transaction,
as the case may be, and (C) no property or asset of the Company or any
Restricted Subsidiary (other than the property or asset acquired or contracted
in connection with such purchase money Obligation or Capitalized Lease
Obligation or subject to such Sale/Leaseback Transaction, as the case may be)
are subject to any Lien securing such Indebtedness.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof or any other entity.
"Physical Securities" has the meaning provided in Section 2.1.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Private Exchange Note" shall have the meaning provided in the Registration
Rights Agreement.
"Private Placement Legend" has the meaning provided in Section 2.15.
"Proceeds Purchase Date" has the meaning provided in Section 4.8.
A "Public Market" exists at any time with respect to the common stock of
COMFORCE Corporation if (a) the common stock of COMFORCE Corporation is then
registered with the Securities and Exchange Commission pursuant to Section 12(b)
or 12(g) of the Exchange Act and traded either on a national securities exchange
or in the National Association of Securities Dealers Automated Quotation System
and (b) at least 15% of the total issued and outstanding common stock of
COMFORCE Corporation, as applicable, has been distributed prior to such time by
means of an effective registration statement under the Securities Act.
"QIB" means any "qualified institutional buyer" (as defined under the
Securities Act).
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"Record Date" means the record dates specified in the Securities, whether
or not a Legal Holiday.
"Redemption Date" when used with respect to any Security, means the date
fixed for the redemption of such Security pursuant to this Indenture and the
Securities by a notice delivered pursuant to the terms of Section 3.3 of this
Indenture.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances,
replaces, renews, repays or extends (including pursuant to any defeasance or
discharge mechanism) (collectively, "refinances," and "refinanced" shall have a
correlative meaning) any Indebtedness existing on the date of this Indenture or
Incurred in compliance with this Indenture (including Indebtedness of the
Company that refinances Indebtedness of any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary that refinances Indebtedness of
another Restricted Subsidiary) including Indebtedness that refinances
Refinancing Indebtedness; provided, however, that (i) the Refinancing
Indebtedness has a Stated Maturity no earlier than the earlier of (A) the first
anniversary of the Stated Maturity of the Securities and (B) Stated Maturity of
the Indebtedness being refinanced, (ii) the Refinancing Indebtedness has an
Average Life at the time such Refinancing Indebtedness is Incurred that is equal
to or greater than the lesser of (A) the Average Life of the Securities and (B)
the Average Life of the Indebtedness being refinanced and, (iii) the Refinancing
Indebtedness is in an aggregate principal amount (or if issued with original
issue discount, an aggregate issue price) that is equal to (or 101% of, in the
case of a refinancing of the Securities in connection with a Change of Control)
or less than the sum of the aggregate principal amount (or if issued with
original issue discount, the aggregate accreted value) then outstanding of the
Indebtedness being refinanced.
"Registrar" has the meaning provided for in Section 2.3.
"Registration Rights Agreement" means the Exchange and Registration Rights
Agreement, dated November 26, 1997, between the Company and Initial Purchaser.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" has the meaning set forth in Section 2.1.
"Responsible Officer" when used with respect to the Trustee, means any
officer within the corporate trust department of the Trustee (or any successor
group of the Trustee) with direct responsibility for the administration of this
Indenture and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Period" means 40 days after the later of commencement of the
offering of the Securities and the Issue Date.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
entitled to request and conclusively rely on an Opinion of Counsel with respect
to whether any Security constitutes a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company other an
Unrestricted Subsidiary.
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"Rule 144A Global Note" has the meaning set forth in Section 2.1.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill,
Inc., and its successors.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Subsidiary leases it
from such Person.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Securities" means the Initial Securities, the Additional Securities, if
and when issued, the Exchange Securities, the Additional Exchange Securities, if
and when issued, the Private Exchange Notes and the Additional Private Exchange
Notes, if and when issued, treated as a single class of securities, as amended
or supplemented from time to time in accordance with the terms hereof, that are
issued pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision.
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Securities pursuant to a written agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person, (ii) such Person and one
or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such
Person. Unless otherwise specified herein, each reference to a Subsidiary shall
refer to a Subsidiary of the Company.
"Successor Issuer" has the meaning provided in Section 5.1.
"Temporary Cash Investments" means any of the following: (i) any Investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
(ii) Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America having capital surplus and undivided profits
aggregating in excess of $250 million (or the foreign currency
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equivalent thereof) and whose long-term debt, or whose parent holding company's
long-term debt, is rated "A" (or such similar equivalent rating) or higher by at
least one nationally recognized statistical rating organization (as defined in
Rule 436 under the Securities Act), (iii) repurchase obligations with a term of
not more than 30 days for underlying securities of the types described in clause
(i) above entered into with a bank meeting the qualifications described in
clause (ii) above, (iv) Investments in commercial paper, maturing not more than
180 days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "P-1" (or higher) according to Moody's. or "A-1" (or higher) according to
S&P, (v) Investments in securities with maturities of six months or less from
the date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's and
(vi) Investments in mutual funds whose investment guidelines restrict such
funds' investments to those satisfying the provisions of clauses (i) through (v)
above.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb)
as in effect on the date of this Indenture; provided, however, that, in the
event the Trust Indenture Act of 1939 is amended after such date, "TIA" means,
to the extent required by any such amendment, the Trust Indenture Act of 1939 as
so amended.
"Trustee" means the party named as such in the preamble to this Indenture
until a successor replaces it in accordance with the provisions of Article VII
of this Indenture and, thereafter, means the successor.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"Uniforce Acquisition" means COMFORCE Corporation's acquisition of Uniforce
Services, Inc., a New York corporation, through a tender offer and a merger of
an indirect wholly-owned subsidiary of COMFORCE Corporation with and into
Uniforce Services, Inc.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any Restricted Subsidiary of the Company
that is not a Subsidiary of the Subsidiary to be so designated; provided,
however, that each Subsidiary to be so designated and each of its Subsidiaries
has not at the time of such designation, and does not thereafter create, Incur,
issue, assume, guarantee or otherwise becomes liable with respect to any
Indebtedness other than Non-Recourse Debt and either (A) the Subsidiary to be so
designated has total consolidated assets of $10,000 or less or (B) if such
Subsidiary has consolidated assets greater than $10,000, then such designation
would be permitted under Section 4.4. of this Indenture. The Board of Directors
may designate any Unrestricted Subsidiary to be a Restricted Subsidiary subject
to the limitations contained in Section 4.12 of this Indenture.
"U.S. Government Obligations" means direct obligations (or certificates
representing
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an ownership interest in such obligations) of the United States of America
(including any agency or instrumentality thereof) for the payment of which the
full faith and credit of the United States of America is pledged and which are
not callable or redeemable at the issuer's option.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"U.S. Person" means any "U.S. Person" as defined by Regulation S under the
Securities Act.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly-Owned Subsidiary" means a Restricted Subsidiary of the Company, at
least 99% of the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or another Wholly-Owned Subsidiary.
SECTION 1.2 Other Definitions.
Defined in
Term Section
---- -------
"Agent Members" 2.16
"covenant defeasance option" 8.1(b)
"Custodian" 6.1
"Event of Default" 6.1
"Excess Proceeds" 4.8(a)
"Global Notes" 2.1
"legal defeasance option" 8.1(b)
"Restricted Payment" 4.4
"Rule 144A" 2.1
SECTION 1.3 Incorporation by Reference of Trust Indenture Act. This
Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, and any other
obligor on the securities.
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All other TIA terms used in this Indenture that are defined by the TIA,
defined by the TIA reference to another statute or defined under rules
promulgated by the Commission have the meanings assigned to them by such
definitions.
SECTION 1.4. Rules of Construction. Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) references to Article and Section numbers refers to the
corresponding Articles and Sections of this Indenture unless otherwise
specified; and
(7) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE II
THE SECURITIES
SECTION 2.1 Form and Dating. The Initial Securities (and any Additional
Securities), and the Trustee's certificate of authentication thereon shall be
substantially in the form of Exhibit A hereto. The Exchange Securities (and any
Additional Exchange Securities), and the Trustee's certificate of authentication
thereon shall be substantially in the form of Exhibit B hereto. The Securities
may have notations, legends or endorsements required by law, stock exchange rule
or Depositary rule or usage. The Company and the Trustee shall approve the form
of the Securities and any notation, legend or endorsement on them. Each Security
shall be dated the date of its authentication.
The terms and provisions contained in the forms of the Securities annexed
hereto as Exhibits A and B, shall constitute, and are hereby expressly made, a
part of this Indenture and, to the extent applicable, the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Securities offered and sold in reliance on Rule 144A under the Securities
Act ("Rule 144A") shall be issued initially in the form of one or more permanent
global notes in registered form, in substantially the form set forth in Exhibit
A (the "Rule 144A Global Note"), deposited with the Trustee, as custodian for
the Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Rule 144A Global
Note may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depositary, as hereinafter
provided. Securities offered and sold in reliance on
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Regulation S under the Securities Act shall be issued in the form of one or more
permanent global notes in registered form in substantially the form set forth in
Exhibit A with the legend set forth in Exhibit A-2 (the "Regulation S Global
Note" and together with the 144A Global Note, the "Global Notes"). The
Regulation S Global Note, which shall be deposited with the Trustee, as
custodian for the Depositary, and registered in the name of the Depositary or
the nominee of the Depositary for the accounts of designated agents holding on
behalf of the Euroclear System ("Euroclear") or Cedel Bank, S.A. ("Cedel Bank").
The aggregate principal amount of the Regulation S Global Note may from time to
time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary, as hereinafter provided.
Securities issued in exchange for interests in the Rule 144A Global Note
pursuant to Section 2.17 may be issued in the form of permanent certificated
Securities in registered form in substantially the form set forth in Exhibit A
(the "Physical Securities").
Each of the Global Notes shall represent such amount of the outstanding
Securities as shall be specified therein and each shall provide that it shall
represent the aggregate amount of outstanding Securities from time to time
endorsed thereon and that the aggregate amount of outstanding Securities
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Note to reflect the amount of any increase or decrease in the amount of
outstanding Securities represented thereby shall be made by the Trustee in
accordance with instructions given by the Holder thereof as required by Section
2.6 hereof.
The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "Management
Resolutions" and "Instructions to Participants" of Cedel Bank shall be
applicable to interests in the Regulation S Global Notes that are held by the
Agent Members through Euroclear or Cedel Bank.
SECTION 2.2 Execution and Authentication. (a) Two Officers of the Company
shall sign, or one Officer shall sign and one Officer or an Assistant Secretary
shall attest to, (each of whom shall, in each case, have been duly authorized by
all requisite corporate actions) the Securities for the Company by manual or
facsimile signature. If an Officer whose signature is on a Security no longer
holds that office at the time the Security is authenticated, the Security shall
nevertheless be valid.
(b) A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature of the Trustee shall be conclusive
evidence that the Security has been authenticated under this Indenture.
(c) The Trustee shall authenticate (i) Initial Securities for original
issue in the aggregate principal amount not to exceed $110,000,000, (ii) Private
Exchange Notes from time to time for issue only in exchange for a like principal
amount of Initial Securities and (iii) Exchange Securities from time to time for
issue only in exchange for a like principal amount of Initial Securities, in
each case upon receipt of a written order of the Company. Each such written
order shall specify the amount of Securities to be authenticated and the date on
which the Securities are to be authenticated, whether the Securities are to be
Initial Securities, Private Exchange Notes or Exchange Securities and whether
the Securities are to be issued as Physical Securities or Global Notes and such
other information as the Trustee may reasonably request.
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(d) Subject to the provisions of this Indenture, including, but not limited
to the provisions of Section 4.3(a) hereof, the Company may cause the Trustee to
authenticate (i) additional Securities (the "Additional Securities") for
original issue in the aggregate principal amount not to exceed $90,000,000, (ii)
Additional Private Exchange Notes from time to time in exchange for a like
principal amount of Additional Securities and (iii) Additional Exchange
Securities from time to time for issue only in exchange for a like principal
amount of Additional Securities in each case upon receipt of a written order of
the Company. Each such written order shall specify the amount of Securities to
be authenticated and the date on which the Securities are to be authenticated,
whether the Securities are to be Additional Securities, Additional Private
Exchange Notes or Additional Exchange Securities and whether the Securities are
to be issued as Physical Securities or Global Notes and such other information
as the Trustee may reasonably request. The aggregate principal amount of
Securities outstanding at any time under this Indenture may not exceed
$200,000,000.
(e)| The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate.
(f) The Securities shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.3 Registrar and Paying Agent. (a) The Company shall maintain an
office or agency (which shall be located in the Borough of Manhattan in the City
of New York, State of New York) where (i) Securities may be presented for
registration of transfer or for exchange ("Registrar"), (ii) Securities may be
presented for payment ("Paying Agent") and (iii) notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional paying
agent. The Company may change any Paying Agent, Registrar or co-registrar
without prior notice to any Securityholder. The Company shall notify the Trustee
and the Trustee shall notify the Securityholders of the name and address of any
Agent not a party to this Indenture. If the Company fails to appoint or maintain
another entity as Registrar or Paying Agent, the Trustee shall act as such. The
Company may act as Paying Agent, Registrar or co-registrar. The Company shall
enter into an appropriate agency agreement with any Agent not a party to this
Indenture, which shall incorporate the provisions of the TIA. The agreement
shall implement the provisions of this Indenture that relate to such Agent. The
Company shall notify the Trustee of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, or fails to give the
foregoing notice, the Trustee shall act as such, and shall be entitled to
appropriate compensation in accordance with Section 7.7.
(b) The Company initially appoints the Trustee as Registrar, Paying Agent,
authenticating agent and agent for service of notices and demands in connection
with the Securities. The Trustee's address for purposes of Section 2.3(a) is c/o
Harris Trust Company of New York, 88 Pine Street, 19th Floor, Wall Street Plaza,
New York, NY 10005.
(c) Any of the Registrar, the Paying Agent or any other agent may resign
upon 30 days' notice to the Company. The office of the Paying Agent and
Registrar for purposes of this Section 2.3 shall initially be c/o Harris Trust
Company of New York, 88 Pine Street, 19th Floor, Wall
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Street Plaza, New York, NY 10005.
SECTION 2.4 Paying Agent to Hold Money in Trust. The Company or any other
obligor on the Securities shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent shall hold in trust for the benefit of
the Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of, premium, if any, and interest on the Securities, and
shall notify the Trustee of any Default by the Company or any other obligor on
the Securities in making any such payment. While any such Default continues, the
Trustee may require a Paying Agent to pay all money held by it to the Trustee.
The Company or any other obligor on the Securities at any time may require a
Paying Agent to pay all money held by it to the Trustee. Upon payment over to
the Trustee, the Paying Agent (if other than the Company) shall have no further
liability for the money delivered to the Trustee. If the Company or any other
obligor on the Securities acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Securityholders all money held by it
as Paying Agent.
SECTION 2.5 Securityholder Lists. The Trustee shall preserve in as current
a form as is reasonably practicable the most recent list available to it of the
names and addresses of Securityholders and shall otherwise comply with TIA ss.
312(a). If the Trustee is not the Registrar, the Company or any other obligor on
the Securities shall furnish to the Trustee at least five Business Days before
each Interest Payment Date and at such other times as the Trustee may request in
writing a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of Securityholders, including the aggregate
principal amount of the Securities held by each thereof, and the Company or any
other obligor on the Securities shall otherwise comply with TIA ss. 312(a).
SECTION 2.6 Transfer and Exchange. (a) Subject to Sections 2.16 and 2.17
where Securities are presented to the Registrar or a co-registrar with a request
to register the transfer thereof or exchange them for an equal principal amount
of Securities of other denominations, the Registrar shall register the transfer
or make the exchange if its requirements for such transactions are met;
provided, that any Security presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar and the Trustee
duly executed by the Securityholder thereof or his attorney duly authorized in
writing. To permit registrations of transfer and exchanges, the Company shall
issue and the Trustee shall authenticate Securities at the Registrar's request.
(b) The Company and the Registrar shall not be required (i) to issue, to
register the transfer of or to exchange Securities during a period beginning at
the opening of business on a Business Day 15 days before the day of any
selection of Securities for redemption pursuant to Article 3 and ending at the
close of business on the day of selection, (ii) to register the transfer of or
exchange any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part or (iii) to register
the transfer or exchange of a Security between the Record Date and the next
succeeding Interest Payment Date.
(c) No service charge shall be made for any registration of a transfer or
exchange (except as otherwise expressly permitted herein), but the Company may
require payment by the Securityholder of a sum sufficient to cover any transfer
tax or similar governmental charge payable in connection therewith (other than
such transfer tax or similar governmental charge payable upon exchanges pursuant
to Section 2.10, 3.6 or 9.5).
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(d) Any Holder of any Global Note shall, by acceptance of such Global Note,
agree that transfers of beneficial interests in such Global Note may be effected
only through a book entry system maintained by the Holder of such Global Note
(or its agent), and that ownership of a beneficial interest in the Global Note
shall be required to be reflected in a book entry.
SECTION 2.7 Replacement Securities. (a) If any mutilated Security is
surrendered to the Trustee, or the Company and the Trustee receives evidence to
their satisfaction of the destruction, loss or theft of any Security, the
Company shall issue and the Trustee, upon receipt by it of the written order of
the Company signed by two Officers of the Company, shall authenticate a
replacement Security if the Trustee's requirements for replacements of
Securities are met. If required by the Trustee or the Company, an indemnity bond
must be supplied by the Holder that is sufficient in the reasonable judgment of
the Trustee and the Company to protect the Company, the Trustee, any Agent or
any authenticating agent from any loss which any of them may suffer if a
Security is replaced. The Company and the Trustee may charge a Securityholder
for reasonable out-of-pocket expenses in replacing a Security, including fees
and expenses of counsel.
(b) Every replacement Security is an additional obligation of the Company
and shall be entitled to the benefits of this Indenture.
SECTION 2.8 Outstanding Securities. (a) The Securities outstanding at any
time are all the Securities authenticated by the Trustee except for those
canceled by the Company or by the Trustee, those delivered to the Trustee for
cancellation and those described in this Section as not outstanding.
(b) If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless and until the Trustee receives proof satisfactory to it that
the replaced Security is held by a bona fide purchaser.
(c) If the principal amount of any Security is considered paid under
Section 4.1, it ceases to be outstanding and interest on it ceases to accrue.
(d) Subject to Section 2.9, a Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security.
(e) If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender sufficient to pay all of the principal, premium, if any, and
interest due on the Securities payable on that date and is not prohibited from
paying such money to the Securityholders thereof pursuant to the terms of this
Indenture, then on and after that date such Securities cease to be outstanding
and interest on them ceases to accrue.
SECTION 2.9 Treasury Securities. In determining whether the Holders of the
required principal amount of Securities have concurred in any direction, waiver
or consent, Securities owned by the Company, or any of their respective
Affiliates shall be considered as though not outstanding, except that for
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Securities which a Responsible Officer
knows to be so owned shall be so considered.
SECTION 2.10 Temporary Securities. Until definitive Securities are ready
for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities.
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Temporary Securities shall be substantially in the form of definitive Securities
but may have variations that the Company and the Trustee consider appropriate
for temporary Securities. Without unreasonable delay, the Company shall prepare
and the Trustee, upon receipt of the written order of the Company signed by two
Officers of the Company, or by one Officer and attested by one Officer or an
Assistant Secretary,(each of whom shall, in each case, have been duly authorized
by all requisite corporate actions) shall authenticate, pursuant to Section 2.2,
definitive Securities in exchange for temporary Securities. Until such exchange,
temporary Securities shall be entitled to the same rights, benefits and
privileges under this Indenture as definitive Securities.
SECTION 2.11 Cancellation. The Company at any time may deliver Securities
to the Trustee for cancellation. The Registrar and Paying Agent shall forward to
the Trustee any Securities surrendered to them for registration of transfer,
exchange or payment. The Trustee shall cancel all Securities, if not already
canceled, surrendered for registration of transfer, exchange, payment,
replacement or cancellation and shall destroy canceled Securities (subject to
the record retention requirement of the Exchange Act), and deliver certification
of their destruction to the Company, unless by a written order, signed by two
Officers of the Company, or by one Officer and attested by one Officer or an
Assistant Secretary (each of whom shall, in each case, have been duly authorized
by all requisite corporate actions), the Company shall direct that canceled
Securities be returned to it. Subject to Section 2.7, the Company may not issue
new Securities to replace Securities that it has redeemed or paid or that have
been delivered to the Trustee for cancellation.
SECTION 2.12 Defaulted Interest. If the Company defaults in a payment of
interest on the Securities, it shall pay the defaulted interest in any lawful
manner plus, to the extent lawful, interest payable on the defaulted interest,
to the Persons who are Securityholders on a subsequent special record date,
which date shall be at the earliest practicable date but in all events at least
five Business Days prior to the payment date, in each case at the rate provided
in the Securities and in Section 4.1. The Company shall, with the consent of the
Trustee, fix or cause to be fixed each such special record date and payment
date. At least 15 days before the special record date, the Company (or the
Trustee, in the name of and at the expense of the Company) shall mail to
Securityholders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
SECTION 2.13 CUSIP Number. The Company in issuing the Securities may use a
"CUSIP" number, and if so, the Trustee shall use the CUSIP number in notices of
redemption or exchange as a convenience to Securityholders; provided, that no
representation shall be deemed to be made by the Trustee as to the correctness
or accuracy of the CUSIP number printed in the notice or on the Securities, and
that reliance may be placed only on the other identification numbers printed on
the Securities. The Company shall promptly notify the Trustee of any change in
the CUSIP number.
SECTION 2.14 Deposit of Moneys. Prior to 11:00 a.m. New York City time on
each Interest Payment Date and Maturity Date, the Company shall have deposited
with the Paying Agent in immediately available funds money sufficient to make
cash payments, if any, due on such Interest Payment Date or Maturity Date, as
the case may be, in a timely manner which permits the Paying Agent to remit
payment to the Securityholders on such Interest Payment Date or Maturity Date,
as the case may be.
SECTION 2.15 Restrictive Legends. Each Global Note and Physical Security
that constitutes a Restricted Security shall bear the following legend (the
"Private Placement Legend")
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on the face thereof until November 26, 1999 unless otherwise agreed by the
Company and the Securityholder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, UNITED STATES PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT
WILL NOT, WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(k) UNDER THE
SECURITIES ACT AS IN EFFECT WITH RESPECT TO SUCH TRANSFER, RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE)
AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF
SECURITIES AT THE TIME OF TRANSFER OF LESS THAN $250,000, AN OPINION OF
COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE WITH
THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND; PROVIDED THAT AN INITIAL INVESTOR THAT IS AN
INSTITUTIONAL ACCREDITED INVESTOR PURCHASING AS DESCRIBED IN CLAUSE (1)(B)
ABOVE SHALL NOT BE PERMITTED TO TRANSFER THIS SECURITY TO AN INSTITUTIONAL
ACCREDITED INVESTOR. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY
WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF
SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR PURCHASING PURSUANT TO
CLAUSE (2)(C) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY
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REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "UNITED STATES PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING RESTRICTIONS.
Each Global Note shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF
THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR
DEPOSITARY OR ANY SUCH NOMINEE, TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITARY. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO.
OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE, AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
The Regulation S Global Note shall bear the following legend on the
face thereof:
THIS NOTE MAY NOT BE OFFERED OR SOLD TO A U.S. PERSON (AS SUCH TERM IS
DEFINED IN REGULATION S UNDER THE SECURITIES ACT) OR FOR THE ACCOUNT OR
BENEFIT OF A U.S. PERSON PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD
(AS DEFINED IN THE INDENTURE), AND NO TRANSFER OR EXCHANGE OF THIS SECURITY
MAY BE MADE FOR AN INTEREST IN A PHYSICAL SECURITY UNTIL AFTER THE LATER OF
THE DATE OF EXPIRATION OF THE RESTRICTED PERIOD AND THE DATE ON WHICH THE
PROPER REQUIRED CERTIFICATION RELATING TO SUCH INTEREST HAS BEEN PROVIDED
IN ACCORDANCE WITH THE TERMS OF THE INDENTURE, TO THE EFFECT THAT THE
BENEFICIAL OWNER OR OWNERS OF SUCH INTEREST ARE NOT U.S. PERSONS.
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SECTION 2.16 Book-Entry Provisions for Global Security. (a) Each Global
Note initially shall (i) be registered in the name of the Depositary or the
nominee of such Depositary, (ii) be delivered to the Trustee as custodian for
such Depositary and (iii) bear legends as set forth in Section 2.15.
Members of, or participants in, the Depositary ("Agent Members") shall have
no rights under this Indenture with respect to any Global Note held on their
behalf by the Depositary, or the Trustee as its custodian, or under the Global
Note, and the Depositary may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of the Global Note for
all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Security.
(b) Transfers of a Global Note shall be limited to transfers in whole, but
not in part, to the Depositary, its successors or their respective nominees.
Interest of beneficial owners in a Global Note may be transferred or exchanged
for Physical Securities in accordance with the rules and procedures of the
Depositary, the provisions of Section 2.17 and the limitation set forth in
Section 2.1 with regard to the Regulation S Global Note. In addition, Physical
Securities shall be transferred to all beneficial owners in exchange for their
beneficial interests in a Global Note if (i) the Depositary notifies the Company
that it is unwilling or unable to continue as Depositary for the Global Note and
a successor depository is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depositary to issue Physical
Securities.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Notes to beneficial owners pursuant to
paragraph (b) above, the Registrar shall (if one or more Physical Securities are
to be issued) reflect on its books and records the date and a decrease in the
principal amount of the beneficial interest in the Global Note to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Physical Securities of like tenor and amount.
(d) In connection with the transfer of an entire Global Note to beneficial
owners pursuant to paragraph (b) above, a Global Note shall be deemed to be
surrendered to the Trustee for cancellation, and the Company shall execute, and
the Trustee shall authenticate and deliver, to each beneficial owner identified
by the Depositary in exchange for its beneficial interest in such Global Note,
an equal aggregate principal amount of Physical Securities of authorized
denominations.
(e) Any Physical Security constituting a Restricted Security delivered in
exchange for an interest in the Global Note pursuant to paragraph (b) or (c)
above shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of
Section 2.17, bear the legend regarding transfer restrictions applicable to the
Physical Securities set forth in Section 2.15.
(f) The Holder of a Global Note may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Securityholder is entitled to take
under this Indenture or the Securities.
SECTION 2.17 Special Transfer Provisions.
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(a) Transfers of Global Notes; Transfers to Non-QIB Institutional
Accredited Investors and Non-U.S. Persons. The following provisions shall apply
with respect to the registration of any proposed transfer of a Security
constituting a Restricted Security to any Institutional Accredited Investor
which is not a QIB or to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Security
constituting a Restricted Security, whether or not such Security bears the
Private Placement Legend, if (x) the requested transfer is after November
26, 1999; provided, however, that neither the Company nor any Affiliate of
the Company has held any beneficial interest in such Security, or portion
thereof, at any time on or prior to November 26, 1999 or (y) (1) in the
case of a transfer to an Institutional Accredited Investor which is not a
QIB (excluding Non-U.S.Persons), the proposed transferee has delivered to
the Registrar a certificate substantially in the form of Exhibit C hereto
or (2) in the case of a transfer to a Non-U.S. Person, the proposed
transferor has delivered to the Registrar a certificate substantially in
the form of Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Rule 144A Global Note, upon receipt by the
Registrar of (x) the certificate, if any, required by paragraph (i) above
and (y) instructions given in accordance with the Depositary's and the
Registrar's procedures, (a) the Registrar shall reflect on its books and
records the date and (if the transfer does not involve a transfer of
outstanding Physical Securities) a decrease in the principal amount of the
Rule 144A Global Note in an amount equal to the principal amount of the
beneficial interest in the Rule 144A Global Note to be transferred, and
(b)(1) the Company shall execute and the Trustee shall authenticate and
deliver one or more Physical Securities of like tenor and amount or (2) the
Registrar shall reflect on its books and records the date and (if the
transfer does not involve a transfer of outstanding Physical Securities) an
increase in the principal amount of the Regulation S Global Note in an
amount equal to the principal amount of the beneficial interest in the Rule
144A Global Note to be transferred.
(iii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Regulation S Global Note, upon receipt by the
Registrar of (x) the certificate, if any, required by paragraph (i) above
and (y) instructions given in accordance with the Depositary's and the
Registrar's procedures, (a) the Registrar shall reflect on its books and
records the date and (if the transfer does not involve a transfer of
outstanding Physical Securities) a decrease in the principal amount of the
Regulation S Global Note in an amount equal to the principal amount of the
beneficial interest in the Regulation S Global Note to be transferred, and
(b)(1) the Company shall execute and the Trustee shall authenticate and
deliver one or more Physical Securities of like tenor and amount or (2) the
Registrar shall reflect on its books and records the date and (if the
transfer does not involve a transfer of outstanding Physical Securities) an
increase in the principal amount of the Rule 144A Global Note in an amount
equal to the principal amount of the beneficial interest in the Rule 144A
Global Note to be transferred.
(b) Transfers to QIBs. The following provisions shall apply with respect to
the registration of any proposed transfer of a Security constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has advised the Company and the
Registrar in writing, that the sale
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has been effected in compliance with the provisions of Rule 144A to a
transferee who has advised the Company and the Registrar in writing, that
it is purchasing the Security for its own account or an account with
respect to which it exercises sole investment discretion and that any such
account is a QIB within the meaning of Rule 144A, and it is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such information and
that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration provided
by Rule 144A; and
(ii) if the proposed transferee is an Agent Member and the Securities
to be transferred consist of Physical Securities which after transfer are
to be evidenced by an interest in the Rule 144A Global Note, upon receipt
by the Registrar of instructions given in accordance with the Depositary's
and the Registrar's procedures, the Registrar shall reflect on its books
and records the date and an increase in the principal amount of the Rule
144A Global Note in an amount equal to principal amount of the Physical
Securities to be transferred, and the Trustee shall cancel the Physical
Securities so transferred.
(c) Transfers to Non-U.S. Persons. The following provisions shall apply
with respect to the registration of any proposed transfer of a Security
constituting a Restricted Security to a Non- U.S. Persons:
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has advised the Company and the
Registrar in writing, that the sale has been effected in compliance with
the provisions of Regulation S to a transferee who has advised the Company
and the Registrar in writing, that it is purchasing the Security in
compliance with Rule 904 under the Securities Act, and it is aware that the
sale to it is being made in reliance on Regulation S and that it is aware
that the transferor is relying upon its foregoing representations in order
to claim the exemption from registration provided by Regulation S; and
(ii)| if the proposed transferee is an Agent Member and the Securities
to be transferred consist of Physical Securities which after transfer are
to be evidenced by an interest in the Regulation S Global Note, upon
receipt by the Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall reflect on
its books and records the date and an increase in the principal amount of
the Regulation S Global Note in an amount equal to principal amount of the
Physical Securities to be transferred, and the Trustee shall cancel the
Physical Securities so transferred.
(d) Private Placement Legend. Upon the registration of the transfer,
exchange or replacement of Securities not bearing the Private Placement Legend,
the Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the registration of the transfer, exchange or replacement of
Securities bearing the Private Placement Legend, the Registrar shall deliver
only Securities that bear the Private Placement Legend unless (i) the
circumstance contem plated by paragraph (a)(i)(x) of this Section 2.17 exists or
(ii) there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
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(e) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Registrar shall retain for at least two years copies of all letters,
notices and other written communications received pursuant to Section 2.16 or
this Section 2.17. The Company shall have the right to inspect and make copies
of all such letters, notices or other written communications at any reasonable
time upon the giving of reasonable written notice to the Registrar.
SECTION 2.18 Persons Deemed Owners. Prior to due presentment of a Security
for registration of transfer and subject to Section 2.12, the Company, the
Trustee, any Paying Agent, any Registrar and any co-registrar may deem and treat
the Person in whose name any Security shall be registered upon the register of
Securities kept by the Registrar as the absolute owner of such Security (whether
or not such Security shall be overdue and notwithstanding any notation of the
ownership or other writing thereon made by anyone other than the Company, any
Registrar or any co-registrar) for the purpose of receiving payments of
principal of or interest on such Security and for all other purposes; and none
of the Company, the Trustee, any Paying Agent, any Registrar or any co-registrar
shall be affected by any notice to the contrary.
SECTION 2.19 Record Date. The record date for purposes of determining the
identity of Securityholders entitled to vote or consent to any action by vote or
consent authorized or permitted under this Indenture shall be the later of (i)
30 days prior to the first solicitation of such consent or (ii) the date of the
most recent list of Holders furnished to the Trustee, if applicable, pursuant to
Section 2.5.
ARTICLE III
REDEMPTION
SECTION 3.1 Notices to Trustee. If the Company elects to redeem Securities
pursuant to paragraph 5 of the Securities, it shall notify the Trustee in
writing of the Redemption Date and the principal amount of Securities to be
redeemed.
The Company shall give each notice to the Trustee provided for in this
Section at least 30 days but no more than 60 days before the Redemption Date
unless the Trustee consents to a shorter period. Such notice shall be
accompanied by an Officers' Certificate from the Company to the effect that such
redemption will comply with the conditions herein.
SECTION 3.2 Selection of Securities To Be Redeemed. In the case of any
partial redemption of the Securities, selection of the Securities for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other method
as the Trustee in its sole discretion shall deem to be fair and appropriate;
provided, however, that if a partial redemption is made with proceeds of an
Equity Offering, selection of the Securities or portion thereof for redemption
shall be made by the Trustee only on a pro rata basis, unless such method is
otherwise prohibited. Securities may be redeemed in part in multiples of $1,000
principal amount only. Notice of redemption will be sent, by first class mail,
postage prepaid, at least 45 days (unless a shorter period is acceptable to the
Trustee) prior to the date fixed for redemption to each holder whose Securities
are to be redeemed at the last address for such holder then shown on the
registry books. If any Security is to be
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redeemed in part only, the notice of redemption that relates to such Security
shall state the portion of the principal amount thereof to be redeemed. A new
Security in principal amount equal to the unredeemed portion thereof will be
issued in the name of the holder thereof upon cancellation of the original
Security. On and after any redemption date, interest will cease to accrue on the
Securities or part thereof called for redemption as long as the Company has
deposited with the Paying Agent funds in satisfaction of the redemption price
pursuant to the Indenture. Provisions of this Indenture that apply to Securities
called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company in writing promptly of the
Securities or portions of Securities to be redeemed.
SECTION 3.3 Notice of Redemption. At least 30 days but not more than 60
days before a date for redemption of Securities, the Company shall mail a notice
of redemption by first-class mail to each Holder of Securities to be redeemed,
at such Holder's registered address.
The notice shall identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(5) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be outstanding
after such partial redemption;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant
to the terms of this Indenture, interest on Securities (or portion thereof)
called for redemption ceases to accrue on and after the Redemption Date;
(7) the CUSIP number, if any, printed on the Securities being
redeemed;
(8) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion shall be
issued; and
(9) the paragraph of the Securities and/or Section of this Indenture
pursuant to which the Securities called for redemption are being redeemed.
At the Company's request made in writing to the Trustee at least 45 days
(unless a shorter period is acceptable to the Trustee) prior to the date fixed
for redemption, the Trustee shall give the notice of redemption in the name and
the expense of the Company to each Holder whose Securities are to be redeemed at
the last address for such Holder then shown on the registry books. In such
event, the Company shall provide the Trustee with the information required by
this Section.
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SECTION 3.4 Effect of Notice of Redemption. Once notice of redemption is
mailed, Securities called for redemption become due and payable on the
designated Redemption Date and at the redemption price stated in the notice.
Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price stated in the notice, plus accrued interest to the designated
Redemption Date; provided, that if any Redemption Date is after a regular Record
Date and on or prior to the Interest Payment Date, the accrued interest shall be
payable to the Securityholder of the redeemed Securities registered on the
relevant Record Date. Failure to give notice or any defect in the notice to any
Holder shall not affect the validity of the notice to any other Holder.
SECTION 3.5 Deposit of Redemption Price. (a) Prior to 11:00 a.m., New York
City time, on any Redemption Date, the Company shall deposit with the Trustee or
with the Paying Agent money sufficient to pay the redemption price of and
accrued interest on all Securities to be redeemed on such Redemption Date. The
Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of, and accrued interest on, all
Securities to be redeemed.
(b) Except as set forth in the last sentence of this paragraph, on and
after any Redemption Date, interest ceases to accrue on the Securities or the
portions of Securities called for redemption. If a Security is redeemed on or
after an interest Record Date but on or prior to the related Interest Payment
Date, then any accrued and unpaid interest shall be paid to the Person in whose
name such Security was registered at the close of business on such Record Date.
If any Security called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the Redemption
Date until such principal is paid and, to the extent lawful, on any interest not
paid on such unpaid principal, in each case at the rate provided in the
Securities and in Section 4.1.
SECTION 3.6 Securities Redeemed in Part. Upon surrender of a Security that
is redeemed in part, the Company shall execute and the Trustee shall
authenticate for and in the name of the Holder (at the Company's expense), a new
Security equal in a principal amount to the unredeemed portion of the Security
surrendered.
ARTICLE IV
COVENANTS
SECTION 4.1 Payment of Securities. The Company shall promptly pay the
principal of, premium, if any, and interest on the Securities on the dates and
in the manner provided in the Securities and in this Indenture. Principal,
premium, if any, and interest shall be considered paid on the date due if on
such date the Trustee or the Paying Agent holds in accordance with this
Indenture money sufficient to pay all principal and interest then due and the
Trustee or the Paying Agent, as the case may be, is not prohibited from paying
such money to the Securityholders on that date pursuant to the terms of this
Indenture. Interest will be computed on the basis of a 360 day year comprised of
twelve 30 day months.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate specified
therefor in the Securities, and it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest (without regard to any applicable grace period) at the same rate
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to the extent lawful.
SECTION 4.2 SEC Reports. (a) The Company will file with the Trustee and
provide to the Holders of the Securities, within 15 days after it files them
with the Commission, copies of the quarterly and annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) which
the Company files with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act.
(b) In the event that the Company is not required to file such reports with
the Commission pursuant to the Exchange Act, the Company will nevertheless
deliver such Exchange Act information to the holders of the Securities within 15
days after it would have been required to file it with the Commission. Upon
qualification of this Indenture under the TIA, the Company will also comply with
the other provisions of TIA ss. 314(a).
SECTION 4.3 Limitation on Indebtedness. (a) The Company shall not, and
shall not permit any of its Restricted Subsidiaries to Incur any Indebtedness;
provided, however, that: (i) the Company may Incur Indebtedness which is
subordinated to the Securities, if no Default or Event of Default shall have
occurred and be continuing at the time of such Incurrence or would occur as a
consequence of such Incurrence and the Consolidated Coverage Ratio would be
equal to at least 1.50 to 1.00 after giving pro forma effect to the Incurrence
of such Indebtedness provided that no such Indebtedness (other than Indebtedness
issued by the Company to a seller of a Permitted Business) shall have a Stated
Maturity which is earlier than the Stated Maturity of the Securities; and (ii)
the Company may Incur Indebtedness ranking on a parity with the Securities if no
Default or Event of Default shall have occurred and be continuing at the time of
such Incurrence or would occur as a consequence of such Incurrence and the
Consolidated Coverage Ratio would be at least equal to 2.25 to 1.00 after giving
pro forma effect to the Incurrence of such Indebtedness.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness Incurred pursuant to the New Credit Facility
(including, without limitation, any renewal, extension, refunding,
restructuring, replacement or refinancing thereof referred to in the
definition thereof) provided, however, that the aggregate principal amount
of all Indebtedness Incurred pursuant to this clause (i) does not exceed
$75.0 million at any time outstanding, less the aggregate principal amount
thereof repaid with the net proceeds of Asset Dispositions;
(ii) Indebtedness represented by Capitalized Lease Obligations,
mortgage financing or purchase money obligations, in each case Incurred for
the purpose of financing all or any part of the purchase price or cost of
construction or improvement of property used in a Permitted Business or
Incurred to refinance any such purchase price or cost of construction or
improvement, in each case Incurred no later than 365 days after the date of
such acquisition or the date of completion of such construction or
improvement; provided, however, that the principal amount of any
Indebtedness Incurred pursuant to this clause (ii) shall not exceed $5.0
million at any time outstanding;
(iii) Indebtedness of the Company owing to and held by any
Wholly-Owned Subsidiary or Indebtedness of a Restricted Subsidiary owing to
and held by the Company or
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any Wholly-Owned Subsidiary; provided, however, that any subsequent
issuance or transfer of any Capital Stock or any other event which results
in any such Wholly-Owned Subsidiary ceasing to be a Wholly-Owned Subsidiary
or any subsequent transfer of any such Indebtedness (except to the Company
or any Wholly-Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the issuer thereof;
(iv) Indebtedness represented by (a) the Securities (b) Existing
Indebtedness and (c) any Refinancing Indebtedness Incurred in respect of
any Indebtedness described in this clause (iv) or Incurred pursuant to
paragraph (a) of this Section 4.3;
(v)(A) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on the date on which such Restricted Subsidiary was acquired by
the Company (other than Indebtedness Incurred in anticipation of, or to
provide all or any portion of the funds or credit support utilized to
consummate the transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Subsidiary or was otherwise
acquired by the Company); provided, however, that at the time such
Restricted Subsidiary is acquired by the Company, the Company would have
been able to Incur $1.00 of additional Indebtedness pursuant to paragraph
(a) above after giving effect to the Incurrence of such Indebtedness
pursuant to this clause (v) and (B) Refinancing Indebtedness Incurred by a
Restricted Subsidiary in respect of Indebtedness Incurred by such
Restricted Subsidiary pursuant to this clause (v);
(vi) Indebtedness (A) in respect of performance bonds, bankers'
acceptances and surety or appeal bonds provided by the Company or any of
its Restricted Subsidiaries to their customers in the ordinary course of
their business, (B) in respect of performance bonds or similar obligations
of the Company or any of its Restricted Subsidiaries for or in connection
with pledges, deposits or payments made or given in the ordinary course of
business in connection with or to secure statutory, regulatory or similar
obligations, including obligations under health, safety or environmental
obligations and (C) arising from Guarantees to suppliers, lessors,
licensees, contractors, franchises or customers of obligations (other than
Indebtedness) incurred in the ordinary course of business;
(vii) Indebtedness under Currency Agreements and Interest Rate
Agreements; provided, however, that in the case of Currency Agreements and
Interest Rate Agreements, such Currency Agreements and Interest Rate
Agreements are entered into for bona fide hedging purposes of the Company
or its Restricted Subsidiaries (as determined in good faith by the Board of
Directors of the Company) and correspond in terms of notional amount,
duration, currencies and interest rates as applicable, to Indebtedness of
the Company or its Restricted Subsidiaries Incurred without violation of
this Indenture or to business transactions of the Company or its Restricted
Subsidiaries on customary terms entered into in the ordinary course of
business;
(viii) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from Guarantees or letters of credits, surety bonds or performance bonds
securing any obligations of the Company or any of its Restricted
Subsidiaries pursuant to such agreements, in each case Incurred in
connection with the disposition of any business assets or Restricted
Subsidiary of the Company (other than Guarantees of Indebtedness or other
obligations incurred by any Person acquiring all or any portion of such
business assets or Restricted Subsidiary of the Company for the purpose of
financing such acquisition) in a principal amount not to exceed the gross
proceeds actually
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received by the Company or any of its Restricted Subsidiaries in connection
with such disposition; provided, however, that the principal amount of any
Indebtedness incurred pursuant to this clause (viii) when taken together
with all Indebtedness incurred pursuant to this clause (viii) and then
outstanding, shall not exceed $2.0 million;
(ix) Indebtedness consisting of (A) Guarantees by the Company (so long
as the Company could have incurred such Indebtedness directly without
violation of this Indenture) and (B) Guarantees by a Restricted Subsidiary
of Indebtedness incurred by the Company without violation of this Indenture
(so long as such Restricted Subsidiary could have incurred such
Indebtedness directly without violation of this Indenture);
(x) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument issued by the
Company or its Subsidiaries drawn against insufficient funds in the
ordinary course of business in an amount not to exceed $250,000 at any
time, provided that such Indebtedness is extinguished within two business
days of its incurrence; and
(xi) Indebtedness (other than Indebtedness described in clauses (i) -
(x)) in a principal amount which, when taken together with the principal
amount of all other Indebtedness Incurred pursuant to this clause (xi) and
then outstanding, will not exceed $10.0 million (it being understood that
any Indebtedness Incurred under this clause (xi) shall cease to be deemed
Incurred or outstanding for purposes of this clause (xi) (but shall be
deemed to be Incurred for purposes of paragraph (a)) from and after the
first date on which the Company or its Restricted Subsidiaries could have
Incurred such Indebtedness under the foregoing paragraph (a) without
reliance upon this clause (xi)).
(c) The Company will not permit any Unrestricted Subsidiary to Incur any
Indebtedness other than Non-Recourse Debt.
SECTION 4.4 Limitation on Restricted Payments. (a) The Company shall not,
and shall not permit any of its Restricted Subsidiaries, directly or indirectly,
to (i) declare or pay any dividend or make any distribution on or in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving the Company or any of its Restricted Subsidiaries)
except (A) dividends or distributions payable in its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to purchase such
Capital Stock and dividends payable in additional shares of Preferred Stock of
the Company outstanding on the Issue Date, (B) dividends or distributions
payable to the Company or a Restricted Subsidiary of the Company which holds any
equity interest in the paying Restricted Subsidiary (and if the Restricted
Subsidiary paying the dividend or making the distribution is not a Wholly-Owned
Subsidiary, to its other holders of Capital Stock on a pro rata basis), (C)
dividends, or other distributions in an amount equal to the "public company"
expenses of COMFORCE Corporation, including, but not limited to, legal,
regulatory compliance and accounting expenses, in any event not to exceed $1.25
million in any fiscal year and (D) dividends payable out of Net Available Cash
resulting from an Asset Disposition to the extent, and only to the extent, that
(x) such amount will be used to comply with Section 4.8 of the indenture under
which the 15% Senior Secured PIK Debentures due 2009 of COMFORCE Corporation are
issued (the "Senior Indenture") and (y) the Company has previously complied with
clauses (A), (B) and (C) of clause (a)(i) of Section 4.8 of this Indenture, (ii)
purchase, redeem, retire or otherwise acquire for value any Capital Stock of the
Company held by Persons other than a Wholly-Owned Subsidiary of the Company or
any Capital Stock of a Restricted
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Subsidiary of the Company held by any Affiliate of the Company, other than a
Wholly-Owned Subsidiary (in either case, other than in exchange for its Capital
Stock (other than Disqualified Stock)), (iii) purchase, repurchase, redeem,
defease or otherwise acquire or retire for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment, any Subordinated
Obligations (other than the purchase, repurchase or other acquisition of
Subordinated Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within one
year of the date of purchase, repurchase or acquisition) or (iv) make any
Investment (other than a Permitted Investment) in any Person (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment as described in preceding clauses (i) through (iv)
being referred to as a "Restricted Payment"); if at the time the Company or such
Restricted Subsidiary makes such Restricted Payment: (1) a Default shall have
occurred and be continuing (or would result therefrom); or (2) the Company is
not able to incur an additional $1.00 of Indebtedness pursuant to Section
4.3(a); or (3) the aggregate amount of such Restricted Payment and all other
Restricted Payments declared or made subsequent to the Issue Date would exceed
the sum of (A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the first day of the fiscal quarter
beginning on or after the Issue Date to the end of the most recent fiscal
quarter ending prior to the date of such Restricted Payment as to which
financial results are available (but in no event ending more than 135 days prior
to the date of such Restricted Payment) (or, in case such Consolidated Net
Income shall be a deficit, minus 100% of such deficit); (B) the aggregate net
proceeds received by the Company from the issue or sale of its Capital Stock
(other than Disqualified Stock) or other capital contributions subsequent to the
Issue Date (other than net proceeds received from an issuance or sale of such
Capital Stock to (x) a Subsidiary of the Company, (y) an employee stock
ownership plan or similar trust or (z) management employees of the Company or
any Subsidiary of the Company); provided, however, that the value of any
non-cash net proceeds shall be as determined by the Board of Directors in good
faith, except that in the event the value of any non-cash net proceeds shall be
$2.0 million or more, the value shall be as determined in writing by an
independent investment banking firm of nationally recognized standing; (C) the
amount by which Indebtedness of the Company is reduced on the Company's balance
sheet upon the conversion or exchange (other than by a Restricted Subsidiary of
the Company) subsequent to the Issue Date of any Indebtedness of the Company
convertible or exchangeable for Capital Stock (other than Disqualified Stock) of
the Company (less the amount of any cash, or other property, distributed by the
Company upon such conversion or exchange); and (D) the amount equal to the net
reduction in Investments (other than Permitted Investments) made after the Issue
Date by the Company or any of its Restricted Subsidiaries in any Person
resulting from (i) repurchases or redemptions of such Investments by such
Person, proceeds realized upon the sale of such Investment to an unaffiliated
purchaser, repayments of loans or advances or other transfers of assets by such
Person to the Company or any Restricted Subsidiary of the Company or (ii) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in
each case as provided in the definition of "Investment") not to exceed, in the
case of any Unrestricted Subsidiary, the amount of Investments previously
included in the calculation of the amount of Restricted Payments; provided,
however, that no amount shall be included under this Clause (D) to the extent it
is already included in Consolidated Net Income.
(b) The provisions of paragraph (a) shall not prohibit: (i) any purchase or
redemption of Capital Stock or Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary, an employee stock
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ownership plan or similar trust or management employees of the Company or any
Subsidiary of the Company); provided, however, that (A) such purchase or
redemption shall be excluded in the calculation of the amount of Restricted
Payments and (B) the Net Cash Proceeds from such sale shall be excluded from
clause (3) (B) of paragraph (a); (ii) any purchase or redemption of Subordinated
Obligations of the Company made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Subordinated Obligations of the Company in
compliance with the Section 4.3 herein; provided, however, that such purchase or
redemption shall be excluded in the calculation of the amount of Restricted
Payments; (iii) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted under Section 4.8 herein; provided,
however, that such purchase or redemption shall be excluded in the calculation
of the amount of Restricted Payments; and (iv) dividends paid within 60 days
after the date of declaration if at such date of declaration such dividend would
have complied with this provision; provided, however, that such dividend shall
be included in the calculation of the amount of Restricted Payments; provided,
however, that in the case of clauses (i), (ii) and (iii) no Default or Event of
Default shall have occurred or be continuing at the time of such payment or as a
result thereof.
(c) For purposes of determining compliance with the foregoing covenant,
Restricted Payments may be made with cash or non-cash assets, provided that any
Restricted Payment made other than in cash shall be valued at the fair market
value (determined, subject to the additional requirements of the immediately
succeeding proviso, in good faith by the Board of Directors) of the assets so
utilized in making such Restricted Payment, provided, further that (i) in the
case of any Restricted Payment made with Capital Stock or Indebtedness, such
Restricted Payment shall be deemed to be made in an amount equal to the greater
of the fair market value thereof and the liquidation preference (if any) or
principal amount of the Capital Stock or Indebtedness, as the case may be, so
utilized, and (ii) in the case of any Restricted Payment in an aggregate amount
in excess of $2.0 million, a written opinion as to the fairness of the valuation
thereof (as determined by the Company) for purposes of determining compliance
with this Section 4.4 shall be issued by an independent investment banking firm
of national standing.
(d) Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officer's Certificate stating that such
Restricted Payment complies with this Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available quarterly
financial statements and a copy of any required investment banker's opinion.
SECTION 4.5 Limitation on Issuances of Capital Stock of Restricted
Subsidiaries. The Company will not permit any of its Restricted Subsidiaries to
issue any Capital Stock to any Person (other than to the Company or a
Wholly-Owned Subsidiary of the Company) or permit any Person (other than the
Company or a Wholly-Owned Subsidiary of the Company) to own any Capital Stock of
a Restricted Subsidiary of the Company, if in either case as a result thereof
such Restricted Subsidiary would no longer be a Restricted Subsidiary of the
Company; provided, however, that this provision shall not prohibit (x) the
Company or any of its Restricted Subsidiaries from selling, leasing or otherwise
disposing of all of the Capital Stock of any Restricted Subsidiary or (y) the
designation of a Restricted Subsidiary as an Unrestricted Subsidiary in
compliance with this Indenture.
SECTION 4.6 Limitation on Affiliate Transactions. (a) The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into or conduct any
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transaction or series of related transactions (including the purchase, sale,
lease or exchange of any property or the rendering of any service) with or for
the benefit of any Affiliate of the Company, other than a Wholly-Owned
Subsidiary (an "Affiliate Transaction") unless: (i) the terms of such Affiliate
Transaction are no less favorable to the Company or such Restricted Subsidiary,
as the case may be, than those that could be obtained at the time of such
transaction in arm's length dealings with a Person who is not such an Affiliate;
(ii) in the event such Affiliate Transaction involves an aggregate amount in
excess of $500,000, the terms of such transaction have been approved by a
majority of the members of the Board of Directors of the Company and by a
majority of the disinterested members of such Board, if any (and such majority
or majorities, as the case may be, determines that such Affiliate Transaction
satisfies the criteria in (i) above); and (iii) in the event such Affiliate
Transaction involves an aggregate amount in excess of $1.0 million, the Company
has received a written opinion from an independent investment banking firm of
nationally recognized standing that such Affiliate Transaction is fair to the
Company or such Restricted Subsidiary, as the case may be, from a financial
point of view.
(b) The foregoing paragraph (a) shall not apply to (i) any Restricted
Payment permitted to be made pursuant to the covenant described under Section
4.4, (ii) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, or any stock options and stock ownership plans for the benefit of
employees, officers and directors, consultants and advisors approved by the
Board of Directors of the Company, (iii) loans or advances to employees in the
ordinary course of business of the Company or any of its Restricted Subsidiaries
in aggregate amount outstanding not to exceed $250,000 to any employee or $1.0
million in the aggregate at any time, (iv) any transaction between Wholly-Owned
Subsidiaries, (v) indemnification agreements with, and the payment of fees and
indemnities to, directors, officers and employees of the Company and its
Restricted Subsidiaries, in each case in the ordinary course of business, (vi)
transactions pursuant to agreements in existence on the Issue Date which are (x)
described in the Offering Memorandum or (y) otherwise, in the aggregate,
immaterial to the Company and its Restricted Subsidiaries taken as a whole,
(vii) any employment, non-competition or confidentiality agreements entered into
by the Company or any of its Restricted Subsidiaries with its employees in the
ordinary course of business or (viii) the issuance of Capital Stock of the
Company (other than Disqualified Stock).
SECTION 4.7 Limitation on Liens. The Company will not and will not permit
any Restricted Subsidiary to, directly or indirectly, create or permit to exist
any Liens except for Permitted Liens.
SECTION 4.8 Limitation on Sales of Assets and Subsidiary Stock. (a) The
Company shall not, and shall not permit any of its Restricted Subsidiaries to,
make any Asset Disposition unless:
(i) the Company or such Restricted Subsidiary receives consideration
at the time of such Asset Disposition at least equal to the fair market
value, as determined in good faith by the Company's Board of Directors
(including as to the value of all non-cash consideration), of the shares
and assets subject to such Asset Disposition;
(ii) at least 80% of the consideration thereof received by the Company
or such Restricted Subsidiary is in the form of cash or Cash Equivalents;
and
(iii) an amount equal to 100% of the Net Available Cash from such
Asset
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Disposition is applied by the Company (or such Restricted Subsidiary, as
the case may be) (A) first, to the extent the Company or any Restricted
Subsidiary elects (or is required by the terms of any senior secured
indebtedness), (x) to prepay, repay or purchase senior secured Indebtedness
or (y) to the investment in or acquisition of Additional Assets within 270
days from the later of the date of such Asset Disposition or the receipt of
such Net Available Cash; (B) second, within 270 days from the receipt of
such Net Available Cash, to the extent of the balance of such Net Available
Cash after application in accordance with clause (A), to make an offer to
purchase Securities at 100% of their principal amount plus accrued and
unpaid interest, if any, thereon; (C) third, within 90 days after the later
of the application of Net Available Cash in accordance with clauses (A) and
(B) and the date that is 270 days from the receipt of such Net Available
Cash, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A) and (B), to prepay, repay or
repurchase Indebtedness (other than Preferred Stock) of a Wholly-Owned
Subsidiary (in each case other than Indebtedness owed to the Company); and
(D) fourth, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A), (B) and (C), to (w) the
investment in or acquisition of Additional Assets, (x) the making of
Temporary Cash Investments, (y) the prepayment, repayment or purchase of
Indebtedness of the Company (other than Indebtedness owing to any
Subsidiary of the Company) or Indebtedness of any Subsidiary (other than
Indebtedness owed to the Company or any of its Subsidiaries) or to pay
dividends to COMFORCE Corporation, to the extent, and only to the extent,
that such dividends are used by COMFORCE Corporation to repurchase Senior
Debentures which COMFORCE Corporation is obligated to repurchase pursuant
to the covenant described in Section 4.8 of the Senior Indenture or (z) any
other purpose otherwise permitted under this Indenture, in each case within
the later of 45 days after the application of Net Available Cash in
accordance with clauses (A), (B) and (C) or the date that is 360 days from
the receipt of such Net Available Cash; provided, however, that, in
connection with any prepayment, repayment or purchase of Indebtedness
pursuant to clause (A), (B), (C) or (D) above, the Company or such
Restricted Subsidiary shall retire such Indebtedness and shall cause the
related loan commitment (if any) to be permanently reduced in an amount
equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions, the Company and its Restricted
Subsidiaries shall not be required to apply any Net Available Cash in
accordance herewith except to the extent that the aggregate Net Available
Cash from all Asset Dispositions which are not applied in accordance with
this covenant at any time exceed $10.0 million. The Company shall not be
required to make an offer for Securities pursuant to this covenant if the
Net Available Cash available therefor (after application of the proceeds as
provided in clause (A)) is less than $10.0 million for any particular Asset
Disposition (which lesser amounts shall be carried forward for purposes of
determining whether an offer is required with respect to the Net Available
Cash form any subsequent Asset Disposition).
For the purposes of this covenant, the following will be deemed to be cash: (x)
the assumption by the transferee of senior indebtedness of the Company or senior
indebtedness of any Restricted Subsidiary of the Company and the release of the
Company or such Restricted Subsidiary from all liability on such senior
indebtedness in connection with such Asset Disposition (in each case the Company
shall, without further action, be deemed to have applied such assumed
Indebtedness in accordance with clause (A) of the preceding paragraph) and (y)
securities received by the Company or any Restricted Subsidiary of the Company
from the transferee that are promptly (and in any event within 60 days)
converted by the Company or such Restricted Subsidiary into cash.
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(b) In the event of an Asset Disposition that requires the purchase of
Securities pursuant to clause (a)(iii)(B) of this Section 4.8, the Company will
be required to purchase Securities tendered pursuant to an offer by the Company
for the Securities at a purchase price of 100% of their principal amount plus
accrued and unpaid interest, if any, to the purchase date in accordance with the
procedures (including prorating in the event of oversubscription) set forth in
this Indenture. If the aggregate purchase price of the Securities tendered
pursuant to the offer is less than the Net Available Cash allotted to the
purchase of the Securities, the Company will apply the remaining Net Available
Cash in accordance with clauses (a) (iii)(C) or (D) of this Section 4.8 as
permitted under this Indenture.
(c) If the Company becomes obligated to make an Offer pursuant to this
Section 4.8, the Securities shall be purchased by the Company, at the option of
the holder thereof, in whole or in part in integral multiples of $1,000, on a
date that is not earlier than 30 days and not later than 60 days from the date
the notice is given to holders, or such later date as may be necessary for the
Company to comply with the requirements under the Exchange Act, subject to
proration in the event the amount Net Available Cash is less than the aggregate
Offered Price of all Securities tendered.
(d) Any notice pursuant to this Section 4.8 shall contain all instructions
and materials necessary to enable such Securityholders to tender Securities
pursuant to the offer required to be made pursuant to this Section 4.8 and shall
state the following terms:
(1) that the offer is being made pursuant to this Section 4.8 and that
all Securities tendered will be accepted for payment; provided, however,
that if the aggregate principal amount of Securities tendered in an offer
exceeds the aggregate amount of the offer, the Company shall select the
Securities to be purchased on a pro rata basis (with such adjustments as
may be deemed appropriate by the Company so that only Securities in
denominations of $1,000 or multiples thereof shall be purchased);
(2) the purchase price (including the amount of accrued interest) and
the purchase date (which shall be 30 days from the date of mailing of
notice of such offer, or such longer period as required by law) (the
"Proceeds Purchase Date");
(3) that any Securities not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor, any
Security accepted for payment pursuant to the offer shall cease to accrue
interest after the Proceeds Purchase Date;
(5) that Securityholders electing to have a Security purchased
pursuant to such offer will be required to surrender the Security, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day prior to
the Proceeds Purchase Date;
(6) that Securityholders will be entitled to withdraw their election
if the Paying Agent receives, not later than five Business Days prior to
the Proceeds Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Securityholder, the principal amount
of the Securities the Securityholder delivered for purchase and a
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statement that such Securityholder is withdrawing his election to have such
Security purchased; and
(7) that Securityholders whose Securities are purchased only in part
will be issued new Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered; provided that each
Security purchased and each new Security issued shall be in an original
principal amount of $1,000 or integral multiples thereof;
On or before the Proceeds Purchase Date, the Company shall (i) accept for
payment Securities or portions thereof tendered pursuant to the offer which are
to be purchased in accordance with item (f)(1) above, (ii) deposit with the
Paying Agent U.S. Legal Tender sufficient to pay the purchase price plus accrued
interest, if any, of all Securities to be purchased and (iii) deliver to the
Trustee Securities so accepted together with an Officers' Certificate stating
the Securities or portions thereof being purchased by the Company. The Paying
Agent shall promptly mail to the Securityholders of Securities so accepted
payment in an amount equal to the purchase price plus accrued interest, if any.
For purposes of this Section 4.8, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of the Securities pursuant to an
offer pursuant to this Section 4.8 shall be returned by the Trustee to the
Company.
(e) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Indenture. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this Indenture by virtue thereof.
SECTION 4.9 Change of Control. (a) Upon the occurrence of a Change of
Control each Securityholder will have the right to require the Company to
repurchase all or any part of such Securityholder's Securities at a purchase
price in cash equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase (subject to the right of
Securityholders of record on the relevant Record Date to receive interest due on
the relevant Interest Payment Date).
(b) Within 30 days following any Change of Control, unless the Company has
mailed a repurchase notice with respect to all the outstanding Notes in
connection with such Change of Control, the Company shall mail a notice to each
Securityholder with a copy to the Trustee stating:
(i) that a Change of Control has occurred and that such Securityholder
has the right to require the Company to purchase such Securityholder's
Securities at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase (subject to the right of Securityholders of record on a record
date to receive interest on the relevant Interest Payment Date);
(ii) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(iii) the procedures determined by the Company, consistent with the
Indenture, that a Securityholder must follow in order to have its
Securities purchased.
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(c) Securityholders electing to have a Security repurchased will be
required to surrender the Security, with the form entitled "Option of
Securityholder to Elect Purchase" on the reverse of the Security completed, to
the Company at the address specified in the notice at least 10 Business Days
prior to the repurchase date. Securityholders will be entitled to withdraw their
election if the Trustee or the Company receives not later than three Business
Days prior to the repurchase date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Securityholder, the principal amount of the
Security which was delivered for repurchase by the Securityholder and a
statement that such Securityholder is withdrawing his election to have such
Security purchased.
(d) On the repurchase date, all Securities repurchased by the Company under
this Section 4.9 shall be delivered by the Trustee for cancellation, and the
Company shall pay the repurchase price plus accrued and unpaid interest, if any,
to the Securityholders entitled thereto.
(e) The Company will to the extent applicable comply with any tender offer
rules under the Exchange Act which may then be applicable, including Section
14(e) and Rule 14e-1, in connection with any offer required to be made by the
Company to repurchase the Securities as a result of a Change of Control. To the
extent that the provisions of any securities laws or regulations conflict with
the provisions of the Indenture relative to the Company's obligation to make an
offer to repurchase the Securities as a result of a Change of Control, the
Company will comply with the applicable securities laws and regulations and will
not be deemed to have breached its obligations under such provisions of the
Indenture by virtue thereof.
SECTION 4.10 Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any such Restricted Subsidiary to
(i) pay dividends or make any other distributions on its Capital Stock or pay
any Indebtedness or other obligation owed to the Company, (ii) make any loans or
advances to the Company or (iii) transfer any of its property or assets to the
Company, except: (a) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date, including the New Credit Facility;
(b) any encumbrance or restriction with respect to such a Restricted Subsidiary
pursuant to an agreement relating to any Indebtedness issued by such Restricted
Subsidiary on or prior to the date on which such Restricted Subsidiary was
acquired by the Company and outstanding on such date (other than Indebtedness
Incurred in anticipation of, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary of the Company or was acquired by the Company); (c) any encumbrance
or restriction with respect to such a Restricted Subsidiary pursuant to an
agreement evidencing Indebtedness Incurred without violation of this Indenture
or effecting a refinancing of Indebtedness issued pursuant to an agreement
referred to in clauses (a) or (b) or this clause (c) or contained in any
amendment to an agreement referred to in clauses (a) or (b) or this clause (c);
provided, however, that the encumbrances and restrictions with respect to such
Restricted Subsidiary contained in any of such agreement, refinancing agreement
or amendment, taken as a whole, are no less favorable to the holders of the
Securities in any material respect, as determined in good faith by the Board of
Directors of the Company, than encumbrances and restrictions with respect to
such Restricted Subsidiary contained in agreements in effect at, or entered into
on, the Issue Date; (d) in the case of clause (iii), any encumbrance or
restriction (A) that restricts in a customary manner the subletting, assignment
or transfer of any property or asset that is a lease, license, conveyance or
contract or
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similar property or asset, (B) by virtue of any transfer of, agreement to
transfer, option or right with respect to, or Lien on, any property or assets of
the Company or any Restricted Subsidiary not otherwise prohibited by this
Indenture, (C) that is included in a licensing agreement to the extent such
restrictions limit the transfer of the property subject to such licensing
agreement or (D) arising or agreed to in the ordinary course of business and
that does not, individually or in the aggregate, detract from the value of
property or assets of the Company or any of its Subsidiaries in any manner
material to the Company or any such Restricted Subsidiary; (e) in the case of
clause (iii) above, restrictions contained in security agreements, mortgages or
similar documents securing Indebtedness of a Restricted Subsidiary to the extent
such restrictions restrict the transfer of the property subject to such security
agreements; (f) in the case of clause (iii) above, any instrument governing or
evidencing Indebtedness of a Person acquired by the Company or any Restricted
Subsidiary of the Company at the time of such acquisition, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person so acquired; provided, however, that such
Indebtedness is not incurred in connection with or in contemplation of such
acquisition; (g) any restriction with respect to such a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or disposition of all
or substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; and (h) encumbrances or
restrictions arising or existing by reason of applicable law.
SECTION 4.11 Limitation on Sale/Leaseback Transactions. The Company will
not, and will not permit any Restricted Subsidiary to, directly or indirectly,
enter into, Guarantee or otherwise become liable with respect to any
Sale/Leaseback Transaction with respect to any property or assets unless (i) the
Company or such Restricted Subsidiary, as the case may be, would be entitled,
pursuant to this Indenture, to Incur Indebtedness secured by a Permitted Lien on
such property or assets in an amount equal to the Attributable Indebtedness with
respect to such Sale/Leaseback Transaction, (ii) the Net Cash Proceeds from such
Sale/Leaseback Transaction are at least equal to the fair market value of the
property or assets subject to such Sale/Leaseback Transaction (such fair market
value determined, in the event such property or assets have a fair market value
in excess of $1.0 million, no more than 30 days prior to the effective date of
such Sale/Leaseback Transaction, by the Board of Directors of the Company as
evidenced by a resolution of such Board) and (iii) the net cash proceeds of such
Sale/Leaseback Transaction are applied in accordance with the provisions
described under Section 4.11.
SECTION 4.12 Limitation on Designations of Unrestricted Subsidiaries. The
Company may designate any Subsidiary of the Company (other than a Subsidiary of
the Company which owns Capital Stock of a Restricted Subsidiary) as an
"Unrestricted Subsidiary" under this Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation; and
(b) the Company would be permitted under this Indenture to make an
Investment at the time of Designation (assuming the effectiveness of such
Designation) in an amount (the "Designation Amount") equal to the sum of
(i) fair market value of the Capital Stock of such Subsidiary owned by the
Company and the Restricted Subsidiaries on such date and (ii) the aggregate
amount of other Investments of the Company and the Restricted Subsidiaries
in such Subsidiary on such date; and
(c) the Company would be permitted to incur $1.00 of additional
Indebtedness
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(other than Permitted Indebtedness) pursuant to the covenant described
under Section 4.3 of this Indenture at the time of Designation (assuming
the effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to the
covenant described under Section 4.4 of this Indenture for all purposes of
this Indenture in the Designation Amount. The Company shall not, and shall
not permit any Restricted Subsidiary to, at any time (x) provide direct or
indirect credit support for or a guarantee of any Indebtedness of any
Unrestricted Subsidiary (including of any undertaking, agreement or
instrument evidencing such Indebtedness), (y) be directly or indirectly
liable for any Indebtedness of any Unrestricted Subsidiary or (z) be
directly or indirectly liable for any Indebtedness which provides that the
holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to
its final scheduled maturity upon the occurrence of a default with respect
to any Indebtedness of any Unrestricted Subsidiary (including any right to
take enforcement action against such Unrestricted Subsidiary), except, in
the case of clause (x) or (y), to the extent permitted under the covenant
described under Section 4.4. of this Indenture.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation"), whereupon such Subsidiary shall
then constitute a Restricted Subsidiary, if:
(d) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation; and
(e) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the
Indenture.
All Designations and Revocations must be evidenced by Board Resolutions of
the Company delivered to the Trustee certifying compliance with the foregoing
provisions.
SECTION 4.13 Further Instruments and Acts. Upon request of the Trustee, the
Company will execute and deliver such further instruments and do such further
acts as may be reasonably necessary or proper to carry out more effectively the
purpose of this Indenture.
SECTION 4.14 Use of Proceeds. The Company shall use the net proceeds from
the sale of the Securities to consummate the transactions contemplated in the
section of the Offering Memorandum entitled "Use of Proceeds".
SECTION 4.15 Compliance Certificates. (a) The Company shall deliver to the
Trustee, within 120 days after the end of each fiscal year, an Officers'
Certificate signed by its principal executive officer, principal financial
officer or principal accounting officer stating that a review of the activities
of the Company and its Subsidiaries during the preceding fiscal year has been
made under the supervision of the signing Officers with a view to determining
whether each has kept, observed, performed and fulfilled its obligations under
this Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge each has kept, observed,
performed and fulfilled each and every covenant contained in this Indenture and
is not in default in the performance or observance of any of the terms,
provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or
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Events of Default of which he or she may have knowledge and what action each is
taking or proposes to take with respect thereto).
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.2 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements nothing has come to
their attention which would lead them to believe that the Company has violated
any provisions of Article 4 or 5 or that there exists a Default or Event of
Default under Article 6 of this Indenture insofar as they relate to accounting
matters or, if any such violation has occurred, specifying the nature and period
of existence thereof, it being understood that such accountants shall not be
liable directly or indirectly to any Person for any failure to obtain knowledge
of any such violation.
(c) The Company shall, so long as any of the Securities are outstanding,
deliver to the Trustee, within 5 days of any Officer becoming aware of any
Default or Event of Default, an Officers' Certificate specifying such Default or
Event of Default and what action the Company is taking or proposes to take with
respect thereto.
(d) The Company shall also comply with TIA ss. 314(a)(4).
SECTION 4.16 Maintenance of Office or Agency. (a) The Company shall
maintain in the Borough of Manhattan, in the City of New York, an office or
agency (which may be an office of the Trustee or an affiliate of the Trustee,
Registrar or co-registrar) where Securities may be surrendered for registration
of transfer or exchange and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Company shall
give prior written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee.
(b) The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, in the City of New York for such purposes. The Company
shall give prior written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.
(c) The Company hereby designates the Trustee at c/o Harris Trust Company
of New York, 88 Pine Street, Wall Street Plaza, New York, NY 10005 as one such
office or agency of the Company in accordance with Section 2.3.
SECTION 4.17 Taxes. The Company shall pay, prior to delinquency, all
material taxes, assessments, and governmental levies; provided, however, that
there shall not be required to be paid or discharged any such tax, assessment or
charge, the amount, applicability or validity of which is being contested in
good faith by appropriate proceedings and for which adequate provision has been
made or for which adequate reserves, to the extent required under GAAP, have
been taken.
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SECTION 4.18 Stay, Extension and Usury Laws. The Company covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that may affect the covenants or the performance of this Indenture
(including, but not limited to, the payment of the principal of or interest on
the Securities); and the Company (to the extent that it may lawfully do so)
hereby expressly waive all benefit or advantage of any such law, and covenant
that they shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
SECTION 4.19 Corporate Existence. Subject to Article V, the Company shall
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence, and the corporate existence of each
Subsidiary, in accordance with the respective organizational documents (as the
same may be amended from time to time) of each Subsidiary and the rights
(charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any Subsidiary, if the Board of Directors of the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries, taken as a whole,
and that the loss thereof is not adverse in any material respect to the
Securityholders.
ARTICLE V
SUCCESSORS
SECTION 5.1 Mergers and Consolidations. The Company may not, in a single
transaction or through a series of related transactions, consolidate or merge
with or into or sell, assign, transfer, lease, convey or otherwise dispose of
(or permit any of its Restricted Subsidiaries to sell, assign, transfer, lease,
convey or otherwise dispose of) all or substantially all of the Company's and
its Restricted Subsidiaries' assets (determined on a consolidated basis for the
Company and its Restricted Subsidiaries taken as a whole) in one or more related
transactions to another Person unless:
(i) the resulting, surviving or transferee Person (the "Successor
Issuer") shall be a corporation, partnership, trust or limited liability
company organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and the Successor
Issuer (if not the Company) shall expressly assume, by supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to
the Trustee, all the obligations of the Company under the Securities and
this Indenture;
(ii) immediately after giving effect to such transaction (and treating
any Indebtedness that becomes an obligation of the Successor Issuer or any
Subsidiary of the Successor Issuer as a result of such transaction as
having been incurred by the Successor Issuer or such Restricted Subsidiary
at the time of such transaction), no Default or Event of Default shall have
occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Issuer (A) shall have a Consolidated Net Worth equal or greater
to the Consolidated Net Worth of the
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Company immediately prior to such transaction and (B) would be able to
incur at least an additional $1.00 of Indebtedness pursuant to Section
4.3(a); and
(iv) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture.
SECTION 5.2 Successor Issuer Substituted. The Successor Issuer will succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture, but, in the case of a lease of all or
substantially all its assets, the Company will not be released from the
obligation to pay the principal of and interest on the Securities.
Notwithstanding clauses (ii) and (iii), of Section 5.1, any Restricted
Subsidiary of the Company may consolidate with, merge into or transfer all or
part of its properties and assets to the Company.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.1 Events of Default. An "Event of Default" will occur under this
Indenture if:
(i) there shall be a default in the payment of any interest on the
Securities when it becomes due and payable and continuance of such default
for a period of 30 days;
(ii) there shall be a default in the payment of the principal of (or
premium, if any, on) the Securities at their Stated Maturity, upon optional
redemption, upon required repurchase, upon declaration or otherwise;
(iii) the failure by the Company or any of its Subsidiaries to comply
with its obligations under Article V of this Indenture;
(iv) the failure by the Company or any of its Subsidiaries to comply
for 30 days after receiving notice of such noncompliance with any of its
obligations under Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9,
4.10, 4.11, 4.12, 4.15 and 4.19 above (in each case, other than a failure
to purchase Securities, which shall constitute an Event of Default under
clause (ii) above);
(v) the failure by the Issuer to comply for 60 days after receiving
notice of such non-compliance with its other agreements contained in this
Indenture;
(vi) Indebtedness of the Company or any Restricted Subsidiary is not
paid within any applicable grace period after its Stated Maturity or is
accelerated by the holders thereof because of a default under the terms of
such Indebtedness and the total amount of such Indebtedness unpaid or
accelerated exceeds $1.0 million and such default shall not have been cured
or such acceleration rescinded after a 10-day period;
(vii) the Company or a Significant Subsidiary pursuant to or within
the meaning
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of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against in an
involuntary case;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property;
(D) makes a general assignment for the benefit of its creditors;
(E) consents to or acquiesces in the institution of a bankruptcy
or an insolvency proceeding against it, or
(F) takes any corporate action to authorize or effect any of the
foregoing;
or takes any comparable action under any foreign laws relating to
insolvency;
(viii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of the property of the Company
or any of its Significant Subsidiaries; or
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary; or any similar relief is granted under any
foreign laws and in each case the order, decree or relief remains
unstayed and in effect for 60 days.
(ix) any judgment or decree for the payment of money in excess of $1.0
million (to the extent not covered by insurance) is rendered against the
Issuer or a Significant Subsidiary and such judgment or decree shall remain
undischarged or unstayed for a period of 60 days after such judgment
becomes final and non-appealable; or
Notwithstanding anything to the contrary contained herein, a Default under
clause (iv) or (v) will not constitute an Event of Default until the Trustee or
Holders of 25% in principal amount of all outstanding series of Securities,
acting as a single class, notify the Company of the Default and the Company does
not cure such Default within the time specified in such clause (iv) or (v) after
receipt of such notice.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
The term "Custodian" means any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.
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SECTION 6.2 Acceleration. If an Event of Default (other than an Event of
Default specified in Section 6.1(vii) or 6.1(viii) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of all outstanding
series of Securities, voting as a single class, by notice to the Company may
declare the principal of and premium and accrued and unpaid interest, if any, on
all the Securities to be due and payable. Upon such declaration, such principal
and premium and accrued and unpaid interest shall be due and payable
immediately. If an Event of Default specified in Section 6.1(vii) or (viii)
occurs and is continuing, the principal of and premium and accrued and unpaid
interest on all the Securities will become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holders.
The Holders of a majority in principal amount of all outstanding series of
Securities, voting as a single class, by notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of acceleration. No such rescission shall affect any subsequent Default
or Event of Default or impair any right consequent thereto.
SECTION 6.3 Other Remedies. If an Event of Default occurs and is
continuing, the Trustee and the Securityholders may pursue any available remedy
to collect the payment of principal of or interest on the Securities or to
enforce the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.4 Waiver of Past Defaults. The Holders of a majority in principal
amount of all outstanding series of Securities, voting as a single class, by
notice to the Trustee may waive an existing Default or Event of Default and its
consequences except (i) a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on a Security or (ii) a Default or
Event of Default in respect of a provision that under Section 9.2 cannot be
amended without the consent of each Securityholder affected. When a Default or
Event of Default is waived, it is deemed cured, but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any consequent
right.
SECTION 6.5 Control by Majority. Subject to Section 2.9, the Holders of a
majority in principal amount of all outstanding series of Securities, voting as
a single class, may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture or, subject to Section 7.1,
that the Trustee determines is unduly prejudicial to the rights of other
Securityholders or would involve the Trustee in personal liability; provided,
however, that the Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction. Prior to taking any action
hereunder, the Trustee shall be entitled to indemnification satisfactory to it
in its sole discretion against all losses and expenses caused by taking or not
taking such action.
SECTION 6.6 Limitation on Suits. A Securityholder may not pursue any remedy
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with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in outstanding principal amount of all
outstanding series of Securities, voting as a single class, make a written
request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in outstanding principal amount of all
outstanding series of Securities, voting as a single class, do not give the
Trustee a direction that, in the opinion of the Trustee, is inconsistent
with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.7 Rights of Holders to Receive Payment. Notwithstanding any other
provision of this Indenture, the right of any Holder to receive payment of
principal of and interest on the Securities held by such Holder, on or after the
respective due dates expressed in the Securities, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.8 Collection Suit by Trustee. If an Event of Default specified in
Section 6.1(i) or (ii) or an acceleration pursuant to Section 6.2 occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company or any other obligor of the Securities for
the whole amount then due and owing (together with interest on any unpaid
interest to the extent lawful) and the amounts provided for in Section 7.7.
SECTION 6.9 Trustee May File Proofs of Claim. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and the Securityholders allowed in
any judicial proceedings relative to the Company, its Subsidiaries or their
respective creditors or properties and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.7.
SECTION 6.10 Priorities. If the Trustee collects any money or property
pursuant to this Article VI, it shall pay out the money or property in the
following order:
FIRST: to the Trustee for amounts due under Section 7.7;
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SECOND: if the Securityholders are forced to proceed against the Company
directly without the Trustee, to the Securityholders for their collection costs;
THIRD: to Securityholders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal and
interest, respectively; and
FOURTH: to the Company.
The Trustee, upon prior notice to the Company, may fix a record date and
payment date for any payment to Securityholders pursuant to this Section 6.10.
At least 15 days before such record date, the Company shall mail to each
Securityholder and the Trustee a notice that states the record date, the payment
date and amount to be paid.
SECTION 6.11 Undertaking for Costs. In any suit for the enforcement of any
right or remedy under this Indenture or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court in its discretion may require
the filing by any party litigant in the suit of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a
suit by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10%
in outstanding principal amount of the Securities.
ARTICLE VII
TRUSTEE
SECTION 7.1 Duties of Trustee. (a) If a Default or an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of a Default or an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture or the TIA and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
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(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or powers,
if it shall have reasonable grounds to believe that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
(h) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section and to the provisions of the TIA.
SECTION 7.2 Rights of Trustee. Subject to TIA ss. 315(a) through (d):
(a) The Trustee may rely and shall be protected in acting or
refraining from acting on any document believed by it to be genuine and to
have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel which shall conform to
Section 12.5. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on the Officers' Certificate or
Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute willful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of
such counsel.
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(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Securityholders, unless such Securityholders shall have
offered to the Trustee security or indemnity reasonably satisfactory to the
Trustee against the losses, expenses and liabilities that might be incurred
by it in compliance with such request or direction.
(g) The Trustee shall not be liable with respect to any action taken
or omitted to be taken by it good faith in accordance with the direction of
the Securityholders of a majority in aggregate principal amount of the
Securities at the time outstanding relating to the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
involving the exercise of any right, duty, trust or power conferred upon
the Trustee under the TIA or this Indenture.
SECTION 7.3 Individual Rights of Trustee. The Trustee, in its individual or
any other capacity, may become the owner or pledgee of Securities and may make
loans to, accept deposits from, perform services for and otherwise deal with the
Company, or their Affiliates with the same rights it would have if it were not
Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the
same with like rights. However, the Trustee must comply with Sections 7.10 and
7.11.
SECTION 7.4 Trustee's Disclaimer. The Trustee shall not be responsible for
and makes no representation as to the validity or adequacy of this Indenture or
the Securities, it shall not be accountable for the Company's use of the
proceeds from the Securities, and it shall not be responsible for any statement
of the Company in this Indenture or in any document issued in connection with
the sale of the Securities or in the Securities other than the Trustee's
certificate of authentication.
SECTION 7.5 Notice of Defaults. If a Default or Event of Default occurs and
is continuing and if a Trust Officer has knowledge thereof, the Trustee shall
mail to each Securityholder in the manner and to the extent provided in TIA ss.
313(a) notice of the Default or Event of Default within 90 days after it occurs,
unless such Default or Event of Default has been cured. Except in the case of a
Default or Event of Default in payment of principal, premium, if any, or
interest on any Security (including payments pursuant to the optional redemption
or required repurchase provisions of such Security, if any), the Trustee may
withhold the notice if and so long as its board of directors, the executive
committee of its board of directors or a committee of its Trust Officers in good
faith determines that withholding the notice is in the interests of
Securityholders.
SECTION 7.6 Reports by Trustee to Holders. As promptly as practicable and
within 60 days after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder, if required by TIA ss. 313(a) a brief report
dated as of such May 15 that complies with TIA ss. 313(a). The Trustee also
shall comply with TIA ss. 313(b), (c) and (d).
A copy of each report at the time of its mailing to Securityholders shall
be filed with the Commission if required by law and each stock exchange (if any)
on which the Securities are listed. The Company agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.7 Compensation and Indemnity. The Company shall pay to the
Trustee
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from time to time reasonable compensation for its services. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses and advances incurred or made by it, including
but not limited to costs of collection, costs of preparing and reviewing
reports, certificates and other documents, costs of preparation and mailing of
notices to Securityholders and reasonable costs of counsel retained by the
Trustee in connection with the delivery of an Opinion of Counsel or otherwise,
in addition to the compensation for its services. Such expenses shall include
the reasonable compensation and expenses, disbursements and advances of the
Trustee's agents, counsel, accountants and experts. The Company shall indemnify
the Trustee for, and hold it harmless against, any and all loss, liability or
expense (including reasonable attorneys' fees) incurred by it in connection with
the administration of this trust and the performance of its duties hereunder and
under the Securities, including the costs and expenses of enforcing this
Indenture and the Securities (including this Section 7.7) and of defending
itself against any claims or liabilities (whether asserted by any
Securityholder, the Company or otherwise) and of complying with any process
served upon it or any of its officers in connection with the exercise or
performance of any of its powers or duties under this Indenture. The Trustee
shall notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company shall not relieve the Company of
its obligations hereunder. The Company shall defend the claim and the Trustee
may have separate counsel and the Company shall pay the fees and expenses of
such counsel. The Company need not reimburse any expense or indemnify against
any loss, liability or expense incurred by the Trustee through the Trustee's own
willful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities. The Trustee's right to
receive payment of any amounts due under this Section 7.7 shall not be
subordinate to any other liability or indebtedness of the Company.
The Company's payment obligations pursuant to this Section shall survive
the discharge of this Indenture. When the Trustee incurs expenses after the
occurrence of a Default specified in Section 6.1(vii) or (viii) with respect to
the Company, the expenses are intended to constitute expenses of administration
under any Bankruptcy Law.
SECTION 7.8 Replacement of Trustee. The Trustee may resign at any time by
so notifying the Company in writing at least 30 days in advance of such
resignation. The Holders of a majority in principal amount of the Securities may
remove the Trustee by so notifying the Trustee in writing and may appoint a
successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed by the Company or by the Holders of a
majority
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in principal amount of the Securities and such Holders do not reasonably
promptly appoint a successor Trustee, or if a vacancy exists in the office of
Trustee for any reason (the Trustee in such event being referred to herein as
the retiring Trustee), the Company shall promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Securityholders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, subject to the lien provided for in Section 7.7.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.8.
If the Trustee fails to comply with Section 7.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section,
the Company's obligations under Section 7.7 shall continue for the benefit of
the retiring Trustee.
SECTION 7.9 Successor Trustee by Merger. If the Trustee consolidates with,
merges or converts into, or transfers all or substantially all its corporate
trust business or assets to, another corporation or banking association, the
resulting, surviving or transferee corporation without any further act shall be
the successor Trustee.
In case at the time such successor or successors by merger, conversion or
consolida tion to the Trustee shall succeed to the trusts created by this
Indenture, any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 7.10 Eligibility; Disqualification. The Indenture shall at all
times have a Trustee that satisfies the requirements of TIA ss. 310(a). The
Trustee shall have a combined capital and surplus of at least $100 million as
set forth in its most recent published annual report of condition. The Trustee
shall comply with TIA ss. 310(b); provided, however, that there shall be
excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures
under which other securities or certificates of interest or participation in
other securities of the Company are outstanding if the requirements for such
exclusion set forth in TIA ss. 310(b)(1) are met.
SECTION 7.11 Preferential Collection of Claims Against Company. The Trustee
shall comply with TIA ss. 311(a), excluding any creditor relationship listed in
TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to
TIA ss. 311(a) to the extent indicated.
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ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1 Discharge of Liability on Securities; Defeasance. (a) When (i)
the Company delivers to the Trustee all outstanding Securities (other than
Securities replaced pursuant to Section 2.7 hereof) canceled or for cancellation
or (ii) all outstanding Securities have become due and payable and the Company
irrevocably deposits with the Trustee funds sufficient to pay at maturity all
outstanding Securities, including interest thereon (other than Securities
replaced pursuant to Section 2.7 hereof), and if in either case the Company pays
all other sums payable hereunder by the Company, then this Indenture shall,
subject to Sections 8.1(e) and 8.6 hereof, cease to be of further effect. The
Trustee shall acknowledge satisfaction and discharge of this Indenture on demand
of the Company accompanied by an Officers' Certificate and an Opinion of Counsel
and at the cost and expense of the Company.
(b) Subject to Sections 8.1(e), 8.2 and 8.6 hereof, the Company at any time
may terminate (i) all its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) all obligations under Sections 4.3, 4.4,
4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.15(a), (b) and (c), 4.19, or
5.1(iii) and (iv) and the operation of Sections 6.1(vi) and 6.1(ix) (as well as
6.1(vii) and 6.1(viii) hereof but only with respect to Significant Subsidiaries)
("covenant defeasance option"). The Company may exercise its legal defeasance
option notwithstanding its prior exercise of its covenant defeasance option.
(c) If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Section 6.1(iv),
6.1(vi), 6.1(vii) or 6.1(viii), or because of the failure of the Company to
comply with Sections 5.1(iii) or 5.1(iv).
(d) Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(e) Notwithstanding clauses (a) and (b) above, the Company's obligations in
Sections 2.3, 2.4, 2.5, 2.6, 2.7, 7.7, 7.8, 8.4, 8.5 and 8.6 hereof shall
survive until the Securities have been paid in full. Thereafter, the Company's
obligations in Sections 7.7, 8.4 and 8.5 hereof shall survive.
SECTION 8.2 Conditions to Defeasance. The Company may exercise its legal
defeasance option or its covenant defeasance option only if:
(a) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations in amounts (including interest, but without
consideration of any reinvestment of such interest) and maturities
sufficient, but in the case of the legal defeasance option only, not more
than such amounts (as certified by a nationally recognized firm of
independent public accountants), to pay and discharge at their Stated
Maturity (or such earlier redemption date as the Company shall have
specified to the Trustee) the principal of, premium, if any, and interest
on all outstanding Securities to maturity or redemption, as the case may
be, and to pay all of the sums payable by it hereunder; provided, that the
Trustee shall have been irrevocably instructed to apply such money or the
proceeds of such U.S.
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Government Obligations to the payment of said principal, premium, if any,
and interest with respect to the Securities;
(b) in the case of the legal defeasance option only, 123 days pass
after the deposit is made and during the 123 day period no Default
specified in Section 6.1(vii) hereof with respect to the Company occurs
which is continuing at the end of the period;
(c) no Default has occurred and is continuing on the date of such
deposit and after giving effect thereto;
(d) the deposit does not constitute a default under any other
agreement binding on the Company;
(e) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940, as amended;
(f) in the case of the legal defeasance option, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (x) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling, or (y) since the date of this Indenture there has been a
change in the applicable Federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Securityholders will not recognize income, gain or loss for Federal
income tax purposes as a result of such defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance had not occurred;
(g) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders will not recognize income, gain or loss for Federal income
tax purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; and
(h) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article
VIII have been complied with.
(i) In order to have money available on a payment date to pay
principal, premium, if any, or interest on the Securities, the U.S.
Government Obligations deposited pursuant to preceding clause (a) shall be
payable as to principal or interest at least one Business Day before such
payment date in such amounts as shall provide the necessary money. U.S.
Government Obligations shall not be callable at the issuer's option.
(j) Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future
date in accordance with Article III hereof.
SECTION 8.3 Application of Trust Money. The Trustee shall hold in trust
money or U.S. Government Obligations deposited with it pursuant to this Article
VIII. It shall apply the
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deposited money and the money from U.S. Government Obligations through the
Paying Agent and in accordance with this Indenture to the payment of principal,
premium, if any, and interest on the Securities.
SECTION 8.4 Repayment to the Company. (a) The Trustee and the Paying Agent
shall promptly pay to the Company upon written request any excess money or
securities held by them at any time; provided, however, that the Trustee shall
not pay any such excess to the Company unless the amount remaining on deposit
with the Trustee, after giving effect to such transfer are sufficient to pay
principal, premium, if any, and interest on the outstanding Securities, which
amount shall be certified by independent public accountants.
(b) The Trustee and the Paying Agent shall pay to the Company upon written
request any money held by them for the payment of principal, premium, if any, or
interest that remains unclaimed for two years after the date upon which such
payment shall have become due; provided, however, that the Company shall have
either caused notice of such payment to be mailed to each Securityholder
entitled thereto no less than 30 days prior to such repayment or within such
period shall have published such notice in a financial newspaper of widespread
circulation published in the City of New York. After payment to the Company,
Securityholders entitled to the money must look to the Company for payment as
general creditors unless an applicable abandoned property law designates another
Person, and all liability of the Trustee and such Paying Agent with respect to
such money shall cease.
SECTION 8.5 Indemnity for Government Obligations. The Company shall pay and
shall indemnify the Trustee against any tax, fee or other charge imposed on or
assessed against deposited U.S. Government Obligations or the principal and
interest received on such U.S. Government Obligations.
SECTION 8.6 Reinstatement. If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with this Article 8
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's Obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article VIII until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with this Article VIII; provided, however, that if the Company has made any
payment of principal of, premium, if any, or interest on any Securities because
of the reinstatement of its Obligations, the Company shall be subrogated to the
rights of the Securityholders to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS
SECTION 9.1 Without Consent of Holders. (a) The Company and the Trustee may
amend this Indenture or the Securities without notice to or consent of any
Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
provided, that such amendment or supplement does not, as evidenced by an
Opinion of Counsel delivered to the Trustee, adversely affect the rights of
any Securityholder in any material respect;
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(2) to comply with Article V;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to secure the Securities;
(5) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(6) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA;
(7) to make any change that does not adversely affect the rights of
any Securityholder;
(8) to surrender any right or power conferred upon the Company;
(9) to provide for a replacement Trustee under Section 7.8 hereof; or
(10) to provide for the issuance of the Exchange Securities, which
will have terms substantially identical in all material respects to the
Initial Securities (except that the transfer restrictions contained in the
Initial Securities will be modified or eliminated, as appropriate), and
which will be treated, together with any outstanding Initial Securities, as
a single issue of securities;
provided, that the Company has delivered to the Trustee an Opinion of
Counsel stating that any such amendment or supplement complies with the
provisions of this Section 10.1.
(b) Upon the request of the Company accompanied by a Board Resolution of
its Board of Directors authorizing the execution of any such supplemental
indenture, and upon receipt by the Trustee of the documents described in Section
9.6, the Trustee shall join with the Company in the execution of any
supplemental indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee shall not be obligated to enter into such
supplemental indenture which affects its own rights, duties or immunities under
this Indenture or otherwise.
(c) After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment.
However, the failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.2 With Consent of Holders. (a) The Company and the Trustee may
amend this Indenture or the Securities with the consent of the Holders of at
least a majority in outstanding principal amount of the Securities (including
consents obtained in connection with a tender offer or exchange offer for the
Securities) and any existing Default and its consequences (including, without
limitation, an acceleration of the Securities) or compliance with any provision
of this Indenture or the Securities may be waived with the consent of the
Holders of a majority in
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principal amount of the then outstanding Securities (including consents obtained
in connection with a tender offer or exchange offer for the Securities).
Furthermore, subject to Sections 6.4 and 6.7, the Holders of a majority in
aggregate principal amount of the Securities then outstanding (including
consents obtained in connection with a tender offer or exchange offer for the
Securities) may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Securities. However, without the consent
of each Holder of a Security then outstanding, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption or repurchase of
any Security or change the time at which any Security may or shall be
redeemed or repurchased in accordance with this Indenture;
(5) make any Security payable in money other than that stated in the
Security;
(6) modify or affect in any manner adverse to the Holders, the terms
and conditions of the obligation of the Company for the due and punctual
payment of the principal of or interest on Securities or to institute suit
for the enforcement of any payment on or with respect to the Securities;
(7) waive a Default or Event of Default in the payment of principal
of, premium, if any, or interest on, or redemption payment with respect to,
any Security (excluding any principal or interest due solely as a result of
the occurrence of a declaration of an Event of Default); or
(8) make any change in Section 6.4 or 6.7 or the third sentence of
this Section;
(9) amend, change or modify in any material respect the obligation of
the Company to make and consummate a Change of Control Offer in the event
of a Change of Control or make and consummate an offer with respect to any
Asset Sale that has been consummated or modify any of the provisions or
definitions with respect thereto;
(10) modify or change any provision of the Indenture or the related
definitions affecting the ranking of the Securities in a manner which
adversely affects the Holders; or
(11) make any change in the amendment provisions which require each
holder's consent or in the waiver provisions.
(b) Upon the request of the Company accompanied by a Board Resolution of
its respective Board of Directors authorizing the execution of any such
supplemental indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Securityholders as aforesaid,
and upon receipt by the Trustee of the documents described in Section 9.6, the
Trustee shall join with the Company in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this
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Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, decline to enter into such supplemental indenture.
(c) It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
(d) After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 9.3 Compliance with Trust Indenture Act. Every amendment to this
Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.4 Revocation and Effect of Consents and Waivers. A consent to an
amendment or a waiver by a Holder of a Security shall bind the Holder and every
subsequent Holder of that Security or portion of the Security that evidences the
same debt as the consenting Holder's Security, even if notation of the consent
or waiver is not made on the Security. However, any such Holder or subsequent
Holder may revoke the consent or waiver as to such Holder's Security or portion
of the Security if the Trustee receives the notice of revocation before the date
the amendment or waiver becomes effective. After an amendment or waiver becomes
effective, it shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall become valid or effective more than 120
days after such record date.
SECTION 9.5 Notation on or Exchange of Securities. If an amendment changes
the terms of a Security, the Trustee may require the Holder of the Security to
deliver it to the Trustee. The Trustee may place an appropriate notation on the
Security regarding the changed terms and return it to the Holder. Alternatively,
if the Company or the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new Security that
reflects the changed terms. Failure to make the appropriate notation or to issue
a new Security shall not affect the validity of such amendment.
SECTION 9.6 Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article IX if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may, but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.1) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture.
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<PAGE>
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the provision required by
the TIA shall control. If any provision of this Indenture modifies or excludes
any provision of the TIA that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or excluded,
as the case may be.
SECTION 10.2 Notices. Any notice or communication shall be in writing and
delivered in person, mailed by registered mail or telecopied to the recipient
addressed as follows:
if to the Company:
COMFORCE Operating Inc.
2001 Marcus Avenue
Lake Success, New York 11042
Telecopier:
Attention: Chief Financial Officer
if to the Trustee:
Wilmington Trust Company
1100 North Market Street
Wilmington, DE 19890-0081
Telecopier: 302-651-8882
Attention: Corporate Trust Administration
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed to
the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
All notices and communications (other than those sent to Securityholders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed.
Any notice or communication to a Securityholder shall be mailed by first
class mail, postage prepaid, to its address shown on the register kept by the
Registrar. Any notice or communication shall also be so mailed to any Person
described in TIA ss. 313(c), to the extent required by the TIA. Failure to mail
a notice or communication to a Securityholder or any defect in it shall not
affect its sufficiency with respect to other Securityholders.
If a notice or communication is mailed to any Person in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
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<PAGE>
If the Company mails a notice or communication to Securityholders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 10.3 Communication by Holders with other Holders . Securityholders
may communicate pursuant to TIA ss. 312(b) with other Securityholders with
respect to their rights under this Indenture or the Securities. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA ss.
312(c).
SECTION 10.4 Certificate and Opinion as to Conditions Precedent. Upon any
request or application by the Company to the Trustee to take or refrain from
taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.5) stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to
the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.5) stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
SECTION 10.5 Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with and such
other opinions as the Trustee may reasonably request.
SECTION 10.6 When Securities Disregarded. In determining whether the
Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Securities outstanding at the time shall be
considered in any such determination.
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<PAGE>
SECTION 10.7 Rules by Trustee, Paying Agent and Registrar. The Trustee may
make reasonable rules for action by or at a meeting of Securityholders. The
Registrar and the Paying Agent may make reasonable rules for their functions.
SECTION 10.8 Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a
day on which banking institutions are not required to be open in the State of
New York, or the State in which the Corporate Trust Office is located. If a
payment date is a Legal Holiday, payment shall be made on the next succeeding
day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If a regular record date is a Legal Holiday, the record date
shall not be affected.
SECTION 10.9 Governing Law. This Indenture and the Securities shall be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 10.10 No Recourse Against Others. A past, present or future
director, officer, employee or stockholder, as such, of the Company shall not
have any liability for any obligations of the Company under the Securities or
this Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
shall waive and release all such liability. The waiver and release shall be part
of the consideration for the issue of the Securities.
SECTION 10.11 Successors. All agreements of the Company in this Indenture
and the Securities shall bind their respective successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 10.12 Multiple Originals. The parties may sign any number of copies
of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.
SECTION 10.13 Variable Provisions. The Company initially appoints the
Trustee as Paying Agent and Registrar and custodian with respect to any Global
Securities.
SECTION 10.14 Qualification of Indenture. The Company shall qualify this
Indenture under the TIA in accordance with the terms and conditions of the
Registration Rights Agreement and shall pay all reasonable costs and expenses
(including attorneys' fees for the Company, the Trustee and the Holders)
incurred in connection therewith, including, but not limited to, costs and
expenses of qualification of the Indenture and the Securities and printing this
Indenture and the Securities. The Trustee shall be entitled to receive from the
Company any such Officers' Certificates, Opinions of Counsel or other
documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
SECTION 10.15 Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
SECTION 10.16 Severability. In case any provision in this Indenture or in
the Securities shall be invalid, illegal or unenforceable, in any respect for
any reason, the validity,
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<PAGE>
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the fullest extent permitted by law.
SECTION 10.17 No Adverse Interpretation of Other Agreements. This Indenture
may not be used to interpret another indenture, loan or debt agreement of the
Company or any of its Subsidiaries. Any such indenture, loan or debt agreement
may not be used to interpret this Indenture.
-65-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
COMFORCE OPERATING, INC.
By /s/ Paul Grillo
-----------------------------------------------
Name: Paul Grillo
Title: Sr. Vice President & Chief Financial
Officer
WILMINGTON TRUST COMPANY, AS
TRUSTEE
By /s/ Jill K. Morrison
-----------------------------------------------
Name: Jill K. Morrison
Title:
-66-
<PAGE>
EXHIBIT A
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, UNITED STATES PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) or (7) UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A UNITED STATES
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 OF THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT
WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(k) UNDER THE SECURITIES ACT
AS IN EFFECT WITH RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING
TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN
AGGREGATE PRINCIPAL AMOUNT OF NOTES AT THE TIME OF THE TRANSFER OF LESS
THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED
STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND; PROVIDED THAT AN INITIAL INVESTOR THAT IS AN
INSTITUTIONAL ACCREDITED INVESTOR PURCHASING AS DESCRIBED IN CLAUSE (1)(B)
ABOVE SHALL NOT BE PERMITTED TO TRANSFER THIS NOTE TO AN INSTITUTIONAL
ACCREDITED INVESTOR. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY
WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE THEREOF RELATING TO THE
<PAGE>
Exhibit A
Page -2-
MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR PURCHASING
PURSUANT TO CLAUSE (2)(c) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS
OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" "UNITED STATES" AND
"UNITED STATES PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE
FOREGOING RESTRICTIONS.
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF
THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR
DEPOSITARY OR ANY SUCH NOMINEE, TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITARY. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO.
OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE, AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
<PAGE>
Exhibit A
Page -3-
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
<PAGE>
Exhibit A
Page -4-
CUSIP No:
(Front of Security)
No. 1
$110,000,000
COMFORCE OPERATING, INC.
12% Senior Notes due 2007
COMFORCE OPERATING, INC., a Delaware corporation, for value received,
promises to pay to Cede & Co., as nominee of the Depository Trust Company, or
its registered assigns, the principal sum of $110,000,000 on December 1, 2007.
Interest Payment Dates: June 1, and December 1, commencing June 1, 1998.
Record Dates: May 15 and November 15 (whether or not a Business Day).
Additional provisions of this Note are set forth on the other side of this
Note.
Dated:
COMFORCE OPERATING, INC.
By: ________________________
Name:
Title:
By: ________________________
Name:
Title:
<PAGE>
Exhibit A
Page -5-
(Trustee's Certificate of Authentication)
This is one of the Securities referred
to in the within-mentioned Indenture
WILMINGTON TRUST COMPANY, as Trustee
By:_________________________________
Authorized Officer
<PAGE>
Exhibit A
Page -6-
(Reverse of Security)
COMFORCE OPERATING, INC.
12% SENIOR NOTE DUE 2007
Capitalized terms used herein have the meanings assigned to them in the
Indenture (as defined below) unless otherwise indicated.
1. Interest. COMFORCE Operating, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate and in the manner specified below. The Company shall pay, in cash,
interest on the principal amount of this Security at the rate per annum of 12%.
The Company will pay interest semiannually in arrears on June 1 and December 1
of each year (each an "Interest Payment Date"), commencing June 1, 1998, or if
any such day is not a Business Day on the next succeeding Business Day. Interest
will be computed on the basis of a 360-day year consisting of twelve 30-day
months. Interest shall accrue from the most recent Interest Payment Date to
which interest has been paid or, if no interest has been paid, from the date of
the original issuance of the Securities. To the extent lawful, the Company shall
pay interest on overdue principal at the rate of 2% per annum in excess of the
then applicable interest rate on the Securities; it shall pay interest on
overdue installments of interest (without regard to any applicable grace
periods) at the same rate to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Securities
(except defaulted interest) to the Persons who are registered Holders of
Securities at the close of business on the Record Date immediately preceding the
Interest Payment Date, even if such Securities are cancelled after such Record
Date and on or before such Interest Payment Date. Securityholders must surrender
Securities to a Paying Agent to collect principal payments. The Company shall
pay principal, premium, if any, and interest in money of the United States that
at the time of payment is legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Company may pay principal, premium, if any,
and interest by its check payable in such U.S. Legal Tender. The Company may
deliver any such interest payment to the Paying Agent or to a Securityholder at
the Securityholder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or
co-registrar without prior notice to any Securityholder. The Company may act in
any such capacity.
4. Indenture. The Company issued the Securities under an Indenture, dated
as of November 26, 1997 (the "Indenture"), among the Company and the Trustee.
The terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.
Code ss.ss.77aaa-77bbbb) (the "TIA") as in effect on the date
<PAGE>
Exhibit A
Page -7-
the Indenture is qualified. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the TIA for a statement of
such terms. The terms of the Indenture shall govern any inconsistencies between
the Indenture and the Securities. The Securities include the Initial Securities
and the Exchange Securities issued in exchange for the Initial Securities
pursuant to the Indenture. The Initial Securities and the Exchange Securities
are treated as a single class of securities under the Indenture. Capitalized
terms herein are used as defined in the Indenture unless otherwise defined
herein. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the TIA, as in effect on the
date of the Indenture. Notwithstanding anything to the contrary herein, the
Securities are subject to all such terms, and Securityholders of Securities are
referred to the Indenture and said Act for a statement of them. The Securities
are unsecured senior obligations of the Company limited to $200,000,000 in
aggregate principal amount.
5. (a) Optional Redemption. Except as set forth below, the Securities will
not be redeemable at the option of the Company prior to December 1, 2002. On and
after such date, the Securities will be redeemable, at the Company's option, in
whole or in part, at any time upon not less than 30 nor more than 60 days' prior
notice mailed by first-class mail to each holder's registered address, at the
following redemption prices (expressed in percentages of principal amount), if
redeemed during the 12-month period commencing on December 1 of the years set
forth below, plus accrued and unpaid interest to the redemption date (subject to
the right of holders of record on the relevant record date to receive interest
due on the relevant interest payment date):
Redemption
Year Price
---- -----
2002 ....................................................... 106.000%
2003 ....................................................... 104.000%
2004 ....................................................... 102.000%
2005 and thereafter......................................... 100.000%
(b) Optional Redemption Upon Public Offerings. In addition, at any time on
or prior to December 1, 2000, the Company, at its option, may redeem up to 35%
of the aggregate principal amount of the Securities with the net cash proceeds
of one or more Equity Offerings at a redemption price equal to 112.000% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the date of redemption; provided, however, that after any such redemption the
aggregate principal amount of the Securities outstanding must equal at least 65%
of the aggregate principal amount of the Securities issued as of the date of
such redemption under the Indenture. In order to effect the foregoing redemption
with the proceeds of any Equity Offering, the Company shall make
<PAGE>
Exhibit A
Page -8-
such redemption not more than 90 days after the consummation of any such Equity
Offering.
6. Mandatory Redemption. Except as set forth in the next succeeding
sentences, the Securities are not subject to mandatory redemption or sinking
fund payments. If the Uniforce Acquisition is not consummated on or prior to the
15th Business Day after the Issue Date (the "Special Redemption Date"), this
security will be subject to mandatory special redemption at a redemption price
equal to 101% of its principal amount plus accrued and unpaid interest to the
Special Redemption Date.
7. Repurchase at Option of Securityholder. Sections 4.8 and 4.9 of the
Indenture provide that, after certain Asset Sales (as defined in the Indenture)
and upon the occurrence of a Change of Control (as defined in the Indenture),
and subject to the further limitations contained therein, the Company will make
an offer to purchase certain amounts of the Securities in accordance with
procedures set forth in the Indenture.
8. Selection and Notice of Redemption. In the case of any partial
redemption, selection of the Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which such Securities are listed, or if such Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by such other method as the Trustee in its sole discretion shall deem to be
fair and appropriate; provided, however, that if a partial redemption is made
with the proceeds of a Equity Offering, selection of the Securities or portion
thereof for redemption shall be made by the Trustee only on a pro rata basis,
unless such method is otherwise prohibited. Securities may be redeemed in part
in multiples of $1,000 principal amount only. Notice of redemption will be sent,
by first class mail, postage prepaid, at least forty-five days (unless a shorter
period is acceptable to the Trustee) prior to the date fixed for redemption to
each holder whose Securities are to be redeemed at the last address for such
holder then shown on the registry books. If any Security is to be redeemed in
part only, the notice of redemption that relates to such Security shall state
the portion of the principal amount thereof to be redeemed. A new Security in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Security. On and
after any redemption date, interest will cease to accrue on the Securities or
part thereof called for redemption as long as the Company has deposited with the
Paying Agent funds in satisfaction of the redemption price pursuant to the
Indenture.
9. Registration Rights. Pursuant to the Registration Rights Agreement, and
subject to certain terms and conditions stated therein, the Company will be
obligated to consummate an Exchange Offer pursuant to which the Holders of the
Initial Securities shall have the right to exchange this Security for Exchange
Securities, which have been registered under the Securities Act, in like
principal amount and having terms identical in all material respect to the
Initial Security. In certain circumstances, and subject to certain terms and
conditions, Holders of the Initial Securities
<PAGE>
Exhibit A
Page -9-
shall have the right to receive liquidated damages if the Company shall have
failed to fulfill its obligations under the Registration Rights Agreement.
10. Denominations, Transfer, Exchange. The Securities are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Securities may be registered and Securities may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Securityholder among other things, to furnish appropriate endorsements
and transfer documents and to pay any taxes and fees required by law or
permitted by the Indenture. The Registrar need not exchange or register the
transfer of any Security or portion of a Security selected for redemption. Also,
it need not exchange or register the transfer of any Securities during a period
beginning at the opening of business on a Business Day 15 days before the day of
any selection of Securities to be redeemed and ending at the close of business
on the day of selection or during the period between a Record Date and the
corresponding Interest Payment Date.
11. Persons Deemed Owners. Prior to due presentment to the Trustee for
registration of the transfer of this Security, the Trustee, any Agent and the
Company may deem and treat the Person in whose name this Security is registered
as its absolute owner for the purpose of receiving payment of principal of,
premium, if any, and interest on this Security and for all other purposes
whatsoever, whether or not this Security is overdue, and neither the Trustee,
any Agent nor the Company shall be affected by notice to the contrary. The
registered Securityholder shall be treated as its owner for all purposes.
12. Amendments and Waivers. Subject to certain exceptions provided in the
Indenture, the Indenture or the Securities may be amended with the written
consent of the Holders of a majority in principal amount of all outstanding
series of the Securities, voting as a single class, and any existing Default or
Event of Default (except a payment default) may be waived with the consent of
the Holders of a majority in principal amount of all outstanding series of the
Securities voting as a single class. Without the consent of any Securityholder,
the Indenture or the Securities may be amended to, among other things, cure any
ambiguity, defect or inconsistency, to comply with the requirements of the
Commission in order to effect or maintain qualification of the Indenture under
the TIA or to make any change that does not adversely affect in any material
respect the rights of any Securityholder.
13. Defaults and Remedies. If an Event of Default occurs and is continuing,
the Trustee or the holders of at least 25% in principal amount of all
outstanding series of the Securities, voting as a single class, by notice to the
Company may declare the principal of and accrued and unpaid interest, if any, on
all the Securities to be due and payable. Upon such a declaration, such
principal and accrued and unpaid interest shall be due and payable immediately.
If an Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs
<PAGE>
Exhibit A
Page -10-
and is continuing, the principal of and accrued and unpaid interest on all the
Securities will become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holders. Under
certain circumstances, the holders of a majority in principal amount of all
outstanding series of the Securities, voting as a single class, may rescind any
such acceleration with respect to the Securities and its consequences.
14. Trustee Dealings with the Company. The Trustee under the Indenture, in
its individual or any other capacity, may make loans to, accept deposits from,
and perform services for the Company or any Affiliate of the Company and may
otherwise deal with the Company and their respective Affiliates as if it were
not Trustee.
15. Restrictive Covenants. The Indenture imposes certain limitations on the
ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, incur liens, create restrictions on the ability of a subsidiary to
pay dividends or make certain payments, sell or issue preferred stock of
subsidiaries to third parties, merge or consolidate with any other person or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company. Such limitations are subject to
a number of important qualifications and exceptions provided for in the
Indenture. The Company must annually report to the Trustee on compliance with
such limitations.
16. Authentication. This Security shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
17. Defeasance. Subject to certain conditions provided for in the
Indenture, the Company at any time may terminate some or all of its obligations
under the Securities and the Indenture if the Company deposits with the Trustee
money or U.S. Government Obligations for the payment of principal, premium (if
any) and interest on the Securities to redemption or maturity, as the case may
be.
18. Governing Law. The Laws of the State of New York shall govern this
Security and the Indenture, without regard to principles of conflict of laws.
19. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
20. Successors. When a successor assumes, in accordance with the Indenture,
all the obligations of its predecessors under the Securities and the Indenture,
the predecessor will be released from those obligations.
<PAGE>
Exhibit A
Page -11-
21. No Recourse Against Others. No stockholder, director, officer, employee
or incorporator, as such, of the Company shall have any liability for any
obligation of the Company under the Securities or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Securityholder by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for the issuance of the
Securities.
22. Abbreviations. Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
23. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Securities and has directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to Securityholders.
No representation is made as to the accuracy of such numbers either as printed
on the Securities or as contained in any notice of redemption and reliance may
be placed only on the other identification numbers placed thereon.
<PAGE>
Exhibit A
Page -12-
The Company will furnish to any Securityholder upon written request and without
charge a copy of the Indenture. Request may be made to:
COMFORCE Operating, Inc.
2001 Marcus Avenue
Lake Success, New York 10042
Attention: Chief Financial Officer
<PAGE>
Exhibit A
Page -13-
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _________________________________________ agent to
transfer this Security on the books of the Company. The agent may substitute
another to Act for him.
<PAGE>
Exhibit A
Page -14-
Date:______________
Your Signature: ___________________________
(Sign exactly as your name appears on the face
of this Security)
Signature Guarantee:
____________________________
<PAGE>
Exhibit A
Page -15-
OPTION OF SECURITYHOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security purchased by
the Company pursuant to Section 4.8 or Section 4.9 of the Indenture check the
appropriate box:
[_] Section 4.8 [_] Section 4.9
If you want to have only part of the Security purchased by the Company
pursuant to Section 4.8 or Section 4.9 of the Indenture, state the amount you
elect to have purchased:
$[_____________________]
Date:[_________________]
Your Signature: ___________________________
(Sign exactly as your name appears on the face
of this Security)
Signature Guarantee:
______________________________
<PAGE>
EXHIBIT A-2
THIS SECURITY MAY NOT BE OFFERED OR SOLD TO A UNITED STATES PERSON (AS SUCH
TERM IS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) OR FOR THE
ACCOUNT OR BENEFIT OF A UNITED STATES PERSON PRIOR TO THE EXPIRATION OF THE
RESTRICTED PERIOD (AS DEFINED IN THE INDENTURE), AND NO TRANSFER OR
EXCHANGE OF THIS SECURITY MAY BE MADE FOR AN INTEREST IN A PHYSICAL
SECURITY UNTIL AFTER THE LATER OF THE DATE OF EXPIRATION OF THE RESTRICTED
PERIOD AND THE DATE ON WHICH THE PROPER REQUIRED CERTIFICATION RELATING TO
SUCH INTEREST HAS BEEN PROVIDED IN ACCORDANCE WITH THE TERMS OF THE
INDENTURE, TO THE EFFECT THAT THE BENEFICIAL OWNER OR OWNERS OF SUCH
INTEREST ARE NOT UNITED STATES PERSONS.
<PAGE>
EXHIBIT B
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF
THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTION 2.17 OF THE INDENTURE.]
<PAGE>
Exhibit B
Page -2-
CUSIP No:
(Front of Security)
No. 1 $110,000,000
COMFORCE OPERATING, INC.
12% Senior Notes due 2007
COMFORCE OPERATING, INC., a Delaware corporation, for value received, promises
to pay to Cede & Co., as nominee of the Depository Trust Company, or its
registered assigns, the principal sum of $110,000,000 on December 1, 2007.
Interest Payment Dates: June 1, and December 1, commencing June 1, 1998.
Record Dates: May 15 and November 15 (whether or not a Business Day).
Additional provisions of this Security are set forth on the other side of this
Security.
Dated:
COMFORCE OPERATING, INC.
By: ________________________
Name:
Title:
By: ________________________
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the Securities referred
to in the within-mentioned Indenture
WILMINGTON TRUST COMPANY, as Trustee
By:_________________________________
Authorized Officer
<PAGE>
Exhibit B
Page -3-
(Reverse of Security)
COMFORCE OPERATING, INC.
12% SENIOR NOTE DUE 2007
Capitalized terms used herein have the meanings assigned to them in the
Indenture (as defined below) unless otherwise indicated.
1. Interest. COMFORCE Operating, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate and in the manner specified below. The Company shall pay, in cash,
interest on the principal amount of this Security at the rate per annum of 12%.
The Company will pay interest semiannually in arrears on June 1 and December 1
of each year (each an "Interest Payment Date"), commencing June 1, 1998, or if
any such day is not a Business Day on the next succeeding Business Day. Interest
will be computed on the basis of a 360-day year consisting of twelve 30-day
months. Interest shall accrue from the most recent Interest Payment Date to
which interest has been paid or, if no interest has been paid, from the date of
the original issuance of the Securities. To the extent lawful, the Company shall
pay interest on overdue principal at the rate of 2% per annum in excess of the
then applicable interest rate on the Securities; it shall pay interest on
overdue installments of interest (without regard to any applicable grace
periods) at the same rate to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Securities
(except defaulted interest) to the Persons who are registered Holders of
Securities at the close of business on the Record Date immediately preceding the
Interest Payment Date, even if such Securities are cancelled after such Record
Date and on or before such Interest Payment Date. Securityholders must surrender
Securities to a Paying Agent to collect principal payments. The Company shall
pay principal, premium, if any, and interest in money of the United States that
at the time of payment is legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Company may pay principal, premium, if any,
and interest by its check payable in such U.S. Legal Tender. The Company may
deliver any such interest payment to the Paying Agent or to a Securityholder at
the Securityholder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or
co-registrar without prior notice to any Securityholder. The Company may act in
any such capacity.
4. Indenture. The Company issued the Securities under an Indenture, dated
as of November 26, 1997 (the "Indenture"), among the Company and the Trustee.
The terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the TIA as in effect on the date the
Indenture is qualified. The Securities are subject to all such
<PAGE>
Exhibit B
Page -4-
terms, and Securityholders are referred to the Indenture and the TIA for a
statement of such terms. The terms of the Indenture shall govern any
inconsistencies between the Indenture and the Securities. The Securities include
the Initial Securities and the Exchange Securities issued in exchange for the
Initial Securities pursuant to the Indenture. The Initial Securities and the
Exchange Securities are treated as a single class of securities under the
Indenture. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Securityholders of
Securities are referred to the Indenture and said Act for a statement of them.
The Securities are unsecured senior obligations of the Company limited to
$200,000,000 in aggregate principal amount.
5. (a) Optional Redemption. Except as set forth below, the Securities will
not be redeemable at the option of the Company prior to December 1, 2002. On and
after such date, the Securities will be redeemable, at the Company's option, in
whole or in part, at any time upon not less than 30 nor more than 60 days' prior
notice mailed by first-class mail to each holder's registered address, at the
following redemption prices (expressed in percentages of principal amount), if
redeemed during the 12-month period commencing on December 1 of the years set
forth below, plus accrued and unpaid interest to the redemption date (subject to
the right of holders of record on the relevant record date to receive interest
due on the relevant interest payment date):
Redemption
Year Price
---- -----
2002 ..................................................... 106.000%
2003 ..................................................... 104.000%
2004 ..................................................... 102.000%
2005 and thereafter....................................... 100.000%
(b) Optional Redemption Upon Public Offerings. In addition, at any time on
or prior to August 1, 2000, the Company, at its option, may redeem up to 35% of
the aggregate principal amount of the Securities with the net cash proceeds of
one or more Equity Offerings at a redemption price equal to 112.000% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the date of redemption; provided, however, that after any such redemption the
aggregate principal amount of the Securities outstanding must equal at least 65%
of the aggregate principal amount of the Securities issued as of the date of
such redemption under the Indenture. In order to effect the foregoing redemption
with the proceeds of any Equity Offering, the Company shall make
<PAGE>
Exhibit B
Page -5-
such redemption not more than 90 days after the consummation of any such Equity
Offering.
6. Mandatory Redemption. Except as set forth in the next succeeding
sentences, the Securities are not subject to mandatory redemption or sinking
fund payments. If the Uniforce Acquisition is not consummated on or prior to the
15th Business Day after the Issue Date (the "Special Redemption Date"), this
security will be subject to mandatory special redemption at a redemption price
equal to 101% of its principal amount plus accrued and unpaid interest to the
Special Redemption Date.
7. Repurchase at Option of Securityholder. Sections 4.8 and 4.9 of the
Indenture provide that, after certain Asset Sales (as defined in the Indenture)
and upon the occurrence of a Change of Control (as defined in the Indenture),
and subject to the further limitations contained therein, the Company will make
an offer to purchase certain amounts of the Securities in accordance with
procedures set forth in the Indenture.
8. Selection and Notice of Redemption. In the case of any partial
redemption, selection of the Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which such Securities are listed, or if such Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by such other method as the Trustee in its sole discretion shall deem to be
fair and appropriate; provided, however, that if a partial redemption is made
with the proceeds of a Public Equity Offering, selection of the Securities or
portion thereof for redemption shall be made by the Trustee only on a pro rata
basis, unless such method is otherwise prohibited. Securities may be redeemed in
part in multiples of $1,000 principal amount only. Notice of redemption will be
sent, by first class mail, postage prepaid, at least 45 days (unless a shorter
period is acceptable to the Trustee) prior to the date fixed for redemption to
each holder whose Securities are to be redeemed at the last address for such
holder then shown on the registry books. If any Security is to be redeemed in
part only, the notice of redemption that relates to such Security shall state
the portion of the principal amount thereof to be redeemed. A new Security in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Security. On and
after any redemption date, interest will cease to accrue on the Securities or
part thereof called for redemption as long as the Company has deposited with the
Paying Agent funds in satisfaction of the redemption price pursuant to the
Indenture.
9. Denominations, Transfer, Exchange. The Securities are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Securities may be registered and Securities may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a
Securityholder among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not exchange or register the transfer of any
Security or portion of a Security selected
<PAGE>
Exhibit B
Page -6-
for redemption. Also, it need not exchange or register the transfer of any
Securities during a period beginning at the opening of business on a Business
Day 15 days before the day of any selection of Securities to be redeemed and
ending at the close of business on the day of selection or during the period
between a Record Date and the corresponding Interest Payment Date.
10. Persons Deemed Owners. Prior to due presentment to the Trustee for
registration of the transfer of this Security, the Trustee, any Agent and the
Company may deem and treat the Person in whose name this Security is registered
as its absolute owner for the purpose of receiving payment of principal of,
premium, if any, and interest on this Security and for all other purposes
whatsoever, whether or not this Security is overdue, and neither the Trustee,
any Agent nor the Company shall be affected by notice to the contrary. The
registered Securityholder shall be treated as its owner for all purposes.
11. Amendments and Waivers. Subject to certain exceptions provided in the
Indenture, the Indenture or the Securities may be amended with the written
consent of the Holders of a majority in principal amount of all outstanding
series of the Securities, voting as a single class, and any existing Default or
Event of Default (except a payment default) may be waived with the consent of
the Holders of a majority in principal amount of all outstanding series of the
Securities, voting as a single class. Without the consent of any Securityholder,
the Indenture or the Securities may be amended to, among other things, cure any
ambiguity, defect or inconsistency, to comply with the requirements of the
Commission in order to effect or maintain qualification of the Indenture under
the TIA or to make any change that does not adversely affect in any material
respect the rights of any Securityholder.
12. Defaults and Remedies. If an Event of Default occurs and is continuing,
the Trustee or the holders of at least 25% in principal amount of all
outstanding series of the Securities, voting as a single class, by notice to the
Company may declare the principal of and accrued and unpaid interest, if any, on
all the Securities to be due and payable. Upon such a declaration, such
principal and accrued and unpaid interest shall be due and payable immediately,
if an Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs and is continuing, the principal of and
accrued and unpaid interest on all the Securities will become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any holders. Under certain circumstances, the holders of a majority in
principal amount of all outstanding series of the Securities, voting as a single
class, may rescind any such acceleration with respect to the Securities and its
consequences.
13. Trustee Dealings with the Company. The Trustee under the Indenture, in
its individual or any other capacity, may make loans to, accept deposits from,
and perform services for the Company or any Affiliate of the Company and may
otherwise deal with the Company and their respective Affiliates as if it were
not Trustee.
<PAGE>
Exhibit B
Page -7-
14. Restrictive Covenants. The Indenture imposes certain limitations on the
ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, pay dividends or make certain other restricted payments,
consummate certain asset sales, enter into certain transactions with affiliates,
incur liens, create restrictions on the ability of a subsidiary to pay dividends
or make certain payments, sell or issue preferred stock of subsidiaries to third
parties, merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the assets of
the Company. Such limitations are subject to a number of important
qualifications and exceptions provided for in the Indenture. The Company must
annually report to the Trustee on compliance with such limitations.
15. Authentication. This Security shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. Defeasance. Subject to certain conditions provided for in the
Indenture, the Company at any time may terminate some or all of its obligations
under the Securities and the Indenture if the Company deposits with the Trustee
money or U.S. Government Obligations for the payment of principal, premium (if
any) and interest on the Securities to redemption or maturity, as the case may
be.
17. Governing Law. The Laws of the State of New York shall govern this
Security and the Indenture, without regard to principles of conflict of laws.
18. Abbreviations. Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
19. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
20. Successors. When a successor assumes, in accordance with the Indenture,
all the obligations of its predecessors under the Securities and the Indenture,
the predecessor will be released from those obligations.
21. No Recourse Against Others. No stockholder, director, officer, employee
or incorporator, as such, of the Company shall have any liability for any
obligation of the Company under the Securities or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Securities.
<PAGE>
Exhibit B
Page -8-
22. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Securities and has directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to Securityholders.
No representation is made as to the accuracy of such numbers either as printed
on the Securities or as contained in any notice of redemption and reliance may
be placed only on the other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written request and
without charge a copy of the Indenture. Request may be made to:
COMFORCE OPERATING, Inc.
2001 Marcus Avenue
Lake Success, New York 10042
Attention: Chief Financial Officer
<PAGE>
Exhibit B
Page -9-
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Date:[______________]
Your Signature:
(Sign exactly as your name appears on the face
of this Security)
Signature Guarantee:
______________________
<PAGE>
Exhibit B
Page -10-
OPTION OF SECURITYHOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security purchased by
the Company pursuant to Section 4.8 or Section 4.9 of the Indenture check the
appropriate box:
C Section 4.8 C Section 4.9
If you want to have only part of the Security purchased by the Company
pursuant to Section 4.8 or Section 4.9 of the Indenture, state the amount you
elect to have purchased:
$[_____________________]
Date:[_________________]
Your Signature:
(Sign exactly as your name appears on
the face of this Security)
Signature Guarantee:
_______________________________________
<PAGE>
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
Wilmington Trust Company
1100 North Market Street
Wilmington, DE 19890-0081
Attention: Corporate Trust Department
Re: COMFORCE Operating, Inc.
12% Senior Notes due 2007
Ladies and Gentlemen:
In connection with our proposed purchase of 12% Senior Notes due 2007 (the
"Securities") of COMFORCE Operating, Inc. (the "Company"), we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated November 19, 1997 relating to the Securities and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to the matters stated on pages (i) and
(ii) of the Offering Memorandum and in the section entitled "Transfer
Restrictions" of the Offering Memorandum including the restrictions on
duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Securities is subject
to certain restrictions and conditions set forth in the Indenture relating to
the Securities (as described in the Offering Memorandum) and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the
Securities except in compliance with, such restrictions and conditions and the
Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Securities have not been
registered under the Securities Act, and that the Securities may not be offered
or sold except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell or otherwise transfer any Securities prior to the
date which is within the time period referred to in Rule 144(k) under the
Securities Act as in effect with respect to such transfer, we will do so only
(i) to the Company or any of its subsidiaries, (ii) inside the United States in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act), (iii) inside the
United States to an institutional "accredited investor" (as defined below) that,
prior to such transfer, furnishes to
<PAGE>
Exhibit C
Page -2-
the Trustee (as defined in the Indenture relating to the Securities), a signed
letter containing certain representations and agreements relating to the
restrictions on transfer of the Securities and if such transfer is in respect of
an aggregate principal amount of Securities at the time of transfer of less than
$250,000, an Opinion of Counsel acceptable to the Company that such transfer is
in compliance with the Securities Act, (iv) outside the United States in
accordance with Rule 904 of Regulation S under the Securities Act, (v) pursuant
to the exemption from registration provided by Rule 144 under the Securities Act
(if available), or (vi) pursuant to an effective registration statement under
the Securities Act, and we further agree to provide to any person purchasing any
of the Securities from us a notice advising such purchaser that resales of the
Securities are restricted as stated herein.
4. We are not acquiring the Securities for or on behalf of, and will not
transfer the Securities to, any pension or welfare plan (as defined in Section 3
of the Employee Retirement Income Security Act of 1974), except as permitted in
the section entitled "Transfer Restrictions" of the Offering Memorandum.
5. We understand that, on any proposed resale of any Securities, we will be
required to furnish to the Trustee and the Company such certification, legal
opinions and other information as the Trustee and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Securities purchased by us will
bear a legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or their investment, as the case may be.
7. We are acquiring the Securities purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited investor")
as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By:___________________________
Name:
<PAGE>
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
______________, ____
Wilmington Trust Company
1100 North Market Street
Wilmington, DE 19890-0081
Attention: Corporate Trust Department
Re: COMFORCE Operating, Inc.
(the "Company") 12% Senior
Notes due 2007 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $[_____________] aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a Person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities.
You and the Company are entitled to rely upon this letter and are
irrevocably
<PAGE>
Exhibit D
Page -2-
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:___________________________
Authorized Signature
<PAGE>
EXHIBIT D
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE.........................1
SECTION 1.1. Definitions............................................1
SECTION 1.2 Other Definitions......................................20
SECTION 1.3 Incorporation by Reference of Trust Indenture Act......20
SECTION 1.4. Rules of Construction.................................20
ARTICLE II THE SECURITIES...................................................21
SECTION 2.1 Form and Dating........................................21
SECTION 2.2 Execution and Authentication...........................22
SECTION 2.3 Registrar and Paying Agent.............................23
SECTION 2.4 Paying Agent to Hold Money in Trus.....................23
SECTION 2.5 Securityholder Lists...................................24
SECTION 2.6 Transfer and Exchange..................................24
SECTION 2.7 Replacement Securities.................................25
SECTION 2.8 Outstanding Securities.................................25
SECTION 2.9 Treasury Securities....................................25
SECTION 2.10 Temporary Securities..................................26
SECTION 2.11 Cancellation..........................................26
SECTION 2.12 Defaulted Interest....................................26
SECTION 2.13 CUSIP Number..........................................26
SECTION 2.14 Deposit of Moneys.....................................27
SECTION 2.15 Restrictive Legends...................................27
SECTION 2.16 Book-Entry Provisions for Global Security.............29
SECTION 2.17 Special Transfer Provisions...........................30
SECTION 2.18 Persons Deemed Owners.................................32
SECTION 2.19 Record Date...........................................33
ARTICLE III REDEMPTION......................................................33
SECTION 3.1 Notices to Trustee.....................................33
SECTION 3.2 Selection of Securities To Be Redeemed.................33
SECTION 3.3 Notice of Redemption...................................34
SECTION 3.4 Effect of Notice of Redemption.........................34
SECTION 3.5 Deposit of Redemption Price............................35
SECTION 3.6 Securities Redeemed in Part............................35
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<PAGE>
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ARTICLE IV COVENANTS........................................................35
SECTION 4.1 Payment of Securities..................................35
SECTION 4.2 SEC Reports............................................36
SECTION 4.3 Limitation on Indebtedness.............................36
SECTION 4.4 Limitation on Restricted Payments......................38
SECTION 4.5 Limitation on Issuances of Capital Stock of
Restricted Subsidiaries.......................41
SECTION 4.6 Limitation on Affiliate Transactions...................41
SECTION 4.7 Limitation on Liens....................................42
SECTION 4.8 Limitation on Sales of Assets and Subsidiary Stock.....42
SECTION 4.9 Change of Control......................................45
SECTION 4.10 Limitation on Restrictions on Distributions
from Restricted Subsidiaries..................46
SECTION 4.11 Limitation on Sale/Leaseback Transactions.............47
SECTION 4.12 Limitation on Designations of Unrestricted
Subsidiaries..................................47
SECTION 4.13 Further Instruments and Acts..........................48
SECTION 4.14 Use of Proceeds.......................................48
SECTION 4.15 Compliance Certificates...............................48
SECTION 4.16 Maintenance of Office or Agency.......................49
SECTION 4.17 Taxes.................................................49
SECTION 4.18 Stay, Extension and Usury Laws........................50
SECTION 4.19 Corporate Existence...................................50
ARTICLE V SUCCESSORS........................................................50
SECTION 5.1 Mergers and Consolidations.............................50
SECTION 5.2 Successor Issuer Substituted...........................51
ARTICLE VI DEFAULTS AND REMEDIES............................................51
SECTION 6.1 Events of Default......................................51
SECTION 6.2 Acceleration...........................................53
SECTION 6.3 Other Remedies.........................................53
SECTION 6.4 Waiver of Past Defaults................................53
SECTION 6.5 Control by Majority....................................54
SECTION 6.6 Limitation on Suits....................................54
SECTION 6.7 Rights of Holders to Receive Payment...................54
SECTION 6.8 Collection Suit by Trustee.............................54
SECTION 6.9 Trustee May File Proofs of Claim.......................55
SECTION 6.10 Priorities.............................................55
SECTION 6.11 Undertaking for Costs..................................55
ARTICLE VII TRUSTEE.........................................................56
SECTION 7.1 Duties of Trustee.....................................56
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<PAGE>
Page
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SECTION 7.2 Rights of Trustee......................................57
SECTION 7.3 Individual Rights of Trustee...........................57
SECTION 7.4 Trustee's Disclaimer...................................58
SECTION 7.5 Notice of Defaults.....................................58
SECTION 7.6 Reports by Trustee to Holders..........................58
SECTION 7.7 Compensation and Indemnity.............................58
SECTION 7.8 Replacement of Trustee.................................59
SECTION 7.9 Successor Trustee by Merger............................60
SECTION 7.10 Eligibility; Disqualification..........................60
SECTION 7.11 Preferential Collection of Claims Against Company......60
ARTICLE VIII DISCHARGE OF INDENTURE; DEFEASANCE..............................61
SECTION 8.1 Discharge of Liability on Securities; Defeasance........61
SECTION 8.2 Conditions to Defeasance................................61
SECTION 8.3 Application of Trust Money.............................63
SECTION 8.4 Repayment to the Company...............................63
SECTION 8.5 Indemnity for Government Obligations...................63
SECTION 8.6 Reinstatement..........................................63
ARTICLE IX AMENDMENTS........................................................64
SECTION 9.1 Without Consent of Holders..............................64
SECTION 9.2 With Consent of Holders.................................65
SECTION 9.3 Compliance with Trust Indenture Act.....................66
SECTION 9.4 Revocation and Effect of Consents and Waivers...........66
SECTION 9.5 Notation on or Exchange of Securities...................67
SECTION 9.6 Trustee To Sign Amendments..............................67
ARTICLE X MISCELLANEOUS......................................................67
SECTION 10.1. Trust Indenture Act Controls..........................67
SECTION 10.2 Notices...............................................67
SECTION 10.3 Communication by Holders with other Holders...........68
SECTION 10.4 Certificate and Opinion as to Conditions Precedent....68
SECTION 10.5 Statements Required in Certificate or Opinion.........69
SECTION 10.6 When Securities Disregarded...........................69
SECTION 10.7 Rules by Trustee, Paying Agent and Registrar..........69
SECTION 10.8 Legal Holidays........................................69
SECTION 10.9 Governing Law.........................................69
SECTION 10.10 No Recourse Against Others............................70
SECTION 10.11 Successors............................................70
SECTION 10.12 Multiple Originals....................................70
SECTION 10.13 Variable Provisions...................................70
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<PAGE>
Page
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SECTION 10.14 Qualification of Indenture...........................70
SECTION 10.15 Table of Contents; Headings.........................70
SECTION 10.16 Severability........................................70
SECTION 10.17 No Adverse Interpretation of Other Agreements.......70
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<PAGE>
Page
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Exhibit A - Form of Series A Security.....................................A-1
Exhibit B - Form of Series B Security.....................................B-1
Exhibit C - Form of Certificate To Be Delivered in Connection with
Transfers to Non-QIB Accredited Investors.....................C-1
Exhibit D - Form of Certificate To Be Delivered in Connection with
Transfers Pursuant to Regulation S............................D-1
- -------------------
Note: This table of Contents shall not, for any purpose, be deemed to be part of
the Indenture.
(-5-)
================================================================================
Exhibit 99.3
COMFORCE CORPORATION
as Issuer,
and
THE BANK OF NEW YORK,
as Trustee
$50,000,000
15% SENIOR SECURED PIK DEBENTURES DUE 2009, SERIES A
15% SENIOR SECURED PIK DEBENTURES DUE 2009, SERIES B
----------------------------
INDENTURE
Dated as of November 26, 1997
---------------------------
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- -------
310(a)(1) ........................... 7.10
(a)(2) ........................... 7.10
(a)(3) ........................... N.A.
(a)(4) ........................... N.A.
(b) ........................... 7.8; 7.10
(c) ........................... N.A.
311(a) ........................... 7.11
(b) ........................... 7.11
(c) ........................... N.A.
312(a) ........................... 2.5
(b) ........................... 10.3
(c) ........................... 10.3
313(a) ........................... 7.6
(b)(1) ........................... N.A.
(b)(2) ........................... 7.6
(c) ........................... 7.6
(d) ........................... 7.6
314(a) ........................... 4.2; 4.10; 10.2
(b) ........................... N.A.
(c)(1) ........................... 10.4
(c)(2) ........................... 10.4
(c)(3) ........................... N.A.
(d) ........................... N.A.
(e) ........................... 10.5
(f) ........................... 4.9
315(a) ........................... 7.1
(b) ........................... 7.5; 10.2
(c) ........................... 7.1
(d) ........................... 7.1
(e) ........................... 6.11
316(a)(last sentence) ........................... 10.6
(a)(1)(A) ........................... 6.5
(a)(1)(B) ........................... 6.4
(a)(2) ........................... N.A.
(b) ........................... 6.7
317(a)(1) ........................... 6.8
(a)(2) ........................... 6.9
(b) ........................... 2.4
318(a) ........................... 12.1
N.A. means Not Applicable.
- ----------
-1-
<PAGE>
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
-2-
<PAGE>
INDENTURE dated as of November 26, 1997, between COMFORCE Corporation, a
Delaware corporation (as further defined below, the "Company"), and The Bank of
New York, as Trustee (the "Trustee").
The Company has duly authorized the creation and issuance of up to
$25,000,000 aggregate principal amount of 15% Senior Secured PIK Debentures due
2009 (the "Initial Securities") and $25,000,000 aggregate principal amount of
15% Senior Secured PIK Debentures due 2009 (the "Exchange Securities", and
together with the Initial Securities, the "Securities") and, to provide
therefor, the Company has duly authorized the execution and delivery of this
Indenture. All things necessary to make the Securities, when duly issued and
executed by the Company, and authenticated and delivered hereunder, the valid
obligations of the Company, and to make this Indenture a valid and binding
agreement of the Company have been done.
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the Securities:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Permitted Business; (ii) the Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the acquisition
of such Capital Stock by the Company or a Restricted Subsidiary of the Company;
(iii) Capital Stock constituting a minority interest in any Person that at such
time is a Restricted Subsidiary of the Company; or (iv) Permitted Investments of
the type and in the amounts described in clause (viii) of the definition
thereof; provided, however, that, in the case of clauses (ii) and (iii), such
Restricted Subsidiary is primarily engaged in a Permitted Business.
"Additional Exchange Securities" means an additional series of 15% Senior
Secured PIK Debentures due 2009, to be issued in exchange for Additional
Securities in accordance with the terms of any exchange and registration rights
agreement applicable thereto.
"Additional Private Exchange Debenture" shall mean any Private Exchange
Debenture issued in respect of an Additional Security.
"Additional Securities" has the meaning set forth in Section 2.2(d).
"Additional PIK Securities" has the meaning set forth in Section 2.2(d).
"Affiliate" of any specified person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person.
<PAGE>
For the purposes of this definition, "control" when used with respect to any
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
meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Disposition" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock of (or
any other equity interests in) a Restricted Subsidiary (other than directors'
qualifying shares) or of any other property or other assets (each referred to
for the purposes of this definition as a "disposition") by the Company or any of
its Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction) other than (i) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly-Owned Subsidiary, (ii) a disposition of inventory in the
ordinary course of business, (iii) a disposition of obsolete or worn out
equipment or equipment that is no longer useful in the conduct of the business
of the Company and its Restricted Subsidiaries and that is disposed of in each
case in the ordinary course of business, (iv) dispositions of property for net
proceeds which, when taken collectively with the net proceeds of any other such
dispositions under this clause (iv) that were consummated since the beginning of
the calendar year in which such disposition is consummated, do not exceed $1.0
million, and (v) transactions permitted pursuant to Section 5.1 of this
Indenture. Notwithstanding anything to the contrary contained above, a
Restricted Payment made in compliance with Section 4.4 of this Indenture shall
not constitute an Asset Disposition except for purposes of determinations of the
Consolidated Coverage Ratio.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Securities, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the product of
the numbers of years (rounded upwards to the nearest month) from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption multiplied by the amount of such payment by (ii)
the sum of all such payments.
"Bankruptcy Law" means Title 11, United States Code, as amended, or any
similar United States federal or state law relating to bankruptcy, insolvency,
receivership, winding-up, liquidation, reorganization or relief of debtors or
any amendment to, succession to or change in any such law.
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<PAGE>
"Board of Directors" means the Board of Directors of any Person or any
committee thereof duly authorized to act on behalf of such Board of Directors.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means each day which is not a Legal Holiday.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations, rights in or other equivalents
of or interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP, and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date such lease may be terminated without penalty.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof, (iii) certificates of deposit, time
deposits and eurodollar time deposits with maturities of one year or less from
the date of acquisition, bankers' acceptances with maturities not exceeding one
year and overnight bank deposits, in each case with any commercial bank having
capital and surplus in excess of $500 million, (iv) repurchase obligations, for
underlying securities of the types described in clauses (ii) and (iii) entered
into with any financial institution meeting the qualifications specified in
clause (iii) above, (v) commercial paper rated A-1 or the equivalent thereof by
Moody's or S&P and in each case maturing within one year after the date of
acquisition, (vi) investment funds investing 95% of their assets in securities
of the types described in clauses (i)-(v) above, (vii) readily marketable direct
obligations issued by any state of the United States of America or any political
subdivision thereof having one of the two highest rating categories obtainable
from either Moody's or S&P and (viii) Indebtedness or preferred stock issued by
Persons with a rating of "A" or higher from S&P or "A2" or higher from Moody's.
"Cedel Bank" has the meaning set forth in Section 2.1.
"Change of Control" means the occurrence of any of the following events:
(a) any sale, lease, exchange or other transfer (collectively, a "Transfer") (in
one transaction or a series of related transactions) of all or substantially all
of the assets of the Company and its Subsidiaries; or
-3-
<PAGE>
(b) a majority of the Board of Directors of the Company or of any direct or
indirect holding company thereof shall consist of Persons who are not Continuing
Directors of the Company; (c) the acquisition by any Person or Group (other than
the Management Group) of the power, directly or indirectly, to vote or direct
the voting of securities having more than 35% of the ordinary voting power for
the election of directors of the Company or of any direct or indirect holding
company thereof; provided that no Change of Control shall be deemed to occur
pursuant to this clause (c), so long as the Management Group owns an amount of
securities representing a greater portion of such ordinary voting power than
such Person or Group; or (d) the acquisition by any Person or Group (including,
but not limited to, the Management Group) of the power, directly or indirectly,
to vote or direct the voting of securities having more than 49.9% of the
ordinary voting power for the election of directors of the Company or any direct
or indirect holding company thereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means COMFORCE Corporation, a Delaware corporation until a
successor replaces it and, thereafter, means the successor.
"Commission" or "SEC" means the U.S. Securities and Exchange Commission or
its successor.
"Consolidated Cash Flow" for any period means the Consolidated Net Income
for such period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) income tax expense, (ii) Consolidated Interest
Expense, (iii) depreciation expense, (iv) amortization expense, (v) exchange or
translation losses on foreign currencies, and (vi) all other non-cash items
reducing Consolidated Net Income (excluding any non-cash item to the extent it
represents an accrual of or reserve for cash disbursements for any subsequent
period prior to the stated maturity of the Securities) and less, (x) the
aggregate amount of contingent and "earnout" payments in respect of any
Permitted Business acquired by the Company or any Restricted Subsidiary that are
paid in cash during such period and (y) to the extent added in calculating
Consolidated Net Income, (A) exchange or translation gains on foreign currencies
and (B) non-cash items (excluding such non-cash items to the extent they
represent an accrual for cash receipts reasonably expected to be received prior
to the Stated Maturity of the Securities), in each case for such period.
Notwithstanding the foregoing, the income tax expense, depreciation expense and
amortization expense of a Subsidiary of the Company shall be included in
Consolidated Cash Flow only to the extent (and in the same proportion) that the
net income of such Subsidiary was included in calculating Consolidated Net
Income.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated Cash Flow for the period of
the most recent four consecutive fiscal quarters ending prior to the date of
such determination and as to which financial statements are available, to (ii)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
that (A) if the Company or any of its Restricted Subsidiaries has incurred any
Indebtedness since the
-4-
<PAGE>
beginning of such period and through the date of determination of the
Consolidated Coverage Ratio that remains outstanding or if the transaction
giving rise to the need to calculate Consolidated Coverage Ratio is an
incurrence of Indebtedness, or both, Consolidated Cash Flow and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to (1) such Indebtedness as if such Indebtedness had been
incurred on the first day of such period (provided that if such Indebtedness is
incurred under a revolving credit facility (or similar arrangement or under any
predecessor revolving credit or similar arrangement) only that portion of such
Indebtedness that constitutes the one year projected average balance of such
Indebtedness (as determined in good faith by the Board of Directors of the
Company) shall be deemed outstanding for purposes of this calculation), and (2)
the discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, (B) if since the
beginning of such period any Indebtedness of the Company or any of its
Restricted Subsidiaries has been repaid, repurchased, defeased or otherwise
discharged (other than Indebtedness under a revolving credit or similar
arrangement unless such revolving credit Indebtedness has been permanently
repaid and the underlying commitment terminated and has not been replaced),
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Indebtedness had been repaid, repurchased,
defeased or otherwise discharged on the first day of such period, (C) if since
the beginning of such period the Company or any of its Restricted Subsidiaries
shall have made any Asset Disposition or if the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio is an Asset Disposition,
Consolidated Cash Flow for such period shall be reduced by an amount equal to
the Consolidated Cash Flow (if positive) attributable to the assets which are
the subject of such Asset Disposition for such period or increased by an amount
equal to the Consolidated Cash Flow (if negative) attributable thereto for such
period, and Consolidated Interest Expense for such period shall be (i) reduced
by an amount equal to the Consolidated Interest Expense attributable to any
Indebtedness of the Company or any of its Restricted Subsidiaries repaid,
repurchased, defeased or otherwise discharged with respect to the Company and
its continuing Restricted Subsidiaries in connection with such Asset Disposition
for such period (or, if the Capital Stock of any Restricted Subsidiary of the
Company is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale) and (ii) increased by interest income attributable
to the assets which are the subject of such Asset Disposition for such period,
(D) if since the beginning of such period the Issuer or any of its Restricted
Subsidiaries (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary of the Company (or any Person which becomes a Restricted
Subsidiary of the Company as a result thereof) or an acquisition of assets
occurring in connection with a transaction causing a calculation to be made
hereunder which constitutes all or substantially all of an operating unit of a
business, Consolidated Cash Flow and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto (including the
incurrence of any Indebtedness) as if such Investment or acquisition occurred on
the first day of such period and (E) if since the beginning of such period any
Person (that subsequently became a Restricted Subsidiary of the Company or was
merged with or into the Company or any Restricted Subsidiary
-5-
<PAGE>
of the Company since the beginning of such period) shall have made any Asset
Disposition, Investment or acquisition of assets that would have required an
adjustment pursuant to clause (C) or (D) above if made by the Company or a
Restricted Subsidiary of the Company during such period, Consolidated Cash Flow
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto as if such Asset Disposition, Investment or
acquisition occurred on the first day of such period. For purposes of this
definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting officer of the Issuer. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term in excess
of 12 months).
"Consolidated Interest Expense" means, for any period, the total
consolidated interest expense of the Company and its Restricted Subsidiaries
determined in accordance with GAAP, plus, to the extent not included in such
interest expense (i) interest expense attributable to Capitalized Lease
Obligations, (ii) capitalized interest, (iii) non-cash interest expense, (iv)
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (v) interest actually paid by the
Company or any such Restricted Subsidiary under any Guarantee of Indebtedness or
other obligation of any other Person, (vi) net payments (whether positive or
negative) pursuant to Interest Rate Agreements, (vii) the cash contributions to
any employee stock ownership plan or similar trust to the extent such
contributions are used by such plan or trust to pay interest or fees to any
Person (other than the Company) in connection with Indebtedness Incurred by such
plan or trust and (viii) cash and Disqualified Stock dividends in respect of all
Preferred Stock of Subsidiaries and Disqualified Stock of the Company held by
Persons other than the Company or a Wholly-Owned Subsidiary and less (a) to the
extent included in such interest expense, the amortization of capitalized debt
issuance costs and (b) interest income. Notwithstanding the foregoing, the
Consolidated Interest Expense with respect to any Restricted Subsidiary of the
Company, that was not a Wholly-Owned Subsidiary, shall be included only to the
extent (and in the same proportion) that the net income of such Restricted
Subsidiary was included in calculating Consolidated Net Income.
"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of the Company and its consolidated Subsidiaries determined in
accordance with GAAP; provided, however, that there shall not be included in
such Consolidated Net Income: (i) any net income (loss) of any person acquired
by the Company or any of its Restricted Subsidiaries in a pooling of interests
transaction for any period prior to the date of such acquisition, (ii) any net
income of any Restricted Subsidiary of the Company if such Restricted Subsidiary
is subject to restrictions, directly or indirectly, on the payment of dividends
or the making of distributions by such Restricted Subsidiary, directly or
indirectly, to the Company (other than restrictions in effect on the Issue Date
with respect
-6-
<PAGE>
to a Restricted Subsidiary of the Company and other than restrictions that are
created or exist in compliance with Section 4.10 of this Indenture), (iii) any
gain or loss realized upon the sale or other disposition of any assets of the
Company or its consolidated Restricted Subsidiaries (including pursuant to any
Sale/Leaseback Transaction) which are not sold or otherwise disposed of in the
ordinary course of business and any gain or loss realized upon the sale or other
disposition of any Capital Stock of any Person, (iv) any extraordinary gain or
loss, (v) the cumulative effect of a change in accounting principles, (vi) the
net income of any Person, other than a Restricted Subsidiary, except to the
extent of the lesser of (A) cash dividends or distributions actually paid to the
Company or any of its Restricted Subsidiaries by such Person and (B) the net
income of such Person (but in no event less than zero), and the net loss of such
Person (other than an Unrestricted Subsidiary) shall be included only to the
extent of the aggregate Investment of the Company or any of its Restricted
Subsidiaries in such Person and (viii) any non-cash expenses attributable to
grants or exercises of employee stock options. Notwithstanding the foregoing,
for the purpose of Section 4.4 of this Indenture only, there shall be excluded
from Consolidated Net Income any dividends, repayments of loans or advances or
other transfers of assets from Unrestricted Subsidiaries to the Company or a
Restricted Subsidiary to the extent such dividends, repayments or transfers
increase the amount of Restricted Payments permitted pursuant to clause
(a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of the Company ending prior to the taking of any
action for the purpose of which the determination is being made and for which
financial statements are available (but in no event ending more than 135 days
prior to the taking of such action), as (i) the par or stated value of all
outstanding Capital Stock of the Company plus (ii) paid in capital or capital
surplus relating to such Capital Stock plus (iii) any retained earnings or
earned surplus less (A) any accumulated deficit and (B) any amounts attributable
to Disqualified Stock.
"Continuing Director" of any Person means, as of the date of determination,
any Person who (i) was a member of the Board of Directors of such Person on the
date of the Securities Indenture or (ii) was nominated for election or elected
to the Board of Directors of such Person with the affirmative vote of a majority
of the Continuing Directors of such Person who were members of such Board of
Directors at the time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 10.2 or such other address as to which the Trustee
may give notice to the Company.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Default" means any event that is, or after notice or passage of time or
both would
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be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and their
respective successors and assigns, or such other depository institution
hereinafter appointed by the Company.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under the Indenture, a member of
the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions.
"Disqualified Stock" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event (other than an event which
would constitute a Change of Control), (i) matures (excluding any maturity as
the result of an optional redemption by an issuer thereof) or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final stated maturity of the Securities, or (ii) is convertible into or
exchangeable (unless at the sole option of the issuer thereof) for (a) debt
securities or (b) any Capital Stock referred to in (i) above, in each case at
any time prior to the final Stated Maturity of the Securities.
"Equity Offering" means an offering for cash by the Company of its common
stock, or options, warrants or rights with respect to its common stock.
"Euroclear" has the meaning set forth in Section 2.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"Exchange Offer" means the registration by the Company under the Securities
Act pursuant to a registration statement of the offer by the Company to each
Securityholder of the Initial Securities to exchange all the Initial Securities
held by such Securityholder for the Exchange Securities in an aggregate
principal amount equal to the aggregate principal amount of the Initial
Securities held by such Securityholder, all in accordance with the terms and
conditions of the Registration Rights Agreement.
"Exchange Securities" means the 15% Senior Secured PIK Debentures due 2009,
Series B, to be issued in exchange for the Initial Securities pursuant to the
Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company or its Restricted
Subsidiaries in existence on the Issue Date, plus interest accrued, thereon,
after application of the
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net proceeds of the New Credit Facility, the Securities and the 12% Senior Notes
due 2007 of COMFORCE Operating, Inc. as described in the Offering Memorandum.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of this Indenture, including those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
this Indenture shall be computed in conformity with GAAP.
"Group" shall mean any "group" for purposes of Section 13(d) of the
Exchange Act.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Holder" or "Securityholder" means the Person in whose name a Security is
registered on the Registrar's books.
"Incur" means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be incurred
by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such
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Person for borrowed money, (ii) the principal of and premium (if any) in respect
of obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of such Person in respect of letters
of credit or other similar instruments (including reimbursement obligations with
respect thereto) (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (i), (ii) and
(v) ) entered into in the ordinary course of business of such Person to the
extent that such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the third business day
following receipt by such Person of a demand for reimbursement following payment
on the letter of credit), (iv) all obligations of such Person to pay the
deferred and unpaid purchase price of property or services (except (x) trade
payables and accrued expenses incurred in the ordinary course of business and
(y) contingent or "earnout" payment obligations in respect of any Permitted
Business acquired by the Company or any Restricted Subsidiary), which purchase
price is due more than six months after the date of placing such property in
service or taking delivery and title thereto or the completion of such services,
(v) all Capitalized Lease Obligations and all Attributable Indebtedness of such
Person, (vi) all Indebtedness of other Persons secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such Person, (vii)
all Indebtedness of other Persons to the extent Guaranteed by such Person,
(viii) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Restricted Subsidiary of the Company, any Preferred Stock of such
Restricted Subsidiary to the extent such obligation arises on or before the
Stated Maturity of the Securities (but excluding, in each case, accrued
dividends) with the amount of Indebtedness represented by such Disqualified
Stock or Preferred Stock, as the case may be, being equal to the greater of its
voluntary or involuntary liquidation preference and its maximum fixed repurchase
price; provided that, for purposes hereof the "maximum fixed repurchase price"
of any Disqualified Stock or Preferred Stock, as the case may be, which does not
have a fixed repurchase price shall be calculated in accordance with the terms
of such Disqualified Stock or Preferred Stock, as the case may be, as if such
Disqualified Stock or Preferred Stock, as the case may be, were purchased on any
date on which Indebtedness shall be required to be determined pursuant to this
Indenture, and if such price is based on the fair market value of such
Disqualified Stock or Preferred Stock, as the case may be, such fair market
value shall be determined in good faith by the Board of Directors of the Company
and (ix) to the extent not otherwise included in this definition, obligations
under Currency Agreements and Interest Rate Agreements. Unless specifically set
forth above, the amount of Indebtedness of any Person at any date shall be the
outstanding principal amount of all unconditional obligations as described
above, as such amount would be reflected on a balance sheet prepared in
accordance with GAAP, and the maximum liability of such Person, upon the
occurrence of the contingency giving rise to the obligation, of any contingent
obligations described above at such date.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Initial Securities" has the meaning set forth in the preamble to this
Indenture.
"Institutional Accredited Investor" means an institution that is an
"accredited
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<PAGE>
investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Securities.
"Interest Rate Agreement" means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts payable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or similar arrangement, but
excluding any debt or extension of credit represented by a bank deposit other
than a time deposit) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person. For purposes of
Section 4.4 of this Indenture, (i) "Investment" shall include the portion
(proportionate to the Company's equity interest in a Restricted Subsidiary to be
designated as an Unrestricted Subsidiary) of the fair market value of the net
assets of such Restricted Subsidiary of the Company at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time that such Subsidiary is so redesignated a Restricted
Subsidiary; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors and
evidenced by a resolution of such Board of Directors certified in an Officers'
Certificate to the Trustee.
"Issue Date" means the date the Securities are originally issued.
"Legal Holiday" has the meaning ascribed in Section 10.8.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Group" means James L. Paterek, Christopher P. Franco and
Michael Ferrentino.
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<PAGE>
"Maturity" means, with respect to any Security, the date on which any
principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal, by
sinking fund payment or by declaration of acceleration, call for redemption or
purchase or otherwise.
"Maturity Date" means December 1, 2009.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets subject to such Asset Disposition) therefrom in each
case net of (i) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all Federal, state, foreign and local
taxes required to be paid or accrued as a liability under GAAP, as a consequence
of such Asset Disposition, (ii) all payments made on any Indebtedness which is
secured by any assets subject to such Asset Disposition, in accordance with the
terms of any Lien upon such assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Disposition or by applicable law, be
repaid out of the proceeds from such Asset Disposition, (iii) all distributions
and other payments required to be made to any Person owning a beneficial
interest in assets subject to sale or minority interest holders in Subsidiaries
or joint ventures as a result of such Asset Disposition, (iv) the deduction of
appropriate amounts to be provided by the seller as a reserve, in accordance
with GAAP, against any liabilities associated with the assets disposed of in
such Asset Disposition, provided, however, that upon any reduction in such
reserves (other than to the extent resulting from payments of the respective
reserved liabilities), Net Available Cash shall be increased by the amount of
such reduction to reserves, and retained by the Company or any Restricted
Subsidiary of the Company after such Asset Disposition and (v) any portion of
the purchase price from an Asset Disposition placed in escrow (whether as a
reserve for adjustment of the purchase price, for satisfaction of indemnities in
respect of such Asset Disposition or otherwise in connection with such Asset
Disposition) provided, however, that upon the termination of such escrow, Net
Available Cash shall be increased by any portion of funds therein released to
the Company or any Restricted Subsidiary.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result of such issuance or sale.
"New Credit Facility" means the Credit Agreement, to be dated as of
November 26, 1997, among COMFORCE Operating, Inc., the Company and its indirect
subsidiaries, Heller
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<PAGE>
Financial, Inc., and any other financial institutions from time to time party
thereto, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including by way of adding Subsidiaries of the Company as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any Restricted Subsidiary (a) provides any guarantee or credit support of
any kind (including any undertaking, guarantee, indemnity, agreement or
instrument that would constitute Indebtedness) or (b) is directly or indirectly
liable (as a guarantor, general partner or otherwise) and (ii) no default with
respect to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default under such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"Non-U.S. Person" means any Person who is not a U.S. Person.
"Notes" means the Senior Notes of COMFORCE Operating, Inc. due 2007.
"Offering Memorandum" means the Offering Memorandum dated November 19,
1997, pursuant to which the Initial Securities were offered, and any supplements
thereto;
"Officer" means the Chairman of the Board, the Vice-Chairman of the Board,
the Chief Executive Officer, the Chief Financial Officer, the President, any
Vice-President, the Treasurer or the Secretary of the Company.
"Officer's Certificate" shall mean a certificate signed by two Officers of
the Company, at least one of whom shall be the principal executive, financial or
accounting officer of the Company.
"Opinion of Counsel" means a written opinion, in form and substance
acceptable to the Trustee, from legal counsel who is acceptable to the Trustee
and which complies, if applicable, with Section 10.5.
"Paying Agent" has the meaning provided in Section 2.3.
"Permitted Business" means any business which is the same as or related,
ancillary or complementary to any of the businesses of the Company and its
Restricted Subsidiaries on the date of this Indenture, as reasonably determined
by the Company's Board of Directors.
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<PAGE>
"Permitted Investment" means an Investment by the Company or any of its
Restricted Subsidiaries in (i) a Wholly-Owned Subsidiary of the Company;
provided, however, that the primary business of such Wholly-Owned Subsidiary is
a Permitted Business; (ii) another Person if as a result of such Investment such
other Person becomes a Wholly-Owned Subsidiary of the Company or is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Company or a Wholly-Owned Subsidiary of the Company; provided,
however, that in each case such Person's primary business is a Permitted
Business; (iii) Temporary Cash Investments; (iv) receivables owing to the
Company or any of its Restricted Subsidiaries, created or acquired in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms; (v) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary course of
business; (vi) loans and advances to employees made in the ordinary course of
business consistent with past practices of the Company or such Restricted
Subsidiary in an aggregate amount outstanding at any one time not to exceed
$250,000 to any one employee or $1.0 million in the aggregate; (vii) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any of its Restricted
Subsidiaries or in satisfaction of judgments or claims; (viii) a Person engaged
in a Permitted Business or a loan or advance by the Company the proceeds of
which are used solely to make an investment in a Person engaged in a Permitted
Business or a Guarantee by the Company of Indebtedness of any Person in which
such Investment has been made provided, however, that no Permitted Investments
may be made pursuant to this clause (viii) to the extent the amount thereof
would, when taken together with all other Permitted Investments made pursuant to
this clause (viii), exceed $5.0 million in the aggregate (plus, to the extent
not previously reinvested, any return of capital realized on Permitted
Investments made pursuant to this clause (viii), or any release or other
cancellation of any Guarantee constituting such Permitted Investment); (ix)
Persons to the extent such Investment is received by the Company or any
Restricted Subsidiary as consideration for asset dispositions effected in
compliance with the covenant described under Section 4.8 of this Indenture; (x)
prepayments and other credits to suppliers made in the ordinary course of
business consistent with the past practices of the Company and its Restricted
Subsidiaries; and (xi) Investments in connection with pledges, deposits,
payments or performance bonds made or given in the ordinary course of business
in connection with or to secure statutory, regulatory or similar obligations,
including obligations under health, safety or environmental obligations.
"Permitted Liens" means: (i) pledges or deposits by the Company or any
Restricted Subsidiary under workmen's compensation laws, unemployment insurance
laws, other types of social security benefits or similar legislation, or good
faith deposits in connection with bids, tenders or contracts (other than for the
payment of Indebtedness) or leases to which the Company or any Restricted
Subsidiary is a party, or deposits to secure public or statutory obligations or
deposits of cash or United States government bonds to secure surety or appeal
bonds to which the Company or any Restricted Subsidiary is a party, or deposits
as security for contested taxes or import duties or for the payment of rent, in
each case incurred by the Company or any Restricted Subsidiary in the ordinary
course of business consistent with past practice; (ii) Liens imposed by law,
such as carriers',
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warehousemen's and mechanics' Liens, in each case for sums not yet due from the
Company or any Restricted Subsidiary or being contested in good faith by
appropriate proceedings by the Company or any Restricted Subsidiary, as the case
may be, or other Liens arising out of judgments or awards against the Company or
any Restricted Subsidiary with respect to which the Company or such Restricted
Subsidiary, as the case may be, will then be prosecuting an appeal or other
proceedings for review; (iii) Liens for property taxes or other taxes,
assessments or governmental charges of the Company or any Restricted Subsidiary
not yet due or payable or subject to penalties for nonpayment or which are being
contested by the Company or such Restricted Subsidiary, as the case may be, in
good faith by appropriate proceedings; (iv) Liens in favor of issuers of
performance bonds and surety bonds issued pursuant to clause (vi) under Section
4.3 of this Indenture; (v) survey exceptions, encumbrances, easements or,
reservations of, or rights of others for, licenses, rights-of-way, sewers,
electric lines, telegraph and telephone lines and other similar purposes or
zoning or other restrictions as to the use of real property of the Company or
any Restricted Subsidiary incidental to the ordinary course of conduct of the
business of the Company or such Restricted Subsidiary or as to the ownership of
properties of the Company or any Restricted Subsidiary, which, in either case,
were not incurred in connection with Indebtedness and which do not in the
aggregate materially adversely affect the value of said properties or materially
impair their use in the operation of the business of the Company or any
Restricted Subsidiary; (vi) Liens to secure Indebtedness permitted under clauses
(a)(ii) and (b)(i) under Section 4.3 of this Indenture; (vii) Liens outstanding
immediately after the Issue Date as set forth on Schedule II to this Indenture
(and not otherwise permitted by clause (vi)); (viii) Liens on property, assets
or shares of stock of any Restricted Subsidiary at the time such Restricted
Subsidiary became a Subsidiary of the Company; provided, however, that (A) if
any such Lien has been Incurred in anticipation of such transaction, such
property, assets or shares of stock subject to such Lien will have a fair market
value at the date of the acquisition thereof not in excess of the lesser of (1)
the aggregate purchase price paid or owed by the Company in connection with the
acquisition of such Restricted Subsidiary and (2) the fair market value of all
property and assets of such Restricted Subsidiary and (B) any such Lien will not
extend to any other assets owned by the Company or any Restricted Subsidiary;
(ix) Liens on property or assets at the time the Company or any Restricted
Subsidiary acquired such assets, including any acquisition by means of a merger
or consolidation with or into the Company or such Restricted Subsidiary;
provided, however, that (A) if any such Lien is Incurred in anticipation of such
transaction, such property or assets subject to such Lien will have a fair
market value at the date of the acquisition thereof not in excess of the lesser
of (1) the aggregate purchase price paid or owed by the Company or such
Restricted Subsidiary in connection with the acquisition thereof and of any
other property and assets acquired simultaneously therewith and (2) the fair
market value of all such property and assets acquired by the Company or such
Restricted Subsidiary and (B) any such Lien will not extend to any other
property or assets owned by the Company or any Restricted Subsidiary; (x) Liens
securing Indebtedness or other obligations of a Restricted Subsidiary owing to
the Company or a Wholly Owned Subsidiary; (xi) Liens to secure any extension,
renewal, refinancing, replacement or refunding (or successive extensions,
renewals, refinancings, replacements or refundings), in whole or in part, of any
Indebtedness secured by Liens referred to in any of clauses (vii), (viii) and
(ix); provided, however, that any such Lien will be limited to all or part of
the same property or assets that
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secured the original Lien (plus improvements on such property) and the aggregate
principal amount of Indebtedness that is secured by such Lien will not be
increased to an amount greater than the sum of (A) the outstanding principal
amount, or, if greater, the committed amount, of the Indebtedness described
under clauses (vii), (viii) and (ix) at the time the original Lien became a
Permitted Lien under this Indenture and (B) an amount necessary to pay any
premiums, fees and other expenses Incurred by the Company in connection with
such refinancing, refunding, extension, renewal or replacement; (xii) Liens on
property or assets of the Company securing Interest Rate Agreements and Currency
Agreements so long as the related Indebtedness is, and is permitted under
Section 4.3 of this Indenture, secured by a Lien on the same property securing
the relevant Interest Rate Agreement or Currency Agreement; (xiii) Liens
securing Indebtedness incurred under (1) the Senior Debentures and (2) the New
Credit Facility or any Guarantee thereof by any Restricted Subsidiary; and (xiv)
Liens on property or assets of the Company or any Restricted Subsidiary securing
Indebtedness (1) under purchase money obligation or Capitalized Lease
Obligations permitted under clause (b)(ii) under Section 4.3 of this Indenture
or (2) under Sale/Leaseback Transactions permitted under Section 4.11 of this
Indenture; provided, that (A) the amount of Indebtedness Incurred in any
specific case does not, at the time such Indebtedness is Incurred, exceed the
lesser of the cost or fair market value of the property or asset acquired or
constructed in connection with such purchase money obligation or Capitalized
Lease Obligation or subject to such Sale/Leaseback Transaction, as the case may
be, (B) such Lien will attach to such property or asset upon acquisition of such
property or asset and or upon commencement of such Sale/Leaseback Transaction,
as the case may be, and (C) no property or asset of the Company or any
Restricted Subsidiary (other than the property or asset acquired or contracted
in connection with such purchase money Obligation or Capitalized Lease
Obligation or subject to such Sale/Leaseback Transaction, as the case may be)
are subject to any Lien securing such Indebtedness.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof or any other entity.
"Physical Securities" has the meaning provided in Section 2.1.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Private Exchange Debenture" shall have the meaning provided in the
Registration Rights Agreement.
"Private Placement Legend" has the meaning provided in Section 2.15.
"Proceeds Purchase Date" has the meaning provided in Section 4.8.
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A "Public Market" exists at any time with respect to the common stock of
the Company if (a) the common stock of the Company is then registered with the
Securities and Exchange Commission pursuant to Section 12(b) or 12(g) of the
Exchange Act and traded either on a national securities exchange or in the
National Association of Securities Dealers Automated Quotation System and (b) at
least 15% of the total issued and outstanding common stock of the Company, as
applicable, has been distributed prior to such time by means of an effective
registration statement under the Securities Act.
"QIB" means any "qualified institutional buyer" (as defined under the
Securities Act).
"Record Date" means the record dates specified in the Securities, whether
or not a Legal Holiday.
"Redemption Date" when used with respect to any Security, means the date
fixed for the redemption of such Security pursuant to this Indenture and the
Securities by a notice delivered pursuant to the terms of Section 3.3 of this
Indenture.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances,
replaces, renews, repays or extends (including pursuant to any defeasance or
discharge mechanism) (collectively, "refinances," and "refinanced" shall have a
correlative meaning) any Indebtedness existing on the date of this Indenture or
Incurred in compliance with this Indenture (including Indebtedness of the
Company that refinances Indebtedness of any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary that refinances Indebtedness of
another Restricted Subsidiary) including Indebtedness that refinances
Refinancing Indebtedness; provided, however, that (i) the Refinancing
Indebtedness has a Stated Maturity no earlier than the earlier of (A) the first
anniversary of the Stated Maturity of the Securities and (B) Stated Maturity of
the Indebtedness being refinanced, (ii) the Refinancing Indebtedness has an
Average Life at the time such Refinancing Indebtedness is Incurred that is equal
to or greater than the lesser of (A) the Average Life of the Securities and (B)
the Average Life of the Indebtedness being refinanced and, (iii) the Refinancing
Indebtedness is in an aggregate principal amount (or if issued with original
issue discount, an aggregate issue price) that is equal to (or 101% of, in the
case of a refinancing of the Securities in connection with a Change of Control)
or less than the sum of the aggregate principal amount (or if issued with
original issue discount, the aggregate accreted value) then outstanding of the
Indebtedness being refinanced.
"Registrar" has the meaning provided for in Section 2.3.
"Registration Rights Agreement" means the Exchange and Registration Rights
Agreement, dated November 26, 1997, between the Company and Initial Purchaser.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Security" has the meaning set forth in Section 2.1.
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"Responsible Officer" when used with respect to the Trustee, means any
officer within the corporate trust department of the Trustee (or any successor
group of the Trustee) with direct responsibility for the administration of this
Indenture and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Period" means 40 days after the later of commencement of the
offering of the Securities and the Issue Date.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
entitled to request and conclusively rely on an Opinion of Counsel with respect
to whether any Security constitutes a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company other an
Unrestricted Subsidiary.
"Rule 144A Global Security" has the meaning set forth in Section 2.1.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill,
Inc., and its successors.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Subsidiary leases it
from such Person.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Securities" means the Initial Securities, the Additional Securities, if
and when issued, the Additional PIK Securities, if and when issued, the Exchange
Securities and the Additional Exchange Securities, if and when issued, and the
Private Exchange Debentures and the Additional Private Exchange Debentures, if
and when issued, treated as a single class of securities, as amended or
supplemented from time to time in accordance with the terms hereof, that are
issued pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable,
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including pursuant to any mandatory redemption provision.
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Securities pursuant to a written agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person, (ii) such Person and one
or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such
Person. Unless otherwise specified herein, each reference to a Subsidiary shall
refer to a Subsidiary of the Company.
"Successor Issuer" has the meaning provided in Section 5.1.
"Temporary Cash Investments" means any of the following: (i) any Investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
(ii) Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America having capital surplus and undivided profits
aggregating in excess of $250 million (or the foreign currency equivalent
thereof) and whose long-term debt, or whose parent holding company's long-term
debt, is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act), (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) Investments in commercial paper, maturing not more than 180
days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "P-1" (or higher) according to Moody's. or "A-1" (or higher) according to
S&P, (v) Investments in securities with maturities of six months or less from
the date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's and
(vi) Investments in mutual funds whose investment guidelines restrict such
funds' investments to those satisfying the provisions of clauses (i) through (v)
above.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb)
as in effect on the date of this Indenture; provided, however, that, in the
event the Trust Indenture Act of 1939 is amended after such date, "TIA" means,
to the extent required by any such amendment, the
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Trust Indenture Act of 1939 as so amended.
"Trustee" means the party named as such in the preamble to this Indenture
until a successor replaces it in accordance with the provisions of Article VII
of this Indenture and, thereafter, means the successor.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"Uniforce Acquisition" means the Company's acquisition of Uniforce
Services, Inc., a New York corporation, through a tender offer and a merger of
an indirect wholly-owned subsidiary of the Company with and into Uniforce
Services, Inc.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any Restricted Subsidiary of the Company
that is not a Subsidiary of the Subsidiary to be so designated; provided,
however, that each Subsidiary to be so designated and each of its Subsidiaries
has not at the time of such designation, and does not thereafter create, Incur,
issue, assume, guarantee or otherwise becomes liable with respect to any
Indebtedness other than Non-Recourse Debt and either (A) the Subsidiary to be so
designated has total consolidated assets of $10,000 or less or (B) if such
Subsidiary has consolidated assets greater than $10,000, then such designation
would be permitted under Section 4.4 of this Indenture. The Board of Directors
may designate any Unrestricted Subsidiary to be a Restricted Subsidiary subject
to the limitations contained in Section 4.12 of this Indenture.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"U.S. Person" means any "U.S. Person" as defined by Regulation S under the
Securities Act.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
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"Wholly-Owned Subsidiary" means a Restricted Subsidiary of the Company, at
least 99% of the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or another Wholly-Owned Subsidiary.
SECTION 1.2. Other Definitions.
Term Defined in
Section
-------
"Agent Members"................................................... 2.16
"covenant defeasance option"...................................... 8.1(b)
"Custodian"....................................................... 6.1
"Event of Default"................................................ 6.1
"Excess Proceeds"................................................. 4.8(a)
"Global Securities"............................................... 2.1
"legal defeasance option"......................................... 8.1(b)
"Restricted Payment".............................................. 4.4
"Rule 144A"....................................................... 2.1
SECTION 1.3. Incorporation by Reference of Trust Indenture Act. This
Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, and any other
obligor on the securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by the TIA reference to another statute or defined under rules
promulgated by the Commission have the meanings assigned to them by such
definitions.
SECTION 1.4. Rules of Construction. Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
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(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) references to Article and Section numbers refers to the
corresponding Articles and Sections of this Indenture unless otherwise
specified; and
(7) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE II
THE SECURITIES
SECTION 2.1. Form and Dating. The Initial Securities (and any Additional
Securities), and the Trustee's certificate of authentication thereon shall be
substantially in the form of Exhibit A hereto. The Exchange Securities (and any
Additional Exchange Securities), and the Trustee's certificate of authentication
thereon shall be substantially in the form of Exhibit B hereto. The Securities
may have notations, legends or endorsements required by law, stock exchange rule
or Depositary rule or usage. The Company and the Trustee shall approve the form
of the Securities and any notation, legend or endorsement on them. Each Security
shall be dated the date of its authentication.
The terms and provisions contained in the forms of the Securities annexed
hereto as Exhibits A and B, shall constitute, and are hereby expressly made, a
part of this Indenture and, to the extent applicable, the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Securities offered and sold in reliance on Rule 144A under the Securities
Act ("Rule 144A") shall be issued initially in the form of one or more permanent
global securities in registered form, in substantially the form set forth in
Exhibit A (the "Rule 144A Global Security"), deposited with the Trustee, as
custodian for the Depositary, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the Rule
144A Global Security may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the Depositary,
as hereinafter provided. Securities offered and sold in reliance on Regulation S
under the Securities Act shall be issued in the form of one or more permanent
global securities in registered form in substantially the form set forth in
Exhibit A with
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the legend set forth in Exhibit A-2 (the "Regulation S Global Security" and
together with the 144A Global Security, the "Global Securities"). The Regulation
S Global Security, which shall be deposited with the Trustee, as custodian for
the Depositary, and registered in the name of the Depositary or the nominee of
the Depositary for the accounts of designated agents holding on behalf of the
Euroclear System ("Euroclear") or Cedel Bank, S.A. ("Cedel Bank"). The aggregate
principal amount of the Regulation S Global Security may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depositary, as hereinafter provided.
Securities issued in exchange for interests in the Rule 144A Global
Security pursuant to Section 2.17 may be issued in the form of permanent
certificated Securities in registered form in substantially the form set forth
in Exhibit A (the "Physical Securities").
Each of the Global Securities shall represent such amount of the
outstanding Securities as shall be specified therein and each shall provide that
it shall represent the aggregate amount of outstanding Securities from time to
time endorsed thereon and that the aggregate amount of outstanding Securities
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Security to reflect the amount of any increase or decrease in the amount of
outstanding Securities represented thereby shall be made by the Trustee in
accordance with instructions given by the Holder thereof as required by Section
2.6 hereof.
The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "Management
Resolutions" and "Instructions to Participants" of Cedel Bank shall be
applicable to interests in the Regulation S Global Securities that are held by
the Agent Members through Euroclear or Cedel Bank.
SECTION 2.2. Execution and Authentication. (a) Two Officers of the Company
shall sign, or one Officer shall sign and one Officer or an Assistant Secretary
(each of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to, the Securities for the Company by manual or
facsimile signature. If an Officer whose signature is on a Security no longer
holds that office at the time the Security is authenticated, the Security shall
nevertheless be valid.
(b) A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature of the Trustee shall be conclusive
evidence that the Security has been authenticated under this Indenture.
(c) The Trustee shall authenticate (i) Initial Securities for original
issue in the aggregate principal amount not to exceed $20,000,000, (ii) Private
Exchange Debentures from time to time for issue only in exchange for a like
principal amount of Initial Securities and (iii) Exchange Securities from time
to time for issue only in exchange for a like principal amount of Initial
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Securities in each case upon receipt of a written order of the Company. Each
such written order shall specify the amount of Securities to be authenticated
and the date on which the Securities are to be authenticated, whether the
Securities are to be Initial Securities, Private Exchange Debentures or Exchange
Securities and whether the Securities are to be issued as Physical Securities or
Global Securities and such other information as the Trustee may reasonably
request.
(d) Subject to the provisions of this Indenture, including, but not limited
to the provisions of Section 4.3(a) hereof, the Company may cause the Trustee to
authenticate (i) additional Securities ("Additional Securities") for original
issue in the aggregate principal amount not to exceed $30,000,000, (ii)
additional Securities issued pursuant to this Indenture as interest on the
Securities (not to exceed $53,300,000 plus the principal amount of any
Securities issued in lieu of cash for Additional Interest due on the Securities
pursuant to the Registration Rights Agreement) (the "Additional PIK Securities")
(iii) Additional Private Exchange Debentures from time to time in exchange for a
like principal amount of Additional Securities and (iv) Additional Exchange
Securities from time to time for issue only in exchange for a like principal
amount of Additional Securities in each case upon receipt of a written order of
the Company. Each such written order shall specify the amount of Securities to
be authenticated and the date on which the Securities are to be authenticated,
whether the Securities are to be Additional Securities, Additional PIK
Securities, Additional Private Exchange Debentures or Additional Exchange
Securities and whether the Securities are to be issued as Physical Securities or
Global Securities and such other information as the Trustee may reasonably
request. The aggregate principal amount of Securities outstanding at any time
under this Indenture may not exceed $50,000,000 (excluding the Additional PIK
Securities).
(e) The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate.
(f) The Securities shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof, except
the Additional PIK Securities.
SECTION 2.3. Registrar and Paying Agent. (a) The Company shall maintain an
office or agency (which shall be located in the Borough of Manhattan in the City
of New York, State of New York) where (i) Securities may be presented for
registration of transfer or for exchange ("Registrar"), (ii) Securities may be
presented for payment ("Paying Agent") and (iii) notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional paying
agent. The Company may change any Paying Agent, Registrar or co-registrar
without prior notice to any Securityholder. The Company shall notify the
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Trustee and the Trustee shall notify the Securityholders of the name and address
of any Agent not a party to this Indenture. If the Company fails to appoint or
maintain another entity as Registrar or Paying Agent, the Trustee shall act as
such. The Company may act as Paying Agent, Registrar or co-registrar. The
Company shall enter into an appropriate agency agreement with any Agent not a
party to this Indenture, which shall incorporate the provisions of the TIA. The
agreement shall implement the provisions of this Indenture that relate to such
Agent. The Company shall notify the Trustee of the name and address of any such
Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to
give the foregoing notice, the Trustee shall act as such, and shall be entitled
to appropriate compensation in accordance with Section 7.7.
(b) The Company initially appoints the Trustee as Registrar, Paying Agent,
authenticating agent and agent for service of notices and demands in connection
with the Securities. The Trustee's address for purposes of Section 2.3(a) is 101
Barclay Street, 21W, New York, New York 10286.
(c) Any of the Registrar, the Paying Agent or any other agent may resign
upon 30 days' notice to the Company. The office of the Paying Agent and
Registrar for purposes of this Section 2.3 shall initially be at 101 Barclay
Street, 21W, New York, New York 10286.
SECTION 2.4. Paying Agent to Hold Money in Trust. The Company or any other
obligor on the Securities shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent shall hold in trust for the benefit of
the Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of, premium, if any, and interest on the Securities, and
shall notify the Trustee of any Default by the Company or any other obligor on
the Securities in making any such payment. While any such Default continues, the
Trustee may require a Paying Agent to pay all money held by it to the Trustee.
The Company or any other obligor on the Securities at any time may require a
Paying Agent to pay all money held by it to the Trustee. Upon payment over to
the Trustee, the Paying Agent (if other than the Company) shall have no further
liability for the money delivered to the Trustee. If the Company or any other
obligor on the Securities acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Securityholders all money held by it
as Paying Agent.
SECTION 2.5. Securityholder Lists. The Trustee shall preserve in as current
a form as is reasonably practicable the most recent list available to it of the
names and addresses of Securityholders and shall otherwise comply with TIA ss.
312(a). If the Trustee is not the Registrar, the Company or any other obligor on
the Securities shall furnish to the Trustee at least five Business Days before
each Interest Payment Date and at such other times as the Trustee may request in
writing a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of Securityholders, including the aggregate
principal amount of the Securities held by each thereof, and the Company or any
other obligor on the Securities shall otherwise comply with TIA ss. 312(a).
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SECTION 2.6. Transfer and Exchange. (a) Subject to Sections 2.16 and 2.17
where Securities are presented to the Registrar or a co-registrar with a request
to register the transfer thereof or exchange them for an equal principal amount
of Securities of other denominations, the Registrar shall register the transfer
or make the exchange if its requirements for such transactions are met;
provided, that any Security presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar and the Trustee
duly executed by the Securityholder thereof or his attorney duly authorized in
writing. To permit registrations of transfer and exchanges, the Company shall
issue and the Trustee shall authenticate Securities at the Registrar's request.
(b) The Company and the Registrar shall not be required (i) to issue, to
register the transfer of or to exchange Securities during a period beginning at
the opening of business on a Business Day 15 days before the day of any
selection of Securities for redemption pursuant to Article 3 and ending at the
close of business on the day of selection, (ii) to register the transfer of or
exchange any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part or (iii) to register
the transfer or exchange of a Security between the Record Date and the next
succeeding Interest Payment Date.
(c) No service charge shall be made for any registration of a transfer or
exchange (except as otherwise expressly permitted herein), but the Company may
require payment by the Securityholder of a sum sufficient to cover any transfer
tax or similar governmental charge payable in connection therewith (other than
such transfer tax or similar governmental charge payable upon exchanges pursuant
to Section 2.10, 3.6 or 9.5).
(d) Any Holder of any Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interests in such Global Security
may be effected only through a book entry system maintained by the Holder of
such Global Security (or its agent), and that ownership of a beneficial interest
in the Global Security shall be required to be reflected in a book entry.
SECTION 2.7. Replacement Securities. (a) If any mutilated Security is
surrendered to the Trustee, or the Company and the Trustee receives evidence to
their satisfaction of the destruction, loss or theft of any Security, the
Company shall issue and the Trustee, upon receipt by it of the written order of
the Company signed by two Officers of the Company, shall authenticate a
replacement Security if the Trustee's requirements for replacements of
Securities are met. If required by the Trustee or the Company, an indemnity bond
must be supplied by the Holder that is sufficient in the reasonable judgment of
the Trustee and the Company to protect the Company, the Trustee, any Agent or
any authenticating agent from any loss which any of them may suffer if a
Security is replaced. The Company and the Trustee may charge a Securityholder
for reasonable out-of-pocket expenses in replacing a Security, including fees
and expenses of counsel.
(b) Every replacement Security is an additional obligation of the Company
and shall
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be entitled to the benefits of this Indenture.
SECTION 2.8. Outstanding Securities. (a) The Securities outstanding at any
time are all the Securities authenticated by the Trustee except for those
cancelled by the Company or by the Trustee, those delivered to the Trustee for
cancellation and those described in this Section as not outstanding.
(b) If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless and until the Trustee receives proof satisfactory to it that
the replaced Security is held by a bona fide purchaser.
(c) If the principal amount of any Security is considered paid under
Section 4.1, it ceases to be outstanding and interest on it ceases to accrue.
(d) Subject to Section 2.9, a Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security.
(e) If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender sufficient to pay all of the principal, premium, if any, and
interest due on the Securities payable on that date and is not prohibited from
paying such money to the Securityholders thereof pursuant to the terms of this
Indenture, then on and after that date such Securities cease to be outstanding
and interest on them ceases to accrue.
SECTION 2.9. Treasury Securities. In determining whether the Holders of the
required principal amount of Securities have concurred in any direction, waiver
or consent, Securities owned by the Company, or any of their respective
Affiliates shall be considered as though not outstanding, except that for
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Securities which a Responsible Officer
knows to be so owned shall be so considered.
SECTION 2.10. Temporary Securities. Until definitive Securities are ready
for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company and the Trustee
consider appropriate for temporary Securities. Without unreasonable delay, the
Company shall prepare and the Trustee, upon receipt of the written order of the
Company signed by two Officers of the Company, or by one Officer and attested by
one Officer or an Assistant Secretary (each of whom shall, in each case, have
been duly authorized by all requisite corporate actions), shall authenticate,
pursuant to Section 2.2, definitive Securities in exchange for temporary
Securities. Until such exchange, temporary Securities shall be entitled to the
same rights, benefits and privileges under this Indenture as definitive
Securities.
SECTION 2.11. Cancellation. The Company at any time may deliver Securities
to the Trustee for cancellation. The Registrar and Paying Agent shall forward to
the Trustee any
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Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee shall cancel all Securities, if not already cancelled,
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall return such cancelled Securities to the Company. Subject
to Section 2.7, the Company may not issue new Securities to replace Securities
that it has redeemed or paid or that have been delivered to the Trustee for
cancellation.
SECTION 2.12. Defaulted Interest. If the Company defaults in a payment of
interest on the Securities, it shall pay the defaulted interest in any lawful
manner plus, to the extent lawful, interest payable on the defaulted interest,
to the Persons who are Securityholders on a subsequent special record date,
which date shall be at the earliest practicable date but in all events at least
five Business Days prior to the payment date, in each case at the rate provided
in the Securities and in Section 4.1. The Company shall, with the consent of the
Trustee, fix or cause to be fixed each such special record date and payment
date. At least 15 days before the special record date, the Company (or the
Trustee, in the name of and at the expense of the Company) shall mail to
Securityholders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
SECTION 2.13. CUSIP Number. The Company in issuing the Securities may use a
"CUSIP" number, and if so, the Trustee shall use the CUSIP number in notices of
redemption or exchange as a convenience to Securityholders; provided, that no
representation shall be deemed to be made by the Trustee as to the correctness
or accuracy of the CUSIP number printed in the notice or on the Securities, and
that reliance may be placed only on the other identification numbers printed on
the Securities. The Company shall promptly notify the Trustee of any change in
the CUSIP number.
SECTION 2.14. Deposit of Moneys. Prior to 11:00 a.m. New York City time on
each Interest Payment Date and Maturity Date, the Company shall have deposited
with the Paying Agent in immediately available funds money (or, if prior to June
1, 2003, with respect to the payment of interest only, at the Company's option,
Additional PIK Securities) sufficient to make cash payments, if any, due on such
Interest Payment Date or Maturity Date, as the case may be, in a timely manner
which permits the Paying Agent to remit payment to the Securityholders on such
Interest Payment Date or Maturity Date, as the case may be.
SECTION 2.15. Restrictive Legends. Each Global Security and Physical
Security that constitutes a Restricted Security shall bear the following legend
(the "Private Placement Legend") on the face thereof until November 26, 1999
unless otherwise agreed by the Company and the Securityholder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, UNITED STATES
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PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER
THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO IN RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT WITH
RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT
(A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN
AGGREGATE PRINCIPAL AMOUNT OF SECURITIES AT THE TIME OF TRANSFER OF LESS
THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT AN INITIAL
INVESTOR THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR PURCHASING AS
DESCRIBED IN CLAUSE (1)(B) ABOVE SHALL NOT BE PERMITTED TO TRANSFER THIS
SECURITY TO AN INSTITUTIONAL ACCREDITED INVESTOR. IN CONNECTION WITH ANY
TRANSFER OF THIS SECURITY WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE
TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR
PURCHASING PURSUANT TO
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CLAUSE (2)(C) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "UNITED
STATES PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE
FOREGOING RESTRICTIONS.
Each Global Security shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF
THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR
DEPOSITARY OR ANY SUCH NOMINEE, TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITARY. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO.
OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE, AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRE SENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
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The Regulation S Global Security shall bear the following legend on the
face thereof:
THIS NOTE MAY NOT BE OFFERED OR SOLD TO A U.S. PERSON (AS SUCH TERM IS
DEFINED IN REGULATION S UNDER THE SECURITIES ACT) OR FOR THE ACCOUNT OR
BENEFIT OF A U.S. PERSON PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD
(AS DEFINED IN THE INDENTURE), AND NO TRANSFER OR EXCHANGE OF THIS SECURITY
MAY BE MADE FOR AN INTEREST IN A PHYSICAL SECURITY UNTIL AFTER THE LATER OF
THE DATE OF EXPIRATION OF THE RESTRICTED PERIOD AND THE DATE ON WHICH THE
PROPER REQUIRED CERTIFICATION RELATING TO SUCH INTEREST HAS BEEN PROVIDED
IN ACCORDANCE WITH THE TERMS OF THE INDENTURE, TO THE EFFECT THAT THE
BENEFICIAL OWNER OR OWNERS OF SUCH INTEREST ARE NOT U.S. PERSONS.
SECTION 2.16. Book-Entry Provisions for Global Security. (a) Each Global
Security initially shall (i) be registered in the name of the Depositary or the
nominee of such Depositary, (ii) be delivered to the Trustee as custodian for
such Depositary and (iii) bear legends as set forth in Section 2.15.
Members of, or participants in, the Depositary ("Agent Members") shall have
no rights under this Indenture with respect to any Global Security held on their
behalf by the Depositary, or the Trustee as its custodian, or under the Global
Security, and the Depositary may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of the Global Security
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Security.
(b) Transfers of a Global Security shall be limited to transfers in whole,
but not in part, to the Depositary, its successors or their respective nominees.
Interest of beneficial owners in a Global Security may be transferred or
exchanged for Physical Securities in accordance with the rules and procedures of
the Depositary, the provisions of Section 2.17 and the limitation set forth in
Section 2.1 with regard to the Regulation S Global Security. In addition,
Physical Securities shall be transferred to all beneficial owners in exchange
for their beneficial interests in a Global Security if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for the Global Security and a successor depository is not appointed by the
Company within 90 days of such notice or (ii) an Event of Default has occurred
and is continuing and the Registrar has received a written request from the
Depositary to issue Physical Securities.
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(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Securitys to beneficial owners pursuant to
paragraph (b) above, the Registrar shall (if one or more Physical Securities are
to be issued) reflect on its books and records the date and a decrease in the
principal amount of the beneficial interest in the Global Security to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and make available for delivery, one or more Physical Securities of like tenor
and amount.
(d) In connection with the transfer of an entire Global Security to
beneficial owners pursuant to paragraph (b) above, a Global Security shall be
deemed to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depositary in exchange for its beneficial interest in
such Global Security, an equal aggregate principal amount of Physical Securities
of authorized denominations.
(e) Any Physical Security constituting a Restricted Security delivered in
exchange for an interest in the Global Security pursuant to paragraph (b) or (c)
above shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of
Section 2.17, bear the legend regarding transfer restrictions applicable to the
Physical Securities set forth in Section 2.15.
(f) The Holder of a Global Security may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Securityholder is
entitled to take under this Indenture or the Securities.
SECTION 2.17. Special Transfer Provisions.
(a) Transfers of Global Securities; Transfers to Non-QIB Institutional
Accredited Investors and Non-U.S. Persons. The following provisions shall apply
with respect to the registration of any proposed transfer of a Security
constituting a Restricted Security to any Institutional Accredited Investor
which is not a QIB or to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Security
constituting a Restricted Security, whether or not such Security bears the
Private Placement Legend, if (x) the requested transfer is after November
26, 1999; provided, however, that neither the Company nor any Affiliate of
the Company has held any beneficial interest in such Security, or portion
thereof, at any time on or prior to November 26, 1999 or (y) (1) in the
case of a transfer to an Institutional Accredited Investor which is not a
QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to
the Registrar a certificate substantially in the form of Exhibit C hereto
or (2) in the case of a transfer to a Non-U.S. Person, the proposed
transferor has delivered to the Registrar a certificate substantially in
the form of Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Rule 144A Global Security, upon receipt by the
Registrar of (x) the certificate, if any,
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required by paragraph (i) above and (y) instructions given in accordance
with the Depositary's and the Registrar's procedures, (a) the Registrar
shall reflect on its books and records the date and (if the transfer does
not involve a transfer of outstanding Physical Securities) a decrease in
the principal amount of the Rule 144A Global Security in an amount equal to
the principal amount of the beneficial interest in the Rule 144A Global
Security to be transferred, and (b)(1) the Company shall execute and the
Trustee shall authenticate and deliver one or more Physical Securities of
like tenor and amount or (2) the Registrar shall reflect on its books and
records the date and (if the transfer does not involve a transfer of
outstanding Physical Securities) an increase in the principal amount of the
Regulation S Global Security in an amount equal to the principal amount of
the beneficial interest in the Rule 144A Global Security to be transferred.
(iii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Regulation S Global Security, upon receipt by
the Registrar of (x) the certificate, if any, required by paragraph (i)
above and (y) instructions given in accordance with the Depositary's and
the Registrar's procedures, (a) the Registrar shall reflect on its books
and records the date and (if the transfer does not involve a transfer of
outstanding Physical Securities) a decrease in the principal amount of the
Regulation S Global Security in an amount equal to the principal amount of
the beneficial interest in the Regulation S Global Security to be
transferred, and (b)(1) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Securities of like tenor and
amount or (2) the Registrar shall reflect on its books and records the date
and (if the transfer does not involve a transfer of outstanding Physical
Securities) an increase in the principal amount of the Rule 144A Global
Security in an amount equal to the principal amount of the beneficial
interest in the Rule 144A Global Security to be transferred.
(b) Transfers to QIBs. The following provisions shall apply with respect to
the registration of any proposed transfer of a Security constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has advised the Company and the
Registrar in writing, that the sale has been effected in compliance with
the provisions of Rule 144A to a transferee who has advised the Company and
the Registrar in writing, that it is purchasing the Security for its own
account or an account with respect to which it exercises sole investment
discretion and that any such account is a QIB within the meaning of Rule
144A, and it is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the exemption
from registration provided by Rule 144A; and
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(ii) if the proposed transferee is an Agent Member and the Securities
to be transferred consist of Physical Securities which after transfer are
to be evidenced by an interest in the Rule 144A Global Security, upon
receipt by the Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall reflect on
its books and records the date and an increase in the principal amount of
the Rule 144A Global Security in an amount equal to principal amount of the
Physical Securities to be transferred, and the Trustee shall cancel the
Physical Securities so transferred.
(c) Transfers to Non-U.S. Persons. The following provisions shall apply
with respect to the registration of any proposed transfer of a Security
constituting a Restricted Security to a Non- U.S. Persons:
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has advised the Company and the
Registrar in writing, that the sale has been effected in compliance with
the provisions of Regulation S to a transferee who has advised the Company
and the Registrar in writing, that it is purchasing the Security in
compliance with Rule 904 under the Securities Act, and it is aware that the
sale to it is being made in reliance on Regulation S and that it is aware
that the transferor is relying upon its foregoing representations in order
to claim the exemption from registration provided by Regulation S; and
(ii) if the proposed transferee is an Agent Member and the Securities
to be transferred consist of Physical Securities which after transfer are
to be evidenced by an interest in the Regulation S Global Security, upon
receipt by the Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall reflect on
its books and records the date and an increase in the principal amount of
the Regulation S Global Security in an amount equal to principal amount of
the Physical Securities to be transferred, and the Trustee shall cancel the
Physical Securities so transferred.
(d) Private Placement Legend. Upon the registration of the transfer,
exchange or replacement of Securities not bearing the Private Placement Legend,
the Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the registration of the transfer, exchange or replacement of
Securities bearing the Private Placement Legend, the Registrar shall deliver
only Securities that bear the Private Placement Legend unless (i) the
circumstance contemplated by paragraph (a)(i)(x) of this Section 2.17 exists or
(ii) there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(e) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth
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in this Indenture and in the Private Placement Legend and agrees that it will
transfer such Security only as provided in this Indenture.
The Registrar shall retain for at least two years copies of all letters,
notices and other written communications received pursuant to Section 2.16 or
this Section 2.17. The Company shall have the right to inspect and make copies
of all such letters, notices or other written communications at any reasonable
time upon the giving of reasonable written notice to the Registrar.
SECTION 2.18. Persons Deemed Owners. Prior to due presentment of a Security
for registration of transfer and subject to Section 2.12, the Company, the
Trustee, any Paying Agent, any Registrar and any co-registrar may deem and treat
the Person in whose name any Security shall be registered upon the register of
Securities kept by the Registrar as the absolute owner of such Security (whether
or not such Security shall be overdue and notwithstanding any notation of the
ownership or other writing thereon made by anyone other than the Company, any
Registrar or any co-registrar) for the purpose of receiving payments of
principal of or interest on such Security and for all other purposes; and none
of the Company, the Trustee, any Paying Agent, any Registrar or any co-registrar
shall be affected by any notice to the contrary.
SECTION 2.19. Record Date. The record date for purposes of determining the
identity of Securityholders entitled to vote or consent to any action by vote or
consent authorized or permitted under this Indenture shall be the later of (i)
30 days prior to the first solicitation of such consent or (ii) the date of the
most recent list of Holders furnished to the Trustee, if applicable, pursuant to
Section 2.5.
ARTICLE III
REDEMPTION
SECTION 3.1. Notices to Trustee. If the Company elects to redeem Securities
pursuant to paragraph 5 of the Securities, it shall notify the Trustee in
writing of the Redemption Date and the principal amount of Securities to be
redeemed.
The Company shall give each notice to the Trustee provided for in this
Section at least 30 days but no more than 60 days before the Redemption Date
unless the Trustee consents to a shorter period. Such notice shall be
accompanied by an Officers' Certificate from the Company to the effect that such
redemption will comply with the conditions herein.
SECTION 3.2. Selection of Securities To Be Redeemed. In the case of any
partial redemption of the Securities, selection of the Securities for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other method
as the Trustee in its sole discretion shall deem to be fair and appropriate;
provided, however, that if a partial redemption is made with proceeds of an
Equity Offering, selection of the Securities or portion thereof for redemption
shall be made by the Trustee only on a pro rata basis, unless such method is
otherwise prohibited. Securities may be
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redeemed in part in multiples of $1,000 principal amount only. Notice of
redemption will be sent, by first class mail, postage prepaid, at least 45 days
(unless a shorter period is acceptable to the Trustee) prior to the date fixed
for redemption to each holder whose Securities are to be redeemed at the last
address for such holder then shown on the registry books. If any Security is to
be redeemed in part only, the notice of redemption that relates to such Security
shall state the portion of the principal amount thereof to be redeemed. A new
Security in principal amount equal to the unredeemed portion thereof will be
issued in the name of the holder thereof upon cancellation of the original
Security. On and after any redemption date, interest will cease to accrue on the
Securities or part thereof called for redemption as long as the Company has
deposited with the Paying Agent funds in satisfaction of the redemption price
pursuant to the Indenture. Provisions of this Indenture that apply to Securities
called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company in writing promptly of the
Securities or portions of Securities to be redeemed.
SECTION 3.3. Notice of Redemption. At least 30 days but not more than 60
days before a date for redemption of Securities, the Company shall mail a notice
of redemption by first-class mail to each Holder of Securities to be redeemed,
at such Holder's registered address.
The notice shall identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(5) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be outstanding
after such partial redemption;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant
to the terms of this Indenture, interest on Securities (or portion thereof)
called for redemption ceases to accrue on and after the Redemption Date;
(7) the CUSIP number, if any, printed on the Securities being
redeemed;
(8) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date upon surrender of such Security,
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a new Security or Securities in principal amount equal to the unredeemed
portion shall be issued; and
(9) the paragraph of the Securities and/or Section of this Indenture
pursuant to which the Securities called for redemption are being redeemed.
At the Company's request made in writing to the Trustee at least 45 days
(unless a shorter period is acceptable to the Trustee) prior to the date fixed
for redemption, the Trustee shall give the notice of redemption in the name and
the expense of the Company to each Holder whose Securities are to be redeemed at
the last address for such Holder then shown on the registry books. In such
event, the Company shall provide the Trustee with the information required by
this Section.
SECTION 3.4. Effect of Notice of Redemption. Once notice of redemption is
mailed, Securities called for redemption become due and payable on the
designated Redemption Date and at the redemption price stated in the notice.
Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price stated in the notice, plus accrued interest to the designated
Redemption Date; provided, that if any Redemption Date is after a regular Record
Date and on or prior to the Interest Payment Date, the accrued interest shall be
payable to the Securityholder of the redeemed Securities registered on the
relevant Record Date. Failure to give notice or any defect in the notice to any
Holder shall not affect the validity of the notice to any other Holder.
SECTION 3.5. Deposit of Redemption Price. (a) Prior to 11:00 a.m., New York
City time, on any Redemption Date, the Company shall deposit with the Trustee or
with the Paying Agent money sufficient to pay the redemption price of and
accrued interest on all Securities to be redeemed on such Redemption Date. The
Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of, and accrued interest on, all
Securities to be redeemed.
(b) Except as set forth in the last sentence of this paragraph, on and
after any Redemption Date, interest ceases to accrue on the Securities or the
portions of Securities called for redemption. If a Security is redeemed on or
after an interest Record Date but on or prior to the related Interest Payment
Date, then any accrued and unpaid interest shall be paid to the Person in whose
name such Security was registered at the close of business on such Record Date.
If any Security called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the Redemption
Date until such principal is paid and, to the extent lawful, on any interest not
paid on such unpaid principal, in each case at the rate provided in the
Securities and in Section 4.1.
SECTION 3.6. Securities Redeemed in Part. Upon surrender of a Security that
is
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redeemed in part, the Company shall execute and the Trustee shall authenticate
for and in the name of the Holder (at the Company's expense), a new Security
equal in a principal amount to the unredeemed portion of the Security
surrendered.
ARTICLE IV
COVENANTS
SECTION 4.1. Payment of Securities. The Company shall promptly pay the
principal of, premium, if any, and interest on the Securities on the dates and
in the manner provided in the Securities and in this Indenture. Principal,
premium, if any, and interest shall be considered paid on the date due if on
such date the Trustee or the Paying Agent holds in accordance with this
Indenture money sufficient to pay all principal and interest then due and the
Trustee or the Paying Agent, as the case may be, is not prohibited from paying
such money to the Securityholders on that date pursuant to the terms of this
Indenture. Interest will be computed on the basis of a 360 day year comprised of
twelve 30 day months.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate specified
therefor in the Securities, and it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest (without regard to any applicable grace period) at the same rate to the
extent lawful.
Through and including December 1, 2002, on each Interest Payment Date, the
Company may, at its option and in its sole discretion, in lieu of the payment in
whole or in part of interest in money on the Securities, pay interest on the
Securities through the issuance of Additional PIK Securities in an aggregate
principal amount equal to the amount of interest that would be payable with
respect to the Securities, if such interest were paid in cash. After December 1,
2002, the Company shall pay interest on the Securities in cash. The Company
shall notify the Trustee in writing of its election to pay interest through the
issuance of Additional PIK Securities not less than 10 nor more than 45 days
prior to the record date for an Interest Payment Date on which Additional PIK
Securities will be issued. On each such Interest Payment Date, the Trustee shall
authenticate Additional PIK Securities for original issuance to each Holder on
the relevant record date in the aggregate principal amount required to pay such
interest. Each Additional PIK Security is an additional obligation of the
Company and shall be governed by, and entitled to the benefits of, this
Indenture and shall be subject to the terms of the this Indenture and shall be
pari passu with and subject to the same terms (including the rate of interest
from time to time payable thereon) as the Securities (except, as the case may
be, with respect to the issuance date and aggregate principal amount).
From and after December 1, 2002, interest on the Securities will be payable
only in cash. To the extent that the Company is prohibited pursuant to the terms
of the New Credit Facility
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or the Notes from paying interest in cash subsequent to December 1, 2002, the
Company will pay interest equal to the interest rate then applicable to the
Securities plus 2.00%.
SECTION 4.2. Reports. (a) The Company will file with the Trustee and
provide to the Holders of the Securities, within 15 days after it files them
with the Commission, copies of the quarterly and annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) which
the Company files with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act.
(b) In the event that the Company is not required to file such reports with
the Commission pursuant to the Exchange Act, the Company will nevertheless
deliver such Exchange Act information to the holders of the Securities within 15
days after it would have been required to file it with the Commission. Upon
qualification of this Indenture under the TIA, the Company shall also comply
with the other provisions of TIA ss. 314(a).
Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.3. Limitation on Indebtedness. (a) The Company shall not, and
shall not permit any of its Restricted Subsidiaries to Incur any Indebtedness;
provided, however, that: the Company may Incur Indebtedness, if no Default or
Event of Default shall have occurred and be continuing at the time of such
Incurrence or would occur as a consequence of such Incurrence and the
Consolidated Coverage Ratio would be equal to at least 1.20 to 1.00 after giving
pro forma effect to the Incurrence of such Indebtedness.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness Incurred pursuant to the New Credit Facility
(including, without limitation, any renewal, extension, refunding,
restructuring, replacement or refinancing thereof referred to in the
definition thereof) provided, however, that the aggregate principal amount
of all Indebtedness Incurred pursuant to this clause (i) does not exceed
$75.0 million at any time outstanding, less the aggregate principal amount
thereof repaid with the net proceeds of Asset Dispositions;
(ii) Indebtedness represented by Capitalized Lease Obligations,
mortgage financing or purchase money obligations, in each case Incurred for
the purpose of financing all or any part of the purchase price or cost of
construction or improvement of property used in a Permitted Business or
Incurred to refinance any such purchase price or cost of construction or
improvement, in each case Incurred no later than 365 days after the date of
such
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acquisition or the date of completion of such construction or improvement;
provided, however, that the principal amount of any Indebtedness Incurred
pursuant to this clause (ii) shall not exceed $5.0 million at any time
outstanding;
(iii) Indebtedness of the Company owing to and held by any
Wholly-Owned Subsidiary or Indebtedness of a Restricted Subsidiary owing to
and held by the Company or any Wholly-Owned Subsidiary; provided, however,
that any subsequent issuance or transfer of any Capital Stock or any other
event which results in any such Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary or any subsequent transfer of any such Indebtedness
(except to the Company or any Wholly-Owned Subsidiary) shall be deemed, in
each case, to constitute the Incurrence of such Indebtedness by the issuer
thereof;
(iv) Indebtedness represented by (a) the Securities (b) Existing
Indebtedness and (c) any Refinancing Indebtedness Incurred in respect of
any Indebtedness described in this clause (iv) or Incurred pursuant to
paragraph (a) of this Section 4.3;
(v)(A) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on the date on which such Restricted Subsidiary was acquired by
the Company (other than Indebtedness Incurred in anticipation of, or to
provide all or any portion of the funds or credit support utilized to
consummate the transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Subsidiary or was otherwise
acquired by the Company); provided, however, that at the time such
Restricted Subsidiary is acquired by the Company, the Company would have
been able to Incur $1.00 of additional Indebtedness pursuant to paragraph
(a) of this Section 4.3 after giving effect to the Incurrence of such
Indebtedness pursuant to this clause (v) and (B) Refinancing Indebtedness
Incurred by a Restricted Subsidiary in respect of Indebtedness Incurred by
such Restricted Subsidiary pursuant to this clause (v);
(vi) Indebtedness (A) in respect of performance bonds, bankers'
acceptances and surety or appeal bonds provided by the Company or any of
its Restricted Subsidiaries to their customers in the ordinary course of
their business, (B) in respect of performance bonds or similar obligations
of the Company or any of its Restricted Subsidiaries for or in connection
with pledges, deposits or payments made or given in the ordinary course of
business in connection with or to secure statutory, regulatory or similar
obligations, including obligations under health, safety or environmental
obligations and (C) arising from Guarantees to suppliers, lessors,
licensees, contractors, franchises or customers of obligations (other than
Indebtedness) incurred in the ordinary course of business;
(vii) Indebtedness under Currency Agreements and Interest Rate
Agreements; provided, however, that in the case of Currency Agreements and
Interest Rate Agreements, such Currency Agreements and Interest Rate
Agreements are entered into for bona fide hedging purposes of the Company
or its Restricted Subsidiaries (as determined in good faith
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by the Board of Directors of the Company) and correspond in terms of
notional amount, duration, currencies and interest rates as applicable, to
Indebtedness of the Company or its Restricted Subsidiaries Incurred without
violation of this Indenture or to business transactions of the Company or
its Restricted Subsidiaries on customary terms entered into in the ordinary
course of business;
(viii) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from Guarantees or letters of credits, surety bonds or performance bonds
securing any obligations of the Company or any of its Restricted
Subsidiaries pursuant to such agreements, in each case Incurred in
connection with the disposition of any business assets or Restricted
Subsidiary of the Company (other than Guarantees of Indebtedness or other
obligations incurred by any Person acquiring all or any portion of such
business assets or Restricted Subsidiary of the Company for the purpose of
financing such acquisition) in a principal amount not to exceed the gross
proceeds actually received by the Company or any of its Restricted
Subsidiaries in connection with such disposition; provided, however, that
the principal amount of any Indebtedness incurred pursuant to this clause
(viii) when taken together with all Indebtedness incurred pursuant to this
clause (viii) and then outstanding, shall not exceed $2.0 million;
(ix) Indebtedness consisting of (A) Guarantees by the Company (so long
as the Company could have incurred such Indebtedness directly without
violation of this Indenture) and (B) Guarantees by a Restricted Subsidiary
of Indebtedness incurred by the Company without violation of this Indenture
(so long as such Restricted Subsidiary could have incurred such
Indebtedness directly without violation of this Indenture);
(x) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument issued by the
Company or its Subsidiaries drawn against insufficient funds in the
ordinary course of business in an amount not to exceed $250,000 at any
time, provided that such Indebtedness is extinguished within two business
days of its incurrence; and
(xi) Indebtedness (other than Indebtedness described in clauses (i) -
(x)) in a principal amount which, when taken together with the principal
amount of all other Indebtedness Incurred pursuant to this clause (xi) and
then outstanding, will not exceed $10.0 million (it being understood that
any Indebtedness Incurred under this clause (xi) shall cease to be deemed
Incurred or outstanding for purposes of this clause (xi) (but shall be
deemed to be Incurred for purposes of paragraph (a) of this Section 4.3)
from and after the first date on which the Company or its Restricted
Subsidiaries could have Incurred such Indebtedness under the foregoing
paragraph (a) of this Section 4.3 without reliance upon this clause (xi)).
(c) The Company will not permit any Unrestricted Subsidiary to Incur any
Indebtedness other than Non-Recourse Debt.
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SECTION 4.4. Limitation on Restricted Payments. (a) The Company shall not,
and shall not permit any of its Restricted Subsidiaries, directly or indirectly,
to (i) declare or pay any dividend or make any distribution on or in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving the Company or any of its Restricted Subsidiaries)
except (A) dividends or distributions payable in its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to purchase such
Capital Stock, (B) dividends or distributions payable to the Company or a
Restricted Subsidiary of the Company which holds any equity interest in the
paying Restricted Subsidiary (and if the Restricted Subsidiary paying the
dividend or making the distribution is not a Wholly-Owned Subsidiary, to its
other holders of Capital Stock on a pro rata basis) and (C) cash dividends in
respect of the preferred stock of the Company that was issued and outstanding on
or prior to the date of this Indenture, (ii) purchase, redeem, retire or
otherwise acquire for value any Capital Stock of the Company held by Persons
other than a Wholly-Owned Subsidiary of the Company or any Capital Stock of a
Restricted Subsidiary of the Company held by any Affiliate of the Company, other
than a Wholly-Owned Subsidiary (in either case, other than in exchange for its
Capital Stock (other than Disqualified Stock)), (iii) purchase, repurchase,
redeem, defease or otherwise acquire or retire for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of purchase, repurchase or acquisition) or (iv)
make any Investment (other than a Permitted Investment) in any Person (any such
dividend, distribution, purchase, redemption, repurchase, defeasance, other
acquisition, retirement or Investment as described in preceding clauses (i)
through (iv) being referred to as a "Restricted Payment"); if at the time the
Company or such Restricted Subsidiary makes such Restricted Payment: (1) a
Default shall have occurred and be continuing (or would result therefrom); or
(2) the Company is not able to incur an additional $1.00 of Indebtedness
pursuant to Section 4.3(a) of this Indenture; or (3) the aggregate amount of
such Restricted Payment and all other Restricted Payments declared or made
subsequent to the Issue Date would exceed the sum of (A) 50% of the Consolidated
Net Income accrued during the period (treated as one accounting period) from the
first day of the fiscal quarter beginning on or after the Issue Date to the end
of the most recent fiscal quarter ending prior to the date of such Restricted
Payment as to which financial results are available (but in no event ending more
than 135 days prior to the date of such Restricted Payment) (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) the
aggregate net proceeds received by the Company from the issue or sale of its
Capital Stock (other than Disqualified Stock) or other capital contributions
subsequent to the Issue Date (other than net proceeds received from an issuance
or sale of such Capital Stock to (x) a Subsidiary of the Company, (y) an
employee stock ownership plan or similar trust or (z) management employees of
the Company or any Subsidiary of the Company or any Subsidiary of the Company
(other than sales of Capital Stock (other than Disqualified Stock) to management
employees of the Company pursuant to bona fide employee stock option plans of
the Company); provided, however, that the value of any non-cash net proceeds
shall be as determined by the Board of Directors in good faith, except that in
the event the value of any non-cash net proceeds shall be $2.0 million or more,
the value shall be as
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determined in writing by an independent investment banking firm of nationally
recognized standing; (C) the amount by which Indebtedness of the Company is
reduced on the Company's balance sheet upon the conversion or exchange (other
than by a Restricted Subsidiary of the Company) subsequent to the Issue Date of
any Indebtedness of the Company convertible or exchangeable for Capital Stock
(other than Disqualified Stock) of the Company (less the amount of any cash, or
other property, distributed by the Company upon such conversion or exchange);
and (D) the amount equal to the net reduction in Investments (other than
Permitted Investments) made after the Issue Date by the Company or any of its
Restricted Subsidiaries in any Person resulting from (i) repurchases or
redemptions of such Investments by such Person, proceeds realized upon the sale
of such Investment to an unaffiliated purchaser, repayments of loans or advances
or other transfers of assets by such Person to the Company or any Restricted
Subsidiary of the Company or (ii) the redesignation of Unrestricted Subsidiaries
as Restricted Subsidiaries (valued in each case as provided in the definition of
"Investment") not to exceed, in the case of any Unrestricted Subsidiary, the
amount of Investments previously included in the calculation of the amount of
Restricted Payments; provided, however, that no amount shall be included under
this Clause (D) to the extent it is already included in Consolidated Net Income.
(b) The provisions of paragraph (a) shall not prohibit: (i) any purchase or
redemption of Capital Stock or Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary, an employee stock ownership plan
or similar trust or management employees of the Company or any Subsidiary of the
Company); provided, however, that (A) such purchase or redemption shall be
excluded in the calculation of the amount of Restricted Payments and (B) the Net
Cash Proceeds from such sale shall be excluded from clause (3) (B) of paragraph
(a); (ii) any purchase or redemption of Subordinated Obligations of the Company
made by exchange for, or out of the proceeds of the substantially concurrent
sale of, Subordinated Obligations of the Company in compliance with the Section
4.3 herein; provided, however, that such purchase or redemption shall be
excluded in the calculation of the amount of Restricted Payments; (iii) any
purchase or redemption of Subordinated Obligations from Net Available Cash to
the extent permitted under Section 4.8 herein; provided, however, that such
purchase or redemption shall be excluded in the calculation of the amount of
Restricted Payments; and (iv) dividends paid within 60 days after the date of
declaration if at such date of declaration such dividend would have complied
with this provision; provided, however, that such dividend shall be included in
the calculation of the amount of Restricted Payments; provided, however, that in
the case of clauses (i), (ii) and (iii) no Default or Event of Default shall
have occurred or be continuing at the time of such payment or as a result
thereof.
(c) For purposes of determining compliance with the foregoing covenant,
Restricted Payments may be made with cash or non-cash assets, provided that any
Restricted Payment made other than in cash shall be valued at the fair market
value (determined, subject to the additional requirements of the immediately
succeeding proviso, in good faith by the Board of Directors) of the assets so
utilized in making such Restricted Payment, provided, further that (i) in the
case of any
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Restricted Payment made with Capital Stock or Indebtedness, such Restricted
Payment shall be deemed to be made in an amount equal to the greater of the fair
market value thereof and the liquidation preference (if any) or principal amount
of the capital stock or indebtedness, as the case may be, so utilized, and (ii)
in the case of any Restricted Payment in an aggregate amount in excess of $2.0
million, a written opinion as to the fairness of the valuation thereof (as
determined by the Company) for purposes of determining compliance with this
Section 4.4 shall be issued by an independent investment banking firm of
national standing.
(d) Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officer's Certificate stating that such
Restricted Payment complies with this Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available quarterly
financial statements and a copy of any required investment banker's opinion.
SECTION 4.5. Limitation on Issuances of Capital Stock of Restricted
Subsidiaries. The Company will not permit any of its Restricted Subsidiaries to
issue any Capital Stock to any Person (other than to the Company or a
Wholly-Owned Subsidiary of the Company) or permit any Person (other than the
Company or a Wholly-Owned Subsidiary of the Company) to own any Capital Stock of
a Restricted Subsidiary of the Company, if in either case as a result thereof
such Restricted Subsidiary would no longer be a Restricted Subsidiary of the
Company; provided, however, that this provision shall not prohibit (x) the
Company or any of its Restricted Subsidiaries from selling, leasing or otherwise
disposing of all of the Capital Stock of any Restricted Subsidiary or (y) the
designation of a Restricted Subsidiary as an Unrestricted Subsidiary in
compliance with this Indenture.
SECTION 4.6. Limitation on Affiliate Transactions. (a) The Company will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into or conduct any transaction or series of related
transactions (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with or for the benefit of any Affiliate of the
Company, other than a Wholly-Owned Subsidiary (an "Affiliate Transaction")
unless: (i) the terms of such Affiliate Transaction are no less favorable to the
Company or such Restricted Subsidiary, as the case may be, than those that could
be obtained at the time of such transaction in arm's length dealings with a
Person who is not such an Affiliate; (ii) in the event such Affiliate
Transaction involves an aggregate amount in excess of $500,000, the terms of
such transaction have been approved by a majority of the members of the Board of
Directors of the Company and by a majority of the disinterested members of such
Board, if any (and such majority or majorities, as the case may be, determines
that such Affiliate Transaction satisfies the criteria in (i) above); and (iii)
in the event such Affiliate Transaction involves an aggregate amount in excess
of $1.0 million, the Company has received a written opinion from an independent
investment banking firm of nationally recognized standing that such Affiliate
Transaction is fair to the Company or such Restricted Subsidiary, as the case
may be, from a financial point of view.
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(b) The foregoing paragraph (a) shall not apply to (i) any Restricted
Payment permitted to be made pursuant to the covenant described under Section
4.4, (ii) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, or any stock options and stock ownership plans for the benefit of
employees, officers and directors, consultants and advisors approved by the
Board of Directors of the Company, (iii) loans or advances to employees in the
ordinary course of business of the Company or any of its Restricted Subsidiaries
in aggregate amount outstanding not to exceed $250,000 to any employee or $1.0
million in the aggregate at any time, (iv) any transaction between Wholly-Owned
Subsidiaries, (v) indemnification agreements with, and the payment of fees and
indemnities to, directors, officers and employees of the Company and its
Restricted Subsidiaries, in each case in the ordinary course of business, (vi)
transactions pursuant to agreements in existence on the Issue Date which are (x)
described in the Offering Memorandum or (y) otherwise, in the aggregate,
immaterial to the Company and its Restricted Subsidiaries taken as a whole,
(vii) any employment, non-competition or confidentiality agreements entered into
by the Company or any of its Restricted Subsidiaries with its employees in the
ordinary course of business, (viii) the issuance of Capital Stock of the Company
(other than Disqualified Stock).
SECTION 4.7. Limitation on Liens. The Company will not and will not permit
any Restricted Subsidiary to, directly or indirectly, create or permit to exist
any Liens except for Permitted Liens.
SECTION 4.8. Limitation on Sales of Assets and Subsidiary Stock. (a) The
Company shall not, and shall not permit any of its Restricted Subsidiaries to,
make any Asset Disposition unless:
(i) the Company or such Restricted Subsidiary receives consideration
at the time of such Asset Disposition at least equal to the fair market
value, as determined in good faith by the Company's Board of Directors
(including as to the value of all non-cash consideration), of the shares
and assets subject to such Asset Disposition;
(ii) at least 80% of the consideration thereof received by the Company
or such Restricted Subsidiary is in the form of cash or Cash Equivalents;
and
(iii) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by the Company (or such Restricted Subsidiary,
as the case may be) (A) first, to the extent the Company or any Restricted
Subsidiary elects (or is required by the terms of any senior secured
indebtedness), (x) to prepay, repay or purchase senior secured Indebtedness
or Notes or (y) to the investment in or acquisition of Additional Assets
within 270 days from the later of the date of such Asset Disposition or the
receipt of such Net Available Cash; (B) second, within 270 days from the
receipt of such Net Available Cash, to the extent of the balance of such
Net Available Cash after application in accordance with clause (A), to make
an offer to purchase Securities at 100% of their principal amount plus
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accrued and unpaid interest, if any, thereon; (C) third, within 90 days
after the later of the application of Net Available Cash in accordance with
clauses (A) and (B) and the date that is 270 days from the receipt of such
Net Available Cash, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B), to prepay, repay
or repurchase Indebtedness (other than Preferred Stock) of a Wholly-Owned
Subsidiary (in each case other than Indebtedness owed to the Company); and
(D) fourth, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A), (B) and (C), to (w) the
investment in or acquisition of Additional Assets, (x) the making of
Temporary Cash Investments, (y) the prepayment, repayment or purchase of
Indebtedness of the Company (other than Indebtedness owing to any
Subsidiary of the Company) or Indebtedness of any Subsidiary (other than
Indebtedness owed to the Company or any of its Subsidiaries) or (z) any
other purpose otherwise permitted under this Indenture, in each case within
the later of 45 days after the application of Net Available Cash in
accordance with clauses (A), (B) and (C) or the date that is 360 days from
the receipt of such Net Available Cash; provided, however, that, in
connection with any prepayment, repayment or purchase of Indebtedness
pursuant to clause (A), (B), (C) or (D) above, the Company or such
Restricted Subsidiary shall retire such Indebtedness and shall cause the
related loan commitment (if any) to be permanently reduced in an amount
equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions, the Company and its Restricted
Subsidiaries shall not be required to apply any Net Available Cash in
accordance herewith except to the extent that the aggregate Net Available
Cash from all Asset Dispositions which are not applied in accordance with
this covenant at any time exceeds $10.0 million. The Company shall not be
required to make an offer for Securities pursuant to this covenant if the
Net Available Cash available therefor (after application of the proceeds as
provided in clause (A)) is less than $10.0 million for any particular Asset
Disposition (which lesser amounts shall be carried forward for purposes of
determining whether an offer is required with respect to the Net Available
Cash form any subsequent Asset Disposition).
For the purposes of this covenant, the following will be deemed to be cash: (x)
the assumption by the transferee of senior indebtedness of the Company or senior
indebtedness of any Restricted Subsidiary of the Company and the release of the
Company or such Restricted Subsidiary from all liability on such senior
indebtedness in connection with such Asset Disposition (in each case the Company
shall, without further action, be deemed to have applied such assumed
Indebtedness in accordance with clause (A) of the preceding paragraph) and (y)
securities received by the Company or any Restricted Subsidiary of the Company
from the transferee that are promptly (and in any event within 60 days)
converted by the Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of
Securities pursuant to clause (a)(iii)(B) of this Section 4.8, the Company will
be required to purchase Securities tendered pursuant to an offer by the Company
for the Securities at a purchase price of 100% of their principal amount plus
accrued and unpaid interest, if any, to the purchase date in accordance with
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the procedures (including prorating in the event of oversubscription) set forth
in this Indenture. If the aggregate purchase price of the Securities tendered
pursuant to the offer is less than the Net Available Cash allotted to the
purchase of the Securities, the Company will apply the remaining Net Available
Cash in accordance with clauses (a) (iii)(C) or (D) of this Section 4.8 as
permitted under this Indenture.
(c) If the Company becomes obligated to make an Offer pursuant to this
Section 4.8, the Securities shall be purchased by the Company, at the option of
the holder thereof, in whole or in part in integral multiples of $1,000, on a
date that is not earlier than 30 days and not later than 60 days from the date
the notice is given to holders, or such later date as may be necessary for the
Company to comply with the requirements under the Exchange Act, subject to
proration in the event the amount Net Available Cash is less than the aggregate
Offered Price of all Securities tendered.
(d) Any notice pursuant to this Section 4.8 shall contain all instructions
and materials necessary to enable such Securityholders to tender Securities
pursuant to the offer required to be made pursuant to this Section 4.8 and shall
state the following terms:
(1) that the offer is being made pursuant to this Section 4.8 and that
all Securities tendered will be accepted for payment; provided, however,
that if the aggregate principal amount of Securities tendered in an offer
exceeds the aggregate amount of the offer, the Company shall select the
Securities to be purchased on a pro rata basis (with such adjustments as
may be deemed appropriate by the Company so that only Securities in
denominations of $1,000 or multiples thereof shall be purchased);
(2) the purchase price (including the amount of accrued interest) and
the purchase date (which shall be 30 days from the date of mailing of
notice of such offer, or such longer period as required by law) (the
"Proceeds Purchase Date");
(3) that any Securities not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor, any
Security accepted for payment pursuant to the offer shall cease to accrue
interest after the Proceeds Purchase Date;
(5) that Securityholders electing to have a Security purchased
pursuant to such offer will be required to surrender the Security, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day prior to
the Proceeds Purchase Date;
(6) that Securityholders will be entitled to withdraw their election
if the Paying Agent receives, not later than five Business Days prior to
the Proceeds Purchase Date, a
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telegram, telex, facsimile transmission or letter setting forth the name of
the Securityholder, the principal amount of the Securities the
Securityholder delivered for purchase and a statement that such
Securityholder is withdrawing his election to have such Security purchased;
and
(7) that Securityholders whose Securities are purchased only in part
will be issued new Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered; provided that each
Security purchased and each new Security issued shall be in an original
principal amount of $1,000 or integral multiples thereof;
On or before the Proceeds Purchase Date, the Company shall (i) accept for
payment Securities or portions thereof tendered pursuant to the offer which are
to be purchased in accordance with item (f)(1) above, (ii) deposit with the
Paying Agent U.S. Legal Tender sufficient to pay the purchase price plus accrued
interest, if any, of all Securities to be purchased and (iii) deliver to the
Trustee Securities so accepted together with an Officers' Certificate stating
the Securities or portions thereof being purchased by the Company. The Paying
Agent shall promptly mail to the Securityholders of Securities so accepted
payment in an amount equal to the purchase price plus accrued interest, if any.
For purposes of this Section 4.8, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of the Securities pursuant to an
offer pursuant to this Section 4.8 shall be returned by the Trustee to the
Company.
(e) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Indenture. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this Indenture by virtue thereof.
SECTION 4.9. Change of Control. (a) Upon the occurrence of a Change of
Control each Securityholder will have the right to require the Company to
repurchase all or any part of such Securityholder's Securities at a purchase
price in cash equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of repurchase (subject to the right of
Securityholders of record on the relevant Record Date to receive interest due on
the relevant Interest Payment Date).
(b) Within 30 days following any Change of Control, unless the Company has
mailed a redemption notice with respect to all the outstanding Securities in
connection with such Change of Control, the Company shall mail a notice to each
Securityholder with a copy to the Trustee stating:
(i) that a Change of Control has occurred and that such Securityholder
has the right to require the Company to purchase such Securityholder's
Securities at a purchase price
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in cash equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase (subject to the right of
Securityholders of record on a record date to receive interest on the
relevant Interest Payment Date);
(ii) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(iii) the procedures determined by the Company, consistent with the
Indenture, that a Securityholder must follow in order to have its
Securities repurchased.
(c) Securityholders electing to have a Security repurchased will be
required to surrender the Security, with the form entitled "Option of
Securityholder to Elect Purchase" on the reverse of the Security completed, to
the Company at the address specified in the notice at least 10 Business Days
prior to the repurchase date. Securityholders will be entitled to withdraw their
election if the Trustee or the Company receives not later than three Business
Days prior to the repurchase date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Securityholder, the principal amount of the
Security which was delivered for repurchase by the Securityholder and a
statement that such Securityholder is withdrawing his election to have such
Security purchased.
(d) On the repurchase date, all Securities repurchased by the Company under
this Section 4.9 shall be delivered by the Trustee for cancellation, and the
Company shall pay the repurchase price plus accrued and unpaid interest, if any,
to the Securityholders entitled thereto.
(e) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Indenture relative to the
Company's obligation to make an offer to repurchase the Securities as a result
of a Change of Control, the Company will comply with the applicable securities
laws and regulations and will not be deemed to have breached its obligations
under such provisions of the Indenture by virtue thereof.
SECTION 4.10. Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any such Restricted Subsidiary to
(i) pay dividends or make any other distributions on its Capital Stock or pay
any Indebtedness or other obligation owed to the Company, (ii) make any loans or
advances to the Company or (iii) transfer any of its property or assets to the
Company, except: (a) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date, including the New Credit Facility
and the indenture between COMFORCE Operating, Inc. and Wilmington Trust Company,
as trustee, dated as of November 26, 1997 (the "Notes Indenture"); (b) any
encumbrance or restriction with respect to such a Restricted Subsidiary pursuant
to an agreement
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relating to any Indebtedness issued by such Restricted Subsidiary on or prior to
the date on which such Restricted Subsidiary was acquired by the Company and
outstanding on such date (other than Indebtedness Incurred in anticipation of,
or to provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant to which
such Restricted Subsidiary became a Restricted Subsidiary of the Company or was
acquired by the Company); (c) any encumbrance or restriction with respect to
such a Restricted Subsidiary pursuant to an agreement evidencing Indebtedness
Incurred without violation of this Indenture or effecting a refinancing of
Indebtedness issued pursuant to an agreement referred to in clauses (a) or (b)
or this clause (c) or contained in any amendment to an agreement referred to in
clauses (a) or (b) or this clause (c); provided, however, that the encumbrances
and restrictions with respect to such Restricted Subsidiary contained in any of
such agreement, refinancing agreement or amendment, taken as a whole, are no
less favorable to the holders of the Securities in any material respect, as
determined in good faith by the Board of Directors of the Company, than
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in agreements in effect at, or entered into on, the Issue Date; (d) in
the case of clause (iii), any encumbrance or restriction (A) that restricts in a
customary manner the subletting, assignment or transfer of any property or asset
that is a lease, license, conveyance or contract or similar property or asset,
(B) by virtue of any transfer of, agreement to transfer, option or right with
respect to, or Lien on, any property or assets of the Company or any Restricted
Subsidiary not otherwise prohibited by this Indenture, (C) that is included in a
licensing agreement to the extent such restrictions limit the transfer of the
property subject to such licensing agreement or (D) arising or agreed to in the
ordinary course of business and that does not, individually or in the aggregate,
detract from the value of property or assets of the Company or any of its
Subsidiaries in any manner material to the Company or any such Restricted
Subsidiary; (e) in the case of clause (iii) above, restrictions contained in
security agreements, mortgages or similar documents securing Indebtedness of a
Restricted Subsidiary to the extent such restrictions restrict the transfer of
the property subject to such security agreements; (f) in the case of clause
(iii) above, any instrument governing or evidencing Indebtedness of a Person
acquired by the Company or any Restricted Subsidiary of the Company at the time
of such acquisition, which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person so
acquired; provided, however, that such Indebtedness is not incurred in
connection with or in contemplation of such acquisition; (g) any restriction
with respect to such a Restricted Subsidiary imposed pursuant to an agreement
entered into for the sale or disposition of all or substantially all the Capital
Stock or assets of such Restricted Subsidiary pending the closing of such sale
or disposition; and (h) encumbrances or restrictions arising or existing by
reason of applicable law.
SECTION 4.11. Limitation on Sale/Leaseback Transactions. The Company will
not, and will not permit any Restricted Subsidiary to, directly or indirectly,
enter into, Guarantee or otherwise become liable with respect to any
Sale/Leaseback Transaction with respect to any property or assets unless (i) the
Company or such Restricted Subsidiary, as the case may be, would be entitled,
pursuant to this Indenture, to Incur Indebtedness secured by a Permitted Lien on
such property or assets in an amount equal to the Attributable Indebtedness with
respect to such
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Sale/Leaseback Transaction, (ii) the Net Cash Proceeds from such Sale/Leaseback
Transaction are at least equal to the fair market value of the property or
assets subject to such Sale/Leaseback Transaction (such fair market value
determined, in the event such property or assets have a fair market value in
excess of $1.0 million, no more than 30 days prior to the effective date of such
Sale/Leaseback Transaction, by the Board of Directors of the Company as
evidenced by a resolution of such Board) and (iii) the net cash proceeds of such
Sale/Leaseback Transaction are applied in accordance with the provisions
described under Section 4.11.
SECTION 4.12. Limitation on Designations of Unrestricted Subsidiaries. The
Company may designate any Subsidiary of the Company (other than a Subsidiary of
the Company which owns Capital Stock of a Restricted Subsidiary) as an
"Unrestricted Subsidiary" under this Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation; and
(b) the Company would be permitted under this Indenture to make an
Investment at the time of Designation (assuming the effectiveness of such
Designation) in an amount (the "Designation Amount") equal to the sum of
(i) fair market value of the Capital Stock of such Subsidiary owned by the
Company and the Restricted Subsidiaries on such date and (ii) the aggregate
amount of other Investments of the Company and the Restricted Subsidiaries
in such Subsidiary on such date; and
(c) the Company would be permitted to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the covenant
described under Section 4.3 of this Indenture at the time of Designation
(assuming the effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
described under Section 4.4 of this Indenture for all purposes of this Indenture
in the Designation Amount. The Company shall not, and shall not permit any
Restricted Subsidiary to, at any time (x) provide direct or indirect credit
support for or a guarantee of any Indebtedness of any Unrestricted Subsidiary
(including of any undertaking, agreement or instrument evidencing such
Indebtedness), (y) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary or (z) be directly or indirectly liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the occurrence
of a default with respect to any Indebtedness of any Unrestricted Subsidiary
(including any right to take enforcement action against such Unrestricted
Subsidiary), except, in the case of clause (x) or (y), to the extent permitted
under the covenant described under Section 4.4 of this Indenture.
The Company may revoke any Designation of a Subsidiary as an Unrestricted
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Subsidiary (a "Revocation"), whereupon such Subsidiary shall then constitute a
Restricted Subsidiary, if:
(a) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of this
Indenture.
All Designations and Revocations must be evidenced by Board Resolutions of
the Company delivered to the Trustee certifying compliance with the foregoing
provisions.
SECTION 4.13. Further Instruments and Acts. Upon request of the Trustee,
the Company will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.14. Use of Proceeds. The Company shall use the net proceeds from
the sale of the Securities to consummate the transactions contemplated in the
section of the Offering Memorandum entitled "Use of Proceeds".
SECTION 4.15. Compliance Certificates. (a) The Company shall deliver to the
Trustee, within 120 days after the end of each fiscal year, an Officers'
Certificate signed by its principal executive officer, principal financial
officer or principal accounting officer stating that a review of the activities
of the Company and its Subsidiaries during the preceding fiscal year has been
made under the supervision of the signing Officers with a view to determining
whether each has kept, observed, performed and fulfilled its obligations under
this Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge each has kept, observed,
performed and fulfilled each and every covenant contained in this Indenture and
is not in default in the performance or observance of any of the terms,
provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action each is taking or proposes
to take with respect thereto).
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.2 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements nothing has come to
their attention which would lead them to believe that the Company has violated
any provisions of Article 4 or 5 or that there exists a Default or Event of
Default under Article 6 of this Indenture insofar as they relate to accounting
matters or, if any such violation has occurred, specifying the nature and period
of existence thereof, it being understood that such accountants shall not be
liable directly or indirectly
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to any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Securities are outstanding,
deliver to the Trustee, within 5 days of any Officer becoming aware of any
Default or Event of Default, an Officers' Certificate specifying such Default or
Event of Default and what action the Company is taking or proposes to take with
respect thereto.
(d) The Company shall also comply with TIA ss. 314(a)(4).
SECTION 4.16. Maintenance of Office or Agency. (a) The Company shall
maintain in the Borough of Manhattan, in the City of New York, an office or
agency (which may be an office of the Trustee or an affiliate of the Trustee,
Registrar or co-registrar) where Securities may be surrendered for registration
of transfer or exchange and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Company shall
give prior written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee.
(b) The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, in the City of New York for such purposes. The Company
shall give prior written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.
(c) The Company hereby designates the Trustee at 101 Barclay Street, 21W,
New York, New York 10286, as one such office or agency of the Company in
accordance with Section 2.3.
SECTION 4.17. Taxes. The Company shall pay, prior to delinquency, all
material taxes, assessments, and governmental levies; provided, however, that
there shall not be required to be paid or discharged any such tax, assessment or
charge, the amount, applicability or validity of which is being contested in
good faith by appropriate proceedings and for which adequate provision has been
made or for which adequate reserves, to the extent required under GAAP, have
been taken.
SECTION 4.18. Stay, Extension and Usury Laws. The Company covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that may affect the covenants or the performance of this Indenture
(including, but not limited to, the payment of the principal of or interest on
the Securities); and the Company (to the extent that it may lawfully do so)
hereby expressly waive all
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benefit or advantage of any such law, and covenant that they shall not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and permit the execution of
every such power as though no such law has been enacted.
SECTION 4.19. Corporate Existence. Subject to Article V, the Company shall
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence, and the corporate existence of each
Subsidiary, in accordance with the respective organizational documents (as the
same may be amended from time to time) of each Subsidiary and the rights
(charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any Subsidiary, if the Board of Directors of the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries, taken as a whole,
and that the loss thereof is not adverse in any material respect to the
Securityholders.
ARTICLE V
SUCCESSORS
SECTION 5.1. Mergers and Consolidations. The Company may not, in a single
transaction or through a series of related transactions, consolidate or merge
with or into or sell, assign, transfer, lease, convey or otherwise dispose of
(or permit any of its Restricted Subsidiaries to sell, assign, transfer, lease,
convey or otherwise dispose of) all or substantially all of the Company's and
its Restricted Subsidiaries' assets (determined on a consolidated basis for the
Company and its Restricted Subsidiaries taken as a whole) in one or more related
transactions to another Person unless:
(i) the resulting, surviving or transferee Person (the "Successor
Issuer") shall be a corporation, partnership, trust or limited liability
company organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and the Successor
Issuer (if not the Company) shall expressly assume, by supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to
the Trustee, all the obligations of the Company under the Securities and
this Indenture;
(ii) immediately after giving effect to such transaction (and treating
any Indebtedness that becomes an obligation of the Successor Issuer or any
Subsidiary of the Successor Issuer as a result of such transaction as
having been incurred by the Successor Issuer or such Restricted Subsidiary
at the time of such transaction), no Default or Event of Default shall have
occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Issuer (A) shall have a Consolidated Net Worth equal or greater
to the Consolidated Net Worth of the Company immediately prior to such
transaction and (B) would be able to incur at least an
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additional $1.00 of Indebtedness pursuant to Section 4.3(a); and
(iv) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture.
SECTION 5.2. Successor Issuer Substituted. The Successor Issuer will
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture, but, in the case of a lease of all or
substantially all its assets, the Company will not be released from the
obligation to pay the principal of and interest on the Securities.
Notwithstanding clauses (ii) and (iii), of Section 5.1, any Restricted
Subsidiary of the Company may consolidate with, merge into or transfer all or
part of its properties and assets to the Company.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.1. Events of Default. An "Event of Default" will occur under this
Indenture if:
(i) there shall be a default in the payment of any interest on the
Securities when it becomes due and payable and continuance of such default
for a period of 30 days;
(ii) there shall be a default in the payment of the principal of (or
premium, if any, on) the Securities at their Stated Maturity, upon optional
redemption, upon required repurchase, upon declaration or otherwise;
(iii) the failure by the Company or any of its Subsidiaries to comply
with its obligations under Article V of this Indenture;
(iv) the failure by the Company or any of its Subsidiaries to comply
for 30 days after receiving notice of such noncompliance with any of its
obligations under Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9,
4.10, 4.11, 4.12, 4.15 and 4.19 above (in each case, other than a failure
to purchase Securities, which shall constitute an Event of Default under
clause (ii) above);
(v) the failure by the Issuer to comply for 60 days after receiving
notice of such non-compliance with its other agreements contained in this
Indenture;
(vi) Indebtedness of the Company or any Restricted Subsidiary is not
paid within any applicable grace period after its Stated Maturity or is
accelerated by the holders thereof
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because of a default under the terms of such Indebtedness and the total
amount of such Indebtedness unpaid or accelerated exceeds $1.0 million and
such default shall not have been cured or such acceleration rescinded after
a 10-day period;
(vii) the Company or a Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against in an
involuntary case;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property;
(D) makes a general assignment for the benefit of its creditors;
(E) consents to or acquiesces in the institution of a bankruptcy
or an insolvency proceeding against it, or
(F) takes any corporate action to authorize or effect any of the
foregoing;
or takes any comparable action under any foreign laws relating to
insolvency;
(viii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of the property of the Company
or any of its Significant Subsidiaries; or
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary; or any similar relief is granted under any
foreign laws and in each case the order, decree or relief remains
unstayed and in effect for 60 days.
(ix) any judgment or decree for the payment of money in excess of $1.0
million (to the extent not covered by insurance) is rendered against the
Issuer or a Significant Subsidiary and such judgment or decree shall remain
undischarged or unstayed for a period of 60 days after such judgment
becomes final and non-appealable; or
(x) the Pledge Agreement ceases to be in full force and effect (except
as contemplated by the terms of this Indenture) or the Company denies or
disaffirms its
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obligation under the Pledge Agreement and such default continues for 10
days.
Notwithstanding anything to the contrary contained herein, a Default under
clause (iv) or (v) will not constitute an Event of Default until the Trustee or
Holders of 25% in principal amount of all outstanding series of Securities,
acting as a single class, notify the Company of the Default and the Company does
not cure such Default within the time specified in such clause (iv) or (v) after
receipt of such notice.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
The term "Custodian" means any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.
SECTION 6.2. Acceleration. If an Event of Default (other than an Event of
Default specified in Section 6.1(vii) or (viii)) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of all outstanding
series of Securities, voting as a single class, by notice to the Company may
declare the principal of and premium and accrued and unpaid interest, if any, on
all the Securities to be due and payable. Upon such declaration, such principal
and premium and accrued and unpaid interest shall be due and payable
immediately. If an Event of Default specified in Section 6.1(vii) or (viii)
occurs and is continuing, the principal of and premium and accrued and unpaid
interest on all the Securities will become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holders.
The Holders of a majority in principal amount of all outstanding series of
Securities, voting as a single class, by written notice to the Trustee may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of acceleration. No such rescission shall affect any
subsequent Default or Event of Default or impair any right consequent thereto.
SECTION 6.3. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee and the Securityholders may pursue any available remedy
to collect the payment of principal of or interest on the Securities or to
enforce the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent
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permitted by law.
SECTION 6.4. Waiver of Past Defaults. The Holders of a majority in
principal amount of all outstanding series of Securities, voting as a single
class, by notice to the Trustee may waive an existing Default or Event of
Default and its consequences except (i) a Default or Event of Default in the
payment of the principal of, premium, if any, or interest on a Security or (ii)
a Default or Event of Default in respect of a provision that under Section 9.2
cannot be amended without the consent of each Securityholder affected. When a
Default or Event of Default is waived, it is deemed cured, but no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any consequent right.
SECTION 6.5. Control by Majority. Subject to Section 2.9, the Holders of a
majority in principal amount of all outstanding series of Securities, voting as
a single class, may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture or, subject to Section 7.1,
that the Trustee determines is unduly prejudicial to the rights of other
Securityholders or would involve the Trustee in personal liability; provided,
however, that the Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction. Prior to taking any action
hereunder, the Trustee shall be entitled to indemnification satisfactory to it
in its sole discretion against all losses and expenses caused by taking or not
taking such action.
SECTION 6.6. Limitation on Suits. A Securityholder may not pursue any
remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in outstanding principal amount of all
outstanding series of Securities, voting as a single class, make a written
request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in outstanding principal amount of all
outstanding series of Securities, voting as a single class, do not give the
Trustee a direction that, in the opinion of the Trustee, is inconsistent
with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another
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Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.7. Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
principal of and interest on the Securities held by such Holder, on or after the
respective due dates expressed in the Securities, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.8. Collection Suit by Trustee. If an Event of Default specified
in Section 6.1(i) or (ii) or an acceleration pursuant to Section 6.2 occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company or any other obligor of the Securities
for the whole amount then due and owing (together with interest on any unpaid
interest to the extent lawful) and the amounts provided for in Section 7.7.
SECTION 6.9. Trustee May File Proofs of Claim. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and the Securityholders allowed in
any judicial proceedings relative to the Company, its Subsidiaries or their
respective creditors or properties and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.7.
SECTION 6.10. Priorities. If the Trustee collects any money or property
pursuant to this Article VI, it shall pay out the money or property in the
following order:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: if the Securityholders are forced to proceed against the Company
directly without the Trustee, to the Securityholders for their collection costs;
THIRD: to Securityholders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal and
interest, respectively; and
FOURTH: to the Company.
The Trustee, upon prior notice to the Company, may fix a record date and
payment date for any payment to Securityholders pursuant to this Section 6.10.
At least 15 days before such record date, the Company shall mail to each
Securityholder and the Trustee a notice that states the record date, the payment
date and amount to be paid.
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SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any
right or remedy under this Indenture or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court in its discretion may require
the filing by any party litigant in the suit of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a
suit by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10%
in outstanding principal amount of the Securities.
ARTICLE VII
TRUSTEE
SECTION 7.1. Duties of Trustee. (a) If a Default or an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of a Default or an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture or the TIA and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture (but need
not confirm or investigate the accuracy of mathematical calculations or
other facts stated therein).
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
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(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or powers,
if it shall have reasonable grounds to believe that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
(h) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section and to the provisions of the TIA.
SECTION 7.2. Rights of Trustee. Subject to TIA ss. 315(a) through (d):
(a) The Trustee may rely and shall be protected in acting or
refraining from acting on any document believed by it to be genuine and to
have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel which shall conform to
Section 12.5. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on the Officers' Certificate or
Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute willful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of
such counsel.
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(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Securityholders, unless such Securityholders shall have
offered to the Trustee security or indemnity reasonably satisfactory to the
Trustee against the losses, expenses and liabilities that might be incurred
by it in compliance with such request or direction.
(g) The Trustee shall not be liable with respect to any action taken
or omitted to be taken by it good faith in accordance with the direction of
the Securityholders of a majority in aggregate principal amount of the
Securities at the time outstanding relating to the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
involving the exercise of any right, duty, trust or power conferred upon
the Trustee under the TIA or this Indenture.
(h) The Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact
such a default is received by the Trustee at the Corporate Trust Office of
the Trustee, and such notice references the Debentures and this Indenture.
SECTION 7.3. Individual Rights of Trustee. The Trustee, in its individual
or any other capacity, may become the owner or pledgee of Securities and may
make loans to, accept deposits from, perform services for and otherwise deal
with the Company, or their Affiliates with the same rights it would have if it
were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent
may do the same with like rights. However, the Trustee must comply with Sections
7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be responsible for
and makes no representation as to the validity or adequacy of this Indenture or
the Securities, it shall not be accountable for the Company's use of the
proceeds from the Securities, and it shall not be responsible for any statement
of the Company in this Indenture or in any document issued in connection with
the sale of the Securities or in the Securities other than the Trustee's
certificate of authentication.
SECTION 7.5. Notice of Defaults. If a Default or Event of Default occurs
and is continuing and if a Responsible Officer has actual knowledge thereof, the
Trustee shall mail to each Securityholder in the manner and to the extent
provided in TIA ss. 313(a) notice of the Default or Event of Default within 90
days after it occurs, unless such Default or Event of Default has been cured.
Except in the case of a Default or Event of Default in payment of principal,
premium, if any, or interest on any Security (including payments pursuant to the
optional redemption or required repurchase provisions of such Security, if any),
the Trustee may withhold the notice if and so long as its board of directors,
the executive committee of its board of directors or a committee of its Trust
Officers in good faith determines that withholding the notice is in the
interests of Securityholders.
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SECTION 7.6. Reports by Trustee to Holders. As promptly as practicable and
within 60 days after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder, if required by TIA ss. 313(a) a brief report
dated as of such May 15 that complies with TIA ss. 313(a). The Trustee also
shall comply with TIA ss. 313(b), (c) and (d).
A copy of each report at the time of its mailing to Securityholders shall
be filed with the Commission if required by law and each stock exchange (if any)
on which the Securities are listed. The Company agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.7. Compensation and Indemnity. The Company shall pay to the
Trustee from time to time such compensation for its services as the Company and
the Trustee shall from time to time agree in writing. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses and advances incurred or made by it, including but not
limited to costs of collection, costs of preparing and reviewing reports,
certificates and other documents, costs of preparation and mailing of notices to
Securityholders and reasonable costs of counsel retained by the Trustee in
connection with the delivery of an Opinion of Counsel or otherwise, in addition
to the compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and experts. The Company shall indemnify the Trustee for,
and hold it harmless against, any and all loss, liability or expense (including
reasonable attorneys' fees) incurred by it in connection with the administration
of this trust and the performance of its duties hereunder and under the
Securities, including the costs and expenses of enforcing this Indenture and the
Securities (including this Section 7.7) and of defending itself against any
claims or liabilities (whether asserted by any Securityholder, the Company or
otherwise) and of complying with any process served upon it or any of its
officers in connection with the exercise or performance of any of its powers or
duties under this Indenture. The Trustee shall notify the Company promptly of
any claim for which it may seek indemnity. Failure by the Trustee to so notify
the Company shall not relieve the Company of its obligations hereunder. The
Company shall defend the claim and the Trustee may have separate counsel and the
Company shall pay the fees and expenses of such counsel. The Company need not
reimburse any expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own willful misconduct, negligence
or bad faith.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities. The Trustee's right to
receive payment of any amounts due under this Section 7.7 shall not be
subordinate to any other liability or indebtedness of the Company.
The Company's payment obligations pursuant to this Section shall survive
the
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discharge of this Indenture. When the Trustee incurs expenses after the
occurrence of a Default specified in Section 6.1(vii) or (viii) with respect to
the Company, the expenses are intended to constitute expenses of administration
under any Bankruptcy Law.
SECTION 7.8. Replacement of Trustee. The Trustee may resign at any time by
so notifying the Company in writing at least 30 days in advance of such
resignation. The Holders of a majority in principal amount of the Securities may
remove the Trustee by so notifying the Trustee in writing and may appoint a
successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed by the Company or by the Holders of a
majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Securityholders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, subject to the lien provided for in Section 7.7.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.8.
If the Trustee fails to comply with Section 7.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section,
the Company's obligations under Section 7.7 shall continue for the benefit of
the retiring Trustee.
If an instrument of acceptance by a successor Trustee shall not have been
delivered
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to the retiring Trustee and the Company within 60 days after the giving of such
notice of removal or resignation, the Trustee being removed or resigning may
petition, at the expense of the Company, any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
SECTION 7.9. Successor Trustee by Merger. If the Trustee consolidates with,
merges or converts into, or transfers all or substantially all its corporate
trust business or assets to, another corporation or banking association, the
resulting, surviving or transferee corporation without any further act shall be
the successor Trustee.
In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture, any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Indenture shall at all
times have a Trustee that satisfies the requirements of TIA ss. 310(a). The
Trustee shall have a combined capital and surplus of at least $100 million as
set forth in its most recent published annual report of condition. The Trustee
shall comply with TIA ss. 310(b); provided, however, that there shall be
excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures
under which other securities or certificates of interest or participation in
other securities of the Company are outstanding if the requirements for such
exclusion set forth in TIA ss. 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 311(a) to the extent indicated.
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1. Discharge of Liability on Securities; Defeasance. (a) When (i)
the Company delivers to the Trustee all outstanding Securities (other than
Securities replaced pursuant to Section 2.7 hereof) canceled or for cancellation
or (ii) all outstanding Securities have become due and payable and the Company
irrevocably deposits with the Trustee funds sufficient to pay at maturity all
outstanding Securities, including interest thereon (other than Securities
replaced pursuant to Section 2.7 hereof), and if in either case the Company pays
all other sums payable hereunder by the Company, then this Indenture shall,
subject to Sections 8.1(e) and 8.6 hereof, cease
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to be of further effect. The Trustee shall acknowledge satisfaction and
discharge of this Indenture on demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel and at the cost and expense of the
Company.
(b) Subject to Sections 8.1(e), 8.2 and 8.6 hereof, the Company at any time
may terminate (i) all its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) all obligations under Sections 4.3, 4.4,
4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.15(a), (b) and (c), 4.19, or
5.1(iii) and (iv) and the operation of Sections 6.1(vi) and 6.1(ix) (as well as
6.1(vii) and 6.1(viii) hereof but only with respect to Significant Subsidiaries)
("covenant defeasance option"). The Company may exercise its legal defeasance
option notwithstanding its prior exercise of its covenant defeasance option.
(c) If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Section 6.1(iv),
6.1(vi), 6.1(vii), (viii) or 6.1(ix), or because of the failure of the Company
to comply with Sections 5.1(iii) or 5.1(iv).
(d) Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(e) Notwithstanding clauses (a) and (b) above, the Company's obligations in
Sections 2.3, 2.4, 2.5, 2.6, 2.7, 7.7, 7.8, 8.4, 8.5 and 8.6 hereof shall
survive until the Securities have been paid in full. Thereafter, the Company's
obligations in Sections 7.7, 8.4 and 8.5 hereof shall survive.
SECTION 8.2. Conditions to Defeasance. (a) The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(i) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations in amounts (including interest, but without
consideration of any reinvestment of such interest) and maturities
sufficient, but in the case of the legal defeasance option only, not more
than such amounts (as certified by a nationally recognized firm of
independent public accountants), to pay and discharge at their Stated
Maturity (or such earlier redemption date as the Company shall have
specified to the Trustee) the principal of, premium, if any, and interest
on all outstanding Securities to maturity or redemption, as the case may
be, and to pay all of the sums payable by it hereunder; provided, that the
Trustee shall have been irrevocably instructed to apply such money or the
proceeds of such U.S. Government Obligations to the payment of said
principal, premium, if any, and interest with respect to the Securities;
(ii) in the case of the legal defeasance option only, 123 days pass
after the deposit is made and during the 123 day period no Default
specified in Section 6.1(vii) or (viii) hereof
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with respect to the Company occurs which is continuing at the end of the
period;
(iii) no Default has occurred and is continuing on the date of such
deposit and after giving effect thereto;
(iv) the deposit does not constitute a default under any other
agreement binding on the Company;
(v) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940, as amended;
(vi) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) since the date of this Indenture there has
been a change in the applicable Federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Securityholders will not recognize income, gain or loss for
Federal income tax purposes as a result of such defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance had not
occurred;
(vii) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders will not recognize income, gain or loss for Federal income
tax purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; and
(viii) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent to
the defeasance and discharge of the Securities as contemplated by this
Article VIII have been complied with.
(b) In order to have money available on a payment date to pay principal,
premium, if any, or interest on the Securities, the U.S. Government Obligations
deposited pursuant to preceding clause (a) shall be payable as to principal or
interest at least one Business Day before such payment date in such amounts as
shall provide the necessary money. U.S. Government Obligations shall not be
callable at the issuer's option.
(c) Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article III hereof.
SECTION 8.3. Application of Trust Money. The Trustee shall hold in trust
money
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or U.S. Government Obligations deposited with it pursuant to this Article VIII.
It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal, premium, if any, and interest on the Securities.
SECTION 8.4. Repayment to the Company. (a) The Trustee and the Paying Agent
shall promptly pay to the Company upon written request any excess money or
securities held by them at any time; provided, however, that the Trustee shall
not pay any such excess to the Company unless the amount remaining on deposit
with the Trustee, after giving effect to such transfer are sufficient to pay
principal, premium, if any, and interest on the outstanding Securities, which
amount shall be certified by independent public accountants.
(b) The Trustee and the Paying Agent shall pay to the Company upon written
request any money held by them for the payment of principal, premium, if any, or
interest that remains unclaimed for two years after the date upon which such
payment shall have become due; provided, however, that the Company shall have
either caused notice of such payment to be mailed to each Securityholder
entitled thereto no less than 30 days prior to such repayment or within such
period shall have published such notice in a financial newspaper of widespread
circulation published in the City of New York. After payment to the Company,
Securityholders entitled to the money must look to the Company for payment as
general creditors unless an applicable abandoned property law designates another
Person, and all liability of the Trustee and such Paying Agent with respect to
such money shall cease.
SECTION 8.5. Indemnity for Government Obligations. The Company shall pay
and shall indemnify the Trustee against any tax, fee or other charge imposed on
or assessed against deposited U.S. Government Obligations or the principal and
interest received on such U.S. Government Obligations.
SECTION 8.6. Reinstatement. If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with this Article 8
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's Obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article VIII until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with this Article VIII; provided, however, that if the Company has made any
payment of principal of, premium, if any, or interest on any Securities because
of the reinstatement of its Obligations, the Company shall be subrogated to the
rights of the Securityholders to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
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ARTICLE IX
AMENDMENTS
SECTION 9.1. Without Consent of Holders. (a) The Company and the Trustee
may amend this Indenture or the Securities without notice to or consent of any
Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
provided, that such amendment or supplement does not, as evidenced by an
Opinion of Counsel delivered to the Trustee, adversely affect the rights of
any Securityholder in any material respect;
(2) to comply with Article V;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to provide additional security for the Securities;
(5) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(6) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA;
(7) to make any change that does not adversely affect the rights of
any Securityholder;
(8) to surrender any right or power conferred upon the Company;
(9) to provide for a replacement Trustee under Section 7.8 hereof; or
(10) to provide for the issuance of the Exchange Securities, which
will have terms substantially identical in all material respects to the
Initial Securities (except that the transfer restrictions contained in the
Initial Securities will be modified or eliminated, as appropriate), and
which will be treated, together with any outstanding Initial Securities, as
a single issue of securities;
provided, that the Company has delivered to the Trustee an Opinion of Counsel
stating that any such amendment or supplement complies with the provisions of
this Section 9.1.
(b) Upon the request of the Company accompanied by a Board Resolution of
its Board of Directors authorizing the execution of any such supplemental
indenture, and upon receipt
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by the Trustee of the documents described in Section 10.5, the Trustee shall
join with the Company in the execution of any supplemental indenture authorized
or permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations which may be therein contained, but the Trustee
shall not be obligated to enter into such supplemental indenture which affects
its own rights, duties or immunities under this Indenture or otherwise.
(c) After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment.
However, the failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.2. With Consent of Holders. (a) The Company and the Trustee may
amend this Indenture or the Securities with the consent of the Holders of at
least a majority in outstanding principal amount of all outstanding series of
Securities, voting as a single class, (including consents obtained in connection
with a tender offer or exchange offer for the Securities) and any existing
Default and its consequences (including, without limitation, an acceleration of
the Securities) or compliance with any provision of this Indenture or the
Securities may be waived with the consent of the Holders of a majority in
principal amount of, voting as a single class, all outstanding series of
Securities (including consents obtained in connection with a tender offer or
exchange offer for the Securities). Furthermore, subject to Sections 6.4 and
6.7, the Holders of a majority in aggregate principal amount of all outstanding
series of Securities, voting as a single class, (including consents obtained in
connection with a tender offer or exchange offer for the Securities) may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Securities. However, without the consent of each Holder of a
Security then outstanding, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption or repurchase of
any Security or change the time at which any Security may or shall be
redeemed or repurchased in accordance with this Indenture;
(5) make any Security payable in money other than that stated in the
Security;
(6) modify or affect in any manner adverse to the Holders, the terms
and conditions of the obligation of the Company for the due and punctual
payment of the principal of or interest on Securities or to institute suit
for the enforcement of any payment on or with respect to the Securities;
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(7) waive a Default or Event of Default in the payment of principal
of, premium, if any, or interest on, or redemption payment with respect to,
any Security (excluding any principal or interest due solely as a result of
the occurrence of a declaration of an Event of Default); or
(8) make any change in Section 6.4 or 6.7 or the third sentence of
this Section;
(9) amend, change or modify in any material respect the obligation of
the Company to make and consummate a Change of Control Offer in the event
of a Change of Control or make and consummate an offer with respect to any
Asset Sale that has been consummated or modify any of the provisions or
definitions with respect thereto;
(10) modify or change any provision of the Indenture or the related
definitions affecting the ranking of the Securities in a manner which
adversely affects the Holders; or
(11) make any change in the amendment provisions which require each
holder's consent or in the waiver provisions.
(b) Upon the request of the Company accompanied by a Board Resolution of
its respective Board of Directors authorizing the execution of any such
supplemental indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Securityholders as aforesaid,
and upon receipt by the Trustee of the documents described in Section 9.6, the
Trustee shall join with the Company in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
supplemental indenture.
(c) It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
(d) After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 9.3. Compliance with Trust Indenture Act. Every amendment to this
Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents and Waivers. A consent to an
amendment or a waiver by a Holder of a Security shall bind the Holder and every
subsequent Holder of that Security or portion of the Security that evidences the
same debt as the consenting Holder's Security, even if notation of the consent
or waiver is not made on the Security. However, any such Holder or subsequent
Holder may revoke the consent or waiver as to such Holder's Security or
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portion of the Security if the Trustee receives the notice of revocation before
the date the amendment or waiver becomes effective. After an amendment or waiver
becomes effective, it shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall become valid or effective more than 120
days after such record date.
SECTION 9.5. Notation on or Exchange of Securities. If an amendment changes
the terms of a Security, the Trustee may require the Holder of the Security to
deliver it to the Trustee. The Trustee may place an appropriate notation on the
Security regarding the changed terms and return it to the Holder. Alternatively,
if the Company or the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new Security that
reflects the changed terms. Failure to make the appropriate notation or to issue
a new Security shall not affect the validity of such amendment.
SECTION 9.6. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article IX if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may, but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.1) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the provision required by
the TIA shall control. If any provision of this Indenture modifies or excludes
any provision of the TIA that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or excluded,
as the case may be.
SECTION 10.2. Notices. Any notice or communication shall be in writing and
delivered in person or mailed by first-class mail addressed as follows:
if to the Company:
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COMFORCE Operating Inc.
2001 Marcus Avenue
Lake Success, New York 11042
Attention: Chief Financial Officer
if to the Trustee:
The Bank of New York
101 Barclay Street, 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed to
the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
All notices and communications (other than those sent to Securityholders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed.
Any notice or communication to a Securityholder shall be mailed by first
class mail, postage prepaid, to its address shown on the register kept by the
Registrar. Any notice or communication shall also be so mailed to any Person
described in TIA ss. 313(c), to the extent required by the TIA. Failure to mail
a notice or communication to a Securityholder or any defect in it shall not
affect its sufficiency with respect to other Securityholders.
If a notice or communication is mailed to any Person in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Securityholders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 10.3. Communication by Holders with other Holders. Securityholders
may communicate pursuant to TIA ss. 312(b) with other Securityholders with
respect to their rights under this Indenture or the Securities. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA ss.
312(c).
SECTION 10.4. Certificate and Opinion as to Conditions Precedent. Upon any
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<PAGE>
request or application by the Company to the Trustee to take or refrain from
taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.5) stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to
the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.5) stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
SECTION 10.5. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with and such
other opinions as the Trustee may reasonably request.
SECTION 10.6. When Securities Disregarded. In determining whether the
Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Securities outstanding at the time shall be
considered in any such determination.
SECTION 10.7. Rules by Trustee, Paying Agent and Registrar. The Trustee may
make reasonable rules for action by or at a meeting of Securityholders. The
Registrar and the Paying Agent may make reasonable rules for their functions.
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<PAGE>
SECTION 10.8. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or
a day on which banking institutions are not required to be open in the State of
New York, or the State in which the Corporate Trust Office is located. If a
payment date is a Legal Holiday, payment shall be made on the next succeeding
day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If a regular record date is a Legal Holiday, the record date
shall not be affected.
SECTION 10.9. Governing Law. This Indenture and the Securities shall be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 10.10. No Recourse Against Others. A past, present or future
director, officer, employee or stockholder, as such, of the Company shall not
have any liability for any obligations of the Company under the Securities or
this Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
shall waive and release all such liability. The waiver and release shall be part
of the consideration for the issue of the Securities.
SECTION 10.11. Successors. All agreements of the Company in this Indenture
and the Securities shall bind their respective successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 10.12. Multiple Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.
SECTION 10.13. Variable Provisions. The Company initially appoints the
Trustee as Paying Agent and Registrar and custodian with respect to any Global
Securities.
SECTION 10.14. Qualification of Indenture. The Company shall qualify this
Indenture under the TIA in accordance with the terms and conditions of the
Registration Rights Agreement and shall pay all reasonable costs and expenses
(including attorneys' fees for the Company, the Trustee and the Holders)
incurred in connection therewith, including, but not limited to, costs and
expenses of qualification of the Indenture and the Securities and printing this
Indenture and the Securities. The Trustee shall be entitled to receive from the
Company any such Officers' Certificates, Opinions of Counsel or other
documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
SECTION 10.15. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
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<PAGE>
SECTION 10.16. Severability. In case any provision in this Indenture or in
the Securities shall be invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the fullest
extent permitted by law.
SECTION 10.17. No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or any of its Subsidiaries. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
COMFORCE CORPORATION
By /s/ Paul Grillo
------------------------------------------------
Name: Paul Grillo
Title: Senior Vice President & Chief Financial
Officer
THE BANK OF NEW YORK, AS TRUSTEE
By /s/ Mary La Gumina
------------------------------------------------
Name: Mary La Gumina
Title:
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<PAGE>
EXHIBIT A
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, UNITED STATES
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
"INSTITUTIONAL ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) or
(7) UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT
IS NOT A UNITED STATES PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 OF THE SECURITIES ACT, (2) AGREES THAT
IT WILL NOT WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE
SECURITIES ACT AS IN EFFECT WITH RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF SECURITIES AT THE TIME OF TRANSFER OF LESS THAN $250,000, AN
OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT
IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT AN INITIAL INVESTOR
THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR PURCHASING AS DESCRIBED IN CLAUSE
(1)(B) ABOVE SHALL NOT BE PERMITTED TO TRANSFER THIS NOTE TO AN INSTITUTIONAL
ACCREDITED INVESTOR. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THE
TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET
FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT
THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR PURCHASING PURSUANT TO CLAUSE (2)(C) ABOVE, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE
<PAGE>
Exhibit A
Page 2
AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION" "UNITED STATES" AND "UNITED STATES PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR DEPOSITARY OR ANY
SUCH NOMINEE, TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE, AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH
IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE>
Exhibit A
Page 3
CUSIP No:
(Front of Security)
No. ____ $____________
COMFORCE CORPORATION
15% Senior Secured PIK Debentures due 2009
COMFORCE CORPORATION, a Delaware corporation, for value received, promises to
pay to Cede & Co., as nominee of the Depository Trust Company, or its registered
assigns, the principal sum of $__________ on December 1, 2009.
Interest Payment Dates: June 1, and December 1, commencing June 1, 1998.
Record Dates: May 15 and November 15 (whether or not a Business Day).
Additional provisions of this Security are set forth on the other side of this
Security.
Dated:
COMFORCE CORPORATION
By: ________________________
Name:
Title:
By: ________________________
Name:
Title:
<PAGE>
Exhibit A
Page 4
(Trustee's Certificate of Authentication)
This is one of the Securities referred
to in the within-mentioned Indenture
THE BANK OF NEW YORK, as Trustee
By:_________________________________
Authorized Signatory
<PAGE>
Exhibit A
Page 5
(Reverse of Security)
COMFORCE CORPORATION
15% SENIOR SECURED PIK DEBENTURES DUE 2009
Capitalized terms used herein have the meanings assigned to them in the
Indenture (as defined below) unless otherwise indicated.
1. Interest. COMFORCE Corporation, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
and in the manner specified below. The Company shall pay, in cash, interest on
the principal amount of this Security at the rate per annum of 15%; provided,
however, that through and including December 1, 2002, on each Interest Payment
Date, the Company may, at its option and in its sole discretion, in lieu of the
payment in whole or in part of interest due on this Security, pay interest on
this Security through the issuance of additional Securities in an aggregate
principal amount equal to the amount of interest that would be payable with
respect to this Security, if such interest were paid in cash. After December 1,
2002, the Company shall pay interest on this Security in cash. The Company shall
notify the Trustee in writing of its election to pay interest on this Security
through the issuance of additional Securities not less than 10 nor more than 45
days prior to the record date for the Interest Payment Date on which additional
Securities will be issued. Additional Securities shall be governed by, and
entitled to the benefits of, the Indenture and shall be subject to the terms of
the Indenture and shall be subject to the same terms (including the rate of
interest from time to time payable thereon) as this Security (except, as the
case may be, with respect to the issuance date and aggregate principal amount).
The Company will pay interest semiannually in arrears on June 1 and December 1
of each year (each an "Interest Payment Date"), commencing June 1, 1998, or if
any such day is not a Business Day on the next succeeding Business Day. Interest
will be computed on the basis of a 360-day year consisting of twelve 30-day
months. Interest shall accrue from the most recent Interest Payment Date to
which interest has been paid or, if no interest has been paid, from the date of
the original issuance of the Securities. To the extent lawful, the Company shall
pay interest on overdue principal at the rate of 2% per annum in excess of the
then applicable interest rate on the Securities; it shall pay interest on
overdue installments of interest (without regard to any applicable grace
periods) at the same rate to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Securities
(except defaulted interest) to the Persons who are registered Holders of
Securities at the close of business on the Record Date immediately preceding the
Interest Payment Date, even if such Securities are cancelled after such Record
Date and on or before such Interest Payment Date. Securityholders must surrender
Securities to a Paying Agent to collect principal payments. The Company shall
pay principal, premium, if any, and interest in money of the United States that
at the time of payment is
<PAGE>
Exhibit A
Page 6
legal tender for payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal, premium, if any, and interest by its
check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Securityholder at the
Securityholder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or
co-registrar without prior notice to any Securityholder. The Company may act in
any such capacity.
4. Indenture. The Company issued the Securities under an Indenture, dated
as of November 26, 1997 (the "Indenture"), among the Company and the Trustee.
The terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.
Code ss.ss. 77aaa-77bbbb) (the "TIA") as in effect on the date the Indenture is
qualified. The Securities are subject to all such terms, and Securityholders are
referred to the Indenture and the TIA for a statement of such terms. The terms
of the Indenture shall govern any inconsistencies between the Indenture and the
Securities. The Securities include the Initial Securities and the Exchange
Securities issued in exchange for the Initial Securities pursuant to the
Indenture. The Initial Securities and the Exchange Securities are treated as a
single class of securities under the Indenture. Capitalized terms herein are
used as defined in the Indenture unless otherwise defined herein. The terms of
the Securities include those stated in the Indenture and those made part of the
Indenture by reference to the TIA, as in effect on the date of the Indenture.
Notwithstanding anything to the contrary herein, the Securities are subject to
all such terms, and Securityholders of Securities are referred to the Indenture
and said Act for a statement of them. The Securities are unsecured senior
obligations of the Company limited to $50,000,000 in aggregate principal amount.
5. (a) Optional Redemption. The Securities will be redeemable, at the
Company's option, in whole or in part, at any time upon not less than 30 nor
more than 60 days' prior notice mailed by first-class mail to each holder's
registered address, at the following redemption prices (expressed in percentages
of principal amount), if redeemed during the 12-month period commencing on
December 1 of the years set forth below, plus accrued and unpaid interest to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date):
Year Redemption Price
---- ----------------
1997 103.000%
1998 and
thereafter 107.500%
(b) Optional Redemption Upon Public Offerings. In addition, at any time the
<PAGE>
Exhibit A
Page 7
Company, at its option, may redeem up to 100% of the aggregate principal amount
of the Securities with the net cash proceeds of one or more Equity Offerings so
long as there is a Public Market at the time of such redemption at redemption
prices described in paragraph(c) above, plus accrued and unpaid interest
thereon, if any, to the date of redemption. In order to effect the foregoing
redemption with the proceeds of any Equity Offering, the Company shall make such
redemption not more than 90 days after the consummation of any such Equity
Offering.
As used in the preceding paragraph, "Equity Offering" means an offering for
cash by the Company of its common stock, or options, warrants or rights with
respect to its common stock.
6. Mandatory Redemption. Except as set forth in the next succeeding
sentences, the Securities are not subject to mandatory redemption or sinking
fund payments. If the Uniforce Acquisition is not consummated on or prior to the
15th Business Day after the Issue Date (the "Special Redemption Date"), this
Security will be subject to mandatory special redemption at a redemption price
equal to 101% of its principal amount plus accrued and unpaid interest to the
Special Redemption Date.
7. Repurchase at Option of Securityholder. Sections 4.8 and 4.9 of the
Indenture provide that, after certain Asset Sales (as defined in the Indenture)
and upon the occurrence of a Change of Control (as defined in the Indenture),
and subject to the further limitations contained therein, the Company will make
an offer to purchase certain amounts of the Securities in accordance with
procedures set forth in the Indenture.
8. Selection and Notice of Redemption. In the case of any partial
redemption, selection of the Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which such Securities are listed, or if such Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by such other method as the Trustee in its sole discretion shall deem to be
fair and appropriate; provided, however, that if a partial redemption is made
with the proceeds of an Equity Offering, selection of the Securities or portion
thereof for redemption shall be made by the Trustee only on a pro rata basis,
unless such method is otherwise prohibited. Securities may be redeemed in part
in multiples of $1,000 principal amount only. Notice of redemption will be sent,
by first class mail, postage prepaid, at least 45 days (unless a shorter period
is acceptable to the Trustee) prior to the date fixed for redemption to each
holder whose Securities are to be redeemed at the last address for such holder
then shown on the registry books. If any Security is to be redeemed in part
only, the notice of redemption that relates to such Security shall state the
portion of the principal amount thereof to be redeemed. A new Security in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Security. On and
after any redemption date, interest will cease to accrue on the Securities or
part thereof called for redemption as long as the Company has deposited with the
Paying Agent funds in satisfaction of the redemption price pursuant to the
Indenture.
<PAGE>
Exhibit A
Page 8
9. Registration Rights. Pursuant to the Registration Rights Agreement, and
subject to certain terms and conditions stated therein, the Company will be
obligated to consummate an Exchange Offer pursuant to which the Holders of the
Initial Securities shall have the right to exchange this Security for Exchange
Securities, which have been registered under the Securities Act, in like
principal amount and having terms identical in all material respect to the
Initial Security. In certain circumstances, and subject to certain terms and
conditions, Holders of the Initial Securities shall have the right to receive
liquidated damages if the Company shall have failed to fulfill its obligations
under the Registration Rights Agreement.
10. Denominations, Transfer, Exchange. The Securities are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Securities may be registered and Securities may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Securityholder among other things, to furnish appropriate endorsements
and transfer documents and to pay any taxes and fees required by law or
permitted by the Indenture. The Registrar need not exchange or register the
transfer of any Security or portion of a Security selected for redemption. Also,
it need not exchange or register the transfer of any Securities during a period
beginning at the opening of business on a Business Day 15 days before the day of
any selection of Securities to be redeemed and ending at the close of business
on the day of selection or during the period between a Record Date and the
corresponding Interest Payment Date.
11. Persons Deemed Owners. Prior to due presentment to the Trustee for
registration of the transfer of this Security, the Trustee, any Agent and the
Company may deem and treat the Person in whose name this Security is registered
as its absolute owner for the purpose of receiving payment of principal of,
premium, if any, and interest on this Security and for all other purposes
whatsoever, whether or not this Security is overdue, and neither the Trustee,
any Agent nor the Company shall be affected by notice to the contrary. The
registered Securityholder shall be treated as its owner for all purposes.
12. Amendments and Waivers. Subject to certain exceptions provided in the
Indenture, the Indenture or the Securities may be amended with the written
consent of the Holders of a majority in principal amount of all outstanding
series of the Securities, voting as a single class, and any existing Default or
Event of Default (except a payment default) may be waived with the consent of
the Holders of a majority in principal amount of all outstanding series of the
Securities, voting as a single class. Without the consent of any Securityholder,
the Indenture or the Securities may be amended to, among other things, cure any
ambiguity, defect or inconsistency, to comply with the requirements of the
Commission in order to effect or maintain qualification of the Indenture under
the TIA or to make any change that does not adversely affect in any material
respect the rights of any Securityholder.
13. Defaults and Remedies. If an Event of Default occurs and is continuing,
the Trustee or the holders of at least 25% in principal amount of all
outstanding series of the Securities,
<PAGE>
Exhibit A
Page 9
voting as a single class, by notice to the Company may declare the principal of
and accrued and unpaid interest, if any, on all the Securities to be due and
payable. Upon such a declaration, such principal and accrued and unpaid interest
shall be due and payable immediately. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and accrued and unpaid interest on all the
Securities will become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holders. Under
certain circumstances, the holders of a majority in principal amount of all
outstanding series of the Securities, voting as a single class, may rescind any
such acceleration with respect to the Securities and its consequences.
14. Trustee Dealings with the Company. The Trustee under the Indenture, in
its individual or any other capacity, may make loans to, accept deposits from,
and perform services for the Company or any Affiliate of the Company and may
otherwise deal with the Company and their respective Affiliates as if it were
not Trustee.
15. Restrictive Covenants. The Indenture imposes certain limitations on the
ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, incur liens, create restrictions on the ability of a subsidiary to
pay dividends or make certain payments, sell or issue preferred stock of
subsidiaries to third parties, merge or consolidate with any other person or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company. Such limitations are subject to
a number of important qualifications and exceptions provided for in the
Indenture. The Company must annually report to the Trustee on compliance with
such limitations.
16. Authentication. This Security shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
17. Defeasance. Subject to certain conditions provided for in the
Indenture, the Company at any time may terminate some or all of its obligations
under the Securities and the Indenture if the Company deposits with the Trustee
money or U.S. Government Obligations for the payment of principal, premium (if
any) and interest on the Securities to redemption or maturity, as the case may
be.
18. Governing Law. The Laws of the State of New York shall govern this
Security and the Indenture, without regard to principles of conflict of laws.
19. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
20. Successors. When a successor assumes, in accordance with the Indenture,
all the
<PAGE>
Exhibit A
Page 10
obligations of its predecessors under the Securities and the Indenture, the
predecessor will be released from those obligations.
21. No Recourse Against Others. No stockholder, director, officer, employee
or incorporator, as such, of the Company shall have any liability for any
obligation of the Company under the Securities or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Securityholder by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Securities.
22. Abbreviations. Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
23. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Securities and has directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to Securityholders.
No representation is made as to the accuracy of such numbers either as printed
on the Securities or as contained in any notice of redemption and reliance may
be placed only on the other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written request and
without charge a copy of the Indenture. Request may be made to:
COMFORCE Corporation
2001 Marcus Avenue
Lake Success, New York 11042
Attention: Chief Financial Officer
<PAGE>
Exhibit A
Page 11
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
<PAGE>
Exhibit A
Page 12
Date:______________
Your Signature: _________________________
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:
__________________________
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the [Registrar], which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the [Registrar] in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE>
Exhibit A
Page 13
OPTION OF SECURITYHOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security purchased by
the Company pursuant to Section 4.8 or Section 4.9 of the Indenture check the
appropriate box:
_ Section 4.8 _ Section 4.9
If you want to have only part of the Security purchased by the Company
pursuant to Section 4.8 or Section 4.9 of the Indenture, state the amount you
elect to have purchased:
$______________________
Date:_________________
Your Signature: _________________________
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:
__________________________
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the [Registrar], which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the [Registrar] in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT A-2
THIS SECURITY MAY NOT BE OFFERED OR SOLD TO A U.S. PERSON (AS SUCH TERM IS
DEFINED IN REGULATION S UNDER THE SECURITIES ACT) OR FOR THE ACCOUNT OR
BENEFIT OF A UNITED STATES PERSON PRIOR TO THE EXPIRATION OF THE RESTRICTED
PERIOD (AS DEFINED IN THE INDENTURE), AND NO TRANSFER OR EXCHANGE OF THIS
SECURITY MAY BE MADE FOR AN INTEREST IN A PHYSICAL SECURITY UNTIL AFTER THE
LATER OF THE DATE OF EXPIRATION OF THE RESTRICTED PERIOD AND THE DATE ON
WHICH THE PROPER REQUIRED CERTIFICATION RELATING TO SUCH INTEREST HAS BEEN
PROVIDED IN ACCORDANCE WITH THE TERMS OF THE INDENTURE, TO THE EFFECT THAT
THE BENEFICIAL OWNER OR OWNERS OF SUCH INTEREST ARE NOT UNITED STATES
PERSONS.
<PAGE>
EXHIBIT B
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF
THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTION 2.17 OF THE INDENTURE.]
<PAGE>
Exhibit B
Page 2
CUSIP No:
(Front of Security)
No. ____ $__________
COMFORCE CORPORATION
15% Senior Secured PIK Debentures due 2009
COMFORCE CORPORATION, a Delaware corporation, for value received, promises to
pay to Cede & Co., as nominee of the Depository Trust Company, or its registered
assigns, the principal sum of $__________ on December 1, 2009.
Interest Payment Dates: June 1, and December 1, commencing June 1, 1998.
Record Dates: May 15 and November 15 (whether or not a Business Day).
Additional provisions of this Security are set forth on the other side of this
Security.
Dated:
COMFORCE CORPORATION
By: ________________________
Name:
Title:
By: ________________________
Name:
Title:
<PAGE>
Exhibit B
Page 3
(Trustee's Certificate of Authentication)
This is one of the Securities referred
to in the within-mentioned Indenture
THE BANK OF NEW YORK, as Trustee
By:_________________________________
Authorized Signatory
<PAGE>
Exhibit B
Page 4
(Reverse of Security)
COMFORCE CORPORATION
15% SENIOR SECURED PIK DEBENTURES DUE 2009
Capitalized terms used herein have the meanings assigned to them in the
Indenture (as defined below) unless otherwise indicated.
1. Interest. COMFORCE Corporation, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
and in the manner specified below. The Company shall pay, in cash, interest on
the principal amount of this Security at the rate per annum of 15%; provided,
however, that through and including December 1, 2002, on each Interest Payment
Date, the Company may, at its option and in its sole discretion, in lieu of the
payment in whole or in part of interest due on this Security, pay interest on
this Security through the issuance of additional Securities in an aggregate
principal amount equal to the amount of interest that would be payable with
respect to this Security, if such interest were paid in cash. After December 1,
2002, the Company shall pay interest on this Security in cash. The Company shall
notify the Trustee in writing of its election to pay interest on this Security
through the issuance of additional Securities not less than 10 nor more than 45
days prior to the record date for the Interest Payment Date on which additional
Securities will be issued. Additional Securities shall be governed by, and
entitled to the benefits of, the Indenture and shall be subject to the same
terms (including the rate of interest from time to time payable thereon) as this
Security (except, as the case may be, with respect to the issuance date and
aggregate principal amount). The Company will pay interest semiannually in
arrears on June 1 and December 1 of each year (each an "Interest Payment Date"),
commencing June 1, 1998, or if any such day is not a Business Day on the next
succeeding Business Day. Interest will be computed on the basis of a 360-day
year consisting of twelve 30-day months. Interest shall accrue from the most
recent Interest Payment Date to which interest has been paid or, if no interest
has been paid, from the date of the original issuance of the Securities. To the
extent lawful, the Company shall pay interest on overdue principal at the rate
of 2% per annum in excess of the then applicable interest rate on the
Securities; it shall pay interest on overdue installments of interest (without
regard to any applicable grace periods) at the same rate to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Securities
(except defaulted interest) to the Persons who are registered Holders of
Securities at the close of business on the Record Date immediately preceding the
Interest Payment Date, even if such Securities are cancelled after such Record
Date and on or before such Interest Payment Date. Securityholders must surrender
Securities to a Paying Agent to collect principal payments. The Company shall
pay principal, premium, if any, and interest in money of the United States that
at the time of payment is legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Company
<PAGE>
Exhibit B
Page 5
may pay principal, premium, if any, and interest by its check payable in such
U.S. Legal Tender. The Company may deliver any such interest payment to the
Paying Agent or to a Securityholder at the Securityholder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or
co-registrar without prior notice to any Securityholder. The Company may act in
any such capacity.
4. Indenture. The Company issued the Securities under an Indenture, dated
as of November __, 1997 (the "Indenture"), among the Company and the Trustee.
The terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the TIA as in effect on the date the
Indenture is qualified. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the TIA for a statement of
such terms. The terms of the Indenture shall govern any inconsistencies between
the Indenture and the Securities. The Securities include the Initial Securities
and the Exchange Securities issued in exchange for the Initial Securities
pursuant to the Indenture. The Initial Securities and the Exchange Securities
are treated as a single class of securities under the Indenture. Capitalized
terms herein are used as defined in the Indenture unless otherwise defined
herein. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Securities are
subject to all such terms, and Securityholders of Securities are referred to the
Indenture and said Act for a statement of them. The Securities are unsecured
senior obligations of the Company limited to $50,000,000 in aggregate principal
amount.
5. (a) Optional Redemption. Except as set forth below, the Securities will
not be redeemable at the option of the Company prior to December 1, 2002. On and
after such date, the Securities will be redeemable, at the Company's option, in
whole or in part, at any time upon not less than 30 nor more than 60 days' prior
notice mailed by first-class mail to each holder's registered address, at the
following redemption prices (expressed in percentages of principal amount), if
redeemed during the 12-month period commencing on December 1 of the years set
forth below, plus accrued and unpaid interest to the redemption date (subject to
the right of holders of record on the relevant record date to receive interest
due on the relevant interest payment date):
Redemption
Year Price
- ---- -----
1997 103.000%
1998 and
thereafter 107.500%
<PAGE>
Exhibit B
Page 6
(b) Optional Redemption Upon Public Offerings. In addition, at any time, the
Company, at its option, may redeem up to 100% of the aggregate principal amount
of the Securities with the net cash proceeds of one or more Equity Offerings so
long as there is a Public Market at the time of such redemption at redemption
prices described in paragraph (c) above, plus accrued and unpaid interest
thereon, if any, to the date of redemption. In order to effect the foregoing
redemption with the proceeds of any Public Equity Offering, the Company shall
make such redemption not more than 90 days after the consummation of any such
Public Equity Offering.
As used in the preceding paragraph, "Equity Offering" means an offering for
cash by the Company of its common stock, or options, warrants, or rights with
respect to its common stock.
6. Mandatory Redemption. Except as set forth in the next succeeding
sentence, the Securities are not subject to mandatory redemption or sinking fund
payments. If the Uniforce Acquisition is not consummated on or prior to the 15th
Business Day after the Issue Date (the "Special Redemption Date") this Security
will be subject to mandatory special redemption at a redemption price equal to
101% of its principal amount plus accrued and unpaid interest to the Special
Redemption Date.
7. Repurchase at Option of Securityholder. Sections 4.8 and 4.9 of the
Indenture provide that, after certain Asset Sales (as defined in the Indenture)
and upon the occurrence of a Change of Control (as defined in the Indenture),
and subject to the further limitations contained therein, the Company will make
an offer to purchase certain amounts of the Securities in accordance with
procedures set forth in the Indenture.
8. Selection and Notice of Redemption. In the case of any partial
redemption, selection of the Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which such Securities are listed, or if such Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by such other method as the Trustee in its sole discretion shall deem to be
fair and appropriate; provided, however, that if a partial redemption is made
with the proceeds of an Equity Offering, selection of the Securities or portion
thereof for redemption shall be made by the Trustee only on a pro rata basis,
unless such method is otherwise prohibited. Securities may be redeemed in part
in multiples of $1,000 principal amount only. Notice of redemption will be sent,
by first class mail, postage prepaid, at least 45 days (unless a shorter period
is acceptable to the Trustee) prior to the date fixed for redemption to each
holder whose Securities are to be redeemed at the last address for such holder
then shown on the registry books. If any Security is to be redeemed in part
only, the notice of redemption that relates to such Security shall state the
portion of the principal amount thereof to be redeemed. A new Security in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Security. On and
after any redemption date, interest will cease to accrue on the Securities or
part thereof called for redemption as long as the Company has deposited with the
Paying Agent funds in satisfaction of the redemption price pursuant to the
Indenture.
<PAGE>
Exhibit B
Page 7
9. Denominations, Transfer, Exchange. The Securities are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Securities may be registered and Securities may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a
Securityholder among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not exchange or register the transfer of any
Security or portion of a Security selected for redemption. Also, it need not
exchange or register the transfer of any Securities during a period beginning at
the opening of business on a Business Day 15 days before the day of any
selection of Securities to be redeemed and ending at the close of business on
the day of selection or during the period between a Record Date and the
corresponding Interest Payment Date.
10. Persons Deemed Owners. Prior to due presentment to the Trustee for
registration of the transfer of this Security, the Trustee, any Agent and the
Company may deem and treat the Person in whose name this Security is registered
as its absolute owner for the purpose of receiving payment of principal of,
premium, if any, and interest on this Security and for all other purposes
whatsoever, whether or not this Security is overdue, and neither the Trustee,
any Agent nor the Company shall be affected by notice to the contrary. The
registered Securityholder shall be treated as its owner for all purposes.
11. Amendments and Waivers. Subject to certain exceptions provided in the
Indenture, the Indenture or the Securities may be amended with the written
consent of the Holders of a majority in principal amount of all outstanding
series of the Securities, voting as a single class, and any existing Default or
Event of Default (except a payment default) may be waived with the consent of
the Holders of a majority in principal amount of all outstanding series of the
Securities, voting as a single class. Without the consent of any Securityholder,
the Indenture or the Securities may be amended to, among other things, cure any
ambiguity, defect or inconsistency, to comply with the requirements of the
Commission in order to effect or maintain qualification of the Indenture under
the TIA or to make any change that does not adversely affect in any material
respect the rights of any Securityholder.
12. Defaults and Remedies. If an Event of Default occurs and is continuing,
the Trustee or the holders of at least 25% in principal amount of all
outstanding series of the Securities, voting as a single class, by notice to the
Company may declare the principal of and accrued and unpaid interest, if any, on
all the Securities to be due and payable. Upon such a declaration, such
principal and accrued and unpaid interest shall be due and payable immediately,
if an Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs and is continuing, the principal of and
accrued and unpaid interest on all the Securities will become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any holders. Under certain circumstances, the holders of a majority in
principal amount of all outstanding series of the Securities, voting as a single
class, may rescind any such acceleration with respect to the Securities and its
consequences.
<PAGE>
Exhibit B
Page 8
13. Trustee Dealings with the Company. The Trustee under the Indenture, in
its individual or any other capacity, may make loans to, accept deposits from,
and perform services for the Company or any Affiliate of the Company and may
otherwise deal with the Company and their respective Affiliates as if it were
not Trustee.
14. Restrictive Covenants. The Indenture imposes certain limitations on the
ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, pay dividends or make certain other restricted payments,
consummate certain asset sales, enter into certain transactions with affiliates,
incur liens, create restrictions on the ability of a subsidiary to pay dividends
or make certain payments, sell or issue preferred stock of subsidiaries to third
parties, merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the assets of
the Company. Such limitations are subject to a number of important
qualifications and exceptions provided for in the Indenture. The Company must
annually report to the Trustee on compliance with such limitations.
15. Authentication. This Security shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. Defeasance. Subject to certain conditions provided for in the
Indenture, the Company at any time may terminate some or all of its obligations
under the Securities and the Indenture if the Company deposits with the Trustee
money or U.S. Government Obligations for the payment of principal, premium (if
any) and interest on the Securities to redemption or maturity, as the case may
be.
17. Governing Law. The Laws of the State of New York shall govern this
Security and the Indenture, without regard to principles of conflict of laws.
18. Abbreviations. Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
19. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
20. Successors. When a successor assumes, in accordance with the Indenture,
all the obligations of its predecessors under the Securities and the Indenture,
the predecessor will be released from those obligations.
21. No Recourse Against Others. No stockholder, director, officer, employee
or
<PAGE>
Exhibit B
Page 9
incorporator, as such, of the Company shall have any liability for any
obligation of the Company under the Securities or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Security by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Securities.
22. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Securities and has directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to Securityholders.
No representation is made as to the accuracy of such numbers either as printed
on the Securities or as contained in any notice of redemption and reliance may
be placed only on the other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written request and
without charge a copy of the Indenture. Request may be made to:
COMFORCE Corporation
2001 Marcus Avenue
Lake Success, New York 11042
Attention: Chief Financial Officer
<PAGE>
Exhibit B
Page 10
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
<PAGE>
Exhibit B
Page 11
Date:______________
Your Signature: _________________________
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:
_______________________
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the [Registrar], which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the [Registrar] in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE>
Exhibit B
Page 12
OPTION OF SECURITYHOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security purchased by
the Company pursuant to Section 4.8 or Section 4.9 of the Indenture check the
appropriate box:
_ Section 4.8 _ Section 4.9
If you want to have only part of the Security purchased by the Company
pursuant to Section 4.8 or Section 4.9 of the Indenture, state the amount you
elect to have purchased:
$______________________
Date:_________________
Your Signature: _________________________
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:
_________________________
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the [Registrar], which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the [Registrar] in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
The Bank of New York
101 Barclay Street, 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: COMFORCE Corporation
15% Senior Secured PIK Debentures due 2009
Ladies and Gentlemen:
In connection with our proposed purchase of 15% Senior Secured PIK
Debentures due 2009 (the "Securities") of COMFORCE Corporation (the "Company"),
we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated November 19, 1997 relating to the Securities and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to the matters stated on pages (i) and
(ii) of the Offering Memorandum and in the section entitled "Transfer
Restrictions" of the Offering Memorandum including the restrictions on
duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Securities is subject
to certain restrictions and conditions set forth in the Indenture relating to
the Securities (as described in the Offering Memorandum) and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the
Securities except in compliance with, such restrictions and conditions and the
Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Securities have not been
registered under the Securities Act, and that the Securities may not be offered
or sold except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell or otherwise transfer any Securities prior to the
date which within the time period referred to in Rule 144(K) under the
Securities Act as in effect with respect to such transfer, we will do so only
(i) to the Company or any of its subsidiaries, (ii) inside the United States in
accordance with Rule 144A under the Securities Act to a "qualified
<PAGE>
Exhibit C
Page 2
institutional buyer" (as defined in Rule 144A under the Securities Act), (iii)
inside the United States to an institutional "accredited investor" (as defined
below) that, prior to such transfer, furnishes to the Trustee (as defined in the
Indenture relating to the Securities), a signed letter containing certain
representations and agreements relating to the restrictions on transfer of the
Securities, and if such transfer is in respect of an aggregate principal amount
of Securities at the time of transfer of less than $250,000, an Opinion of
Counsel acceptable to the Company that such transfer is in compliance with the
Securities Act, (iv) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (v) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available), or
(vi) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing any of the Securities
from us a notice advising such purchaser that resales of the Securities are
restricted as stated herein.
4. We are not acquiring the Securities for or on behalf of, and will not
transfer the Securities to, any pension or welfare plan (as defined in Section 3
of the Employee Retirement Income Security Act of 1974), except as permitted in
the section entitled "Transfer Restrictions" of the Offering Memorandum.
5. We understand that, on any proposed resale of any Securities, we will be
required to furnish to the Trustee and the Company such certification, legal
opinions and other information as the Trustee and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Securities purchased by us will
bear a legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or their investment, as the case may be.
7. We are acquiring the Securities purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited investor")
as to each of which we exercise sole investment discretion.
<PAGE>
Exhibit C
Page 3
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By:___________________________
Name:
<PAGE>
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
________________, __
The Bank of New York
101 Barclay Street, 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: COMFORCE Corporation (the "Company") 15% Senior Secured
PIK Debentures due 2009 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $_____________ aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a Person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration
<PAGE>
Exhibit D
Page 2
requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:___________________________
Authorized Signature
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EXHIBIT D
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE..........................1
SECTION 1.1. Definitions.............................................1
SECTION 1.2. Other Definitions......................................20
SECTION 1.3. Incorporation by Reference of Trust Indenture Act......20
SECTION 1.4. Rules of Construction..................................20
ARTICLE II THE SECURITIES....................................................21
SECTION 2.1. Form and Dating........................................21
SECTION 2.2. Execution and Authentication...........................22
SECTION 2.3. Registrar and Paying Agent.............................23
SECTION 2.4. Paying Agent to Hold Money in Trust....................24
SECTION 2.5. Securityholder Lists...................................24
SECTION 2.6. Transfer and Exchange..................................24
SECTION 2.7. Replacement Securities.................................25
SECTION 2.8. Outstanding Securities.................................25
SECTION 2.9. Treasury Securities....................................26
SECTION 2.10. Temporary Securities..................................26
SECTION 2.11. Cancellation..........................................26
SECTION 2.12. Defaulted Interest....................................26
SECTION 2.13. CUSIP Number..........................................27
SECTION 2.14. Deposit of Moneys.....................................27
SECTION 2.15. Restrictive Legends...................................27
SECTION 2.16. Book-Entry Provisions for Global Security.............29
SECTION 2.17. Special Transfer Provisions...........................30
SECTION 2.18. Persons Deemed Owners.................................33
SECTION 2.19. Record Date...........................................33
ARTICLE III REDEMPTION.......................................................33
SECTION 3.1. Notices to Trustee.....................................33
SECTION 3.2. Selection of Securities To Be Redeemed.................33
SECTION 3.3. Notice of Redemption...................................34
SECTION 3.4. Effect of Notice of Redemption.........................35
SECTION 3.5. Deposit of Redemption Price............................35
SECTION 3.6. Securities Redeemed in Part............................35
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ARTICLE IV COVENANTS.......................................................36
SECTION 4.1. Payment of Securities................................36
SECTION 4.2. Reports..............................................36
SECTION 4.3. Limitation on Indebtedness...........................37
SECTION 4.4. Limitation on Restricted Payments....................39
SECTION 4.5. Limitation on Issuances of Capital Stock of
Restricted Subsidiaries ...........................41
SECTION 4.6. Limitation on Affiliate Transactions.................42
SECTION 4.7. Limitation on Liens..................................42
SECTION 4.8. Limitation on Sales of Assets and Subsidiary Stock...42
SECTION 4.9. Change of Control....................................45
SECTION 4.10. Limitation on Restrictions on Distributions
from RestrictedSubsidiaries ......................46
SECTION 4.11. Limitation on Sale/Leaseback Transactions...........48
SECTION 4.12. Limitation on Designations of Unrestricted
Subsidiaries .....................................48
SECTION 4.13. Further Instruments and Acts........................49
SECTION 4.14. Use of Proceeds.....................................49
SECTION 4.15. Compliance Certificates.............................49
SECTION 4.16. Maintenance of Office or Agency.....................50
SECTION 4.17. Taxes...............................................50
SECTION 4.18. Stay, Extension and Usury Laws......................50
SECTION 4.19. Corporate Existence.................................51
ARTICLE V SUCCESSORS.......................................................51
SECTION 5.1. Mergers and Consolidations...........................51
SECTION 5.2. Successor Issuer Substituted.........................52
ARTICLE VI DEFAULTS AND REMEDIES...........................................52
SECTION 6.1. Events of Default....................................52
SECTION 6.2. Acceleration.........................................54
SECTION 6.3. Other Remedies.......................................54
SECTION 6.4. Waiver of Past Defaults..............................54
SECTION 6.5. Control by Majority..................................55
SECTION 6.6. Limitation on Suits..................................55
SECTION 6.7. Rights of Holders to Receive Payment.................55
SECTION 6.8. Collection Suit by Trustee...........................55
SECTION 6.9. Trustee May File Proofs of Claim.....................56
SECTION 6.10. Priorities..........................................56
SECTION 6.11. Undertaking for Costs...............................56
ARTICLE VII TRUSTEE........................................................56
SECTION 7.1. Duties of Trustee....................................56
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SECTION 7.2. Rights of Trustee....................................58
SECTION 7.3. Individual Rights of Trustee.........................58
SECTION 7.4. Trustee's Disclaimer.................................58
SECTION 7.5. Notice of Defaults...................................59
SECTION 7.6. Reports by Trustee to Holders........................59
SECTION 7.7. Compensation and Indemnity...........................59
SECTION 7.8. Replacement of Trustee...............................60
SECTION 7.9. Successor Trustee by Merger..........................61
SECTION 7.10. Eligibility; Disqualification.......................61
SECTION 7.11. Preferential Collection of Claims Against Company...61
ARTICLE VIII DISCHARGE OF INDENTURE; DEFEASANCE............................61
SECTION 8.1. Discharge of Liability on Securities; Defeasance.....61
SECTION 8.2. Conditions to Defeasance.............................62
SECTION 8.3. Application of Trust Money...........................63
SECTION 8.4. Repayment to the Company.............................64
SECTION 8.5. Indemnity for Government Obligations.................64
SECTION 8.6. Reinstatement........................................64
ARTICLE IX AMENDMENTS......................................................64
SECTION 9.1. Without Consent of Holders...........................64
SECTION 9.2. With Consent of Holders..............................65
SECTION 9.3. Compliance with Trust Indenture Act..................67
SECTION 9.4. Revocation and Effect of Consents and Waivers........67
SECTION 9.5. Notation on or Exchange of Securities................67
SECTION 9.6. Trustee To Sign Amendments...........................68
ARTICLE X MISCELLANEOUS....................................................68
SECTION 10.1. Trust Indenture Act Controls........................68
SECTION 10.2. Notices.............................................68
SECTION 10.3. Communication by Holders with other Holders.........69
SECTION 10.4. Certificate and Opinion as to Conditions Precedent..69
SECTION 10.5. Statements Required in Certificate or Opinion.......69
SECTION 10.6. When Securities Disregarded.........................70
SECTION 10.7. Rules by Trustee, Paying Agent and Registrar........70
SECTION 10.8. Legal Holidays......................................70
SECTION 10.9. Governing Law.......................................70
SECTION 10.10. No Recourse Against Others.........................70
SECTION 10.11. Successors.........................................70
SECTION 10.12. Multiple Originals.................................71
SECTION 10.13. Variable Provisions................................71
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<TABLE>
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<S> <C>
SECTION 10.14. Qualification of Indenture...........................................71
SECTION 10.15. Table of Contents; Headings..........................................71
SECTION 10.16. Severability.........................................................71
SECTION 10.17. No Adverse Interpretation of Other Agreements........................71
Exhibit A - Form of Series A Security.............................A-1
Exhibit B - Form of Series B Security.............................B-1
Exhibit C - Form of Certificate To Be Delivered in Connection
with Transfers to Non-QIB Accredited Investors........C-1
Exhibit D - Form of Certificate To Be Delivered in Connection
with Transfers Pursuant to Regulation S...............D-1
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be part of
the Indenture.
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