<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
----- ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
| X | EXCHANGE ACT OF 1934 [FEE REQUIRED]
-----
For the fiscal year ended January 1, 1995
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Commission File No. 0-3532
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THE OLSTEN CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 13-2610512
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
175 Broad Hollow Road, Melville, New York 11747-8905
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 844-7800
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, $.10 par value New York Stock Exchange
Class B Common Stock Purchase Warrants New York Stock Exchange
4-7/8% Convertible Subordinated Debentures New York Stock Exchange
due 2003
Securities registered pursuant to Section 12(g) of the act:
Class B Common Stock, $.10 par value
------------------------------------
(Title of class)
[Cover page 1 of 2 pages]
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of Registrant's voting stock (Common Stock and
Class B Common Stock, assuming conversion of Class B Common Stock into Common
Stock on a share for share basis) held by nonaffiliates of Registrant, as of
March 10, 1995, was $1,031,623,788 based on the closing price of the Common
Stock on the New York Stock Exchange on such date.
The number of shares outstanding of Registrant's Common Stock and Class B
Common Stock, as of March 10, 1995, were 32,436,556 shares and 9,254,716
shares, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Proxy Statement for 1995 Annual Meeting of Shareholders of
Registrant. Certain information to be included therein is
incorporated by reference into PART III hereof.
[Cover page 2 of 2 pages]
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PART I
Item 1. Business.
General
Olsten Corporation (herein, together with its subsidiaries unless the
context otherwise requires, generally referred to as "Registrant") was
incorporated in Delaware in 1967 as the successor to a business founded in 1950.
On July 30, 1993, Lifetime Corporation merged into Registrant. The merger was
accounted for as a pooling of interests and materially increased Registrant's
health care business.
Registrant operates through subsidiaries principally under the trade
names "Olsten Kimberly QualityCare" and "Olsten Staffing Services" and engages
in and derives substantially all of its revenues from two industry segments,
HealthCare Services and Staffing Services. Registrant furnishes, through offices
operated or licensed by it and its subsidiaries or pursuant to franchises
granted by Registrant, health care personnel ("caregivers") in home, health care
facility and business settings and temporary personnel ("assignment employees")
to business, industry and government. Registrant also provides management
services for hospital-based home health agencies and, through its ASB Meditest
subsidiary, provides on-site diagnostic and paramedical examination services for
insurance, corporate and government clients. A full range of permanent and
temporary placement services are also offered in Great Britain through
Registrant's Office Angels subsidiary. Registrant's owned, licensed and
franchised operations conduct business through approximately 1,200 offices in
50 states, the District of Columbia, Puerto Rico, the Canadian provinces of
Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland, Nova Scotia,
Ontario and Quebec, Great Britain and Mexico.
Selected financial information relating to Registrant's industry
segments is contained herein in Note 9 of Notes to Consolidated Financial
Statements.
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Systemwide HealthCare and Staffing sales accounted for approximately
47% and 53%, respectively, of Registrant's 1994 systemwide sales, approximately
54% and 46%, respectively, of Registrant's 1993 systemwide sales and
approximately 58% and 42%, respectively, of Registrant's 1992 systemwide sales.
Systemwide sales represent all services and home care visits provided by or
through Registrant's entire network, including Registrant, licensed and
franchised offices and hospital-based home health agencies under management.
In HealthCare Services, Registrant provides home health care through
Registrant's licensed health care personnel, such as registered nurses, offering
a broad range of services, including physician-prescribed skilled nursing
treatments, patient and family education, case management, pediatric and
perinatal care, physical, occupational, neurological and speech therapies,
intravenous administration of drugs, nutrients and other solutions, and
rehabilitation. Through its clinical pharmacy network, Registrant has the
ability to deliver nutrients and medications utilized in certain of its home
health care services. Home health care provided by Registrant's unlicensed
personnel, such as home health aides and homemakers, may involve assistance with
personal hygiene, feeding, dressing, preparation of meals and light
housekeeping. In carrying out supplemental institutional staffing, Registrant's
health care professionals perform services for hospitals, nursing homes, clinics
and other health care facilities and furnish business and industry with
specialized staffing. Health care institutions use supplemental staffing for
peak periods, illnesses and vacations, helping these facilities control employee
costs.
Factors that Registrant believes have contributed to the development
of home health care in particular include institutional, governmental and third-
party payor recognition that home health care is a cost-effective alternative
to lengthy, more expensive institutional care; an aging population;
creasing consumer awareness and interest in home health care; the psychological
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benefits of recuperating from an illness or accident in one's own home; and
advanced technology that allows more health care procedures to be provided at
home instead of only in hospital settings. Of Registrant's systemwide
HealthCare sales, approximately 38% is attributable to Medicare cost
reimbursement. The federal government, in terms of its Medicare program, and
various states where Registrant operates have enacted laws and regulations that
affect the provision of home health care services by Registrant, including
reimbursement for such services.
Registrant is expanding its health care service delivery capabilities
through hospital management contracts to manage hospital home health operations
in exchange for management fees. In 1994, Registrant entered into hospital
management contracts with, among others, Columbia/HCA Healthcare Corporation
whereby Registrant manages certain of that Corporation's hospital-based home
health agencies in Florida and provides patients with a comprehensive range of
home health care services.
Registrant is also actively pursuing relationships with managed care
organizations as a provider and is expanding its capabilities as a home health
managed care delivery network. In this role, Registrant manages and contracts
for all home health care services. Registrant's nationwide office network and
the quality, range and cost-effectiveness of its services are important factors
as it seeks opportunities in the managed care delivery network. In its managed
care relationships, Registrant offers the direct and managed provision of care
as a single gatekeeper, thereby optimizing utilization.
In Staffing Services, Registrant provides assignment employees in more
then 300 skill categories in the following broad service areas: general office
and administrative services, office automation, accounting,
production/assembly/distribution, technical, legal support, records management,
marketing support and telemarketing. Registrant furnishes assignment employees
who provide accounting services to business and industry under the trade name
"Olsten Professional Accounting Services."
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In general, Registrant obtains clients through personal sales
presentations, telephone marketing calls, direct mail solicitation, referrals
from other clients and advertising in a variety of local and national media,
including the Yellow Pages, newspapers, magazines and trade publications.
Registrant's marketing efforts for HealthCare Services also involve personal
contact with case managers for managed health care programs, such as those
involving Health Maintenance Organizations (HMOs) and Preferred Provider
Organizations (PPOs), physicians and their staffs, hospital discharge planners,
nursing home supervisors, insurance company representatives and employers with
self-funded employee health benefit programs.
By supplying an auxiliary work force to its Staffing Services clients,
Registrant believes it affords them economies and flexibility in meeting their
requirements for peak periods caused by such recurring factors as seasonal
demands, inventories, month-end requirements and vacations and such
unpredictable factors as special projects, marketing promotions, illnesses and
emergencies. Assignments of personnel may be for hours, days, weeks, months or
longer periods.
Utilization of assignment employees has become a valuable and
recognized management tool for many companies to convert fixed costs to variable
costs, especially in view of corporate reengineering and restructuring in a more
competitive global environment. With the availability of such services, a
client can maintain on a cost-effective basis a core level of permanent
personnel required by normal business activities which may not expand much even
as business conditions improve. The expense and inconvenience to a client of
hiring additional permanent employees for assignments of a limited duration,
including advertising, interviewing and testing, are eliminated. The use of
Registrant's services also enables clients to eliminate the record
keeping, payroll taxes, insurance and administrative costs usually associated
with permanent personnel. A client pays only for actual hours worked by
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Registrant's assignment employees and may terminate their services immediately
upon completion of the job assignment without the adverse effects of lay-offs.
In Staffing Services, Registrant is pursuing outsourcing service
relationships with client companies. Outsourcing, which is becoming
increasingly important to Registrant, typically involves an arrangement between
a personnel staffing company and the client, with the staffing company moving
management personnel on site at the client to coordinate temporary staffing from
within or with the staffing company taking some or all of the responsibility for
the supply, supervision and operation of personnel for whole departments within
a client. Registrant's services may also include customized training, billing
and electronic information exchange programs for its clients. Outsourcing can
enable a client to better manage personnel expenses and can save a client time
and money by reducing its employee recruitment and training efforts,
particularly if the client is experiencing a high employee turnover rate.
Registrant, through its Partnership Program SM services with major corporate
clients, recruits, trains and manages large groups of employees, allowing its
clients to better focus on their core businesses.
Registrant believes that its success in furnishing caregivers and
assignment employees is based, among other factors, on its reputation for
quality and its extensive office network. Registrant utilizes an established
system of procedures aimed at custom matching its assignment employees to the
specific requirements of its clients. Registrant has implemented an
interviewing and evaluation process that determines the level of skills of its
caregivers and assignment employees and aids in their proper selection and
placement. Thereafter, the employees' performance is reviewed with the client
to provide quality control. Registrant empowers its branch managers and branch
directors with a high level of responsibility, providing strong incentives to
manage the business effectively at the local level--one of the central
ingredients in a business where relationships are vital for success.
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There is no one client that accounts for as much as 10% of Registrant's
revenues. In the opinion of Registrant, its business is not seasonal to any
material degree. Except for the expansion of management services for hospital-
based home health agencies and services as a home health care delivery network
manager, there have not been any significant changes in the kinds of services
rendered or methods of distribution of Registrant since the end of the last
fiscal year.
Registrant's caregivers and assignment employees, as well as the
employees of other firms providing similar services, are paid weekly for their
services while payments are generally received from customers within five to ten
weeks on average of the related billings for such services. Consequently, as
new offices are established or acquired, or as existing offices expand, there
is an ongoing requirement for cash resources to fund current operations as well
as to provide for the expansion of the business.
Registrant has grown and is pursuing expansion opportunities through
the acquisition of companies, the opening of additional Registrant-owned and
licensed area representative offices and through the development and extension
of specialized services, particularly health care, office automation, accounting
and technical services.
Franchise Operations
Approximately 105 offices were operated by nine franchisees under
franchises granted by Registrant. Franchisees, most of whom provide only
Staffing Services, have the exclusive right to market and furnish assignment
employees within a designated geographic area using Registrant's trade names,
service marks, advertising materials, sales programs, manuals and forms.
Franchisees receive training from Registrant, attend seminars, participate in
marketing programs and utilize Registrant's sales literature. Registrant has
established operating procedures and standards to be followed by its
franchisees. Registrant provides franchisees with billing, payroll and other
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data processing systems and services and offers them accounts receivable
financing. Registrant also assists its franchisees in obtaining business from
its national accounts and through its national and cooperative local
advertising.
Franchisees operate their businesses autonomously within the framework
of Registrant's policies and standards, and recruit, employ and pay their own
permanent and assignment employees. Registrant receives royalty fees from each
franchise based upon its gross franchise sales. Royalty fees generally start
at 5% of gross franchise sales and decrease based upon volume. Sales by
franchisees to their clients are not included in Registrant's service sales.
Franchise agreements are generally for a term of ten years and typically are
renewable at the option of the franchisee for five additional five-year terms.
Registrant may terminate a franchise if the franchisee fails to meet
Registrant's standards or otherwise breaches the franchise agreement.
Registrant is not granting new franchises and has not granted any since 1980.
Licensed Area Representative Operations
Approximately 90 offices were operated by 60 licensed area
representatives. Substantially all of these offices provided only Staffing
Services. A licensed area representative is a person authorized by Registrant
to operate Registrant's Staffing Services business within an exclusive marketing
area. The agreements governing licensed area representative operations do not
have a stated term. The licensed area representative does not have an ownership
interest in the business but receives approximately 50% of the office's gross
profit margin in the form of commissions, which are reflected in Registrant's
selling, general and administrative expenses. The licensed area representative
is responsible for the office's operating expenses, such as rent, utilities and
permanent staff salaries, and Registrant is responsible for the assignment
employee wages and related payroll taxes and insurances. Registrant also
provides national advertising, shares in the costs of certain local advertising,
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conducts training seminars and furnishes operating manuals, automated payroll
systems, forms, sales materials and basic supplies to the licensed area
representatives.
Licensed area representatives are required to observe Registrant's
operating procedures and standards and act for Registrant in recruiting,
screening, classifying and employing assignment employees. The licensed area
representatives solicit orders for assignment employees from clients and assign
Registrant's assignment employees to clients in response to such orders.
Registrant's experience has shown that licensing is a more profitable method of
operation than franchising.
Source and Availability of Personnel
Caregivers and assignment employees are recruited through advertising
in local and, to a lesser extent, national media. In addition, a substantial
portion of new employees is obtained through referrals by other employees of
Registrant. Registrant interviews, screens, checks references and evaluates the
skills of applicants for employment, utilizing systems and procedures that it
has developed and enhanced over the years. Caregivers and assignment employees
are generally employed by Registrant on an as-needed basis dependent upon client
demand. Registrant's employees are paid by Registrant only for time they
actually work, subject to a four-hour daily minimum on the days they work.
Although conditions may vary in different areas of the country and with respect
to different skill categories, caregivers and assignment employees were
generally less available during 1994 than they were in the preceding year.
Importance and Effect of Trademarks Held
Various trademarks are registered with the United States Patent and
Trademark Office protecting the name OLSTEN (R). Other marks that are
registered and utilized in Registrant's business include MATURE ADVANTAGE (R),
PRECISE (R), PROFILER (R) and THE WORKING SOLUTION (R). Under current law,
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these federal trademark registrations can be renewed indefinitely. National
advertising and usage have, in the belief of Registrant, given significance to
these marks in the United States and Canada.
Competitive Position
The HealthCare Services and Staffing Services provided by Registrant
also are provided by several companies which operate, as Registrant does,
nationally throughout the United States and by numerous regional and local firms
and are highly competitive. Unlike Registrant, such companies and firms usually
provide either HealthCare Services or Staffing Services, but not both.
Registrant believes that it is North America's largest provider of home health
care services and third largest provider of staffing services.
The principal methods of competing are availability of personnel,
quality of services and the price of such services. Registrant believes that
its favorable competitive position is attributable to its early industry entry,
to its widespread office network and to the consistently high quality and
targeted services it has provided over the years to its clients, as well as to
its screening and evaluation procedures, its training programs and its employee
retention techniques.
Number of Persons Employed
At January 1, 1995, Registrant employed approximately 7,900 permanent
employees and during 1994 employed approximately 550,000 caregivers and
assignment employees. In addition, Registrant's franchisees employed
approximately 600 permanent employees as well as approximately 90,000 assignment
employees during 1994. Employees of franchisees are not Registrant's employees.
As the employer of its caregivers and assignment employees, Registrant
is responsible for and pays the employer's share of Social Security taxes,
federal and state unemployment taxes, workers' compensation insurance and other
similar costs. Wages are paid to caregivers and assignment employees by
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Registrant on an hourly basis and may vary in different geographic areas to give
effect to prevailing wages paid for particular skills in the community where the
services are performed. Registrant believes that its relationships with its
employees are generally good.
All caregivers and assignment employees of Registrant are covered by
general liability insurance and by a fidelity bond maintained by Registrant.
In addition, caregivers are covered by professional medical liability insurance.
Registrant believes that its insurance coverages are adequate for the purposes
of its business.
Operations in Great Britain, Canada and Mexico
Registrant, through its Office Angels subsidiary, operated
approximately 45 offices in Great Britain to provide temporary and permanent
placement services. Registrant, through subsidiaries, operated approximately
20 offices to provide assignment employees and 15 offices to provide caregivers
in Canada. In addition, five Canadian offices were operated by licensed area
representatives to provide caregivers. In 1994 Registrant acquired a majority
interest in a Mexican staffing services company, now called Olsten STAFF, which
operates three offices in Mexico. The British, Canadian and Mexican operations
do not account for a significant percentage of Registrant's assets, revenues or
net income.
Item 2. Properties.
The international corporate headquarters of Registrant are located at
175 Broad Hollow Road, Melville, New York. The building in which the
headquarters are located is owned by Registrant through a subsidiary and
contains approximately 120,000 square feet of office space.
The leases for the operating offices utilized by Registrant's
subsidiaries expire at various dates. Registrant believes that such facilities
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are adequate for its immediate needs. Registrant does not anticipate that it
will have any problem obtaining additional space if needed in the future.
Item 3. Legal Proceedings.
There are no material pending legal proceedings to which Registrant or
any of its subsidiaries is a party.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the
fourth quarter of Registrant's 1994 fiscal year.
Item 4(a). Executive Officers of Registrant.
The following table sets forth certain information regarding each of
the executive officers of Registrant:
Executive Expiration
Officer of Term Positions and Offices
Name Since Age of Office with Registrant
---- --------- --- ---------- ---------------------
Frank N. Liguori 1976 48 April 1995 Chairman of the Board and
Chief Executive Officer
Stuart Olsten 1987 42 April 1995 President and
Vice Chairman
Robert A. Fusco 1992 44 April 1995 Executive Vice President and
President, Olsten Kimberly
QualityCare
Richard A. Piske, III 1993 46 April 1995 Executive Vice President and
President, Olsten Staffing
Services
Gerald J. Kapalko 1993 48 April 1995 Executive Vice President
William P. Costantini 1992 47 April 1995 Senior Vice President and
General Counsel
Anthony J. Puglisi 1993 45 April 1995 Senior Vice President-
Finance and Treasurer
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Frank N. Liguori has been Chairman of the Board of Registrant since
February 1992 and its Chief Executive Officer since April 1990. He was Vice
Chairman of Registrant from April 1990 to February 1992, President
of Registrant from January 1986 to April 1990 and its Chief Operating Officer
from April 1983 to April 1990.
Stuart Olsten has been Vice Chairman of Registrant since August 1994
and President of Registrant since April 1990. He was Chief Operating Officer
of Registrant from April 1990 through July 1993 and was Executive Vice President
of Registrant from November 1987 to April 1990.
Robert A. Fusco has been Executive Vice President of Registrant since
January 1992 and President, Olsten Kimberly QualityCare, since July 1993. He
was General Manager, Olsten HealthCare, from January 1992 to July 1993. From
November 1990 to December 1991, Mr. Fusco was Senior Vice President of Olsten
HealthCare. From September 1989 to November 1990, he was President of
Protocare, Inc., a provider of home infusion therapy services.
Richard A. Piske, III has been Executive Vice President of Registrant
and President, Olsten Staffing Services, since September 1993. From March 1990
to September 1993, he was Senior Vice President - Southeast Division of
Registrant and was Vice President - Southeast Division from October 1989 to
March 1990.
Gerald J. Kapalko has been Executive Vice President of Registrant since
July 1993. From August 1987 to July 1993, he was Senior Vice President -
Corporate Development of Registrant.
William P. Costantini has been Senior Vice President and General
Counsel of Registrant since June 1992. For more than five years prior thereto,
he was Vice President, General Counsel and Secretary of GEO International
Corporation, which had holdings in oil field services, quality assurance and
graphic arts.
Anthony J. Puglisi has been Senior Vice President-Finance and Treasurer
of Registrant since April 1993. From December 1988 to April 1993, he was Chief
Financial Officer of NMB (USA) Inc., a high technology manufacturer, and was
President of IMC Magnetics Corp. from July 1988 to April 1993.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
Market Information
Registrant has outstanding two classes of common equity securities:
Common Stock and Class B Common Stock. Registrant's Common Stock (symbol OLS)
has been listed on the New York Stock Exchange since December 15, 1994. Prior
thereto it was listed on the American Stock Exchange. The following table sets
forth the high and low prices of the Common Stock for each quarter during fiscal
1994 and 1993, as reported by the applicable Exchange:
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1994 1993
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High Low High Low
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1st Quarter $34-7/8 $28-1/8 $32 $24-7/8
2nd Quarter 34-3/8 29 30 22-1/8
3rd Quarter 37-3/4 31 31-1/4 25
4th Quarter 38-7/8 28-7/8 30 25-1/8
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There is no established public trading market for Registrant's Class
B Common Stock, which is subject to significant restrictions on sale.
Registrant's Class B Common Stock, which has ten votes per share, is convertible
at any time on a share for share basis into Registrant's Common Stock, which has
one vote per share.
Holders
On March 17, 1995 there were approximately 1,290 holders of record of
Registrant's Common Stock (including brokerage firms holding Registrant's Common
Stock in "street name" and other nominees) and 570 holders of record of
Registrant's Class B Common Stock.
Dividends Fiscal Year
--------------------------------
1994 1993
--------------------------------
Per share data
Cash dividends*
Common Stock $.24 $.24
Class B Common Stock .24 .24
*Registrant paid quarterly dividends in its two most recent fiscal years.
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Item 6. Selected Financial Data.
<TABLE>
OLSTEN CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
-----------------------
(In thousands, except share amounts)
<CAPTION>
1994 1993 1992 1991 1990
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Service sales, franchise fees,
management fees and other
income 2,260,331 2,157,535 1,956,094 1,696,703 1,331,485
Income before merger and
integration costs,
restructuring charges
and impairment charge,
net of tax 70,121 46,712 33,888 32,462 31,693
Income (loss)
before extraordinary charge 70,121 (11,939) 26,763 (10,392) 29,480
Net income (loss) 70,121 (26,607) 26,763 (10,392) 30,104
Total assets 725,958 690,094 661,991 631,946 623,551
Working capital 274,470 241,031 230,884 215,456 149,692
Long-term debt 125,000 176,057 150,419 211,471 170,217
Shareholders' equity 386,003 304,320 318,722 237,936 242,348
SHARE INFORMATION:
Primary earnings (loss) per share:
Income before merger and
integration costs,
restructuring charges
and impairment charge,
net of tax 1.67 1.16 .93 .90 .92
Income (loss)
before extraordinary
charge 1.67 (.30) .73 (.29) .85
Net income (loss) 1.67 (.67) .73 (.29) .87
Fully diluted earnings (loss)
per share:
Income before merger and
integration costs,
restructuring charges
and impairment charge,
net of tax 1.61 1.16 .93 .90 .92
Income (loss)
before extraordinary
charge 1.61 (.30) .73 (.29) .85
Net income (loss) 1.61 (.67) .73 (.29) .87
Cash dividends .24 .24 .19 .16 .16
Book value 9.30 7.52 8.26 6.80 7.04
SYSTEMWIDE SALES:
HealthCare Services 1,214,543 1,288,870 1,238,221 1,115,377 768,755
Staffing Services 1,344,006 1,086,751 903,275 738,242 736,314
--------- --------- --------- --------- ---------
Total 2,558,549 2,375,621 2,141,496 1,853,619 1,505,069
========= ========= ========= ========= =========
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
OLSTEN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
Operating results reflect the combined operations of Olsten Corporation (the
"Company") and Lifetime Corporation ("Lifetime"), pursuant to the merger
completed on July 30, 1993, which was accounted for as a pooling of interests.
Comparisons with prior years are based on restated combined results. Results
for 1993 included merger and integration costs of $80.9 million, as well as an
extraordinary charge, net of taxes, of $14.7 million relating to the prepayment
of debt assumed in the Lifetime merger. In 1992, Lifetime recorded a charge of
$11.7 million relating to the restructuring of certain operations and severance
pay provided to the former chairman.
Excluding the effects of these non-recurring charges, primary earnings per
share increased 44 percent to $1.67 in 1994 versus $1.16 in 1993. Primary
earnings per share for 1993 increased 25 percent from 93 cents in 1992.
Included in net income for 1994 was $1.9 million, or 5 cents per share, related
primarily to the recognition, net of tax, of a previously deferred gain and
related interest income on the sale of National Mentor, Inc.
Revenues increased 5 percent to $2.3 billion in 1994 compared to $2.2 billion
in 1993. Revenues in 1993 rose 10 percent from $2 billion in 1992.
HealthCare Services' revenues decreased 10 percent in 1994 and increased 4
percent in 1993, over the prior years. Adverse sales comparisons in 1994
resulted from the sale, transfer, or repositioning of certain parts of our
Olsten Kimberly QualityCare business for future growth in a changing health
care marketplace. We entered into contracts with a number of major managed
care providers that give us access to millions of covered lives. In October
1994, we became the largest provider of management services to hospital-based
home health agencies when we announced an agreement with Columbia/HCA
Healthcare Corporation, the nation's largest hospital system, to manage home
health agencies in 22 of its hospitals. The modest growth in 1993 was
attributable to the management and operational focus on the immediate
integration of the combined Olsten and Lifetime health care organizations.
Staffing Services' revenues increased 24 percent and 21 percent in 1994 and
1993, respectively, as the Company took advantage of an improving economy and
a surging demand for assignment employees. We continued to provide Partnership
Program SM services to major corporations in North America and Great Britain,
bringing to them a broad array of staffing solutions as they restructured and
reengineered their operations in a competitive global environment.
Cost of services sold increased 6 percent, to $1.6 billion in 1994; 11 percent,
to $1.5 billion in 1993; and 17 percent, to $1.3 billion in 1992. As a
percentage of revenues, such expenses were 70.3 percent, 69.3 percent and 68.7
percent in 1994, 1993 and 1992, respectively. Gross margins as a percentage of
revenues decreased to 29.7 percent in 1994 from 30.7 percent in 1993, and 31.3
percent in 1992 as a result of the faster growth of the Staffing Services
business, which operates at lower average gross margins than HealthCare
Services.
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Selling, general and administrative expenses as a percentage of revenues were
24.2 percent, 26 percent and 27.2 percent in 1994, 1993 and 1992, respectively.
The decrease resulted from the effective management of operating costs, and
operating efficiencies achieved in the integration of Lifetime into the Company.
Net interest expense of $5.1 million, $17.9 million and $19.8 million, in 1994,
1993 and 1992, respectively, reflected borrowing costs on long-term debt offset
by interest income on investments. The decrease in net interest expense in 1994
resulted from the repayment of $137 million of double-digit coupon Lifetime debt
in 1993, the conversion to equity of $14 million of high coupon debt assumed in
the merger with Lifetime, and the repayment of $34 million of borrowings under
our revolving credit agreement. The decrease in 1993 resulted primarily from
the repayment of the $137 million of Lifetime debt in the latter half of 1993.
The combination of the factors previously described increased pre-tax income
from operations, excluding the merger and integration costs and the
restructuring charges, to $120.9 million in 1994, compared to $83 million in
1993 and $60.3 million in 1992.
Excluding the impact of the non-recurring charges, the 1994 effective income
tax rate was 42 percent, compared to 43.7 percent in 1993 and 43.8 percent in
1992. The Company's effective rate has exceeded the Federal statutory rate
primarily because of non-deductible goodwill amortization and state income
taxes, which vary from year to year in relation to the mix of taxable income
by state.
Systemwide Sales
Systemwide sales for our two segments increased 8 percent, to $2.6 billion in
1994; 11 percent, to $2.4 billion in 1993; and 16 percent, to $2.1 billion in
1992. Systemwide sales represent all services and home care visits provided
by or through the entire Olsten network, including Company, licensed and
franchised offices and hospital-based home health agencies under management.
The presentation of systemwide sales is provided to reflect the entire scope
of Olsten's operations. This has become a key statistic, particularly in
measuring the effect of the hospital management contracts entered into by the
Company's HealthCare Services subsidiary.
Liquidity and Capital Resources
Working capital at January 1, 1995, including $68.3 million in cash, was $274
million, an increase of 14 percent over the prior year. Cash increased $43.6
million to $68.3 million in 1994 as a result of revenue growth and cash
collection efforts which reduced receivable balances. Fixed assets, net,
increased $12.4 million primarily relating to the purchase of the Company's new
international headquarters building.
The Company has a revolving credit agreement with six banks for up to $200
million in borrowings and letters of credit. As of January 1, 1995, there were
no borrowings and $67.7 million in standby letters of credit outstanding. The
Company believes that its levels of working capital and liquidity and its
available sources of funds are sufficient to support present operations and to
continue to fund future growth and business opportunities as the Company
increases its scope of services.
The Company's annual dividend on common stock and Class B common stock was 24
cents per share.
- 18 -
<PAGE> 19
Item 8. Financial Statements and Supplementary Data.
The following financial statements of Registrant are included in this Report:
Page(s) in this Report
----------------------
Consolidated Financial Statements:
Balance Sheets at January 1, 1995 and F-2
January 2, 1994
Statements of Income for the three years F-3
ended January 1, 1995
Statements of Changes in Shareholders' Equity F-4
for the three years ended January 1, 1995
Statements of Cash Flows for the three years F-5
ended January 1, 1995
Notes to Consolidated Financial Statements F-6 - F-15
Report of Independent Auditors F-16
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There have been no such changes or disagreements.
PART III
Item 10. Directors and Executive Officers of the Registrant.
See the information under the caption "Election of Directors" in
Registrant's definitive Proxy Statement with respect to its 1995 Annual Meeting
of Shareholders to be filed with the Securities and Exchange Commission, which
information is incorporated herein by reference. See also the information with
respect to executive officers of Registrant under Item 4(a) of PART I hereof,
which information is incorporated herein by reference.
- 19 -
<PAGE> 20
Item 11. Executive Compensation.
See the information under the captions "Election of Directors,"
"Summary Compensation Table," "Option Grants in Last Fiscal Year," "Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year End Option Values,"
"Retirement Plan," "Employment Contracts, Termination of Employment and Change-
in-Control Arrangements" and "Compensation Committee Report on Executive
Compensation" in Registrant's definitive Proxy Statement with respect to its
1995 Annual Meeting of Shareholders to be filed with the Securities and Exchange
Commission, which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
See the information under the caption "Security Ownership of Certain
Beneficial Owners and Management" in Registrant's definitive Proxy Statement
with respect to its 1995 Annual Meeting of Shareholders to be filed with the
Securities and Exchange Commission, which information is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions.
There have been no relationships or transactions, the disclosure of
which is called for by this Item 13.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)(1) Financial Statements
See Index to Financial Statements attached (Page F-1).
- 20 -
<PAGE> 21
(a)(2) Financial Statement Schedules
Schedules have been omitted since they are either not required
or are not applicable or the required information is shown in
the financial statements or related notes.
(a)(3) Exhibits:
3(a) Restated Certificate of Incorporation of
Registrant, filed as Exhibit 3(a) to Registrant's
Annual Report on Form 10-K for the year ended
January 2, 1994, is incorporated herein by
reference.
3(b) By-Laws of Registrant, filed as Exhibit 3(b) to
Registrant's Annual Report on Form 10-K for the
year ended January 2, 1994, is incorporated herein
by reference.
4(a) Restated Certificate of Incorporation of
Registrant, filed as Exhibit 3(a).
4(b) By-Laws of Registrant, filed as Exhibit 3(b).
4(c) Amended and Restated Agreement and Plan of Merger
dated as of May 10, 1993 between Registrant and
Lifetime Corporation, filed as Exhibit 2(a) to
Registrant's Current Report on Form 8-K/A dated May
17, 1993, is incorporated herein by reference.
4(d) Indenture dated as of March 15, 1993 between
Registrant and Bankers Trust Company, as Trustee,
relating to Registrant's 4-7/8% Convertible
Subordinated Debentures due 2003, filed as Exhibit
4 to Registrant's Quarterly Report on Form 10-Q for
the quarter ended April 4, 1993, is incorporated
herein by reference.
4(e) Warrant Agreement between Lifetime Corporation and
American Stock Transfer and Trust Company dated
November 4, 1986, as amended as of December 11,
1989 and July 23, 1993, filed as Exhibit 1 to
Registrant's Registration Statement on Form 8-A
dated July 23, 1993, is incorporated herein by
reference.
- 21 -
<PAGE> 22
*10(a) Registrant's 1984 Incentive Stock Option Plan, as
amended, filed as Exhibit 10(a) to Registrant's
Annual Report on Form 10-K for the year ended
January 2, 1994, is incorporated herein by
reference.
*10(b) Registrant's 1984 Non-Qualified Stock Option Plan,
as amended, filed as Exhibit 10(b) to Registrant's
Annual Report on Form 10-K for the year ended
January 2, 1994, is incorporated herein by
reference.
*10(c) Registrant's Incentive Restricted Stock Plan, as
amended, filed as Exhibit 10(e) to Registrant's
Annual Report on Form 10-K for the year ended
January 2, 1994, is incorporated herein by
reference.
*10(d) Form of agreement under Registrant's Incentive
Restricted Stock Plan, filed as Exhibit 10(g) to
Registrant's Annual Report on Form 10-K for the
year ended December 30, 1990, is incorporated
herein by reference.
+10(e) Amended and Restated Credit Agreement dated as of
September 9, 1994 among Registrant and certain of
its Subsidiaries signatory thereto, the Banks
signatory thereto and The Chase Manhattan Bank,
N.A., as Agent, covering $200 million credit
facility.
*10(f) Registrant's 1990 Non-Qualified Stock Option Plan
for Non-Employee Directors and Consultants, as
amended and restated, is incorporated by reference
to Exhibit C to Registrant's definitive Proxy
Statement with respect to its 1995 Annual Meeting
of Shareholders.
*10(g) Registrant's Supplemental Retirement Plan for Key
Executives filed as Exhibit 10(k) to Registrant's
Annual Report on Form 10-K for the year ended
January 3, 1993, is incorporated herein by
reference.
*Management contract or compensatory plan or arrangement.
+Filed herewith.
- 22 -
<PAGE> 23
*10(h) Registrant's Executive Voluntary Deferred
Compensation Plan and Trust Agreement between
Registrant and Prudential Trust Company, filed as
Exhibit 10(k) to Registrant's Annual Report on Form
10-K for the year ended January 2, 1994, is
incorporated herein by reference.
*10(i) Registrant's Retirement Plan for Outside Directors
and Consultants, filed as Exhibit 10(l) to
Registrant's Annual Report on Form 10-K for the
year ended January 2, 1994, is incorporated herein
by reference.
*10(j) Registrant's Deferred Compensation Plan for Outside
Directors, filed as Exhibit 10(m) to Registrant's
Annual Report on Form 10-K for the year ended
January 2, 1994, is incorporated herein by
reference.
*10(k) 1987 Stock Option Plan, as amended, of Lifetime
Corporation, filed as Exhibit 10(c) to Lifetime
Corporation's Annual Report on Form 10-K for the
year ended December 31, 1992, is incorporated
herein by reference.
*10(l) 1989 Non-Employee Directors Stock Option Plan, as
amended, of Lifetime Corporation, filed as Exhibit
10(d) to Lifetime Corporation's Annual Report on
Form 10-K for the year ended December 31, 1992, is
incorporated herein by reference.
*10(m) Employment Agreement dated March 28, 1994 between
Registrant and Frank N. Liguori, filed as Exhibit
10(q) to Registrant's Annual Report on Form 10-K
for the year ended January 2, 1994, is incorporated
herein by reference.
*10(n) Agreement dated November 8, 1993 between Registrant
and Frank N. Liguori covering incentive award under
Incentive Restricted Stock Plan and amendment
thereto dated March 27, 1994, filed as Exhibit
10(r) to Registrant's Annual Report on Form 10-K
for the year ended January 2, 1994, is incorporated
herein by reference.
*Management contract or compensatory plan or arrangement.
- 23 -
<PAGE> 24
+*10(o) Form of change in control agreement between
Registrant and each of Robert A. Fusco, Richard A.
Piske, III and Gerald J. Kapalko.
10(p) Amended and Restated Agreement and Plan of Merger
dated as of May 10, 1993 between Registrant and
Lifetime Corporation, filed as Exhibit 2(a) to
Registrant's Current Report on Form 8-K/A dated May
17, 1993, is incorporated herein by reference.
*10(q) Registrant's 1994 Stock Incentive Plan, as amended
and restated, is incorporated by reference to
Exhibit B to Registrant's definitive Proxy
Statement with respect to its 1995 Annual Meeting
of Shareholders.
*10(r) Registrant's Executive Officer Bonus Plan is
incorporated by reference to Exhibit C to
Registrant's definitive Proxy Statement with
respect to its 1994 Annual Meeting of Shareholders.
+21 Subsidiaries of Registrant.
+23 Consent of Coopers & Lybrand, independent auditors,
appearing on page F-14 of this Annual Report on
Form 10-K.
+27 Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the last
quarter of the period covered by the report.
*Management contract or compensatory plan or arrangement.
+Filed herewith.
- 24 -
<PAGE> 25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
OLSTEN CORPORATION
Date: March 29, 1995 By:/s/ Frank N. Liguori
Frank N. Liguori
Chairman and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: March 29, 1995 By:/s/ Frank N. Liguori
Frank N. Liguori
Chairman and Chief
Executive Officer and Director
(Principal Executive Officer)
Date: March 29, 1995 By:/s/ Anthony J. Puglisi
Anthony J. Puglisi
Senior Vice President-Finance and
Treasurer
(Principal Financial and Accounting
Officer)
Date: March 29, 1995 By:/s/ Allan Tod Gittleson
Allan Tod Gittleson
Director
Date: March 29, 1995 By:/s/ Andrew N. Heine
Andrew N. Heine
Director
Date: March 29, 1995 By:/s/ John M. May
John M. May
Director
Date: March 29, 1995 By:/s/ Miriam Olsten
Miriam Olsten
Director
Date: March 29, 1995 By:/s/ Stuart Olsten
Stuart Olsten
Director
Date: March 29, 1995 By:/s/ Richard J. Sharoff
Richard J. Sharoff
Director
Date: March 29, 1995 By:/s/ Raymond S. Troubh
Raymond S. Troubh
Director
- 25 -
<PAGE> 26
OLSTEN CORPORATION and SUBSIDIARIES
INDEX to FINANCIAL STATEMENTS
--------------
Pages
-----
Consolidated Financial Statements:
Balance Sheets at January 1, 1995 and F-2
January 2, 1994
Statements of Income for the three years F-3
ended January 1, 1995
Statements of Changes in Shareholders' Equity F-4
for the three years ended January 1, 1995
Statements of Cash Flows for the three F-5
years ended January 1, 1995
Notes to Consolidated Financial Statements F-6 - F-15
Report of Independent Auditors F-16
Consent of Independent Auditors F-17
F-1
<PAGE> 27
<TABLE>
OLSTEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
<CAPTION>
(In thousands, except share amounts) January 1, 1995 January 2, 1994
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 68,338 $ 24,709
Receivables, less allowance for
doubtful accounts of $13,682
and $15,532, respectively 319,613 325,122
Refundable and deferred taxes (Note 7) 28,969 43,375
Prepaid expenses and other current assets 22,606 13,432
------- --------
Total current assets 439,526 406,638
Fixed assets, net (Note 3) 72,543 60,185
Intangibles, principally goodwill, net of
accumulated amortization of $61,393
and $52,059, respectively 200,972 204,670
Other assets 12,917 18,601
------- -------
$725,958 $690,094
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accrued expenses (Note 2) $ 71,889 $ 76,137
Insurance costs 47,301 45,730
Payroll and related taxes 30,241 31,143
Accounts payable 15,625 12,597
------- -------
Total current liabilities 165,056 165,607
Long-term debt (Note 4) 125,000 176,057
Other liabilities 49,899 44,110
Commitments (Note 10) -- --
Shareholders' equity (Notes 2, 5, and 6)
Common stock $.10 par value; authorized
110,000,000 shares; issued 32,257,321
shares and 29,976,240 shares,
respectively 3,226 2,998
Class B common stock $.10 par value;
authorized 50,000,000 shares;
issued 9,266,496 shares and 10,482,514
shares, respectively 927 1,048
Additional paid-in capital 232,594 211,331
Retained earnings 150,506 90,280
Cumulative translation adjustment (1,250) (1,337)
------- -------
Total shareholders' equity 386,003 304,320
------- -------
$725,958 $690,094
======== ========
</TABLE>
See notes to consolidated financial statements. F-2
<PAGE> 28
<TABLE>
OLSTEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
For the Three Years Ended January 1, 1995
<CAPTION>
(In thousands, except share amounts) January 1, 1995 January 2, 1994 January 3, 1993
--------------- --------------- ---------------
<S> <C> <C> <C>
Service sales, franchise
fees, management fees and
other income $2,260,331 $2,157,535 $1,956,094
Cost of services sold 1,588,148 1,494,690 1,344,654
--------- --------- ---------
Gross profit 672,183 662,845 611,440
Selling, general and administrative
expenses 546,178 561,956 531,384
Interest expense, net (Note 4) 5,106 17,920 19,806
Merger and integration costs and
restructuring charges (Note 2) -- 80,911 11,700
------- ------- -------
Income before income taxes
and extraordinary charge 120,899 2,058 48,550
Income taxes (Note 7) 50,778 13,997 21,787
------- ------- -------
Income (loss) before extraordinary
charge 70,121 (11,939) 26,763
Extraordinary charge, net -- (14,668) --
------- ------- -------
Net income (loss) $ 70,121 $ (26,607) $ 26,763
======== ========= ========
SHARE INFORMATION:
------------------
Primary earnings (loss) per share:
Income (loss) before extraordinary
charge $1.67 $(.30) $.73
Extraordinary charge, net -- (.37) --
----- ----- -----
Net income (loss) $1.67 $(.67) $.73
===== ===== =====
Average shares outstanding 42,003 39,450 36,475
====== ====== ======
Fully diluted earnings (loss) per share:
Income (loss) before extraordinary
charge $1.61 $(.30) $.73
Extraordinary charge, net -- (.37) --
----- ----- ----
Net income (loss) $1.61 $(.67) $.73
===== ===== =====
Average shares outstanding 45,807 39,450 36,475
====== ====== ======
</TABLE>
See notes to consolidated financial statements. F-3
<PAGE> 29
<TABLE>
OLSTEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
-------------------------------
For the Three Years Ended January 1, 1995
<CAPTION>
Common stock Additional Cumulative
--------------- paid-in Retained translation
(In thousands, except share amounts) Shares Amount capital earnings adjustment Total
---------- ------- --------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 29, 1991 $ 27,176,568 $ 2,717 $ 128,931 $ 102,596 $ 3,692 $ 237,936
Net income -- -- -- 26,763 -- 26,763
Cash dividends -- -- -- (4,475) -- (4,475)
Conversion of debentures 2,034,134 203 51,415 -- -- 51,618
Issuance of stock for
acquisitions 118,680 12 1,463 -- -- 1,475
Translation adjustment -- -- -- -- (2,486) (2,486)
Exercise of stock options and
employee stock purchases 402,150 40 7,287 -- -- 7,327
Issuance of restricted stock, net 17,000 2 -- -- -- 2
Amortization of restricted stock -- -- 562 -- -- 562
Three-for-two stock split 8,859,041 886 (886) -- -- --
---------- ----- ------- ------- ----- -------
Balance at January 3, 1993 38,607,573 3,860 188,772 124,884 1,206 318,722
Net loss -- -- -- (26,607) -- (26,607)
Cash dividends -- -- -- (7,997) -- (7,997)
Translation adjustment -- -- -- -- (2,543) (2,543)
Exercise of stock options and
employee stock purchases 1,509,181 152 17,509 -- -- 17,661
Issuance of restricted stock 342,000 34 -- -- -- 34
Amortization of restricted stock -- -- 5,050 -- -- 5,050
---------- ----- ------- ------ ----- -------
Balance at January 2, 1994 40,458,754 4,046 211,331 90,280 (1,337) 304,320
Net income -- -- -- 70,121 -- 70,121
Cash dividends -- -- -- (9,895) -- (9,895)
Conversion of debentures 636,109 64 13,819 -- -- 13,883
Translation adjustment -- -- -- -- 87 87
Exercise of stock options and
employee stock purchases 428,954 43 5,145 -- -- 5,188
Amortization of restricted stock -- -- 2,299 -- -- 2,299
---------- ----- ------- ------- ------ -------
Balance at January 1, 1995 $ 41,523,817 $ 4,153 $ 232,594 $ 150,506 $ (1,250) $ 386,003
=========== ====== ======== ======== ======== =========
</TABLE>
See notes to consolidated financial statements. F-4
<PAGE> 30
<TABLE>
OLSTEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
For the Three Years Ended January 1, 1995
<CAPTION>
(In thousands) January 1, 1995 January 2, 1994 January 3, 1993
--------------- --------------- ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 70,121 $(26,607) $ 26,763
Adjustments to reconcile net
income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 23,523 25,663 26,005
Deferred income taxes 16,116 (15,653) (3,111)
Extraordinary charge, net -- 14,668 --
Changes in assets and liabilities,
net of effects from acquisitions:
Accounts receivable, refundable
taxes and prepaid expenses (3,567) (20,390) (41,126)
Current liabilities 7,890 21,137 12,688
Other, net 9,794 ( 3,071) 4,812
Net cash provided by (used in) ------- -------- -------
operating activities 123,877 (4,253) 26,031
------- -------- -------
INVESTING ACTIVITIES:
Purchases of fixed assets (42,136) (30,070) (20,743)
Disposition of fixed assets and
businesses 6,698 6,988 --
Acquisitions of businesses and
reacquisitions of franchises (6,103) (2,797) (6,467)
Net cash used in investing -------- -------- --------
activities (41,541) (25,879) (27,210)
-------- -------- --------
FINANCING ACTIVITIES:
Retirement of long-term debt -- (136,821) --
Proceeds from issuance (and expenses
for conversion) of convertible
debentures -- 122,105 (839)
Net proceeds from (repayment of)
line of credit agreements (34,000) 26,596 (20,953)
Issuances of common stock under
stock plans 5,188 17,661 5,387
Cash dividends (9,895) (7,997) (4,475)
Net cash provided by (used in) -------- -------- --------
financing activities (38,707) 21,544 (20,880)
-------- -------- --------
Net increase (decrease) in cash 43,629 (8,588) (22,059)
Cash at beginning of year 24,709 33,297 55,356
-------- -------- --------
Cash at end of year $ 68,338 $ 24,709 $ 33,297
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest $ 7,450 $ 20,604 $ 22,057
Cash payments for income taxes $ 19,534 $ 11,639 $ 20,335
Conversion of debt to equity $ 13,883 $ -- $ 53,500
</TABLE>
See notes to consolidated financial statements. F-5
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
Note 1. Summary of Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. The Company's fiscal year ends on the Sunday
nearest to December 31st. Certain prior period amounts have been reclassified
to conform with the current year presentation.
Revenue Recognition
Service sales and the related labor costs and payroll taxes are recorded in the
period in which the services are performed. Franchise fees, which are based
upon contractual percentages of franchise sales, and management fees generated
from management services provided to hospital-based home health agencies, are
included with Company service sales and recorded in the period in which the
services are provided.
Cash
Cash includes equivalents which are highly liquid investments with maturities
of three months or less.
Fixed Assets
Fixed assets are stated at cost and depreciated over the estimated useful lives
of the assets using the straight-line method. Leasehold improvements are
amortized over the shorter of the life of the lease or the life of the
improvement.
Intangibles
Intangibles, principally goodwill, associated with acquired businesses and the
unexpired terms of reacquired franchise contracts are being amortized on a
straight-line basis over periods ranging from three to forty years.
Foreign Currency Translation
The functional currencies of the Company's foreign subsidiaries are Canadian
dollars, United Kingdom pounds sterling and Mexican pesos. Assets and
liabilities of these subsidiaries are translated into U.S. dollars at the rates
of exchange in effect at the appropriate balance sheet date. Results of
operations are translated using an average exchange rate for the appropriate
periods. Translation gains and losses and intercompany foreign currency
transactions which are long-term in nature are reflected as adjustments to
shareholders' equity. Net foreign currency transaction gains and losses
recognized by the Company have not been significant. Foreign currency exchange
rate fluctuations have not had a material effect on operating cash balances.
Income Taxes
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109
"Accounting for Income Taxes," effective January 4, 1993. The adoption of SFAS
109 changed the Company's method of accounting for income taxes from the
deferred method under Accounting Principles Board Opinion (APB) No. 11 to an
asset and liability approach. Deferred income taxes are recognized for all
temporary differences between the tax and financial reporting bases of the
Company's assets and liabilities based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to
affect taxable income.
F-6
<PAGE> 32
Earnings Per Share
Primary earnings per share are based on the weighted average number of shares
of common stock and Class B common stock outstanding during the period, after
giving effect to potentially dilutive options and warrants under the treasury
stock method. In calculating fully diluted earnings per share, both net income
and shares outstanding have been adjusted to assume the Company's convertible
debt had been converted to common stock at the beginning of the period.
Note 2. Merger of Lifetime Corporation
On July 30, 1993, following approval by the shareholders of both companies,
Lifetime Corporation was merged into the Company. As a result, the Company
issued approximately 13.5 million shares of Class B common stock in exchange for
all of the outstanding Lifetime common stock and vested options based upon the
conversion ratio of 1.27 shares of Class B common stock for each share of
Lifetime common stock. Substantially all of the Class B common stock issued in
the merger was subsequently converted into common stock. The merger was
accounted for as a pooling of interests and, accordingly, the consolidated
financial statements of the Company were restated for all periods prior to the
merger to combine the accounts and operations of the Company and Lifetime.
Additionally, certain reclassifications were made in order to conform Lifetime's
accounts to the Company's presentation.
In the third quarter of 1993, the Company recorded merger and integration costs
of $80.9 million, consisting of transaction costs of $15 million, compensation
and severance costs of $33 million, asset writedowns of $16 million and
integration costs of $17 million. These costs reduced net income by $58.7
million, net of tax, or $1.46 per share. At January 1, 1995 and January 2,
1994, $11.7 million and $38.8 million, respectively, of these costs remained
unpaid and were included in accrued expenses.
In the last half of 1993, the Company prepaid $136.8 million representing
outstanding principal balances on certain Notes which were assumed as part of
the Lifetime merger. In connection with this early repayment, the Company paid
prepayment penalties, reflected as an extraordinary charge, totaling $14.7
million, net of income tax benefit of $16.4 million.
In the second quarter of 1992, Lifetime recorded a charge of $11.7 million
relating to the restructuring of certain operations and severance payable to the
former chairman. This charge reduced 1992 net income by $7.1 million, net of
tax, or 20 cents per share.
In the fourth quarter of 1993, the Company sold National Mentor Inc.
("Mentor"), a subsidiary engaged in the provision of community-based
psychiatric care, for $13.6 million, in cash. In conjunction with the sale, the
Company loaned Mentor $6 million in 9% subordinated debt and purchased 9,913
shares of common stock for $1 million. The Company deferred the recognition of
the after-tax gain on the sale of $3.9 million until the Company's interest in
the subordinated debt and stock was deemed fully realizable. As a result of the
subsequent resale of Mentor, the previously deferred gain and related interest
income was recognized in the fourth quarter of 1994, and is included in
revenues.
F-7
<PAGE> 33
<TABLE>
Note 3. Fixed Assets, Net
<CAPTION>
January 1, 1995 January 2, 1994
--------------- ---------------
<S> <C> <C>
Furniture and fixtures $ 79,478 $ 73,379
Buildings and improvements 32,527 21,519
Machinery and equipment 12,595 14,683
------- -------
124,600 109,581
Less accumulated depreciation and amortization 52,057 49,396
------- -------
$ 72,543 $ 60,185
======== ========
Note 4. Long-Term Debt
January 1, 1995 January 2, 1994
4-7/8% Convertible Subordinated Debentures --------------- ---------------
due 2003 $ 125,000 $ 125,000
11.2% Convertible Senior Subordinated
Notes due 1995 -- 13,883
Revolving credit agreements and other -- 37,174
------- -------
$ 125,000 $ 176,057
======== ========
</TABLE>
In March 1993, the Company issued $125 million of 4-7/8% Convertible
Subordinated Debentures maturing in 2003 which are convertible into the
Company's common stock at $34.80 per share. The Debentures are redeemable in
whole or in part at the option of the Company, together with accrued interest,
except that no redemption may be made prior to May 16, 1996.
On April 12, 1994, the Company called for redemption all $14 million of its
11.2% Convertible Senior Subordinated Notes, representing the last of the high
coupon debt assumed in the Lifetime merger. At the option of the noteholders,
all $14 million was converted into 636,109 shares of Class B common stock, and
subsequently converted into common stock.
In September 1994, the Company's existing revolving credit agreement with six
banks was amended and extended through the year 2000. The agreement provides
for up to $200 million in borrowings and letters of credit with interest rates
based on London Interbank Offered Rate (LIBOR). Under the provisions of the
agreement, on December 15, 1996, any amounts outstanding will be converted to
a term loan and amortized over the remaining life of the facility. As of
January 1, 1995 there were no borrowings and $67.7 million in standby letters
of credit outstanding.
The revolving credit agreement contains various covenants which, among other
things, require the maintenance of certain financial ratios and restrict the
incurrence of liens, additional indebtedness, payment of dividends, purchase
or redemption of stock or warrants, ability to merge, consolidate, or dispose
of assets.
Interest expense is net of interest income of $3 million in 1994, $2.7 million
in 1993, and $1.7 million in 1992.
F-8
<PAGE> 34
Note 5. Shareholders' Equity
Common stock consists of shares of common stock and Class B common stock as
follows:
<TABLE>
<CAPTION>
January 1, 1995 January 2, 1994 January 3, 1993
--------------- --------------- ---------------
<S> <C> <C> <C>
Common stock 32,257,321 29,976,240 17,243,517
Class B common stock 9,266,496 10,482,514 21,364,056
---------- ---------- ----------
41,523,817 40,458,754 38,607,573
========== ========== ==========
</TABLE>
Each share of Class B common stock is convertible into one share of common
stock, has a par value of $.10 and is entitled to ten votes. The Company is
also authorized to issue 250,000 shares of preferred stock; no shares have
been issued.
Lifetime had previously issued warrants to purchase shares of its common stock
in connection with the sale of convertible debentures which Lifetime
subsequently repaid. As a result of the merger, the warrant holders were
entitled to exchange six warrants plus $27 for 1.27 Olsten Class B common
shares. Additionally, on January 31, 1995, the Company announced an agreement
in principle for settlement of a class action lawsuit that, among its terms,
would reduce the cash payment required to exchange six warrants to $24.17 per
share. The settlement is subject to the execution of a definitive settlement
agreement and approval of the Court of Chancery of the State of Delaware. At
January 1, 1995, 4,530,000 warrants to purchase 959,000 shares of Olsten Class
B common stock, as adjusted for the merger, were exercisable and expire on
October 31, 1996.
Note 6. Stock Plans
In 1994, shareholders of the Company approved the adoption of the 1994 Stock
Incentive Plan ("1994 Plan") under which an aggregate of 2,000,000 shares of
common stock are reserved for issuance upon exercise of options thereunder.
These options may be awarded in the form of incentive stock options ("ISOs")
or non-qualified stock options ("NQSOs"). The option price of an ISO cannot
be less than 100%, and the option price of the NQSO cannot be less than 85%,
of the fair market value at the date of the grant. This plan replaces the
1984 Incentive Stock Option Plan ("1984 ISO Plan") and the 1984 Non-Qualified
Stock Option Plan ("1984 NQSO Plan"), which terminated in February 1994 except
as to options then outstanding. At January 1, 1995, there were options
outstanding of 351,150, 412,319 and 187,500 for the 1994 Plan, 1984 ISO Plan
and 1984 NQSO Plan, respectively. Options become cumulatively exercisable
commencing one year after grant in four equal annual installments under the
1994 Plan and 1984 ISO Plan and in five equal annual installments under the
1984 NQSO Plan.
F-9
<PAGE> 35
In 1991, shareholders of the Company approved the adoption of the Non-
Qualified Stock Option Plan for Non-Employee Directors and Consultants (the
"Non-Employee Plan") authorizing the grant of options to outside directors and
consultants to purchase up to an aggregate of 150,000 shares of common stock.
At January 1, 1995, there were options outstanding of 51,500 under this plan.
Under the Non-Employee Plan, options may be granted at prices not less than
fair market value at the date of grant and become exercisable no earlier than
six months nor later than five years from the date of grant.
Lifetime maintained four Stock Option Plans, including a Non-Employee Director
Stock Option Plan. All plans involved options which were granted at not less
than the fair market value at the date of grant. At the merger date, all of
the currently vested options under these plans were exchanged for Olsten Class
B common stock equal to their net economic value. Remaining outstanding
options were converted to options for Olsten Class B shares and are
exercisable over various periods not exceeding three years. At January 1,
1995, 161,005 options were outstanding under this plan.
Options under the 1994 Plan and Non-Employee Plan generally expire 10 years
after grant, subject to shareholder approval, except that options granted
under the Non-Employee Plan prior to 1995 expire five years after grant.
Options under the other plans generally expire five years after grant. A
summary of activity under all plans during 1994 follows:
<TABLE>
<CAPTION>
Incentive stock option plan Shares Price
under option per share
------------ ---------
<S> <C> <C>
Options outstanding at
January 2, 1994 524,922 $ 8.00 - 25.75
Granted 351,150 $ 31.00
Exercised (78,970) $ 8.00 - 25.75
Cancelled (33,633) $ 9.33 - 25.75
-------- ------------
Options outstanding at
January 1, 1995 763,469 $ 8.00 - 31.00
======== ============
Non-qualified stock option plans
Options outstanding at
January 2, 1994 742,124 $ 8.93 - 26.00
Granted 18,000 $ 31.625
Exercised (349,851) $ 8.00 - 26.00
Cancelled (10,268) $11.61 - 19.39
--------- --------------
Options outstanding at
January 1, 1995 400,005 $ 8.00 - 31.625
======== ==============
</TABLE>
During 1993 and 1992, options on 1,440,242 and 337,052 shares, respectively,
were exercised under all plans at prices of $7.87 to $24.80 per share.
At January 1, 1995, options for an aggregate of 422,473 shares were
exercisable under all plans and options for an aggregate of 1,732,850 shares
were available for grant (972,204 shares at January 2, 1994) under the four
Olsten plans.
F-10
<PAGE> 36
Under an Incentive Restricted Stock Plan adopted in 1990 and amended in 1993,
up to 875,000 shares of common stock may be granted or sold at prices less
than the prevailing market price to officers, key employees and others subject
to restrictions as to transfer or sale. During 1993, 327,000 shares of common
stock were granted under this plan. At January 1, 1995, 297,500 shares were
available for future grants. Shares under the plan are generally subject to
restrictions as to transfer which lapse ratably in three and five equal annual
installments commencing one year from the date of grant, provided that
recipients are continuously employed by the Company. Additional paid-in
capital is net of unearned compensation related to restricted stock of $2.7
million, $5 million and $1.7 million for 1994, 1993, and 1992, respectively.
Note 7. Income Taxes
Comparative analysis of the provisions for income taxes before extraordinary
charge follows:
<TABLE>
<CAPTION>
January 1, 1995 January 2, 1994 January 3, 1993
Current --------------- --------------- ---------------
<S> <C> <C> <C>
Federal $29,939 $22,525 $18,314
State and local 2,434 5,350 4,965
Foreign 2,289 1,775 1,619
------ ------ ------
34,662 29,650 24,898
======= ======= =======
Deferred
Federal 12,332 (11,574) (2,421)
State and local 3,784 (4,079) (690)
------ -------- -------
16,116 (15,653) (3,111)
------ -------- -------
$50,778 $13,997 $21,787
======= ======== ========
</TABLE>
Reconciliations of the differences between income taxes computed at Federal
statutory rates and consolidated provisions for income taxes before
extraordinary charge follow:
<TABLE>
<CAPTION>
January 1, 1995 January 2, 1994 January 3, 1993
Income taxes computed at Federal --------------- --------------- ---------------
<S> <C> <C> <C>
statutory tax rate $42,315 $ 720 $16,617
State income taxes, net of Federal
benefit 3,612 1,174 2,502
Amortization 2,404 2,822 2,077
Foreign net operating losses not
currently utilizable -- 677 482
Non-deductible merger costs -- 8,841 --
Other, net 2,447 (237) 109
------ ------- ------
$50,778 $13,997 $21,787
======= ======== ========
</TABLE>
F-11
<PAGE> 37
Under SFAS 109, assets and liabilities acquired in purchase business
combinations are assigned their fair values, and deferred taxes are provided
for lower or higher tax bases. In adopting the provisions of SFAS 109,
effective January 4, 1993, the Company adjusted the carrying amounts of its
purchase business acquisitions. Such adjustments reduced goodwill by
approximately $7 million with a corresponding adjustment to deferred taxes.
The cumulative effect of this change in accounting principle on income before
income taxes and on income (loss) before extraordinary charge was not
material.
Deferred tax assets and liabilities follow:
January 1, 1995 January 2, 1994
--------------- ---------------
Deferred tax assets
Reserves $18,126 $37,761
Intangible assets 1,112 617
Other 459 --
------ ------
19,697 38,378
======= =======
Deferred tax liabilities
Capitalized software (3,073) (5,020)
Investments (623) (989)
Other (578) (721)
------- -------
(4,274) (6,730)
------- -------
Net deferred tax asset $ 15,423 $ 31,648
======== ========
The components of income tax expense and variations between income tax expense
and the Federal statutory rate under SFAS 109 do not differ significantly from
those previously reported under APB 11 in the Company's 1992 consolidated
financial statements.
Note 8. Benefit Plans for Permanent Employees
The Company maintains qualified and non-qualified defined contribution
retirement plans for its salaried employees which provide for a partial match
of employee savings under the plans and for discretionary profit sharing
contributions based on employee compensation. The Company also maintains a
non-qualified defined benefit retirement program for key employees and
officers which provides supplemental retirement benefits funded in part by
profit sharing contributions.
Company contributions under the above plans were approximately $4.4 million
in both 1994 and 1993, and $4 million in 1992.
Note 9. Business Segment Information
The Company operates in two business segments:
F-12
<PAGE> 38
HealthCare Services
Provides home health care, including skilled nursing, home health aides,
physical/occupational/ neurological/speech therapies, pediatric and perinatal
care, rehabilitation services, infusion therapy and hospice services;
management services for hospital-based home health care agencies; paramedical
and occupational health services; and institutional staffing.
Staffing Services
Provides office services, including general office and administrative
services, office automation and records management; accounting services; legal
and paralegal services; technical services; production/distribution/assembly
services; marketing support and telemarketing services; and managed services
for corporations.
Information about the Company's operations in different geographic areas and
sales between segments is not significant.
Information about the Company's operations, net of merger and integration
costs and restructuring charges of $80.9 million and $11.7 million in 1993 and
1992, respectively, related to HealthCare Services, included in Corporate and
other, is as follows:
<TABLE>
<CAPTION>
Service sales,
franchise fees, Income before
management fees income taxes
and other and extraordinary Identifiable Depreciation Capital
income charge assets and amortization expenditures
--------------- ----------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C>
Year ended January 1, 1995
--------------------------
HealthCare Services $1,147,336 $ 64,836 $ 382,091 $ 17,027 $14,251
Staffing Services 1,098,635 45,272 165,108 2,789 5,755
Corporate and other 14,360 10,791 178,759 3,707 22,130
--------- ------- ------- ------ ------
$2,260,331 $ 120,899 $ 725,958 $ 23,523 $42,136
========== ========= ========= ======== =======
Year ended January 2, 1994
--------------------------
HealthCare Services $1,278,219 $ 48,002 $ 201,458 $ 17,655 $15,584
Staffing Services 882,846 28,226 136,580 2,720 3,444
Corporate and other (3,530) (74,170) 352,056 5,288 11,042
--------- ------- -------- ------ ------
$2,157,535 $ 2,058 $ 690,094 $ 25,663 $30,070
========== ========= ========= ======== =======
Year ended January 3, 1993
--------------------------
HealthCare Services $1,226,620 $ 34,664 $ 228,826 $ 16,836 $10,750
Staffing Services 729,168 17,129 113,691 2,744 2,376
Corporate and other 306 (3,243) 319,474 6,425 7,617
--------- ------- ------- ------ ------
$1,956,094 $ 48,550 $ 661,991 $ 26,005 $20,743
========== ========= ========= ======== =======
</TABLE>
F-13
<PAGE> 39
Note 10. Lease Commitments
The Company rents certain properties under noncancellable, long-term operating
leases which expire at various dates. Certain of these leases require
additional payments for taxes, insurance and maintenance and, in many cases,
provide for renewal options. Rent expense, in millions, under all leases was
$37 in 1994, $40 in 1993, and $36 in 1992.
Future minimum rental commitments for all noncancellable leases having a
remaining term in excess of one year at January 1, 1995, follow:
1995 $ 29,565
1996 $ 21,573
1997 $ 15,400
1998 $ 10,302
1999 $ 6,062
Thereafter $ 22,949
F-14
<PAGE> 40
Note 11. Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Year ended January 1, 1995
$ $ $ $
Service sales, franchise fees,
management fees and other income 537,483 562,922 578,299 581,627
Gross profit 161,951 163,606 170,539 176,087
Net income 14,347 16,404 18,184 21,186
SHARE INFORMATION:
Primary earnings per share .35 .39 .43 .50
Fully diluted earnings per share .34 .38 .41 .48
Year ended January 2, 1994
Service sales, franchise fees,
management fees and other income 515,349 538,970 556,675 546,541
Gross profit 162,184 166,931 168,797 164,933
Income (loss) before extraordinary
charge 10,347 10,785 (46,203) 13,132
Net income (loss) 10,347 10,785 (60,871) 13,132
SHARE INFORMATION:
Primary earnings (loss) per share
Income (loss) before extraordinary
charge .26 .27 (1.14) .32
Net income (loss) .26 .27 (1.50) .32
Fully diluted earnings (loss) per share
Income (loss) before extraordinary
charge .26 .27 (1.14) .31
Net income (loss) .26 .27 (1.50) .31
</TABLE>
F-15
<PAGE> 41
REPORT OF INDEPENDENT AUDITORS
------------------------------
To the Board of Directors of Olsten Corporation:
We have audited the accompanying consolidated balance sheets of OLSTEN
CORPORATION AND SUBSIDIARIES as of January 1, 1995 and January 2, 1994 and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for each of the three years in the period ended January 1, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of OLSTEN
CORPORATION and SUBSIDIARIES at January 1, 1995 and January 2, 1994 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended January 1, 1995, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
February 6, 1995
F-16
<PAGE> 42
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
-----------
We consent to the incorporation by reference in the Registration
Statements of Olsten Corporation on Form S-8 (Registration Nos. 33-9804, 33-
41603, 33-66782 and 33-66784) and on Form S-3 (Registration Nos. 33-54463 and
33-66016) of our report dated February 6, 1995, on our audits of the
consolidated financial statements of OLSTEN CORPORATION AND SUBSIDIARIES at
January 1, 1995 and January 2, 1994, and for each of the three years in the
period ended January 1, 1995, which report is included in this Annual Report on
Form 10-K.
COOPERS & LYBRAND L.L.P.
New York, New York
March 29, 1995
F-17
<PAGE> 43
EXHIBIT INDEX
-------------
Exhibit No. Description How Filed
----------- ----------- ---------
3(a) Restated Certificate of Incorporated by
Incorporation of Registrant, filed reference
as Exhibit 3(a) to Registrant's
Annual Report on Form 10-K for the
year ended January 2, 1994, is
incorporated herein by reference.
3(b) By-Laws of Registrant, filed as Incorporated by
Exhibit 3(b) to Registrant's Annual reference
Report on Form 10-K for the year
ended January 2, 1994, is
incorporated herein by reference.
4(a) Restated Certificate of Incorporated by
Incorporation of Registrant, filed reference
as Exhibit 3(a).
4(b) By-Laws of Registrant, filed as Incorporated by
Exhibit 3(b). reference
4(c) Amended and Restated Agreement and Incorporated by
Plan of Merger dated as of May 10, reference
1993 between Registrant and
Lifetime Corporation, filed as
Exhibit 2(a) to Registrant's
Current Report on Form 8-K/A dated
May 17, 1993, is incorporated
herein by reference.
4(d) Indenture dated as of March 15, Incorporated by
1993 between Registrant and Bankers reference
Trust Company, as Trustee, relating
to Registrant's 4 % Convertible
Subordinated Debentures due 2003,
filed as Exhibit 4 to Registrant's
Quarterly Report on Form 10-Q for
the quarter ended April 4, 1993, is
incorporated herein by reference.
4(e) Warrant Agreement between Lifetime Incorporated by
Corporation and American Stock reference
Transfer and Trust Company dated
November 4, 1986, as amended as of
December 11, 1989 and July 23,
1993, filed as Exhibit 1 to
Registrant's Registration Statement
on Form 8-A dated July 23, 1993, is
incorporated herein by reference.
i
<PAGE> 44
Exhibit No. Description How Filed
----------- ----------- ---------
*10(a) Registrant's 1984 Incentive Stock Incorporated by
Option Plan, as amended, filed as reference
Exhibit 10(a) to Registrant's
Annual Report on Form 10-K for the
year ended January 2, 1994, is
incorporated herein by reference.
*10(b) Registrant's 1984 Non-Qualified Incorporated by
Stock Option Plan, as amended, reference
filed as Exhibit 10(b) to
Registrant's Annual Report on Form
10-K for the year ended January 2,
1994, is incorporated herein by
reference.
*10(c) Registrant's Incentive Restricted Incorporated by
Stock Plan, as amended, filed as reference
Exhibit 10(e) to Registrant's
Annual Report on Form 10-K for the
year ended January 2, 1994, is
incorporated herein by reference.
*10(d) Form of agreement under Incorporated by
Registrant's Incentive Restricted reference
Stock Plan, filed as Exhibit 10(g)
to Registrant's Annual Report on
Form 10-K for the year ended
December 30, 1990, is incorporated
herein by reference.
10(e) Amended and Restated Credit Filed herewith
Agreement dated as of September 9,
1994 among Registrant and certain
of its Subsidiaries signatory
thereto, the Banks signatory
thereto and The Chase Manhattan
Bank, N.A., as Agent, covering $200
million credit facility.
*10(f) Registrant's 1990 Non-Qualified Incorporated by
Stock Option Plan for Non-Employee reference
Directors and Consultants, as
amended and restated, is
incorporated by reference to
Exhibit C to Registrant's
definitive Proxy Statement with
respect to its 1995 Annual Meeting
of Shareholders.
*Management contract or compensatory plan or arrangement.
ii
<PAGE> 45
Exhibit No. Description How Filed
----------- ----------- ---------
*10(g) Registrant's Supplemental Incorporated by
Retirement Plan for Key Executives reference
filed as Exhibit 10(k) to
Registrant's Annual Report on Form
10-K for the year ended January 3,
1993, is incorporated herein by
reference.
*10(h) Registrant's Executive Voluntary Incorporated by
Deferred Compensation Plan and reference
Trust Agreement between Registrant
and Prudential Trust Company, filed
as Exhibit 10(k) to Registrant's
Annual Report on Form 10-K for the
year ended January 2, 1994, is
incorporated herein by reference.
*10(i) Registrant's Retirement Plan for Incorporated by
Outside Directors and Consultants, reference
filed as Exhibit 10(l) to
Registrant's Annual Report on Form
10-K for the year ended January 2,
1994, is incorporated herein by
reference.
*10(j) Registrant's Deferred Compensation Incorporated by
Plan for Outside Directors, filed reference
as Exhibit 10(m) to Registrant's
Annual Report on Form 10-K for the
year ended January 2, 1994, is
incorporated herein by reference.
*10(k) 1987 Stock Option Plan, as amended, Incorporated by
of Lifetime Corporation, filed as reference
Exhibit 10(c) to Lifetime
Corporation's Annual Report on Form
10-K for the year ended December
31, 1992, is incorporated herein by
reference.
*10(l) 1989 Non-Employee Directors Stock Incorporated by
Option Plan, as amended, of reference
Lifetime Corporation, filed as
Exhibit 10(d) to Lifetime
Corporation's Annual Report on Form
10-K for the year ended December
31, 1992, is incorporated herein by
reference.
*10(m) Employment Agreement dated March Incorporated by
28, 1994 between Registrant and reference
Frank N. Liguori, filed as Exhibit
10(q) to Registrant's Annual Report
*Management contract or compensatory plan or arrangement.
iii
<PAGE> 46
Exhibit No. Description How Filed
----------- ----------- ---------
on Form 10-K for the year ended
January 2, 1994, is incorporated
herein by reference.
*10(n) Agreement dated November 8, 1993 Incorporated by
between Registrant and Frank N. reference
Liguori covering incentive award
under Incentive Restricted Stock
Plan and amendment thereto dated
March 27, 1994, filed as Exhibit
10(r) to Registrant's Annual Report
on Form 10-K for the year ended
January 2, 1994, is incorporated
herein by reference.
*10(o) Form of change in control agreement Filed herewith
between Registrant and each of
Robert A. Fusco, Richard A. Piske,
III and Gerald J. Kapalko.
10(p) Amended and Restated Agreement and Incorporated by
Plan of Merger dated as of May 10, reference
1993 between Registrant and
Lifetime Corporation, filed as
Exhibit 2(a) to Registrant's
Current Report on Form 8-K/A dated
May 17, 1993, is incorporated
herein by reference.
*10(q) Registrant's 1994 Stock Incentive Incorporated by
Plan, as amended and restated, is reference
incorporated by reference to
Exhibit B to Registrant's
definitive Proxy Statement with
respect to its 1995 Annual Meeting
of Shareholders.
*10(r) Registrant's Executive Officer Incorporated by
Bonus Plan is incorporated by reference
reference to Exhibit C to
Registrant's definitive Proxy
Statement with respect to its 1994
Annual Meeting of Shareholders.
21 Subsidiaries of Registrant. Filed herewith
23 Consent of Coopers & Lybrand, Filed herewith
independent auditors, appearing on
page F-17 of this Annual Report on
Form 10-K.
27 Financial Data Schedule. Filed herewith
*Management contract or compensatory plan or arrangement.
iv
<PAGE> 1
EXHIBIT 10(e)
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of September 9, 1994
among
THE OLSTEN CORPORATION and certain
of its Subsidiaries signatory hereto,
the Banks signatory hereto
and
THE CHASE MANHATTAN BANK, N.A.,
as Agent
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS. . . . . . . . . . . . . . . . . 1
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Accounting Terms . . . . . . . . . . . . . . . . . 16
ARTICLE 2. REVOLVING CREDIT AND LETTER OF CREDIT COMMITMENT . . . . . . . 16
Section 2.01. Revolving Credit Loans . . . . . . . . . . . . . . 16
Section 2.02. The Revolving Credit Notes . . . . . . . . . . . . 17
Section 2.03. Use of Proceeds. . . . . . . . . . . . . . . . . . 17
Section 2.04. Borrowing Procedures for Revolving Credit
Loans. . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.05. Interest Periods, Continuations and
Conversions. . . . . . . . . . . . . . . . . . . . 18
Section 2.06. Changes of Commitments . . . . . . . . . . . . . . 20
Section 2.07. Minimum Amounts. . . . . . . . . . . . . . . . . . 20
Section 2.08. The Letters of Credit. . . . . . . . . . . . . . . 20
ARTICLE 3. TERM LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.01. Term Loans.. . . . . . . . . . . . . . . . . . . . 25
Section 3.02. The Term Notes. . . . . . . . . . . . . . . . . . 25
Section 3.03. Amortization of Term Loans. . . . . . . . . . . . 25
Section 3.04. Interest Periods; Continuations and
Conversions. . . . . . . . . . . . . . . . . . . . 26
ARTICLE 4. GENERAL CREDIT PROVISIONS;
FEES AND PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.01. Certain Notices. . . . . . . . . . . . . . . . . . 27
Section 4.02. Prepayments. . . . . . . . . . . . . . . . . . . . 28
Section 4.03. Interest . . . . . . . . . . . . . . . . . . . . . 29
Section 4.04. Facility Fee . . . . . . . . . . . . . . . . . . . 30
Section 4.05. Letter of Credit Fees. . . . . . . . . . . . . . . 30
Section 4.06 Commitment Fee . . . . . . . . . . . . . . . . . . 30
Section 4.07. Payments Generally . . . . . . . . . . . . . . . . 31
Section 4.08. Term Loan Facility Fee.. . . . . . . . . . . . . . 32
ARTICLE 5. YIELD PROTECTION; ETC. . . . . . . . . . . . . . . . . . . . . 32
Section 5.01. Additional Costs . . . . . . . . . . . . . . . . . 32
Section 5.02. Limitation on Types of Loans . . . . . . . . . . . 34
Section 5.03. Illegality . . . . . . . . . . . . . . . . . . . . 35
Section 5.04. Certain Variable Rate Loans Pursuant To
Sections 5.01, 5.02 and 5.03 . . . . . . . . . . . 35
Section 5.05. Certain Compensation . . . . . . . . . . . . . . . 35
ARTICLE 6. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . 36
Section 6.01. Documentary Conditions Precedent . . . . . . . . . 36
Section 6.02. Additional Conditions Precedent. . . . . . . . . . 38
Section 6.03. No Default Certificate and Deemed
Representations. . . . . . . . . . . . . . . . . . 39
-i-
<PAGE> 3
ARTICLE 7. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 41
Section 7.01. Incorporation, Good Standing and Due Qualification;
Compliance with Law. . . . . . . . . . . . . . . . 41
Section 7.02. Corporate Power and Authority; No Conflicts. . . . 41
Section 7.03. Legally Enforceable Agreements . . . . . . . . . . 42
Section 7.04. Litigation . . . . . . . . . . . . . . . . . . . . 42
Section 7.05. Financial Statements . . . . . . . . . . . . . . . 42
Section 7.06. Ownership and Liens. . . . . . . . . . . . . . . . 43
Section 7.07. Taxes. . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.08. ERISA. . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.09. Subsidiaries and Ownership of Stock. . . . . . . . 44
Section 7.10. Credit Arrangements. . . . . . . . . . . . . . . . 44
Section 7.11. Operation of Business. . . . . . . . . . . . . . . 44
Section 7.12. Hazardous Substances . . . . . . . . . . . . . . . 45
Section 7.13. No Default on Outstanding Judgments or Orders . . . 45
Section 7.14. No Defaults on Other Agreements. . . . . . . . . . 46
Section 7.15. Labor Disputes and Acts of God . . . . . . . . . . 46
Section 7.16. Governmental Regulation. . . . . . . . . . . . . . 46
Section 7.17. Partnerships . . . . . . . . . . . . . . . . . . . 46
Section 7.18. No Forfeiture. . . . . . . . . . . . . . . . . . . 46
Section 7.19. No Default or Event of Default . . . . . . . . . . 47
Section 7.20. Accounts Receivable. . . . . . . . . . . . . . . . 47
Section 7.21. Solvency . . . . . . . . . . . . . . . . . . . . . 47
Section 7.22. Material Adverse Change. . . . . . . . . . . . . . 47
Section 7.23. Consolidated Total Assets. . . . . . . . . . . . . 47
ARTICLE 8. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . 47
Section 8.01. Maintenance of Existence . . . . . . . . . . . . . 47
Section 8.02. Conduct of Business. . . . . . . . . . . . . . . . 48
Section 8.03. Maintenance of Properties. . . . . . . . . . . . . 48
Section 8.04. Maintenance of Records . . . . . . . . . . . . . . 48
Section 8.05. Maintenance of Insurance . . . . . . . . . . . . . 48
Section 8.06. Compliance with Laws . . . . . . . . . . . . . . . 48
Section 8.07. Right of Inspection. . . . . . . . . . . . . . . . 48
Section 8.08. Reporting Requirements . . . . . . . . . . . . . . 49
Section 8.09. Payment of Obligations . . . . . . . . . . . . . . 52
Section 8.10. Consolidated Total Assets. . . . . . . . . . . . . 53
ARTICLE 9. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.01. Debt . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.02. Liens. . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.03. Investments. . . . . . . . . . . . . . . . . . . . 56
Section 9.04. Sale of Assets . . . . . . . . . . . . . . . . . . 57
Section 9.05. Transactions with Affiliates . . . . . . . . . . . 58
Section 9.06. Mergers, Etc.. . . . . . . . . . . . . . . . . . . 58
Section 9.07. Acquisitions . . . . . . . . . . . . . . . . . . . 58
Section 9.08. No Activities Leading to Forfeiture. . . . . . . . 58
Section 9.09. Amendments to Indenture; Certain Voluntary
Prepayments; etc . . . . . . . . . . . . . . . . . 59
Section 9.10. Corporate Documents; Fiscal Year . . . . . . . . . 59
ARTICLE 10. FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . 59
Section 10.01. Minimum Consolidated Working Capital. . . . . . . 59
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<PAGE> 4
Section 10.02. Minimum Consolidated Tangible Net Worth . . . . . 61
Section 10.03. Current Ratio . . . . . . . . . . . . . . . . . . 61
Section 10.04. Consolidated Total Liabilities To
Consolidated Tangible Net Worth Ratio . . . . . . 61
Section 10.05. Fixed Coverage Ratio. . . . . . . . . . . . . . . 62
Section 10.06. Funded Debt to Consolidated Net Operating
Cash Flow . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 11. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . 63
Section 11.01. Events of Default . . . . . . . . . . . . . . . . 63
Section 11.02. Remedies. . . . . . . . . . . . . . . . . . . . . 65
ARTICLE 12. THE AGENT;
RELATIONS AMONG BANKS AND CO-BORROWERS. . . . . . . . . . . . 66
Section 12.01. Appointment, Powers and Immunities of Agent . . . 66
Section 12.02. Reliance by Agent . . . . . . . . . . . . . . . . 66
Section 12.03. Defaults. . . . . . . . . . . . . . . . . . . . . 67
Section 12.04. Rights of Agent as a Bank . . . . . . . . . . . . 67
Section 12.05. Indemnification of Agent. . . . . . . . . . . . . 68
Section 12.06. Documents . . . . . . . . . . . . . . . . . . . . 68
Section 12.07. Non-Reliance on Agent and Other Banks . . . . . . 68
Section 12.08. Failure of Agent to Act . . . . . . . . . . . . . 69
Section 12.09. Resignation or Removal of Agent . . . . . . . . . 69
Section 12.10. Amendments Concerning Agency Function . . . . . . 70
Section 12.11. Liability of Agent. . . . . . . . . . . . . . . . 70
Section 12.12. Transfer of Agency Function . . . . . . . . . . . 70
Section 12.13. Non-Receipt of Funds by the Agent . . . . . . . . 70
Section 12.14. Withholding Taxes . . . . . . . . . . . . . . . . 71
Section 12.15. Several Obligations and Rights of Banks . . . . . 71
Section 12.16. Pro Rata Treatment of Loans, Etc. . . . . . . . . 71
Section 12.17. Sharing of Payments Among Banks . . . . . . . . . 72
ARTICLE 13. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 13.01. Amendments and Waivers. . . . . . . . . . . . . . 72
Section 13.02. Usury . . . . . . . . . . . . . . . . . . . . . . 73
Section 13.03. Expenses. . . . . . . . . . . . . . . . . . . . . 73
Section 13.04. Survival. . . . . . . . . . . . . . . . . . . . . 74
Section 13.05. Assignment; Participation . . . . . . . . . . . . 74
Section 13.06. Special Provision With Respect To New
Subsidiaries. . . . . . . . . . . . . . . . . . . 74
Section 13.07. Notices . . . . . . . . . . . . . . . . . . . . . 75
Section 13.08. Setoff. . . . . . . . . . . . . . . . . . . . . . 75
Section 13.09. Jurisdiction; Immunities. . . . . . . . . . . . . 76
Section 13.10. Table of Contents; Headings . . . . . . . . . . . 76
Section 13.11. Severability. . . . . . . . . . . . . . . . . . . 76
Section 13.12. Counterparts. . . . . . . . . . . . . . . . . . . 77
Section 13.13. Integration . . . . . . . . . . . . . . . . . . . 77
Section 13.14. Governing Law . . . . . . . . . . . . . . . . . . 77
Section 13.15. Treatment of Certain Information. . . . . . . . . 77
Section 13.16. Co-Borrowers' Attorney-in-Fact. . . . . . . . . . 77
Section 13.17. Joint and Several Obligations. . . . . . . . . . 77
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EXHIBITS
Exhibit A Form of Revolving Credit Note
Exhibit A-1 Form of Term Note
Exhibit B Opinion of Counsel for Co-Borrowers
Exhibit C Form of Borrowing Base Certificate
Exhibit D Letter of Credit Agreement
SCHEDULES
Schedule I Subsidiaries of Olsten
Schedule II Indebtedness/Liens
Schedule III Existing Letters of Credit
Schedule IV Partnerships
Schedule V Certain Permitted Investments/Asset Sales
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<PAGE> 6
AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 9, 1994
among THE OLSTEN CORPORATION, a corporation organized under the laws of the
State of Delaware ("Olsten") and certain of its Subsidiaries signatory hereto
(each such Subsidiary, a "Consolidated Subsidiary", and collectively with
Olsten, the "Co-Borrowers"), each of the banks which is a signatory hereto
(individually, a "Bank", and collectively, the "Banks") and THE CHASE
MANHATTAN BANK, N.A., a national banking association organized under the laws
of the United States of America, as agent for the Banks (in such capacity,
together with its successors in such capacity, the "Agent").
W I T N E S S E T H:
-------------------
WHEREAS, the parties hereto entered into a certain Credit Agreement
dated as of December 15, 1993 (the "Original Agreement"); and
WHEREAS, the parties desire to amend the Original Agreement in
certain respects and, for convenience of reference, to amend and restate the
Original Agreement in its entirety, all upon the terms and provisions and
subject to the conditions hereinafter set forth;
NOW, THEREFORE, as of the Effective Date, the Original Agreement is
hereby amended and restated as follows:
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS.
Section 1.01. Definitions. As used in this Agreement the
following terms have the following meanings (terms defined in the singular to
have a correlative meaning when used in the plural and vice versa):
"Acceptable Acquisition" means any Acquisition of a corporation,
partnership or other entity engaged in the business of providing human
resource services, including, without limitation, health care services and
related office management services or related businesses, which in the case
of a corporation, has been either (a) approved by the board of directors of
such corporation which is the subject of such Acquisition or (b) recommended
for approval by such board to the shareholders of such corporation and
subsequently approved by such shareholders as required under applicable law
or by the by-laws or the certificate of incorporation of such corporation;
provided, however, that no Acquisition shall be an Acceptable Acquisition if,
after giving effect thereto, a Default or Event of Default shall have
occurred and be continuing.
"Acquisition" means any transaction pursuant to which the Co-
Borrowers, or any of them, or any of their respective Subsidiaries (a)
acquires equity securities (or warrants, options or other rights to acquire
such securities) of any corporation or other business entity other than a Co-
Borrower or any entity which is a Subsidiary of a Co-Borrower, pursuant to a
solicitation of tenders therefor, or in one or more negotiated block, market
or other transactions not involving a tender offer, or a combination of any
of the foregoing, or (b) makes any entity a subsidiary of a Co-Borrower, or
causes any such entity to be merged into a Co-Borrower or any of their
respective Subsidiaries, in any case pursuant to a merger, purchase of assets
or any reorganization providing for the delivery or issuance to the holders
of such entity's then outstanding securities, in exchange for such
securities, of cash or securities of such Co-Borrower or any of its
Subsidiaries, or a combination thereof, or (c) purchases all or substantially
all of the business or assets of any entity.
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<PAGE> 7
"Additional Costs" shall have the meaning given to that term in
Section 5.01 hereof.
"Affiliate" means any Person: (a) which directly or indirectly
controls, or is controlled by, or is under common control with, the Co-
Borrowers or any of them or any of their respective Subsidiaries; (b) which
directly or indirectly beneficially owns or holds 5% or more of any class of
voting stock of the Co-Borrowers or any of them or any of their respective
Subsidiaries; (c) 5% or more of the voting stock of which is directly or
indirectly beneficially owned or held by the Co-Borrowers or any of them or
any of their respective Subsidiaries; or (d) which is a partnership in which
the Co-Borrowers or any of them or any of their respective Subsidiaries is a
general partner. The term "control" 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,
by contract, or otherwise.
"Aggregate LC Outstandings" means, at a particular time, the sum of
(a) the aggregate maximum amount then available or available in the future to
be drawn under all outstanding Letters of Credit (giving effect to any
amendment to such Letters of Credit which reduce permanently the amounts
available to be drawn thereunder) plus (b) the aggregate amount of any
payments made by the Agent under any Letter of Credit that have not been
reimbursed by the Co-Borrowers pursuant to Section 2.08 hereof.
"Aggregate Outstandings" means, at any particular time, the sum of
(a) the Aggregate LC Outstandings at such time plus (b) the aggregate
outstanding principal amount of the Revolving Credit Loans or the Term Loans,
as the case may be, at such time.
"Agreement" means the Original Agreement, as amended or
supplemented from time to time. References to Articles, Sections, Exhibits,
Schedules and the like refer to the Articles, Sections, Exhibits, Schedules
and the like of this Agreement unless otherwise indicated.
"Amortization" means amortization as determined in accordance with
GAAP.
"Amortization Date" means the last day of each calendar month,
commencing on the first such day occurring after the Conversion Date, up to
(and including) the Termination Date; provided that if any such day is not a
Banking Day, such day shall be the next succeeding Banking Day (or, if such
next succeeding Banking Day falls in the next calendar month, the next
preceding Banking Day).
"Banking Day" means any day on which commercial banks are not
authorized or required to close in New York City, and whenever such day
relates to a Eurodollar Loan or notice with respect to any Eurodollar Loan,
such term shall exclude any day on which banks are not open for dealings in
Dollar deposits in the London interbank market.
"Banks" means The Chase Manhattan Bank, N.A., in its capacity as a
bank hereunder, Chemical Bank, Boatmen's First National Bank of Kansas City,
Bank of America National Trust and Savings Association, Fleet Bank and
National Westminster Bank USA, and any of their permitted assigns pursuant to
Section 13.05 hereof.
"Borrowing Base" means at any time an amount equal to the sum of
(i) eighty-five percent (85%) of the Co-Borrowers' Eligible Receivables
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<PAGE> 8
(other than Eligible Receivables from Medicare or Medicaid) which have
remained unpaid for no more than 63 days past their invoice date, (ii)
seventy percent (70%) of the Co-Borrowers' Eligible Receivables (other than
Eligible Receivables from Medicare or Medicaid) which have remained unpaid
for at least 64 days but no more than 91 days past their invoice date and
(iii) fifty percent (50%) of all Eligible Receivables from Medicare or
Medicaid which have remained unpaid for no more than 91 days past their
invoice date.
"Borrowing Base Certificate" means a certificate signed by the
Chief Financial Officer of Olsten in the form of Exhibit C annexed hereto
with such changes as the Banks may require from time to time.
"Capital Lease" means any lease which has been capitalized on the
balance sheet of the lessee in accordance with GAAP.
"Cash Collateral" means a deposit by the Co-Borrowers, or any of
them, made in immediately available funds, to a cash collateral account at
the Agent or the purchase by the Co-Borrowers of a certificate of deposit
issued by the Agent and the execution of all documents and the taking of all
steps required to give the Agent, on behalf of the Banks, a perfected
security interest in such deposit or certificate of deposit.
"Closing Date" means December 15, 1993.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment" means, with respect to each Bank, subject to the other
provisions of this Agreement, the obligation of such Bank to extend credit to
the Co-Borrowers hereunder (whether directly by making Loans or indirectly
participating in the risk of Letters of Credit issued by the Agent) in the
following aggregate principal amount, as such amount may be reduced or
otherwise modified from time to time:
Banks Revolving Credit Loans/ Letters of Credit
----- Term Loans
---------------------- ----------------
The Chase Manhattan Bank, N.A.: $31,250,000 $18,750,000
Chemical Bank: $28,125,000 $16,875,000
Boatmen's First National Bank
of Kansas City: $21,875,000 $13,125,000
Bank of America National Trust and
Savings Association: $15,625,000 $ 9,375,000
National Westminster Bank USA: $15,625,000 $ 9,375,000
Fleet Bank: $12,500,000 $ 7,500,000
Total: $125,000,000 $75,000,000
"Commitment Fee" means the commitment fee payable by the Co-
Borrowers to the Agent for the account of the Banks pursuant to Section 4.06
hereof.
"Commitment Proportion" means, with respect to each Bank at the
time of determination, that proportion that its Commitment bears to the Total
Commitment.
"Consolidated Current Assets" means, at a particular date, all
amounts which would, in conformity with GAAP, be included under current
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<PAGE> 9
assets on a consolidated balance sheet of Olsten and its Consolidated
Subsidiaries as at such date.
"Consolidated Current Liabilities" means, at a particular
date, all amounts which would, in conformity with GAAP, be included under
current liabilities on a consolidated balance sheet of Olsten and its
Consolidated Subsidiaries as at such date including, without limitation, (a)
all obligations payable on demand or within one year after the date in which
the determination is made, and (b) installment and sinking fund payments
required to be made within one year after the date on which determination is
made, but excluding all such liabilities or obligations which are renewable
or extendable at the option of the Co-Borrowers, or any of them, to a date
more than one year from the date of determination.
"Consolidated Interest Expense" means, for any fiscal
period, the gross interest expense for such period determined on a
consolidated basis in accordance with GAAP for Olsten and its Consolidated
Subsidiaries.
"Consolidated Net Loss" means, for any fiscal period, the
amount of consolidated net loss of the Co-Borrowers, excluding (profits or)
losses attributable to extraordinary items, for such period, determined in
accordance with GAAP.
"Consolidated Net Operating Cash Flow" means Net Profit
Before Taxes plus Depreciation plus Amortization plus Consolidated Interest
Expense, determined on a consolidated basis in accordance with GAAP.
"Consolidated Subordinated Debt" means, at any particular
date, the Subordinated Debt of Olsten and its Consolidated Subsidiaries
outstanding on such date determined on a consolidated basis in accordance
with GAAP.
"Consolidated Subsidiary" has the meaning given to that
term in the introductory paragraph of this Agreement.
"Consolidated Tangible Net Worth" means, at any particular
date, the amount of excess of Consolidated Total Assets over Consolidated
Total Liabilities which would, in conformity with GAAP, be included under
shareholders' equity on a consolidated balance sheet of Olsten and its
Consolidated Subsidiaries as at such date, excluding, however, from the
determination of total assets all deferred charges included in the line item
"Goodwill and other Intangible Assets" on the consolidated balance sheet of
Olsten in conformity with GAAP and all other intangible assets, including,
without limitation, customer lists, organizational expenses, patents,
trademarks, copyrights, goodwill, covenants not to compete, research and
developmental costs and training costs.
"Consolidated Total Assets" means, at a particular date,
all amounts which would, in conformity with GAAP, be included under assets on
a consolidated balance sheet of Olsten and its Consolidated Subsidiaries as
at such date.
"Consolidated Total Liabilities" means, at a particular
date, all amounts which would, in conformity with GAAP, be included under
liabilities on a consolidated balance sheet of Olsten and its Consolidated
Subsidiaries, as at such date.
"Consolidated Working Capital" means, at the date of
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<PAGE> 10
determination, the excess of Consolidated Current Assets over Consolidated
Current Liabilities as at such date.
"Conversion Date" means December 15, 1996.
"Debentures" means the 4 7/8% Convertible Subordinated
Debentures due 2003 and issued by Olsten pursuant to the Indenture, a copy of
which is included in Olsten's Registration Statement on Form S-3
(Registration No. 33-58762) filed with the Securities and Exchange Commission
on February 25, 1993.
"Debt" means, with respect to any Person: (a) indebtedness
of such Person for borrowed money; (b) indebtedness for the deferred purchase
price of property or services (except trade payables and accruals incurred in
the ordinary course of business, including insurance costs of the Co-
Borrowers incurred in connection with their workers compensation programs
incurred in the ordinary course of business); (c) Unfunded Vested Liabilities
of such Person (if such Person is not a Co-Borrower, determined in a manner
analogous to that of determining Unfunded Vested Liabilities of the Co-
Borrowers); (d) the face amount of any outstanding letters of credit issued
for the account of such Person including, without limitation, the maximum
face amount of all letters of credit issued hereunder or otherwise to support
workers' compensation programs; (e) obligations arising under acceptance
facilities; (f) guaranties, endorsements (other than for collection in the
ordinary course of business) and other contingent obligations to purchase, to
provide funds for payment, to supply funds to invest in any Person, or
otherwise to assure a creditor against loss; (g) obligations secured by any
Lien on property of such Person; (h) obligations of such Person as lessee
under Capital Leases; and (i) indebtedness of such Person evidenced by a note
(other than notes payable to insurance companies issued in connection with
the Co-Borrowers' workers compensation programs, if any), bond, indenture or
similar instrument; and (j) all obligations of such Person in respect of
interest rate swap agreements, currency swap agreements and other similar
agreements designed to hedge against fluctuations in interest rates or
foreign exchange.
"Default" means any event which with the giving of notice
or lapse of time, or both, would become an Event of Default.
"Default Rate" means, with respect to the principal of any
Loan and, to the extent permitted by law, any other amount payable by the Co-
Borrowers, or any of them, under this Agreement or any Note (a) a rate per
annum equal to 3% above the rate of interest otherwise applicable to such
Loan, in the case of a past due payment of principal, and (b) a rate per
annum equal to 3% above the rate that would be applicable to Variable Rate
Loans from time to time, in the case of a past due payment of any other
amount.
"Depreciation" means depreciation as determined in
accordance with GAAP.
"Dividends" means, for any period, dividends paid by the
Co-Borrowers, or any of them, during such period but shall not include
dividends paid by one Co-Borrower to another.
"Dollars" and the sign "$" mean lawful money of the United
States of America.
"Effective Date" means the first date upon which all of
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<PAGE> 11
the conditions precedent set forth in Section 6.04 have been satisfied (or
waived by the Agent and all of the Banks).
"Eligible Receivables" means and includes only the gross
amount of the Co-Borrowers' accounts receivable less any discounts or
allowances relating to accounts receivable recorded on the books and records
of the Co-Borrowers and reported on a consolidated basis in accordance with
GAAP, arising out of sales in the ordinary course of business made by the Co-
Borrowers which are not in dispute and for which records are maintained at a
location of the Co-Borrowers, or any of them, in the United States; provided,
however that intercompany receivables owing from one Co-Borrower or
Subsidiary thereof to another Co-Borrower and receivables encumbered by any
Lien (whether or not permitted to exist hereunder) shall be ineligible. Any
receivable shall be ineligible if the account debtor for such receivable or
any entity that controls or is controlled by that account debtor has filed
and there is pending a case for bankruptcy or reorganization under the
Bankruptcy Code, or if any such case under the Bankruptcy Code has been filed
and is pending against the account debtor, or any entity that controls or is
controlled by that account debtor, or if the account debtor or any entity
that controls or is controlled by that account debtor has made and there is
pending a general assignment for the benefit of creditors, or if the account
debtor or any entity that controls or is controlled by that account debtor
has failed, suspended business operations, become insolvent, or has suffered
or is suffering a receiver or a trustee to be appointed for all or a
significant portion of its assets or affairs, or if any other receivable owed
from the account debtor on such receivable or from any entity that controls
or is controlled by the account debtor to the Co-Borrowers is more than 91
days past its invoice date. Notwithstanding the foregoing, at the request of
the Co-Borrowers, the Required Banks in their sole discretion and on a case
by case basis may elect to include as Eligible Receivables certain
receivables due from debtors in possession which would otherwise be deemed
ineligible under this definition. Any receivable shall also be ineligible
upon forty-five (45) days prior written notice to the Co-Borrowers, if the
Required Banks have reasonable grounds for insecurity with respect to the
collectability of such receivable in relation to the amount of credit
extended.
"Environmental Laws" means any and all federal, state,
local and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, concessions, grants, franchises, licenses,
agreements or other governmental restrictions relating to the environment or
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or
wastes into the environment including, without limitation, ambient air,
surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time, including any rules and regulations
promulgated thereunder.
"ERISA Affiliate" means any corporation or trade or
business which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as the Co-Borrowers or is
under common control (within the meaning of Section 414(c) of the Code) with
the Co-Borrowers.
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<PAGE> 12
"Eurocurrency Reserve Requirements" means, with respect to
each Interest Period for each Eurodollar Loan, the aggregate (without
duplication) of the maximum rates (expressed as a percentage and rounded
upward if necessary to the nearest 1/100th of 1%) of reserve requirements
current on the date two Banking 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/or from time to time hereafter in effect,
dealing with reserve requirements prescribed for eurocurrency funding
maintained by a member bank of such System. Such reserve percentages shall
include, without limitation, those imposed under Regulation D. Eurodollar
Loans shall be deemed to constitute Eurocurrency Liabilities (as defined in
Regulation D) and as such shall be deemed to be subject to such reserve
requirements without benefit of or credit for proration, exemptions or
offsets which may be available from time to time to any Bank under Regulation
D. Eurocurrency Reserve Requirements shall be adjusted automatically on and
as of the effective date of any change in any such reserve percentage.
"Eurodollar Base Rate" means, for any Eurodollar Loan, the
rate per annum (rounded upward if necessary to the nearest 1/16 of 1%) quoted
at approximately 11:00 a.m. London time by the principal London branch of the
Agent two Banking Days prior to the first day of the Interest Period for such
Loan for the offering to leading banks in the London interbank market of
Dollar deposits in immediately available funds, for a period, and in an
amount, comparable to such Interest Period and principal amount of the
Eurodollar Loan which shall be made by the Agent and outstanding during such
Interest Period.
"Eurodollar Loan" means any Loan when and to the extent
the interest rate therefor is determined on the basis of the Reserve Adjusted
Eurodollar Rate.
"Event of Default" has the meaning given such term in
Section 11.01.
"Existing Letters of Credit" means the letters of credit
issued prior to the Closing Date and listed on Schedule III hereto; provided
that no such letter of credit shall be deemed to be an Existing Letter of
Credit unless such letter of credit would have been permitted to be issued
hereunder in accordance with the provisions of Section 2.08(a) hereof.
"Facility Documents" means this Agreement, the Notes, the
Letters of Credit, the Letter of Credit Agreement and all other documents or
instruments executed in connection herewith or therewith.
"Facility Fee" means the facility fee payable by the Co-
Borrowers to the Agent for the account of the Banks pursuant to Section 4.04
hereof.
"Federal Funds Rate" means, for any day, the rate per
annum (expressed on a 360 day basis of calculation, if the rate on Variable
Rate Loans is so calculated) equal to the weighted average of the rates on
overnight federal funds transactions with member banks of the Federal Reserve
System arranged by federal funds brokers, as published by the Federal Reserve
Bank of New York for such day (or for any day that is not a Banking Day, for
the immediately preceding Banking Day).
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<PAGE> 13
"Forfeiture Proceeding" means the commencement of any
action or proceeding affecting any Co-Borrower or any of their Subsidiaries
before any court, governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, which may result in the seizure or
forfeiture of any of their property which would cause a material adverse
effect upon the operations, business, properties or financial condition of
the Co-Borrowers taken as a whole.
"Funded Debt" means with respect to the Co-Borrowers, at
any particular time, the aggregate then outstanding principal amount of
indebtedness of the Co-Borrowers for borrowed money excluding Subordinated
Debt, plus the aggregate amount then available to be drawn under any
outstanding letters of credit issued for the account of the Co-Borrowers,
plus the aggregate amount of any reimbursement obligations of any Co-Borrower
under any letters of credit plus the excess of (i) the Total Commitments over
(ii) Aggregate Outstandings.
"GAAP" means generally accepted accounting principles in
the United States of America as in effect from time to time, applied on a
basis consistent with those used in the preparation of the financial
statements referred to in Section 7.05.
"Hazardous Substance" means any material, whether animate
or inanimate, raw, processed or waste by-product, which in itself or as found
or used, is potentially toxic, noxious or harmful to the health or safety of
human or animal life or vegetation, regardless of whether such material be
found on or below the surface of the ground, in any surface or underground
water, or airborne in ambient air or in the air inside of any structure built
or located upon or below the surface of the ground, or in any machinery,
equipment or inventory located or used in any such structure, including, but
in no event limited to all hazardous materials, hazardous wastes, toxic
substances, infectious wastes, pollutants and contaminants from time to time
defined or classified as such under any Environmental Law regardless of the
quantity found, used, manufactured or removed from a given location.
"Indenture" means that certain Indenture dated as of March
15, 1993, by and between Olsten and Bankers Trust Company, as Trustee, a copy
of which is included in Olsten's Registration Statement on Form S-3
(Registration No. 33-58762) filed with the Securities and Exchange Commission
on February 25, 1993, as such Indenture may be amended, supplemented or
modified from time to time.
"Interest Period" means the period commencing on the date
a Eurodollar Loan is made (i.e., an additional borrowing, a conversion or a
continuation), and ending, as the Co-Borrowers may select pursuant to
Sections 2.05 or 3.04, as the case may be, on the numerically corresponding
day in the first, second, third, or (as available) sixth or twelfth calendar
month thereafter; provided, however, that if any Interest Period would
otherwise expire on a day which is not a Banking Day, such Interest Period
shall expire on the next succeeding Banking Day unless such next succeeding
Banking Day would fall on the next calendar month, in which case such
Interest Period shall end on the next preceding Banking Day, and any Interest
Period which commences on the last Banking Day of a calendar month (or on any
day for which there is no numerically corresponding day of the last calendar
month of such Interest Period) shall end on the last Banking Day of the last
month of such Interest Period.
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<PAGE> 14
"Lending Office" means, for each Bank and for each type of
Loan, the lending office of such Bank (or of an affiliate of such Bank)
designated as such for such type of Loan on its signature page hereof or such
other office of such Bank (or of an affiliate of such Bank) as such Bank may
from time to time specify to the Agent and the Co-Borrowers as the office by
which its Loans of such type are to be made and maintained.
"Letter of Credit" means a standby letter of credit, as
defined in the International Chamber of Commerce Uniform Customs and Practice
for Documentary Credit Publication No. 400 (or any successor publication
thereof), issued by the Agent for the account of a Co-Borrower pursuant to a
Letter of Credit Agreement and the terms of this Agreement as such terms may
be amended from time to time. Unless the context otherwise requires, the
term "Letter of Credit" shall include all Existing Letters of Credit.
"Letter of Credit Agreement" means the Agent's effective
form of Application for Letter of Credit, as such form may be amended from
time to time. A copy of the form which is in effect as of the date hereof is
attached hereto as Exhibit D. If there are any conflicts between the
provisions of any Letter of Credit and this Agreement, the provisions of this
Agreement shall control.
"Letter of Credit Commitment" means, with respect to each
Bank, the obligation of such Bank to purchase participating interests in each
outstanding Letter of Credit, including the Existing Letters of Credit,
issued by the Agent from time to time hereunder in the aggregate maximum face
amount available to be drawn not to exceed at any one time the product of (i)
its Commitment Proportion and (ii) $75,000,000, as such amount may be reduced
from time to time pursuant to Section 2.06 hereof.
"Lien" means any lien (statutory or otherwise), security
interest, mortgage, deed of trust, priority, pledge, charge, conditional
sale, title retention agreement, Capital Lease or other encumbrance or
similar right of others, or any agreement to give any of the foregoing.
"Loan" means a Revolving Credit Loan, Term Loan or a
Letter of Credit (or a participation therein).
"Margin" means, for (a) a Variable Rate Loan (i) which is
a Revolving Credit Loan, 0% per annum or (ii) which is a Term Loan, 1/4 of 1%
per annum, and (b) for a Eurodollar Loan (i) which is a Revolving Credit
Loan, 5/8 of 1% per annum or (ii) which is a Term Loan, 7/8 of 1% per annum.
"Medicaid and Medicare Receivables" means all accounts
receivable of the Co-Borrowers or any of them which are payable pursuant to
Titles XVIII or XIX of the United States Social Security Act and the
regulations promulgated thereunder.
"Multiemployer Plan" means a Plan defined as such in
Section 4001(a)(3) of ERISA to which contributions have been made by any Co-
Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Profit Before Taxes" means, for any fiscal quarterly
period, the amount of consolidated net income (or loss) of the Co-Borrowers
for such period excluding therefrom profits or losses attributable to
extraordinary or unusual items plus, to the extent reflected as a charge in
the statement of such consolidated net income for such period, the sum of
taxes measured by income.
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<PAGE> 15
"Notes" means the Revolving Credit Notes and the Term
Notes.
"Obligations" means all of the obligations of the Co-
Borrowers to the Agent or the Banks under or in relation to this Agreement,
the Notes, any Letters of Credit or any of the other Facility Documents, as
such agreements, documents and instruments are originally executed or as
modified, amended, restated, supplemented or extended from time to time, and
all obligations of the Co-Borrowers to the Agent or the Banks arising out of
any extension, refinancing or refunding of any of the foregoing obligations,
whether such obligations are now existing or hereafter acquired or arising,
direct or indirect, joint or several, absolute or contingent, due or to
become due, matured or unmatured, liquidated or unliquidated, arising by
contract, operation of law or otherwise.
"PBGC" means the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity of whatever nature.
"Plan" means any employee benefit or other plan
established or maintained, or to which contributions have been made, by any
Co-Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA
or to which Section 412 of the Code applies provided that such term shall not
include plans terminated prior to the date hereof.
"Prime Rate" means that rate of interest from time to time
announced by the Agent at its principal office as its prime commercial
lending rate.
"Principal Office" means the principal office of the
Agent, presently located at 1 Chase Manhattan Plaza, New York, New York
10081.
"Principal Payments" means, for any period, principal
payments of indebtedness for borrowed money, including any principal payment
under any note, bond, indenture or similar instrument, made by Olsten and its
Subsidiaries on a consolidated basis.
"Regulation D" means Regulation D of the Board of
Governors of the Federal Reserve System as the same may be amended or
supplemented from time to time.
"Regulatory Change" means, with respect to any Bank, any
change after December 15, 1993 in United States federal, state, municipal or
foreign laws or regulations (including Regulation D) or the adoption or
making after such date of any interpretations, directives or requests
applying to a class of banks including such Bank of or under any United
States, federal, state, municipal or foreign laws or regulations (whether or
not having the force of law) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
"Reportable Event" means any of the events set forth in
Section 4043(b) of ERISA as to which events the PBGC by regulation has not
waived the requirement of Section 4043(a) of ERISA that it be notified within
30 days of the occurrence of such event, provided that a failure to meet the
minimum funding standard of Section 412 of the Code or Section 302 of ERISA
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<PAGE> 16
shall be a Reportable Event regardless of any waivers given under Section
412(d) of the Code.
"Required Banks" means, at any time that no Loans are
outstanding, Banks having at least 66 2/3% of the aggregate amount of the
Commitments, and at any time that Loans are outstanding, Banks holding
(including through participations) at least 66 2/3% of Aggregate
Outstandings.
"Reserve Adjusted Eurodollar Rate" means, with respect to
the Interest Period for each Eurodollar Loan, the rate per annum (rounded
upwards to the nearest whole multiple of 1/100th of one percent) equal to the
following:
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements.
"Revolving Credit Commitment" means, with respect to each
Bank, the obligation of such Bank to make Revolving Credit Loans from time to
time hereunder from the date hereof to but excluding the earliest of the
Conversion Date and the Termination Date in an aggregate principal amount at
any one time outstanding not to exceed the product of (i) such Bank's
Commitment Proportion and (ii) $125,000,000, as such amount may be reduced
from time to time pursuant to Section 2.06 hereof.
"Revolving Credit Loan" means any Loan made by a Bank
pursuant to Section 2.01 hereof.
"Revolving Credit Note" means a promissory note of the Co-
Borrowers in the form of Exhibit A evidencing the Revolving Credit Loans made
by a Bank from time to time hereunder, as such note may be amended from time
to time.
"Solvent" means when used with respect to any Person on a
particular date, that on such date: (a) the fair saleable value of its
assets is in excess of the total amount of its liabilities, including,
without limitation, the reasonably expected amount of such Person's
obligations with respect to contingent liabilities, (b) the present fair
saleable value of the assets of such Person is not less than the amount that
will be required to pay the probable liability of such Person on its Debts as
they become absolute and matured, (c) such Person does not intend to, and
does not believe that it will, incur Debts or liabilities beyond such
Person's ability to pay as such Debts and liabilities mature and (d) such
Person is not engaged in business or a transaction, for which such Person's
property would constitute an unreasonably small capital.
"Subordinated Debt" means any unsecured Debt of the Co-
Borrowers, or any one of them (including, without limitation, the
Debentures), that is subordinated on terms satisfactory to the Required Banks
to the Co-Borrowers' obligations to the Banks under this Agreement.
"Subsidiary" means, as to any Person, any corporation or
other entity of which at least a majority of the securities or other
ownership interests having ordinary voting power (absolutely or contingently)
for the election of directors or other persons performing similar functions
are at the time owned directly or indirectly by such Person.
"Termination Date" means, (a) if the Co-Borrowers do not
elect to convert all outstanding Revolving Credit Loans to Term Loans on the
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<PAGE> 17
Conversion Date pursuant to the provisions hereof, the earliest of (i) the
date on which the Loans are paid in full and the Commitments terminate
hereunder and the obligations of the Co-Borrowers in connection therewith
have been satisfied, (ii) December 15, 1996 and (iii) such earlier date on
which the Loans are due and payable, or (b) if the Co-Borrowers have
converted all outstanding Revolving Credit Loans to Term Loans on the
Conversion Date pursuant to the provisions hereof, the earliest of (i) the
date on which the Loans are paid in full and the obligations of the Co-
Borrowers in connection therewith have been satisfied, (ii) December 15, 2000
and (iii) such earlier date on which all Loans are due and payable; provided
that if the Termination Date (as referenced in subparagraph (a) or
subparagraph (b) above, as the case may be) is not a Banking Day, the
Termination Date shall be the next succeeding Banking Day (or, if such next
succeeding Banking Day falls in the next calendar month, the next preceding
Banking Day).
"Term Loan" means any Loan made by a Bank pursuant to
Section 3.01 hereof.
"Term Loan Facility Fee" means the Term Loan facility fee
payable by the Co-Borrowers to the Agent for the account of the Banks
pursuant to Section 4.08 hereof.
"Term Loan Note" or "Term Note" means a promissory note of
the Co-Borrowers in the form of Exhibit A-1, evidencing the Term Loan to be
made by a Bank hereunder on the Conversion Date (assuming conversion), as
such note may be amended from time to time.
"The date hereof" or "the date hereof" means the Closing
Date.
"Total Commitments" means, at any time, the aggregate of
the Commitments in effect at such time.
"Unfunded Vested Liabilities" means, with respect to any
Plan, the amount (if any) by which the present value of all vested benefits
under the Plan exceeds the fair market value of all Plan assets allocable to
such benefits, as determined on the most recent valuation date of the Plan
and in accordance with the provisions of ERISA for calculating the potential
liability of any Co-Borrower or any ERISA Affiliate to the PBGC or the Plan
under Title IV of ERISA.
"Variable Rate" means, for any day, the Prime Rate for
such day.
"Variable Rate Loan" means any Loan when and to the extent
the interest rate for such Loan is determined on the basis of the Variable
Rate.
Section 1.02. Accounting Terms. All accounting terms not
specifically defined in this Agreement shall be construed in accordance with
GAAP, and all financial data required to be delivered hereunder shall be
prepared in accordance with GAAP.
ARTICLE 2. REVOLVING CREDIT AND
LETTER OF CREDIT COMMITMENT
Section 2.01. Revolving Credit Loans. Subject to the
terms and conditions of this Agreement, each of the Banks severally (but not
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<PAGE> 18
jointly) agrees to make revolving credit loans in Dollars (the "Revolving
Credit Loans") to the Co-Borrowers from time to time from and including the
Closing Date to but excluding the earliest of the Conversion Date and the
Termination Date up to but not exceeding at any one time outstanding the
amount of its Revolving Credit Commitment; provided, that no Revolving Credit
Loan shall be made if after giving effect to such Loan the aggregate
outstanding principal amount of all Revolving Credit Loans at the time of
such Loan would exceed the aggregate of the Revolving Credit Commitments of
the Banks on such date or if the Aggregate Outstandings at the time of such
Loan would exceed the lesser of the Total Commitments or the Borrowing Base
in effect on such date. The Revolving Credit Loans may be outstanding as
Variable Rate Loans or Eurodollar Loans. The Revolving Credit Loans of each
type of each Bank shall be made and maintained at such Bank's Lending Office
for such type of Loans. Subject to the foregoing limits, the Co-Borrowers
may borrow, repay and reborrow, on or after the Closing Date and prior to the
earliest of the Conversion Date and the Termination Date, all or a portion of
the Revolving Credit Commitments hereunder.
Section 2.02. The Revolving Credit Notes. The Revolving
Credit Loans of each Bank shall be evidenced by a single promissory note in
favor of such Bank substantially in the form of Exhibit A with appropriate
insertions, duly executed and completed by the Co-Borrowers. Each Bank is
hereby authorized to record the date, type and amount of each Revolving
Credit Loan, the date and amount of each payment or prepayment of principal
thereof, the date of each interest rate conversion pursuant to Section 2.05
and the principal amount subject thereto and the Interest Period and interest
rate with respect thereto in such Bank's records and/or on the schedule
annexed to and constituting a part of its Revolving Credit Note, and, absent
manifest error, any such recordation shall constitute conclusive evidence of
the information so recorded; provided that the failure to make any such
recordation shall not in any way affect the Co-Borrowers' obligation to repay
the Revolving Credit Loans. Each Revolving Credit Note (a) shall be dated
the Closing Date, (b) be stated to mature on the Conversion Date and (c)
shall bear interest from and including the Closing Date on the unpaid
principal amount thereof from time to time outstanding as provided herein.
Section 2.03. Use of Proceeds.
(a) The Co-Borrowers shall use the proceeds of the
Revolving Credit Loans for general working capital purposes, to finance
Acceptable Acquisitions, for general corporate purposes and for the payment
or voluntary prepayment (including any "make whole" or prepayment penalties
with respect thereto) of the items of Debt described on Schedule II hereto.
No part of the proceeds of any of the Loans will be used for any purpose
which violates the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System as in effect on the date of making
such Loans. The Co-Borrowers will use the Letters of Credit to support their
commercial insurance programs, particularly their workers' compensation
programs, and otherwise for general corporate purposes.
(b) The Co-Borrowers, jointly and severally, agree to
indemnify each Bank (including Chase as the Agent) and its Affiliates,
agents, officers, directors and employees (individually and collectively, an
"Indemnified Party") and hold each Indemnified Party harmless from and
against any and all liabilities, losses, damages, costs and expenses of any
kind (including, without limitation, the reasonable fees and disbursements of
counsel for any Indemnified Party in connection with any investigative,
administrative or judicial proceeding, whether or not such Indemnified Party
shall be designated a party thereto) which may be incurred by any Indemnified
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<PAGE> 19
Party, relating to or arising out of this Agreement or any actual or proposed
use of proceeds of Loans hereunder; provided, that no Indemnified Party shall
have the right to be indemnified hereunder for its own gross negligence,
willful misconduct or bad faith as determined by a court of competent
jurisdiction.
Section 2.04. Borrowing Procedures for Revolving Credit
Loans. The Co-Borrowers may request a Revolving Credit Loan hereunder as
provided in Section 4.01. Not later than 1:00 p.m. New York City time on the
date of such borrowing, each Bank shall, through its Lending Office and
subject to the conditions of this Agreement, make the amount of the Revolving
Credit Loan to be made by it on such day available to the Agent, at the
Principal Office and in immediately available funds for the account of the
Co-Borrowers. The amount received by the Agent shall, subject to the
conditions of this Agreement, be made available to the Co-Borrowers, in
immediately available funds, by the Agent crediting an account of the Co-
Borrowers designated by the Co-Borrowers and maintained with the Agent at the
Principal Office.
Section 2.05. Interest Periods, Continuations and
Conversions.
(a) In the case of each Eurodollar Loan, the Co-
Borrowers shall select an Interest Period of any of the durations set forth
in the definition of Interest Period in Section 1.01 and shall notify the
Agent of such selection as provided in Section 4.01 hereof.
(b) Upon the expiration of an Interest Period for any
Revolving Credit Loan which is a Eurodollar Loan, or any portion thereof,
such Revolving Credit Loan or portion thereof shall be automatically
converted to a Revolving Credit Loan which is a Variable Rate Loan, except to
the extent that such Loan shall be repaid hereunder or shall be required to
be repaid hereunder or unless the Co-Borrowers shall have notified the Agent,
as provided in Section 4.01 hereof, of their intention to continue such
Revolving Credit Loan as a Eurodollar Loan and select an Interest Period with
respect thereto. Subject to the following conditions and to the terms and
conditions of this Agreement, the Co-Borrowers shall have the right to
convert or continue (as the case may be) any Revolving Credit Loan or portion
thereof as aforesaid, provided that:
(i) if less than all Revolving Credit Loans at the time
outstanding shall be converted or continued, the
notice given by the Co-Borrowers to the Agent shall
specify the aggregate amount of Revolving Credit
Loans in each case to be converted or continued and
such conversion or continuation shall be made
ratably among the Banks in accordance with Section
12.16 hereof;
(ii) in the case of a conversion or continuation of less
than all outstanding Revolving Credit Loans, the
aggregate principal amount of Revolving Credit Loans
to be converted or continued shall not be less than
(1) $4,000,000 (and if greater in integral multiples
of $1,000,000 in excess thereof) in the case of
conversions to or continuations of Eurodollar Loans
or (2) $1,000,000 (or if greater in integral
multiples of $1,000,000 in excess thereof) in the
case of conversions to Variable Rate Loans;
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<PAGE> 20
(iii) no Revolving Credit Loan may be converted to or
continued as a Eurodollar Loan less than one month
before the Termination Date;
(iv) a Eurodollar Loan may be converted to a Variable
Rate Loan only on the last day of an Interest
Period;
(v) no Revolving Credit Loan or portion thereof may be
converted to or continued as a Eurodollar Loan after
the occurrence and during the continuance of a
Default or an Event of Default;
(vi) the initial Interest Period for any Eurodollar Loan
shall commence on the date of the making of such
Loan (including the date of any conversion from a
Variable Rate Loan) and each Interest Period
occurring thereafter in respect of such Loan shall
commence on the date on which the next preceding
Interest Period expires; and
(vii) no Interest Period in respect of any Eurodollar Loan
shall extend beyond the Termination Date.
Section 2.06. Changes of Commitments.
(a) The Co-Borrowers shall have the right to reduce or
terminate the amount of unused Commitments at any time or from time to time
prior to the Conversion Date, provided that: (i) the Co-Borrowers shall give
notice of each such reduction or termination to the Agent as provided in
Section 4.01; and (ii) each partial reduction shall be in an aggregate amount
at least equal to $4,000,000 or, if greater, in integral multiples of
$1,000,000 in excess thereof.
(b) The Commitments once reduced or terminated may not
be reinstated.
(c) In the event that the Commitments are reduced in
accordance with this Section 2.06, the Co-Borrowers will notify the Agent and
the Banks of the allocation of such reduction between the Letter of Credit
Commitment and the Revolving Credit Commitment, respectively.
Section 2.07. Minimum Amounts. Except for borrowings
which exhaust the full remaining amount of the Revolving Credit Commitments
and for borrowings made pursuant to Section 2.08(d) hereof, and prepayments
(in the case of Variable Rate Loans only) which result in the prepayment of
all Revolving Credit Loans, each borrowing and prepayment of principal of
Variable Rate Loans shall be in an amount at least equal to $1,000,000, and,
if greater, integral multiples of $1,000,000 in excess thereof, and each
borrowing of Eurodollar Loans of each type having concurrent Interest Periods
shall be in an amount at least equal to $4,000,000, and, if greater, integral
multiples of $1,000,000 in excess thereof.
Section 2.08. The Letters of Credit.
(a) Subject to the terms and conditions hereof, the
Agent agrees to issue Letters of Credit for the account of the Co-Borrowers,
or any of them, from time to time on any Banking Day prior to the earliest of
the Conversion Date and the Termination Date; provided that, (i) the
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<PAGE> 21
Aggregate LC Outstandings shall not exceed at any time the aggregate of the
Letter of Credit Commitments of the Banks and (ii) no Letter of Credit shall
be issued if, after giving effect to such issuance, the Aggregate
Outstandings at the time of such issuance would exceed the lesser of the
Total Commitments and the Borrowing Base in effect on such date. Under no
circumstances shall any Letter of Credit be issued hereunder having an expiry
date which falls on or after December 15, 1997. Furthermore, notwithstanding
anything contained herein to the contrary, neither the Agent nor any of the
Banks shall be under any obligation to issue or participate in a Letter of
Credit if any order, judgment or decree of any court, arbitrator or
governmental authority shall purport by its terms to enjoin, restrict or
restrain the Agent or any of the Banks in any respect relating to the
issuance of or participation in such Letter of Credit or a similar letter of
credit, or any law, rule, regulation, policy, guideline or directive (whether
or not having the force of law) from any governmental authority with
jurisdiction over the Agent or any of the Banks shall prohibit or direct the
Agent or any of the Banks in any respect relating to the issuance of or
participation in such Letter of Credit or a similar letter of credit, or
shall impose upon the Agent or any of the Banks with respect to any Letter of
Credit, any restrictions, any reserve or capital requirement or any loss,
cost or expense not reimbursed by the Co-Borrowers to the Agent or any of the
Banks. No Letter of Credit will expire more than one year from its date of
issuance. The Existing Letters of Credit shall automatically be deemed to
have been issued under, and shall be subject to the provisions of, this
Agreement as of the date hereof; provided, however that with respect to any
Existing Letter of Credit that was issued by a Bank other than the Agent,
such Bank shall be deemed the "Agent" for purposes of all provisions
applicable thereto contained in Section 2.08 hereof.
(b) Each request for issuance of a Letter of Credit
shall be in writing and shall be received by the Agent by no later than 12:00
p.m. on the day which is at least two Banking Days prior to the proposed date
of issuance. Such issuance shall occur by no later than 5:00 p.m. on the
proposed date of issuance (assuming proper prior notice as aforesaid). The
Co-Borrowers, or any of them, may request the Agent to issue a Letter of
Credit by submitting a Letter of Credit Agreement together with a written
notice setting forth (i) the proposed issuance date of such Letter of Credit
and (ii) the face amount of such Letter of Credit. The Co-Borrowers shall
also provide such other certificates, documents and other papers and
information as the Agent may request. Upon receipt of such notice, the Agent
shall notify promptly each Bank thereof and shall, subject to the terms and
conditions hereof and to the terms of the Letter of Credit Agreement, issue
such Letter of Credit by delivering the original of such Letter of Credit to
the beneficiary thereof and by furnishing a copy thereof to the Co-Borrowers.
The Agent agrees to notify promptly each Bank of the issuance of each Letter
of Credit hereunder.
(c) Effective as of the date of the issuance of each
Letter of Credit hereunder, the Agent agrees to allot and does allot to each
Bank and each Bank severally and irrevocably agrees to take and does take, an
undivided participating interest in such Letter of Credit in an amount equal
to such Bank's Commitment Proportion of the face amount of such Letter of
Credit.
(d) Prior to the earliest of the Conversion Date and
the Termination Date and subject to the terms and conditions hereof, in the
event that the Agent makes a payment under any Letter of Credit, the Co-
Borrowers shall be deemed to have requested a Revolving Credit Loan in the
principal amount of such payment and each Bank agrees that it shall be deemed
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<PAGE> 22
to have made a Revolving Credit Loan to the Co-Borrowers in an amount equal
to its Commitment Proportion of the amount of such payment; provided,
however, that the Banks shall not be deemed to have made Revolving Credit
Loans pursuant to this Section 2.08(d) if the conditions precedent to the
making of such Revolving Credit Loan as set forth in Section 6.02 hereof are
not satisfied or if, after giving effect to such Loan, the aggregate
Revolving Credit Loans made by the Banks shall exceed the aggregate of the
Revolving Credit Commitments of the Banks or if, after giving effect to such
Loan, the Aggregate Outstandings would exceed the lesser of the Total
Commitments or the Borrowing Base in effect on such date. The Agent shall
promptly notify the Banks of any Revolving Credit Loans made pursuant to this
Section 2.08(d) and each Bank shall immediately make the amount of such
Revolving Credit Loan deemed to have been made by it available to the Agent
at the Principal Office in immediately available funds for the account of the
Co-Borrowers. All Revolving Credit Loans made pursuant to this Section
2.08(d) shall be Variable Rate Loans.
(e) The Co-Borrowers absolutely and unconditionally
and jointly and severally agree (i) to reimburse the Agent, forthwith upon
its demand for any payment made by the Agent under any Letter of Credit which
has not been paid by the proceeds of a Revolving Credit Loan made by the
Banks pursuant to Section 2.08(d) and (ii) to pay interest on any
unreimbursed portion of any such payment from the date of such payment until
reimbursement in full at a rate equal to (A) from the date of such payment by
the Agent until demand for payment by the Agent (or, as the case may be, to
the date on which the reimbursement obligations under the Letters of Credit
become automatically due and payable as provided in Article 11), the Variable
Rate and (B) thereafter the Default Rate with respect to Variable Rate Loans.
In the event that the Agent makes a payment under any Letter of Credit and is
not reimbursed by the Co-Borrowers in full therefor forthwith upon demand of
the Agent, the Agent will promptly notify each Bank. Forthwith upon its
receipt of such notice, each other Bank will transfer to the Agent, in
immediately available funds, an amount equal to such Bank's Commitment
Proportion of the unreimbursed portion of such payment. Whenever, at any
time after the Agent has made a payment under any Letter of Credit and has
received from any Bank such Bank's Commitment Proportion of the unreimbursed
portion of such payment, the Agent receives any reimbursement on account of
such unreimbursed portion or any payment of interest on account thereof, the
Agent will distribute to such Bank its Commitment Proportion thereof.
(f)(i) The obligation of the Co-Borrowers to reimburse
the Agent as provided hereunder in respect of drawings or payments under
Letters of Credit shall rank pari passu with the obligation of the Co-
Borrowers to repay the Revolving Credit Loans or the Term Loans hereunder, as
the case may be, and shall be absolute and unconditional and joint and
several under any and all circumstances. Without limiting the generality of
the foregoing, the obligation of the Co-Borrowers to reimburse the Agent in
respect of drawings under Letters of Credit shall not be subject to any
defense based on the non-application or misapplication by the beneficiary of
the proceeds of any such payment or the legality, validity, regularity or
enforceability of the Letters of Credit or any related document or any
dispute between or among the Co-Borrowers, the beneficiary of any Letter of
Credit or any financing institution or other party to which any Letter of
Credit may be transferred. Neither the Agent nor any of its correspondents
shall be responsible, as to any document presented under a Letter of Credit
which appears to be regular on its face, and appears on its face to conform
to the terms of the Letter of Credit, for the validity or sufficiency of any
signature or endorsement, for delay in giving any notice or failure of any
instrument to bear adequate reference to the Letter of Credit, or for failure
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<PAGE> 23
of any person to note the amount of any draft on the reverse of the Letter of
Credit.
(ii) Any action, inaction or omission on the part of
the Agent or any of its correspondents under or in connection with any Letter
of Credit or the related instruments, documents or property, if in good faith
and in conformity with such laws, regulations or customs as are applicable,
shall be binding upon the Co-Borrowers and shall not place the Agent or any
of its correspondents under any liability to the Co-Borrowers, in the absence
of (i) gross negligence or willful misconduct by the Agent or its
correspondents or (ii) the failure by the Agent to pay under a Letter of
Credit after presentation of a draft and documents strictly complying with
such Letter of Credit. The Agent's rights, powers, privileges and immunities
specified in or arising under this Agreement are in addition to any
heretofore or at any time hereafter otherwise created or arising, whether by
statute or rule of law or contract.
(g) Each Bank acknowledges that each Letter of Credit
issued by the Agent pursuant to this Agreement is issued by the Agent on
behalf of and with the pro rata participation of all of the Banks (i.e., in
accordance with their respective Commitment Proportions), and each Bank
agrees to make the payments required by subsection (b) hereof and agrees to
be responsible for its pro rata share of all liabilities incurred by the
Agent in respect of each Letter of Credit issued, established, opened or
extended by the Agent hereunder for the account of the Co-Borrowers other
than liabilities arising out of the gross negligence or willful misconduct of
the Agent. Each Bank agrees with the Agent and the other Banks that its
obligation to make the payments required by subsection (b) hereof shall not
be affected in any way by any circumstances (other than the gross negligence
or willful misconduct of the Agent) occurring before or after the making of
any payment by the Agent pursuant to any Letter of Credit, including, without
limitation:
(i) any modification or amendment of, or any
consent, waiver, release or forbearance with respect to,
any of the terms of this Agreement or any other instrument
or document referred to herein made in accordance with the
terms hereof;
(ii) the existence of any Default or an Event
of Default; or
(iii) any change of any kind whatsoever in the
financial position or credit worthiness of the Co-Borrowers.
(h) The Co-Borrowers and the Banks hereby agree that
from and after the date hereof, subject to the satisfaction of the conditions
precedent to the initial Loans hereunder or the issuance of the initial
Letter of Credit hereunder as set forth in Article 2 hereof, the letters of
credit issued prior to the date hereof and listed and described on Schedule
III attached hereto shall be Letters of Credit for all purposes of this
Agreement (other than with respect to opening or transaction fees and the
payment of commissions made or accrued prior to the date hereof, which fees
and commissions shall be for the sole account of the Bank that issued the
same), and the Banks hereby affirm their pro rata participation (i.e., in
accordance with their respective Commitment Proportions) in such Letters of
Credit. The Co-Borrowers represent and warrant that the undrawn or
outstanding amounts with respect to all such outstanding Letters of Credit on
the date hereof is set forth on Schedule III.
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<PAGE> 24
ARTICLE 3. TERM LOANS.
Section 3.01. Term Loans.
Subject to the terms and conditions hereof, if the Co-
Borrowers give the Banks irrevocable notice of their election to convert all
outstanding Revolving Credit Loans to Term Loans at least 30 Banking Days
prior to the Conversion Date, and provided that no Default or Event of
Default shall have occurred and be continuing at any time from and after the
date of any such notification to and including the Conversion Date, each of
the Banks severally agrees to permit the Co-Borrowers to convert the
aggregate outstanding principal amount of the Revolving Credit Loans at the
Conversion Date (but not less than such amount, and, in any event, in an
aggregate amount not to exceed $125,000,000) to Term Loans in Dollars
(individually, a "Term Loan"; and collectively, the "Term Loans"), and each
such Bank's Commitment Proportion of the amount so converted shall be deemed
the Term Loan made by and owing to such Bank; provided that no Term Loans
shall be made if Aggregate Outstandings exceed the Borrowing Base in effect
on the Conversion Date.
Section 3.02. The Term Notes. The Term Loan by each Bank
shall be evidenced by a single promissory note of the Co-Borrowers
substantially in the form of Exhibit A-1 hereto, with appropriate insertions,
payable to the order of such Bank and representing the obligation of the Co-
Borrowers to pay the unpaid principal amount of the Term Loan made by such
Bank, with interest thereon as described herein. Each Bank is hereby
authorized to record the type of its Term Loan, the date and amount of each
payment or prepayment of principal thereof, the date of each interest rate
conversion pursuant to Section 3.04 hereof and the principal amount subject
thereto and the Interest Period and interest rate applicable thereto, in such
Bank's records and/or on the schedule annexed to and constituting a part of
its Term Note, and, absent manifest error, any such recordation shall
constitute conclusive evidence of the accuracy of the information so
recorded; provided that the failure to make any such recordation shall not
affect the obligation of the Co-Borrowers to repay the Term Loans. Each Term
Note shall (a) be dated, and delivered to the Bank which is the payee
thereunder on, the Conversion Date, (b) be stated to amortize and mature in
48 equal consecutive monthly installments and (c) bear interest from the date
thereof on the unpaid principal amount thereof from time to time outstanding
as provided herein.
Section 3.03. Amortization of Term Loans. The Co-
Borrowers shall repay the Term Loans in 48 equal consecutive monthly
installments, such payments to be made in accordance with Section 4.07 on
each Amortization Date commencing on the first Amortization Date to occur
after the Conversion Date.
Section 3.04. Interest Periods; Continuations and
Conversions.
(a) Subject to the terms and conditions hereof, the
Term Loans may from time to time be either Variable Rate Loans or Eurodollar
Loans or any combination thereof.
(b) In the case of each Eurodollar Loan, the Co-
Borrowers shall select an Interest Period of any of the durations set forth
in the definition of the term "Interest Period" in Section 1.01 hereof and
shall notify the Agent of such selection as provided in Section 4.01 hereof.
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<PAGE> 25
(c) Upon the expiration of an Interest Period for any
Term Loan which is a Eurodollar Loan, or any portion thereof, such Term Loan
or portion thereof shall be automatically converted to a Term Loan which is a
Variable Rate Loan, except to the extent that such Loan shall be repaid
hereunder or shall be required to be repaid hereunder or unless the Co-
Borrowers shall have notified the Agent, as provided in Section 4.01 hereof,
of their intention to continue such Term Loan as a Eurodollar Loan and of
their selection of the Interest Period with respect thereto. Subject to the
following conditions and to the terms and conditions of this Agreement, the
Co-Borrowers shall have the right to convert or continue (as the case may be)
any Term Loan or portion thereof as aforesaid, provided that:
(i) if less than all Term Loans at the time outstanding
shall be converted or continued, the notice given
by the Co-Borrowers to the Agent shall specify the
aggregate amount of Term Loans in each case to be
converted or continued and such conversion or
continuation shall be made ratably among the Banks
in accordance with Section 12.16 hereof;
(ii) in the case of a conversion or continuation of less
than all outstanding Term Loans, the aggregate
principal amount of Term Loans to be converted or
continued shall not be less than (1) $4,000,000
(and if greater in integral multiples of $1,000,000
in excess thereof) in the case of conversions to or
continuations of Eurodollar Loans or (2) $1,000,000
(or if greater in integral multiples of $1,000,000
in excess thereof) in the case of conversions to
Variable Rate Loans;
(iii) no Term Loan may be converted to or continued as a
Eurodollar Loan less than one month before the
Termination Date;
(iv) a Eurodollar Loan may be converted to a Variable
Rate Loan only on the last day of an Interest
Period;
(v) no Term Loan or portion thereof may be converted to
or continued as a Eurodollar Loan after the
occurrence and during the continuance of a Default
or an Event of Default;
(vi) the initial Interest Period for any Eurodollar Loan
shall commence on the date of the making of such
Loan (including the date of any conversion from a
Variable Rate Loan) and each Interest Period
occurring thereafter in respect of such Loan shall
commence on the date on which the next preceding
Interest Period expires; and
(vii) no Interest Period in respect of any Eurodollar
Loan shall extend beyond the Termination Date.
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<PAGE> 26
ARTICLE 4. GENERAL CREDIT PROVISIONS;
FEES AND PAYMENTS.
Section 4.01. Certain Notices. Notices by the Co-
Borrowers to the Agent of each prepayment pursuant to Section 4.02 and each
reduction or termination of Commitments pursuant to Section 2.06 and of a
conversion pursuant to Section 3.01 shall be irrevocable and shall be
effective on the date of receipt only if received by the Agent not later than
11:00 a.m., New York City time, on or prior to the date notice with respect
thereto is required to be given hereunder; and (a) the Co-Borrowers shall
give the Agent (i) at least three Banking Days' irrevocable telephonic notice
(confirmed in writing) of each Eurodollar Loan (whether representing an
additional borrowing hereunder, a conversion of a borrowing hereunder from a
Variable Rate Loan to a Eurodollar Loan or a continuation of a Eurodollar
Loan for an additional Interest Period) prior to 10:30 a.m., New York, New
York time on the day such notice is given and (ii) irrevocable telephonic
notice (confirmed in writing) of each Variable Rate Loan (whether
representing an additional borrowing hereunder or the conversion of an
existing Eurodollar Loan to a Variable Rate Loan at the end of the Interest
Period with respect to any such Eurodollar Loan) prior to 10:30 a.m., New
York, New York time on the day of the proposed Variable Rate Loan; and (b) in
the case of reductions or termination of Commitments, given thirty (30) days
prior thereto. Each such notice relating to the borrowing, continuation,
conversion or prepayment of a Revolving Credit Loan or a Term Loan, as the
case may be, shall specify the Loans to be borrowed, converted, continued or
prepaid, and the amount (subject to Section 2.07 or Section 3.04, as the case
may be) and type of the Loans to be borrowed or prepaid, the Interest Period
with respect to any Eurodollar Loan and the date of borrowing, conversion,
continuation or prepayment (which shall be a Banking Day). Each such notice
of reduction or termination of Commitments shall specify the amount of the
Commitments to be reduced or terminated. The Agent shall notify the Banks of
the contents of each such notice promptly after the Agent's receipt thereof.
Section 4.02. Prepayments.
(a) The Co-Borrowers shall have the right at any time
and from time to time to prepay any Variable Rate Loan, in whole or in part,
upon at least one Banking Day's prior written notice to the Agent in the case
of prepayment of a Variable Rate Loan; provided, however, that each such
partial prepayment of Variable Rate Loans shall be in a minimum aggregate
principal amount of $1,000,000 or, if greater, in amounts which are integral
multiples of $1,000,000 in excess thereof. Except as required by paragraphs
(b) or (c) below or on the last day of an Interest Period with respect
thereto, the Co-Borrowers shall not be permitted to prepay Eurodollar Loans.
Each prepayment of Term Loans under this subsection shall be applied to the
installments thereof in the inverse order of maturity. Amounts paid or
prepaid in respect of Term Loans may not be reborrowed.
(b) On the date of any reduction of the Commitments as
provided in Section 2.06, the Co-Borrowers jointly and severally shall pay or
prepay so much of the Revolving Credit Loans as shall be necessary in order
that the Aggregate Outstandings will not exceed the Total Commitments after
giving effect to such reduction. All prepayments under this paragraph shall
be subject to Section 5.05.
(c) In the event that the Aggregate Outstandings
exceed the Borrowing Base at any time prior to the Termination Date, the Co-
Borrowers jointly and severally shall promptly pay or prepay so much of the
Loans
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<PAGE> 27
outstanding as shall be necessary in order that the Aggregate Outstandings
will not exceed the Borrowing Base then in effect. All prepayments under
this paragraph shall be subject to Section 5.05.
(d) All prepayments required by paragraphs (b) or (c)
above shall be applied first to Variable Rate Loans outstanding and then to
Eurodollar Loans outstanding.
(e) All prepayments made pursuant to this Section 4.02
shall be accompanied by the payment of all accrued interest on the amount so
prepaid and by all amounts required to be paid pursuant to Section 5.05 in
connection therewith.
(f) If, after making the mandatory prepayment required
by paragraph (c) above, the Aggregate LC Outstandings exceeds the Borrowing
Base, the Co-Borrowers agree to provide the Agent on behalf of the Banks with
Cash Collateral in an amount equal to such excess promptly after the
occurrence of any such excess.
Section 4.03. Interest.
(a) Interest shall accrue on the outstanding and
unpaid principal amount of each Loan for the period from and including the
date of such Loan to but excluding the date such Loan is due, at the
following rates per annum: (i) for a Variable Rate Loan, at a variable rate
per annum equal to the Variable Rate plus the applicable Margin; and (ii) for
a Eurodollar Loan, at a fixed rate equal to the Reserve Adjusted Eurodollar
Rate plus the applicable Margin. Any principal amount not paid when due (at
maturity, by acceleration or otherwise) and, to the extent permitted by law,
any other amount payable hereunder which is not paid when due, shall bear
interest thereafter until paid in full, at the Default Rate which shall be
payable on demand.
(b) The interest rate on each Variable Rate Loan shall
change when the Variable Rate changes and interest on each such Loan shall be
calculated on the basis of a year of 360 days for the actual number of days
elapsed. Interest on each Eurodollar Loan shall be calculated on the basis
of a year of 360 days for the actual number of days elapsed. Promptly after
the determination of any interest rate provided for herein or any change
therein, the Agent shall notify the Co-Borrowers and the Banks thereof.
(c) Accrued interest on Variable Rate Loans shall be
due and payable (i) for the period from the Closing Date to but excluding the
Conversion Date, quarterly in arrears on the last day of each calendar
quarter commencing on December 31, 1993 and (ii) for the period commencing on
the Conversion Date and thereafter, on each Amortization Date, and (iii) on
the Termination Date. Accrued interest on Eurodollar Loans shall be due and
payable in arrears upon any payment of principal and on the last day of the
Interest Period with respect thereto and, in the case of an Interest Period
greater than three months, at three-month intervals after the first day of
such Interest Period. Notwithstanding the foregoing, interest accruing at
the Default Rate shall be due and payable from time to time on demand of the
Agent.
(d) Notwithstanding any other provision of this
Agreement, upon the occurrence and during the continuance of a Default or an
Event of Default, each Revolving Credit Loan or Term Loan outstanding and
each reimbursement obligation with respect to any outstanding Letter of
Credit hereunder shall bear interest at a rate per annum equal to the Default
Rate. - 22 -
<PAGE> 28
Section 4.04. Facility Fee; Structuring Fee. (a) The Co-
Borrowers jointly and severally shall pay to the Agent for the pro-rata
account of each Bank a facility fee on the date hereof in the aggregate
amount of $187,500 (i.e., 3/32 of one percent of the Total Commitments).
(b) The Co-Borrowers jointly and severally shall pay
to the Agent for the pro-rata account of each Bank a structuring fee on the
date hereof in the aggregate amount of $187,500 (i.e., 3/32 of one percent of
the Total Commitments).
Section 4.05. Letter of Credit Fees. The Co-Borrowers
jointly and severally shall pay to the Agent, (a) for the pro rata account of
the Banks an aggregate fee of one-half of one percent (0.50%) per annum based
upon a 365/366 day year on the daily outstanding amount available to be drawn
on any Letter of Credit issued by the Agent (or in the case of an Existing
Letter of Credit, the Bank that issued the same) hereunder from and including
the date of issuance to and including the last day of the calendar quarter,
payable quarterly in arrears on the last Banking Day of the calendar quarter
and (b) for the account of the Agent (or in the case of an Existing Letter of
Credit, the Bank that issued the same), the Agent's (or in the case of an
Existing Letter of Credit, the issuing Bank's) usual and customary charges
with respect to Letters of Credit. Notwithstanding any other provision of
this Agreement, upon the occurrence and during the continuance of a Default
or Event of Default, all fees payable under this Section 4.05 shall be
increased by one percentage point (1%) per annum.
Section 4.06 Commitment Fee.
The Co-Borrowers shall pay to the Agent on behalf and for
the ratable benefit of each Bank an aggregate commitment fee for the period
from and including the date hereof to and excluding the Conversion Date equal
to such Bank's Commitment Proportion of one quarter of one percent (.25%) per
annum of the average daily unused portion of the aggregate of the Revolving
Credit Commitments of the Banks during the applicable period. The commitment
fee shall be due and payable in arrears on the last day of each calendar
quarter (i.e., the last day of each March, June, September and December) and
on the Conversion Date.
Section 4.07. Payments Generally.
(a) All payments under this Agreement, the Notes or any of
the other Facility Documents shall be made in Dollars in immediately
available funds not later than 1:00 p.m. New York City time on the relevant
dates specified above (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding Banking Day) at
the Principal Office for the account of the applicable Lending Office of each
Bank; provided that, when a new Loan is to be made by each Bank on a date the
Co-Borrowers are to repay any principal of an outstanding Loan, the Agent
shall apply the proceeds thereof to the payment of the principal to be repaid
and only an amount equal to the difference between the principal to be
borrowed and the principal to be repaid shall be made available by the Agent
to the Co-Borrowers as provided in Section 2.04 or paid by the Co-Borrowers
to the Agent pursuant to this Section 4.07, as the case may be. The Agent
may (but shall not be obligated to) debit the amount of any such payment
which is not made by such time to any ordinary deposit account of the Co-
Borrowers, or any of them, with the Agent. The Co-Borrowers shall, at the
time of making each payment under this Agreement or the Notes, specify to the
Agent the principal or other amount payable by the Co-Borrowers under this
Agreement or the Notes to which such
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<PAGE> 29
payment is to be applied (and in the event that it fails to so specify, or if
a Default or Event of Default has occurred and is continuing, the Agent may
apply such payment as it may elect in its sole discretion (subject to Section
12.16)). Unless otherwise specified herein, if the due date of any payment
under this Agreement, the Notes or any of the other Facility Documents would
otherwise fall on a day which is not a Banking Day, such date shall be
extended to the next succeeding Banking Day and interest shall be payable for
any principal so extended for the period of such extension. Each payment
received by the Agent hereunder or under any Note for the account of a Bank
shall be paid promptly to such Bank, in immediately available funds, for the
account of such Bank's Lending Office.
(b) All payments made by the Co-Borrowers under this
Agreement, the Notes or the other Facility Documents shall be made free and
clear of, and without deduction or withholding for or on account of, any
present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any governmental or taxing authority of
any jurisdiction located outside of the United States, excluding, in the case
of the Agent and each Bank, income taxes and franchise taxes (imposed in lieu
of income taxes) imposed on the Agent or such Bank, as the case may be, as a
result of a present or former connection between the jurisdiction of the
government or the taxing authority imposing such tax and the Agent or such
Bank (excluding a connection arising solely from the Agent or such Bank
having executed, delivered, or performed its obligations or received a
payment under, or enforced, this Agreement, the Notes or the other Facility
Documents) or any political subdivision or taxing authority thereof or
therein (all such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions and withholdings being hereinafter called "Taxes"). If any Taxes
are required to be withheld from any amounts payable to the Agent or any Bank
hereunder or under the Facility Documents, the amounts so payable to the
Agent or such Bank shall be increased to the extent necessary to yield to the
Agent or such Bank (after payment of all Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement, the Notes and the other Facility Documents. Whenever any Taxes
are payable by the Co-Borrowers, or any of them, as promptly as possible
thereafter the Co-Borrowers shall send to the Agent for its own account or
for the account of such Bank, as the case may be, a certified copy of an
original official receipt received by the Co-Borrowers (or any of them)
showing payment thereof. If the Co-Borrowers, or any of them, fail to pay
any Taxes when due to the appropriate taxing authority or fail to remit to
the Agent the required receipts or other required documentary evidence, the
Co-Borrowers shall indemnify the Agent and the Banks for any incremental
taxes, interest or penalties that may become payable by the Agent or any Bank
as a result of any such failure. The agreements in this subsection shall
survive the termination of this Agreement and the Facility Documents and the
payment of the Notes and all other amounts payable hereunder or thereunder.
Section 4.08. Term Loan Facility Fee. If Revolving
Credit Loans are converted to Term Loans on the Conversion Date pursuant to
the provisions of this Agreement, the Co-Borrowers jointly and severally
shall, on the Conversion Date, pay to the Agent for the pro-rata account of
each Bank a Term Loan Facility Fee in an aggregate amount equal to 1/8 of 1%
of the aggregate outstanding principal amount of the Term Loans on such date.
ARTICLE 5. YIELD PROTECTION; ETC.
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<PAGE> 30
Section 5.01. Additional Costs.
(a) The Co-Borrowers shall pay directly to each Bank from
time to time on demand such amounts as such Bank may determine to be
necessary to compensate it for any costs which such Bank determines are
attributable to its issuing or participating in any Letter of Credit or
making or maintaining any Eurodollar Loans under this Agreement or its Note
or its obligation to make any such Loans or issue or participate in any such
Letters of Credit hereunder, or any reduction in any amount receivable by
such Bank hereunder in respect of any such Loans or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change which: (i) changes
the basis of taxation of any amounts payable to such Bank under this
Agreement or its Note in respect of any of such Loans or Letters of Credit
(other than taxes imposed on the overall net income of such Bank or of its
Lending Office for any of such Loans by the jurisdiction in which such Bank
has its principal office or such Lending Office); or (ii) imposes or modifies
any reserve, special deposit, deposit insurance or assessment, minimum
capital, capital ratio or similar requirements relating to any extensions of
credit, or commitments therefor, or other assets of, or any deposits with or
other liabilities of, such Bank (including any of such Loans or any deposits
referred to in the definition of "Reserve Adjusted Eurodollar Rate" in
Section 1.01); or (iii) imposes any other condition affecting this Agreement,
the Letters of Credit or its Note (or any of such extensions of credit, or
commitments therefor, or liabilities). Each Bank will notify the Agent of
any event occurring after the date of this Agreement which will entitle such
Bank to compensation pursuant to this Section 5.01(a) as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation and the Agent on behalf of such Bank will promptly notify the
Co-Borrowers of such event. If any Bank requests compensation from the Co-
Borrowers under this Section 5.01(a), or under Section 5.01(c), the Co-
Borrowers may, by notice to the Agent (with a copy to such Bank), suspend the
obligation of such Bank to make Loans of the type with respect to which such
compensation is requested (in which case the provisions of Section 5.04 shall
be applicable).
(b) Without limiting the effect of the foregoing
provisions of this Section 5.01, in the event that, by reason of any
Regulatory Change, any Bank either (i) incurs Additional Costs based on or
measured by the excess above a specified level of the amount of a category of
deposits or other liabilities of such Bank which includes deposits by
reference to which the interest rate on Eurodollar Loans is determined as
provided in this Agreement or a category of extensions of credit or other
assets of such Bank which includes Eurodollar Loans or (ii) becomes subject
to restrictions on the amount of such a category of liabilities or assets
which it may hold, then, if such Bank so elects by notice to the Agent (with
a copy to the Co-Borrowers), the obligation of such Bank to make Loans of
such type hereunder shall be suspended until the date such Regulatory Change
ceases to be in effect (in which case the provisions of Section 5.04 shall be
applicable).
(c) Without limiting the effect of the foregoing
provisions of this Section 5.01 (but without duplication), the Co-Borrowers
shall pay directly to each Bank from time to time on request such amounts as
such Bank may determine to be necessary to compensate such Bank for any costs
which it determines are attributable to the maintenance by it or any of its
affiliates pursuant to any law or regulation of any jurisdiction or any
interpretation, directive or request (whether or not having the force of law
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<PAGE> 31
and whether in effect on the date of this Agreement or thereafter) of any
court or governmental or monetary authority of capital in respect of its
Loans hereunder or its obligation to make Loans hereunder or its obligation
to issue Letters of Credit or to participate in such issuance hereunder (such
compensation to include, without limitation, an amount equal to any reduction
in return on assets or equity of such Bank to a level below that which it
could have achieved but for such law, regulation, interpretation, directive
or request). Each Bank will notify the Agent if it is entitled to
compensation pursuant to this Section 5.01(c) as promptly as practicable
after it determines to request such compensation and the Agent on behalf of
such Bank will promptly notify the Co-Borrowers.
(d) Determinations and allocations by a Bank for
purposes of this Section 5.01 of the effect of any Regulatory Change pursuant
to subsections (a) or (b), or of the effect of capital maintained pursuant to
subsection (c), on its costs of making or maintaining Loans or Letters of
Credit or its obligation to make Loans or to issue Letters of Credit or
participate in such issuance, or on amounts receivable by, or the rate of
return to, it in respect of Loans, Letters of Credit (or participations
therein) or such obligation, and of the additional amounts required to
compensate such Bank under this Section 5.01, shall be conclusive absent
manifest error, provided that such determinations and allocations are made on
a reasonable basis and provided further that such Bank provides the Co-
Borrowers with copies of the calculations made by such Bank to enable such
determination or allocation to be made.
Section 5.02. Limitation on Types of Loans. Anything
herein to the contrary notwithstanding, if:
(a) the Agent determines (which determination shall be
conclusive) that quotations of interest rates for the relevant deposits
referred to in the definition of "Reserve Adjusted Eurodollar Rate" in
Section 1.01 are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining the rate of interest for any
Eurodollar Loans as provided in this Agreement; or
(b) any Bank reasonably determines (which determination
shall be conclusive) and notifies the Agent that the relevant rates of
interest referred to in the definition of "Reserve Adjusted Eurodollar Rate"
in Section 1.01 upon the basis of which the rate of interest for any
Eurodollar Loans is to be determined do not cover the cost to such Bank of
making or maintaining such Loans, then the Agent shall give the Co-Borrowers
and each other Bank prompt notice thereof (i.e., the condition described in
(a) or (b) above), and so long as such condition remains in effect, such Bank
shall be under no obligation to make Loans of such type.
Section 5.03. Illegality. Notwithstanding any other
provision in this Agreement, in the event that it becomes unlawful for any
Bank or its Lending Office to honor its obligation to make or maintain
Eurodollar Loans hereunder, then such Bank shall promptly notify the Agent
thereof (with a copy to the Co-Borrowers) and such Bank's obligation to make
or maintain Eurodollar Loans hereunder shall be suspended until such time as
such Bank may again make and maintain such affected Loans (in which case the
provisions of Section 5.04 shall be applicable).
Section 5.04. Certain Variable Rate Loans Pursuant To
Sections 5.01, 5.02 and 5.03. If the obligations of any Bank to make
Eurodollar Loans (Eurodollar Loans being herein called "Affected Loans")
shall
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be suspended pursuant to Section 5.01, 5.02 or 5.03, all Affected Loans shall
be made instead as Variable Rate Loans and, if an event referred to in
Section 5.01(b), 5.02 or 5.03 has occurred and such Bank so requests by
notice to the Agent (with a copy to the Co-Borrowers), all Affected Loans of
such Bank then outstanding shall be automatically converted into Variable
Rate Loans on the date specified by such Bank in such notice, and, to the
extent that Affected Loans are so made as (or converted into) Variable Rate
Loans, all payments of principal which would otherwise be applied to such
Bank's Affected Loans shall be applied instead to its Variable Rate Loans.
In the event of any conversion of any Eurodollar Loan to a Variable Rate Loan
pursuant to this Section 5.04 prior to the last day of the Interest Period
with respect to such Eurodollar Loan, the Co-Borrowers jointly and severally
shall pay to the Agent for the account of each Bank all amounts required to
be paid pursuant to Section 5.05 hereof.
Section 5.05. Certain Compensation. The Co-Borrowers
shall pay to the Agent for the account of each Bank, upon the request of such
Bank through the Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Bank) to compensate it for any loss, cost or
expense which such Bank determines is attributable to:
(a) any prepayment by the Co-Borrowers of a Eurodollar
Loan made by such Bank (whether by reason of the mandatory prepayment
provisions of this Agreement or otherwise) or any failure by the Co-Borrowers
to pay principal or interest on a Eurodollar Loan made by such Bank when due
as required hereunder; or
(b)(i) any failure by the Co-Borrowers to borrow, convert
into or continue a Eurodollar Loan to be made by such Bank on the date
specified therefor in the relevant notice under Section 4.01 or (ii) any
conversion under Section 5.04; or
(c) any failure by the Co-Borrowers to prepay a
Eurodollar Loan on the date required pursuant to Section 4.02.
Without limiting the foregoing, such compensation shall include an amount
equal to the excess, if any, of: (i) the amount of interest which otherwise
would have accrued on the principal amount so paid or converted or not
borrowed (i.e., not borrowed, not converted or not continued) for the period
from and including the date of such payment or failure to borrow (i.e.,
failure to borrow, failure to convert or failure to continue) to but
excluding the last day of the Interest Period for such Loan (or, in the case
of a failure to borrow, to but excluding the last day of the Interest Period
for such Loan which would have commenced on the date specified therefor in
the relevant notice) at the applicable rate of interest for such Loan
provided for herein; over (ii) the amount of interest (as reasonably
determined by such Bank) such Bank would have bid in the London interbank
market for Dollar deposits for amounts comparable to such principal amount
and maturities comparable to such period. A determination of any Bank as to
the amounts payable pursuant to this Section 5.05 shall be conclusive absent
manifest error provided that such determination is made on a reasonable basis
and provided further that such Bank provides the Co-Borrowers with copies of
the calculations made by such Bank in making such determination.
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ARTICLE 6. CONDITIONS PRECEDENT.
Section 6.01. Documentary Conditions Precedent. The
obligations of the Banks to make Loans constituting any borrowing on the date
hereof and the obligations of the Agent to issue and the Banks to participate
in the risk of any Letters of Credit and the obligations of the Banks to
enter into this Agreement and to consummate the transactions contemplated
hereby are subject to the conditions precedent that:
(a) the Agent shall have received, on or before the
Closing Date, each of the following, in form and substance satisfactory to
the Agent and its counsel:
(i) the Revolving Credit Notes duly executed by
the Co-Borrowers;
(ii) a certificate of the Secretary or Assistant
Secretary of each Co-Borrower, dated the Closing Date,
attesting to all corporate action taken by such Co-Borrower,
including resolutions of its Board of Directors authorizing
the execution, delivery and performance of the Facility
Documents and each other document to be delivered pursuant
to this Agreement, together with certified (by each such
Secretary or Assistant Secretary, and in the case of Olsten,
Olsten Staffing Services, Inc. and Olsten Kimberly
QualityCare, Inc., which shall also be certified by the
relevant Secretary of State) copies of the certificate or
articles of incorporation and the by-laws of the Co-
Borrowers; and, such certificate shall state that the
resolutions and corporate documents thereby certified have
not been amended, modified, revoked or rescinded as of the
date of such certificate;
(iii) a certificate of the Secretary or Assistant
Secretary of each Co-Borrower, dated the Closing Date,
certifying the names and true signatures of the officers of
the Borrower authorized to sign the Facility Documents and
the other documents to be delivered by such Co-Borrower
under this Agreement;
(iv) a certificate of a duly authorized officer
of Olsten, dated the Closing Date, stating that the
representations and warranties in Article 7 are true and
correct on such date as though made on and as of such date
(except when such representation or warranty by its terms
relates to a specific date other than the date made or the
date hereof) and that no event has occurred and is
continuing which constitutes a Default or an Event of
Default;
(v) a favorable opinion of counsel for the Co-
Borrowers, dated the Closing Date, in substantially the form
of Exhibit B and as to such other matters as the Agent or
any Bank may reasonably request;
(vi) a Borrowing Base Certificate (dated the
Closing Date) with information thereon as of November 28,
1993;
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<PAGE> 34
(vii) good standing certificates evidencing that
each of the Co-Borrowers is duly organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation; and
(viii) such other documents, instruments,
approvals, opinions and evidence as the Agent may require;
(b) the Co-Borrowers shall have paid or caused to be
paid all fees required to be paid hereunder or in connection herewith and all
accrued fees and expenses of the Agent in connection with the preparation,
execution and delivery of this Agreement, and the other Facility Documents
and the consummation of the transactions contemplated thereby;
(c) the Co-Borrowers shall have obtained all consents,
permits and approvals required in connection with the execution, delivery and
performance by the Co-Borrowers of their obligations hereunder and such
consents, permits and approvals shall continue in full force and effect; and
(d) all legal matters in connection with this
financing shall be satisfactory to the Banks and their counsel.
Section 6.02. Additional Conditions Precedent. The
obligations of the Banks to make any Loan (including, without limitation, the
conversion of all outstanding Revolving Credit Loans to Term Loans on the
Conversion Date) and the obligations of the Agent to issue and the Banks to
participate in the risk of any Letter of Credit shall be subject to the
further conditions precedent that on the date of such Loan:
(a) the following statements shall be true:
(i) the representations and warranties
contained in Article 7 are true and correct on and as of the date of such
Loan or issuance of such Letter of Credit as though made on and as of such
date (except when such representation or warranty relates to a specific date
other than the Closing Date);
(ii) no Default or Event of Default has
occurred and is continuing or would result from such Loan or issuance of such
Letter of Credit; and
(iii) no material adverse change shall have
occurred in the business, financial condition or operations of the Co-
Borrowers, taken as a whole, since the date of the then most recent financial
statements of the Co-Borrowers delivered to the Agent hereunder or in
connection herewith; and
(b) with respect to the conversion of all outstanding
Revolving Credit Loans to Term Loans on the Conversion Date only,
(i) the Agent shall have received, on or
before the Conversion Date, the Term Loan Notes evidencing all Term Loans
duly completed and executed by the Co-Borrowers; and
(ii) the Co-Borrowers shall have paid or caused
to be paid all fees required to be paid hereunder or in connection herewith
and all accrued fees and expenses of the Agent in connection with such
conversion, if any; and
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<PAGE> 35
(c) the Agent shall have received such approvals,
opinions, documents or instruments as the Agent or any Bank may reasonably
request.
Section 6.03. No Default Certificate and Deemed
Representations. Each notice of a Loan (including, without limitation, the
conversion of all outstanding Revolving Credit Loans to Term Loans on the
Conversion Date) or submission to the Agent of a Letter of Credit Agreement
shall be accompanied by a certificate of the chief financial officer of
Olsten certifying that the statements contained in Section 6.02(a) are true
and correct on the date of such notice or submission and, unless the Co-
Borrowers otherwise notify the Agent prior to such borrowing or the issuance
of such Letter of Credit, the acceptance by the Co-Borrowers of the proceeds
thereof (including, without limitation, the conversion of all outstanding
Revolving Credit Loans to Term Loans on the Conversion Date) or the issuance
of such Letter of Credit shall constitute a representation and warranty that
such statements are true and correct as of the date of such Loan (including,
without limitation, the conversion of all outstanding Revolving Credit Loans
to Term Loans on the Conversion Date) or the issuance of such Letter of
Credit.
Section 6.04. Conditions Precedents to Amendment. This
Agreement shall not become effective until each of the following conditions
precedent has been satisfied (or waived by all of the Banks):
(a) the Agent shall have received, on or before the
date of this Agreement, each of the following, in form and substance
satisfactory to the Agent and its counsel:
(i) a certificate of the Secretary or Assistant
Secretary of each Co-Borrower, dated the date of this
Agreement, attesting to all corporate action taken by such
Co-Borrower, including resolutions of its Board of
Directors, authorizing the execution, delivery and
performance of this Agreement and each other document to be
executed and/or delivered in connection herewith; and, such
certificate shall state that the resolutions thereby
certified, and that the certificates or articles of
incorporation and the by-laws of the Co-Borrowers, copies of
which were delivered to the Banks and certified by the
Secretary or Assistant Secretary of each Co-Borrower
pursuant to 6.01(a)(ii) of the Original Agreement on the
Closing Date, have not been amended, modified, revoked or
rescinded as of the date of such certificate;
(ii) a certificate of the Secretary or Assistant
Secretary of each Co-Borrower, dated the date of this
Agreement, certifying the names and true signatures of the
officers of the Co-Borrower authorized to execute this
Agreement and each other document to be executed and/or
delivered by such Co-Borrower in connection herewith;
(iii) a certificate of a duly authorized officer
of Olsten, dated the date of this Agreement, stating (A)
that the representations and warranties in Article 7 are
true and correct in all material respects on such date as
though made on and as of such date (except when such
representation or warranty by its terms relates to a
specific date other than the date made or the Closing Date)
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<PAGE> 36
and (B) that no event has occurred and is continuing which
constitutes a Default or an Event of Default; and
(iv) such other documents, instruments,
approvals, opinions and evidence as the Agent may require;
(b) the Co-Borrowers shall have paid or caused to be
paid all fees required to be paid hereunder or in connection herewith and all
accrued fees and expenses of the Agent in connection with the preparation,
execution and delivery of this Agreement and the other documents to be
executed and/or delivered by the Co-Borrowers in connection herewith and the
consummation of the transactions contemplated thereby;
(c) the Co-Borrowers shall have obtained all consents,
permits and approvals required in connection with the execution, delivery and
performance by the Co-Borrowers of their obligations hereunder and such
consents, permits and approvals shall continue in full force and effect; and
(d) all legal matters in connection with this
financing shall be satisfactory to the Banks and their counsel.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES.
The Co-Borrowers hereby represent and warrant that:
Section 7.01. Incorporation, Good Standing and Due
Qualification; Compliance with Law. Each of the Co-Borrowers and their
respective Subsidiaries is duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its assets and to transact the business
in which it is now engaged or proposed to be engaged, and is duly qualified
as a foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required except where the failure
to so qualify and/or be in good standing would not in any case or in the
aggregate, have a material adverse effect on the operations, business,
property or financial condition of the Co-Borrowers taken as a whole or on
the ability of the Co-Borrowers to perform their obligations hereunder. In
addition, each of the Co-Borrowers and their respective Subsidiaries is in
compliance with all laws, treaties, rules or regulations, or determination of
an arbitration or a court or other governmental authority, in each case
applicable to or binding upon it or any of its material property or to which
it or any of its material property is subject, except to the extent that the
failure to so comply would not, in any case or in the aggregate, have a
material adverse effect on the operations, business, property or financial
condition of the Co-Borrowers taken as a whole or on the ability of the Co-
Borrowers to perform their obligations hereunder.
Section 7.02. Corporate Power and Authority; No
Conflicts. The execution, delivery and performance by each of the Co-
Borrowers of the Facility Documents have been duly authorized by all
necessary corporate action and do not and will not: (a) require any consent
or approval of its stockholders; (b) contravene its charter or by-laws; (c)
violate any provision of, or require any filing, registration, consent or
approval under, any law, rule, regulation (including, without limitation, the
provisions of Regulation G, T, U or X of the Board of Governors of the
Federal Reserve system as in effect from time to time), order, writ,
judgment, injunction, decree, determination or award presently in effect
having applicability to such Co-
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<PAGE> 37
Borrower or any of its Subsidiaries; (d) result in a breach of or constitute
a default or require any consent under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which such Co-
Borrower is a party or by which any of its properties may be bound or
affected; (e) result in, or require, the creation or imposition of any Lien
upon or with respect to any of the properties now owned or hereafter acquired
by such Co-Borrower; or (f) cause such Co-Borrower (or any Subsidiary) to be
in default under any such rule, regulation, order, writ, judgment,
injunction, decree, determination or award or any such indenture, agreement,
lease or instrument, except, in the case of clauses (c), (d), (e) and (f)
above, where such violation, failure to satisfy such requirement, breach,
default, failure to obtain consent or creation or imposition of a lien, as
the case may be, would not, in any case or in the aggregate, have a material
adverse effect upon the operations, business, property or financial condition
of the Co-Borrowers taken as a whole or on the ability of the Co-Borrowers to
perform their obligations hereunder.
Section 7.03. Legally Enforceable Agreements. Each
Facility Document is, or when delivered under this Agreement will be, a
legal, valid and binding obligation of each of the Co-Borrowers party thereto
enforceable against such Co-Borrowers in accordance with its terms, except to
the extent that such enforcement may be limited by applicable bankruptcy,
insolvency and other similar laws affecting creditors' rights generally.
Section 7.04. Litigation. There are no actions, suits or
proceedings pending or, to the knowledge of the Co-Borrowers, threatened,
against or affecting the Co-Borrowers or any of them or any of their
respective Subsidiaries before any court, governmental agency or arbitrator,
which may, in any one case or in the aggregate, materially adversely affect
the financial condition, operations, properties or business of the Co-
Borrowers, taken as a whole, or on the ability of the Co-Borrowers to perform
their obligations under the Facility Documents.
Section 7.05. Financial Statements. The consolidated
balance sheet of Olsten as at January 3, 1993, the consolidated balance sheet
of Lifetime Corporation ("Lifetime") as at December 31, 1992, and the related
consolidated income statements and statements of cash flow of such Co-
Borrowers for their respective fiscal years then ended, and the accompanying
notes, together with the opinion thereon, of Coopers & Lybrand, independent
certified public accountants, in the case of Olsten, and of Price Waterhouse,
independent certified public accountants, in the case of Lifetime, copies of
which have been furnished to each of the Banks, and the interim financial
statements of the Co-Borrowers as at and as of (as the case may be) October
3, 1993 for the nine month period then ended, copies of which have been
furnished to each of the Banks, are complete and correct and fairly present
the consolidated financial condition of such Co-Borrowers as at such dates,
respectively, and the consolidated results of the operations of such Co-
Borrowers for the periods covered by such statements, respectively, all in
accordance with GAAP consistently applied (subject, in the case of interim
financial statements, to year-end adjustments and except, in the case of such
interim financial statements, for the absence of GAAP Notes thereto). As of
the date hereof, there are no liabilities of such Co-Borrowers, fixed or
contingent, which are material but are not reflected in the financial
statements or in the notes thereto, other than liabilities arising in the
ordinary course of business since October 3, 1993, and the liabilities
created by this Agreement. No information, exhibit or report furnished by
the Co-Borrowers to the Banks in connection with the negotiation of this
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<PAGE> 38
Agreement contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements contained therein
not materially misleading. Since the date of the most recent financial
statements delivered to the Banks hereunder, there has been no material
adverse change in the condition (financial or otherwise), business,
operations or prospects of the Co-Borrowers taken as a whole.
Section 7.06. Ownership and Liens. Each of the Co-
Borrowers has title to, or valid leasehold interests in, all of its
properties and assets, real and personal, including the properties and
assets, and leasehold interests reflected in the financial statements
referred to in Section 7.05 (other than any properties or assets disposed of
in the ordinary course of business), and none of the properties and assets
owned by the Co-Borrowers, or any of them, and none of their leasehold
interests is subject to any Lien, except as disclosed in Schedule II or as
may be permitted hereunder.
Section 7.07. Taxes. Each of the Co-Borrowers and their
respective Subsidiaries has filed all tax returns (federal, state and local)
required to be filed except where the failure to file would not, in any case,
or in the aggregate, have a material adverse effect upon the operations,
business, property or financial condition of the Co-Borrowers taken as a
whole or on the ability of the Co-Borrowers to perform their obligations
hereunder and each of the Co-Borrowers and their respective Subsidiaries has
paid all taxes, assessments and governmental charges and levies thereon to be
due, including interest and penalties other than taxes, assessments and
governmental changes and levies being contested in good faith by appropriate
proceedings and with respect to which adequate reserves in conformity with
GAAP shall have been provided on the books of the Co-Borrowers or their
Subsidiaries, as the case may be.
Section 7.08. ERISA. Each of the Co-Borrowers and their
respective Subsidiaries is in compliance in all material respects with all
applicable provisions of ERISA. No Reportable Event has occurred with
respect to any Plan; no notice of intent to terminate a Plan has been filed
nor has any Plan been terminated; no circumstance exists which constitutes
grounds under Section 4042 of ERISA entitling the PBGC to institute
proceedings to terminate, or appoint a trustee to administer, a Plan, nor has
the PBGC instituted any such proceedings; none of the Co-Borrowers nor any
ERISA Affiliate has completely or partially withdrawn under Sections 4201 or
4204 of ERISA from a Multiemployer Plan; each of the Co-Borrowers and each of
its ERISA Affiliates has met its minimum funding requirements under ERISA
with respect to all of its Plans and there are no Unfunded Vested
Liabilities; and none of the Co-Borrowers nor any ERISA Affiliate has
incurred any liability to the PBGC under ERISA.
Section 7.09. Subsidiaries and Ownership of Stock.
Schedule I is a complete and accurate list of the Subsidiaries of Olsten,
showing the jurisdiction of incorporation or organization of each Subsidiary
and showing the percentage of the Olsten's ownership of the outstanding stock
or other interest of each such Subsidiary. All of the outstanding capital
stock or other interest of each such Subsidiary has been validly issued, is
fully paid and nonassessable and is owned by Olsten free and clear of all
Liens. Except as disclosed in Schedule I, none of the Co-Borrowers has any
Subsidiaries.
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Section 7.10. Credit Arrangements. Schedule II is a
complete and correct list of all credit agreements, indentures, purchase
agreements, guaranties, Capital Leases and other investments, agreements and
arrangements in effect on the date of this Agreement providing for or
relating to extensions of credit to the Co-Borrowers or any of them
(including agreements and arrangements for the issuance of letters of credit
or for acceptance financing) which provide for maximum availability of
$100,000 or more in principal or face amount in respect of which the Co-
Borrowers, or any of them, or any of their respective Subsidiaries is in any
manner directly or contingently obligated; and the maximum principal or face
amounts of the credit in question, outstanding and which can be outstanding,
are correctly stated, and all Liens of any nature given or agreed to be given
as security therefor are correctly described or indicated in such Schedule.
Section 7.11. Operation of Business. Each of the Co-
Borrowers and each of their respective Subsidiaries possesses all licenses,
permits, franchises, patents, copyrights, trademarks and trade names, or
rights thereto, to conduct their business substantially as now conducted and
as presently proposed to be conducted except where the failure to do so would
not, in any case or in the aggregate, have a material adverse effect upon the
operations, business, property or financial condition of the Co-Borrowers
taken as a whole or on the ability of the Co-Borrowers to perform their
obligations hereunder; and none of the Co-Borrowers nor any of their
respective Subsidiaries is in violation of any valid rights of others with
respect to any of the foregoing, except where such violation would not, in
any case or in the aggregate, have a material adverse effect upon the
operations, business, property or financial condition of the Co-Borrowers
taken as a whole or on the ability of the Co-Borrowers to perform their
obligations hereunder. Without limiting the generality of the foregoing, all
health care personnel employed by the Co-Borrowers, or any of them, including
all nurses, home health aides, therapists, etc. are properly licensed, to the
extent required, to perform the duties of their employment in each
jurisdiction where such duties are performed, except where the failure to be
properly licensed would not, in any case or in the aggregate, have a material
adverse effect upon the operations, business, property or financial condition
of the Co-Borrowers taken as a whole or on the ability of the Co-Borrowers to
perform their obligations hereunder.
Section 7.12. Hazardous Substances. Each of the Co-
Borrowers, and each of their respective Subsidiaries, is in compliance with
all Environmental Laws, and has obtained all necessary licenses and permits
required to be issued pursuant to any Environmental Law except where the
failure to so comply or to obtain such licenses or permits would not in any
case or in the aggregate have a material adverse effect on the business,
property or financial condition of the Co-Borrowers taken as a whole or on
the ability of the Co-Borrowers to perform their obligations hereunder. To
the best of the Co-Borrowers' knowledge, none of the Co-Borrowers, nor any of
their respective Subsidiaries, has received any notice or communication from
any governmental agency with respect to (i) any Hazardous Substance relative
to its operations, property or acts or (ii) any investigation, demand or
request pursuant to or enforcing any Environmental Law relating to it or its
operations, no such investigation is pending or threatened.
Section 7.13. No Default on Outstanding Judgments or
Orders. Each of the Co-Borrowers and each of their respective Subsidiaries
has satisfied all judgments and none of the Co-Borrowers nor any of their
respective Subsidiaries is in default with respect to any judgment, writ,
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<PAGE> 40
injunction, decree, rule or regulation of any court, arbitrator or federal,
state, municipal or other governmental authority, commission, board, bureau,
agency or instrumentality, domestic or foreign except to the extent that such
defaults would not, in any case or in the aggregate, have a material adverse
effect on the operations, business, property or financial condition of the
Co-Borrowers taken as a whole or on the ability of the Co-Borrowers to
perform their obligations hereunder.
Section 7.14. No Defaults on Other Agreements. None of
the Co-Borrowers nor any of their respective Subsidiaries is a party to any
indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any charter or corporate restriction which would in
any case or in the aggregate have a material adverse effect on its ability to
carry out its obligations under the Facility Documents or on the business,
properties, assets, operations or condition, financial or otherwise, of the
Co-Borrowers taken as a whole or on the ability of the Co-Borrowers to
perform their obligations hereunder. None of the Co-Borrowers, nor any of
their respective Subsidiaries is in default in any respect in the
performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any agreement or instrument material to its
business to which it is a party except where such default would not, in any
case or in the aggregate, have a material adverse effect on the business,
properties, assets, operations or condition, financial or otherwise of the
Co-Borrowers taken as a whole or on the ability of the Co-Borrowers to
perform their obligations hereunder.
Section 7.15. Labor Disputes and Acts of God. Neither the
business nor the properties of the Co-Borrowers or any of them or any of
their respective Subsidiaries are affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy or other casualty (whether or not
covered by insurance), materially and adversely affecting such business or
properties or the operations of the Co-Borrowers taken as a whole or the
ability of the Co-Borrowers to perform their obligations hereunder.
Section 7.16. Governmental Regulation. None of the Co-
Borrowers nor any of their respective Subsidiaries is subject to regulation
under the Public Utility Holding Company Act of 1935, the Investment Company
Act of 1940 or any other statute or regulation limiting its ability to incur
indebtedness for money borrowed as contemplated hereby.
Section 7.17. Partnerships. Except as disclosed on
Schedule IV hereto, none of the Co-Borrowers nor any of their respective
Subsidiaries is a partner in any partnership.
Section 7.18. No Forfeiture. To the best of the Co-
Borrowers' knowledge, none of the Co-Borrowers, nor any of their respective
Subsidiaries is engaged in or proposes to be engaged in the conduct of any
business or activity which could result in a Forfeiture Proceeding and no
Forfeiture Proceeding against any of them is pending or, to the best of the
Co-Borrowers' knowledge, threatened.
Section 7.19. No Default or Event of Default. No Default
or Event of Default has occurred and is continuing.
Section 7.20. Accounts Receivable. To the best of the
Co-Borrowers' knowledge, each account receivable shown on each Borrowing Base
Certificate shall be based upon an actual bona fide sale and shipment of
delivery of goods or rendition of services to customers, made by the Co-
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<PAGE> 41
Borrowers in the ordinary course of its business; the goods and inventory
being sold and the accounts thereby created and created by services being
rendered are the Co-Borrowers' exclusive property and are not and shall not
be subject to any Lien (other than Liens permitted hereunder or which are
disclosed on Schedule II hereto); and except as the Co-Borrowers may
otherwise advise the Agent pursuant to Section 8.08(o), the Co-Borrowers'
customers have accepted such goods or services and owe and are obligated to
pay the full amount stated in the invoices according to their terms, without
dispute, offset, defense or counterclaim.
Section 7.21. Solvency. The Co-Borrowers are Solvent on
a consolidated basis.
Section 7.22. Material Adverse Change. No event or
series of events has occurred since October 3, 1993 which would result in a
material adverse effect on the operations, business, property or financial
condition of the Co-Borrowers taken as a whole or on the ability of the Co-
Borrowers to perform their obligations hereunder.
Section 7.23. Consolidated Total Assets. At least 90% of
the amount of Consolidated Total Assets of, owned or held by Olsten and its
Consolidated Subsidiaries as at the date hereof are the amount of
Consolidated Total Assets of, owned or held by one or more of the Co-
Borrowers.
ARTICLE 8. AFFIRMATIVE COVENANTS.
So long as any of the Notes shall remain unpaid, any
Letters of Credit remain outstanding or any Bank shall have any Commitment
under this Agreement, the Co-Borrowers and each of them shall:
Section 8.01. Maintenance of Existence. Except as
otherwise provided in this Agreement, preserve and maintain, and cause each
of its Subsidiaries to preserve and maintain, its corporate existence and
good standing in the jurisdiction of its incorporation, and qualify and
remain qualified, and cause each of its Subsidiaries to qualify and remain
qualified, as a foreign corporation in each jurisdiction in which such
qualification is required except where the failure to remain qualified as a
foreign corporation would not, in any case or in the aggregate, have a
material adverse effect upon the operations, business, property or financial
condition of the Co-Borrowers taken as a whole or on the ability of the Co-
Borrowers to perform their obligations hereunder.
Section 8.02. Conduct of Business. In all material
respects to continue, and cause each of its Subsidiaries to continue, to
engage in an efficient and economical manner in the business of providing
human resource services including, without limitation, office management
services, health care services and other related businesses.
Section 8.03. Maintenance of Properties. Maintain, keep
and preserve, and cause each of its Subsidiaries to maintain, keep and
preserve, all of its properties (tangible and intangible) necessary or useful
in the proper conduct of its business in good working order and condition,
ordinary wear and tear excepted.
Section 8.04. Maintenance of Records. Keep, and cause
each of its Subsidiaries to keep, adequate records and books of account, in
which complete entries will be made in accordance with GAAP, reflecting all
financial transactions of such Co-Borrower and its Subsidiaries.
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<PAGE> 42
Section 8.05. Maintenance of Insurance. Maintain, and
cause each of its Subsidiaries (i) to maintain insurance with financially
sound and reputable insurance companies or associations or (ii) to maintain
self-insurance in accordance with prudent business practices, in each case,
in such amounts and covering such risks as are usually carried by companies
engaged in the same or a similar business and similarly situated, which
insurance may provide for reasonable deductibles or self-retained amounts.
Section 8.06. Compliance with Laws. Comply, and cause
each of its Subsidiaries to comply, in all respects with all applicable laws,
rules, regulations and orders except where the failure to so comply would not
have a material adverse effect upon the operations, business, properties or
financial condition of the Co-Borrowers taken as a whole or on the ability of
the Co-Borrowers to perform their obligations hereunder.
Section 8.07. Right of Inspection. At any reasonable
time during normal business hours and from time to time, permit the Agent or
any Bank or any agent or representative thereof, to examine and make copies
and abstracts from the records and books of account of, and visit the
properties of, such Co-Borrower and any of its Subsidiaries, and to discuss
the affairs, finances and accounts of such Co-Borrower and any such
Subsidiary with any of their respective officers and directors and such Co-
Borrower's independent accountants; provided, that prior to the occurrence
and continuance of a Default or Event of Default, the costs of any such
examination or visit shall not be charged to the Co-Borrowers hereunder but
shall be borne by the Banks. Notwithstanding the foregoing, the costs of any
reports delivered to the Banks under Section 8.08 below shall be borne by the
Co-Borrowers.
Section 8.08. Reporting Requirements. Furnish directly
to each of the Banks:
(a) as soon as available and in any event within 90
days after the end of each fiscal year of Olsten, an audited consolidated
balance sheet of Olsten and its Consolidated Subsidiaries as of the end of
such fiscal year and a consolidated income statement, balance sheet and
statement of cash flows of such entities for such fiscal year, all in
reasonable detail (and including a complete listing and description of all
deferred charges by line item and by category) and stating in comparative
form the respective consolidated figures for the corresponding date and
period in the prior fiscal year and all prepared in accordance with GAAP and
as to the consolidated statements accompanied by an opinion thereon
acceptable to the Agent and each of the Banks by Coopers & Lybrand or other
independent certified public accountants acceptable to the Agent which
opinion neither includes an exception as to adherence with GAAP nor expresses
an adverse opinion nor contains a disclaimer;
(b) as soon as available and in any event within 45
days after the end of each of the first three quarters of each fiscal year of
Olsten, a consolidated balance sheet of Olsten and its Consolidated
Subsidiaries as of the end of such quarter and a consolidated income
statement, balance sheet and statements of cash flow of such entities for the
period commencing at the end of the previous fiscal year and ending with the
end of such quarter, all in reasonable detail (and including a complete
listing and description of all deferred charges by line item and by category)
and stating in comparative form the respective consolidated figures for the
corresponding date and period in the previous fiscal year and all prepared in
accordance with GAAP and attested to by the chief financial officer of Olsten
(subject to year-end adjustments);
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(c) promptly following receipt thereof, copies of any
management letter prepared by the Co-Borrowers' independent certified public
accountants relating to the consolidated financial statements of the Co-
Borrowers and delivered to Olsten;
(d) simultaneously with the delivery of the financial
statements referred to above, a certificate of the chief financial officer of
Olsten (i) certifying that to the best of his knowledge no Default or Event
of Default has occurred and is continuing or, if a Default or Event of
Default has occurred and is continuing, a statement as to the nature thereof
and the action which is proposed to be taken with respect thereto, and (ii)
with computations demonstrating compliance with the covenants contained in
Article 10;
(e) quarterly, on or before the 28th day of each
calendar month which immediately succeeds a fiscal quarter end of the
Borrower, through the Termination Date, a duly completed and fully executed
Borrowing Base Certificate for the last day of each such fiscal quarter,
together with summary aging reports (including a breakdown of Medicare and
Medicaid Receivables), in form and substance satisfactory to the Agent;
(f) simultaneously with the delivery of the annual
financial statements referred to in Section 8.08(a), (i) a certificate of the
independent public accountants who audited such statements to the effect
that, in making the examination necessary for the audit of such statements,
they have obtained no knowledge of any condition or event which constitutes a
Default or Event of Default, or if such accountants shall have obtained
knowledge of any such condition or event, specifying in such certificate each
such condition or event of which they have knowledge and the nature and
status thereof and (ii) an affirmation by such accountants of the information
contained in the Borrowing Base Certificate delivered by the Co-Borrowers to
the Agent providing information for December of such fiscal year;
(g) promptly after the Co-Borrowers become aware of
the commencement thereof, notice of all actions, suits, and proceedings
before any court or governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, affecting the Co-Borrowers,
or any of them, or any of their respective Subsidiaries including, without
limitation, any such proceeding relating to any alleged violation of any
Environmental Law, which, if determined adversely to the Co-Borrowers or such
Subsidiary, would have a material adverse effect on the financial condition,
properties, or operations of the Co-Borrowers, taken as a whole or on the
ability of the Co-Borrowers to perform their obligations hereunder;
(h) as soon as possible and in any event within five
days after the occurrence of each Default or Event of Default a written
notice setting forth the details of such Default or Event of Default and the
action which is proposed to be taken by the Co-Borrowers with respect
thereto;
(i) as soon as possible and in any event within five
days after the Co-Borrowers know or have reason to know that any of the
events or conditions specified below with respect to any Plan or
Multiemployer Plan have occurred or exist, a statement signed by a senior
financial officer of Olsten setting forth details respecting such event or
condition and the action, if any, which the Co-Borrowers or their ERISA
Affiliate proposes to take with respect thereto (and a copy of any report or
notice required to be filed with or given to PBGC by the Co-Borrower, or any
of them or an ERISA Affiliate with respect to such event or condition):
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<PAGE> 44
(i) any reportable event, as defined in Section
4043(b) of ERISA and the regulations issued thereunder, with
respect to a Plan, as to which PBGC has not by regulation
waived the requirement of Section 4043(a) of ERISA that it
be notified within 30 days of the occurrence of such event
(provided that a failure to meet the minimum funding
standard of Section 412 of the Code or Section 302 of ERISA
shall be a reportable event regardless of the issuance of
any waivers in accordance with Section 412(d) of the Code);
(ii) the filing under Section 4041 of ERISA of a
notice of intent to terminate any Plan or the termination of
any Plan;
(iii) the institution by PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by the Co-Borrowers, or any of them or any ERISA
Affiliate of a notice from a Multiemployer Plan that such
action has been taken by PBGC with respect to such
Multiemployer Plan;
(iv) the complete or partial withdrawal by the Co-
Borrowers or any of them or any ERISA Affiliate under
Section 4201 or 4204 of ERISA from a Multiemployer plan, or
the receipt by the Co-Borrowers, or any of them or any ERISA
Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or
4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA; and
(v) the institution of a proceeding by a fiduciary
or any Multiemployer Plan against the Co-Borrowers or any
ERISA Affiliate to enforce Section 515 of ERISA, which
proceeding is not dismissed within 30 days;
(j) promptly after the furnishing thereof, copies of
any statement or report furnished to any other party pursuant to the terms of
any indenture, loan or credit or similar agreement and not otherwise required
to be furnished to the Banks pursuant to any other clause of this Section
8.08;
(k) promptly, and in any event within five business
days, after the sending or filing thereof, copies of all proxy statements,
financial statements and reports which the Co-Borrowers, or any of them or
any of their respective Subsidiaries sends to its stockholders, and copies of
all regular, periodic and special reports and all registration statements
which the Co-Borrowers, or any of them or any such Subsidiary files with the
Securities and Exchange Commission or any governmental authority which may be
substituted therefor, or with any national securities exchange or state
securities administrator;
(l) promptly after the commencement thereof or
promptly after the Co-Borrowers know of the commencement or threat thereof,
notice of any Forfeiture Proceeding;
(m) promptly following the creation thereof, notice of
the creation of any Subsidiary of any Co-Borrower and disclosure in
reasonable detail of the assets transferred to or Investments in any such
Person; - 39 -
<PAGE> 45
(n) promptly, notice of any matter materially
adversely affecting the value, enforceability or collectability of the
Eligible Receivables taken as a whole including, without limitation, notice
of all material customer disputes, offsets, defenses, counterclaims, returns
and rejections and all reclaimed or repossessed merchandise or goods; and
(o) such other information respecting the condition or
operations, financial or otherwise, of the Co-Borrowers, or any of them or
any of their respective Subsidiaries as the Agent may from time to time
reasonably request.
Section 8.09. Payment of Obligations. Each Co-Borrower
will, and will cause each of its Subsidiaries to, pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case
may be, all of its material Debt and other material obligations of whatever
nature (including any obligation for taxes and wages), except for any Debt or
other material obligation which is being contested in good faith and with
respect to which on a consolidated basis, adequate reserves in conformity
with GAAP shall have been provided on the books of the Co-Borrowers or their
Subsidiaries, as the case may be.
Section 8.10. Consolidated Total Assets. At least 90%
of the amount of Consolidated Total Assets of, owned or held by Olsten and
its Consolidated Subsidiaries shall at all times be the amount of
Consolidated Total Assets of, owned or held by, one or more of the Co-
Borrowers.
ARTICLE 9. NEGATIVE COVENANTS.
So long as any of the Notes shall remain unpaid, any
Letters of Credit remain outstanding or any Bank shall have any Commitment
under this Agreement, neither the Co-Borrowers nor any of them shall:
Section 9.01. Debt. Create, incur, assume or suffer
to exist, or permit any of its Subsidiaries to create, incur, assume or
suffer to exist any Debt, except:
(a) Debt of the Co-Borrowers under this Agreement or
the Notes;
(b) Debt described in Schedule II; provided, however,
that the items of Debt described in paragraphs 2 and 4 of Schedule II were
retired and paid in full simultaneously with the execution of the Original
Agreement with the proceeds of the initial Loans thereunder and the items of
Debt described in paragraph 3(b) of Schedule II were retired and paid in full
on or prior to January 2, 1994 (all of the foregoing items of Debt which were
retired are collectively, "Retiring Debt"), and any renewals, extensions or
refinancings of any of the items of Debt described in Schedule II (other than
Retiring Debt), provided, that such renewals, extensions or refinancings are
on terms no less favorable to the Co-Borrowers than the original terms of
such Debt and that such terms are reasonably satisfactory to the Required
Banks, and further provided, that no such renewals, extensions or
refinancings shall increase the Debt (i.e., either with respect to
outstandings or availability) of the Co-Borrowers, or any of them, and
further provided, that with respect to the items of Debt described in
paragraphs 3(a) and 3(c) of Schedule II, the Banks shall at all times be
deemed holders of "Senior Debt" under the instruments or agreements
evidencing such scheduled Debt and that any amendment, supplementation or
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<PAGE> 46
modification of the terms of such scheduled Debt shall be subject to Section
9.09 hereof;
(c) Subordinated Debt;
(d) Debt of any Co-Borrower to any other Co-Borrower;
(e) Debt incurred in connection with operating leases
entered into by the Co-Borrowers, or any of them, consistent with past
practices or in the ordinary course of business;
(f) Notwithstanding anything contained in Section
9.01 hereof to the contrary and in addition to any of the Debt described in
any of Sections 9.01(a)-(j) hereof (other than this Section 9.01(f)), Debt
incurred after the date of this Agreement (including, without limitation,
Debt of any Co-Borrower to any Subsidiary of any Co-Borrower which is not
itself a Co-Borrower and guarantees by any Co-Borrower of the Debt of any
Subsidiary of any Co-Borrower which is not itself a Co-Borrower) in an
aggregate principal amount not to exceed $40,000,000 at any time outstanding
as to all such Persons;
(g) Debt of the Co-Borrowers or any of them secured
by purchase money Liens permitted by Section 9.02(i);
(h) Debt of the Co-Borrowers or any of them secured
by a mortgage on the property of Olsten located at One Merrick Avenue,
Westbury, New York or any adjacent property in an amount not to exceed
$7,000,000 or if such property is sold by Olsten, the property of Olsten or
another Co-Borrower located at 175 Broadhollow Road, Melville, New York and
any adjacent property in an amount not to exceed $15,000,000;
(i) Guarantees by any Co-Borrower of the Debt of any
other Co-Borrower; and
(j) Debt incurred as a result of bid bonds or
performance bonds incurred by any Co-Borrower in the ordinary course of its
business consistent with past practices.
Section 9.02. Liens. Create, incur, assume or suffer to
exist, or permit any of its Subsidiaries to create, incur, assume or suffer
to exist, any Lien, upon or with respect to any of its properties, now owned
or hereafter acquired, except:
(a) Liens in favor of the Agent on behalf of the
Banks securing the Loans hereunder;
(b) Liens for taxes or assessments or other
government charges or levies if not yet due and payable or if due and payable
if they are being contested in good faith by appropriate proceedings and for
which appropriate reserves are maintained in conformity with GAAP;
(c) Liens imposed by law, such as mechanic's,
materialmen's, landlord's, warehousemen's and carrier's Liens, and other
similar Liens, securing obligations incurred in the ordinary course of
business which are not past due for more than 30 days, or which are being
contested in good faith by appropriate proceedings and for which appropriate
reserves have been established;
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<PAGE> 47
(d) Liens under workers' compensation, unemployment
insurance, social security or similar legislation (other than ERISA);
(e) Liens, deposits or pledges to secure the
performance of bids, tenders, contracts (other than contracts for the payment
of money), leases, public or statutory obligations, surety, stay, appeal,
indemnity, performance or other similar bonds, or other similar obligations
arising in the ordinary course of business;
(f) judgment and other similar Liens arising in
connection with court proceedings; provided that the execution or other
enforcement of such Liens is effectively stayed and the claims secured
thereby are being actively contested in good faith and by appropriate
proceedings;
(g) easements, rights-of-way, restrictions and other
similar encumbrances which, in the aggregate, do not materially interfere
with the occupation, use and enjoyment by the Co-Borrower or any such
Subsidiary of the property or assets encumbered thereby in the normal course
of its business or materially impair the value of the property subject
thereto;
(h) Liens securing obligations of any Co-Borrower to
another Co-Borrower;
(i) purchase money Liens on any property heretofore
or hereafter acquired or the assumption of any Lien on property existing at
the time of such acquisition, or a Lien incurred in connection with any
conditional sale or other title retention agreement or a Capital Lease;
provided, that such liens attach only to the property as acquired and do not
extend to any additional property of the Co-Borrowers;
(j) Liens existing on the date hereof and described
on Schedule II hereto;
(k) Liens securing indebtedness permitted by Section
9.01(h) hereof;
(l) Notwithstanding anything contained in this
Section 9.02 to the contrary, Liens securing indebtedness of any of the Co-
Borrowers in an aggregate principal amount outstanding or available to be
drawn at any one time respecting all of the Co-Borrowers, not in excess of
$1,000,000, provided that such Liens do not attach to the accounts receivable
of the Co-Borrowers, or any of them; and
(m) Liens on accounts receivable acquired by the Co-
Borrowers (or any of them) in Acceptable Acquisitions or on accounts
receivable of entities acquired by the Co-Borrowers (or any of them) in
Acceptable Acquisitions which secure indebtedness provided that all such
indebtedness so secured shall not be in excess of $1,000,000 at any one time
outstanding.
Section 9.03. Investments. Notwithstanding anything
contained in this Agreement to the contrary, make, or permit any of its
Subsidiaries to make, any loan or advance to any Person or purchase or
otherwise acquire or redeem, or permit any such Subsidiary to purchase or
otherwise acquire, any capital stock, assets, obligations or other securities
of, make any capital contribution to, or otherwise invest in, or acquire any
interest in (each of the foregoing, an "Investment"), any Person (including,
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<PAGE> 48
without limitation, any Co-Borrower or any Subsidiary or Affiliate of any Co-
Borrower), except (a) any of the following Investments: (i) obligations
issued or guaranteed by states or municipalities within the United States of
America and rated at least A-1 by Standard & Poors or an equivalent rating by
another recognized credit rating agency approved by the Required Banks (an
"Equivalent Rating"); (ii) obligations issued or guaranteed by the United
States of America or any agency or subdivision thereof, the payment or
guarantee of which constitutes a full faith and credit obligation of the
United States of America; (iii) certificates of deposit, time deposits,
Eurodollar certificates of deposit, bankers acceptances and other "money
market instruments" issued by any bank, trust company or financial
institution organized under the laws of the United States of America or any
state thereof (or, in the case of Eurodollar certificates of deposit, a
branch of any such bank, trust company or financial institution) having
capital and surplus in an aggregate amount not less than $200,000,000 and
rated (i.e., the instrument) at least A-1 by Standard & Poors or an
Equivalent Rating, or by any of the Banks, or by any bank, trust company or
financial institution organized under the laws of a jurisdiction other than
the United States of America or any state thereof having capital and surplus
in an aggregate amount not less than $200,000,000 and rated (i.e., the
instrument) at least A-1 by Standard & Poors or an Equivalent Rating; (iv)
commercial paper rated at least Prime-1 by Moody's Investor Services or A-1
by Standard & Poors; (v) repurchase agreements entered into with any bank,
trust company or financial institution organized under the laws of the United
States of America or any state thereof having capital and surplus in an
aggregate amount not less than $200,000,000, or with any of the Banks, or
with any bank, trust company or financial institution organized under the
laws of a jurisdiction other than the United States of America or any state
thereof having capital and surplus in an aggregate amount not less than
$200,000,000, and which (with respect to any such repurchase agreement
referred to in this Section 9.03(v)) are fully secured by obligations of the
type described in Section 9.03(ii) hereof and (vi) Investments, other than of
any of the types referenced in (a)(i)-(v) above or (b)-(e) below, which are
of the same general nature as the Co-Borrowers' Investments existing on the
date hereof, including, without limitation, loans to franchisees or licensed
area representatives of the Co-Borrowers or any of them, provided that the
recipient or beneficiary of any such Investment referred to in this Section
9.03(a)(vi) is not an Affiliate of the Co-Borrowers or any of them, and
further provided that the aggregate of such Investments (i.e., those
referenced in this clause (vi)) do not, at any time, in any case or in the
aggregate, exceed $20,000,000; and provided that in the case of any of the
Investments referred to in clauses (i), (ii), (iii) and (iv) above, each such
Investment matures or is maturing or being due or payable in full not more
than one year after the relevant Person's acquisition thereof; (b) Acceptable
Acquisitions with respect to which the amounts paid or payable do not at any
time, in any case or in the aggregate, exceed $20,000,000 during any
"contract year" hereunder (e.g., the period from the date hereof through the
anniversary date of the date hereof is the first such contract year of
potentially seven contract years (assuming conversion) hereunder); (c)
Investments (including by the purchase of equity securities) to or in non-
Subsidiary entities that are Affiliates of the Co-Borrowers, or any of them,
provided that such entities are engaged in the business of providing human
resource services, including without limitation, health care services,
related office management services or related businesses, and that such
entities do not become Subsidiaries of the Co-Borrowers or any of them as a
result of such loans, advances or investments; (d) Investments to or in any
Subsidiary that is not a Co-Borrower; provided, however, that notwithstanding
anything contained in this Agreement to the contrary,in the case of any of
the Investments referenced in either of clauses (c) or (d) above, such
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<PAGE> 49
Investments do not, at any time, in any case or in the aggregate (i.e., any
such Investments referenced in clause (c) above plus any such Investments
referenced in clause (d) above), exceed $20,000,000; and (e) the Investments
described in paragraph A of Schedule V hereto.
Section 9.04. Sale of Assets. Sell, lease, assign,
transfer or otherwise dispose of, or permit any of its Subsidiaries to sell,
lease, assign, transfer or otherwise dispose of, any of its now owned or
hereafter acquired assets (including, without limitation, shares of stock and
indebtedness of such Subsidiaries, receivables and leasehold interests),
except: (a) for assets disposed of in the ordinary course of business; (b)
the sale or other disposition of assets no longer used or useful in the
conduct of its business; (c) that any Co-Borrower may sell, lease, assign, or
otherwise transfer its assets to another Co-Borrower; (d) for dispositions of
shares of capital stock in connection with a transaction permitted by Section
9.06; (e) sales or dispositions of assets in arm's length transactions
provided that the aggregate net proceeds of all such sales shall not exceed
$5,000,000 in any fiscal year; and (f) the transactions described in Schedule
V hereto.
Section 9.05. Transactions with Affiliates. Enter into
any transaction, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service, with any Affiliate or
permit any of its Subsidiaries to enter into any transaction, including,
without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate, except in the ordinary course
of and pursuant to the reasonable requirements of such Co-Borrower's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
such Co-Borrower or such Subsidiary than would obtain in a comparable arm's
length transaction with a Person not an Affiliate.
Section 9.06. Mergers, Etc. Merge or consolidate with,
or sell, assign, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to, any person, or acquire all or
substantially all of the assets or the business of any Person (or enter into
any agreement to do any of the foregoing), or permit any of its Subsidiaries
to do so except that: (a) any such Co-Borrower or Subsidiary may merge into
or transfer assets to a Co-Borrower; and (b) a Co-Borrower may effect any
Acceptable Acquisition permitted by Section 9.07 by means of a merger or
otherwise provided that if such Acceptable Acquisition is effected by means
of a merger, the Co-Borrower shall be the surviving entity, and further
provided that in any merger transaction referenced in either (a) or (b) above
involving Olsten, Olsten shall be the surviving entity.
Section 9.07. Acquisitions. Make any Acquisition other
than an Acceptable Acquisition.
Section 9.08. No Activities Leading to Forfeiture. None
of the Co-Borrowers nor any of their respective Subsidiaries shall engage in
the conduct of any business or activity which could result in a Forfeiture
Proceeding.
Section 9.09. Amendments to Indenture; Certain Voluntary
Prepayments; etc. Amend, supplement or modify any term or provision of the
Indenture or of any Subordinated Debt or of any of the items of Debt
referenced in any of Schedule II which would adversely affect the rights of
the Banks, including, without limitation, amendments to the subordination
provisions of the Subordinated Debt and amendments, modifications or changes
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<PAGE> 50
which would accelerate the maturity or increase the amount of any payment of
principal thereof or which would increase the rate or accelerate the date for
the payment of interest thereon, or consent to or permit any such amendment,
supplement or modification; or make any voluntary or optional prepayment,
repurchase or redemption of or with respect to any Debt other than the items
of Subordinated Debt referenced in Schedule II, paragraphs 3(a), 3(b) and
3(c).
Section 9.10. Corporate Documents; Fiscal Year. Amend,
modify or supplement its certificate or articles of incorporation or by-laws
in any way which would adversely affect the ability of the Co-Borrowers to
perform their obligations hereunder or change its fiscal year.
ARTICLE 10. FINANCIAL COVENANTS.
Note: The fiscal year-end dates for the 1993, 1994,
1995, 1996, 1997, 1998 and 1999 fiscal years of Olsten are 1/2/94, 1/1/95,
12/31/95, 12/29/96, 12/28/97, 1/3/99 and 1/2/00, respectively.
So long as any of the Notes shall remain unpaid, any
Letters of Credit remain outstanding or any Bank shall have any Commitment
under this Agreement:
Section 10.01. Minimum Consolidated Working Capital. The
Co-Borrowers shall maintain at all times an excess of Consolidated Current
Assets over Consolidated Current Liabilities (hereinafter, "CWC") of not less
than the amount set forth below opposite the applicable period:
Period Amount
------- --------
The date hereof through 12/31/94 $120,000,000
1/1/95-12/30/95 $149,000,000
12/31/95-12/28/96 $156,000,000
12/29/96-12/27/97 CWC as at 12/31/95 plus
$35,000,000
12/28/97-1/2/99 CWC as at 12/29/96 plus
$35,000,000
1/3/99-1/1/00 CWC as at 12/28/97 plus
$35,000,000
1/2/00 and thereafter CWC as at 1/3/99 plus
$35,000,000;
provided, however, for purposes of determining this calculation at any time
through 10/02/94, Consolidated Current Liabilities shall at any such time
exclude the amount attributable to amounts charged for merger and
restructuring costs in the financial statements at and for the quarter ended
October 3, 1993 attributable to transaction costs, compensation and severance
costs, asset writedowns and integration costs which remain unpaid; and
further provided, however, that such amount (i.e., the amount to be excluded
from Consolidated Current Liabilities) shall not at any time for purposes of
this exclusion exceed $60,000,000.
Section 10.02. Minimum Consolidated Tangible Net Worth.
The Co-Borrowers shall maintain at all times during each of the periods set
forth below, a Consolidated Tangible Net Worth of not less than the amount
set forth below opposite such period:
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Period Amount
------- --------
1/2/94-12/31/94 $80,000,000
1/1/95-12/30/95 Consolidated Tangible Net
Worth as at 1/2/94 plus
$35,000,000
12/31/95-12/28/96 Consolidated Tangible Net
Worth as at 1/1/95 plus
$35,000,000
12/29/96-12/27/97 Consolidated Tangible Net
Worth as at 12/31/95 plus
$35,000,000
12/28/97-1/2/99 Consolidated Tangible Net
Worth as at 12/29/96 plus
$35,000,000
1/3/99-1/1/00 Consolidated Tangible Net
Worth as at 12/28/97 plus
$35,000,000
1/2/00 and thereafter Consolidated Tangible Net
Worth as at 1/3/99 plus
$35,000,000
Furthermore, the Consolidated Net Loss of the Co-Borrowers for the fiscal
year ending on 1/2/94 shall not be greater than $32,000,000.
Section 10.03. Current Ratio. The Co-Borrowers shall
maintain, determined as of the last day of each fiscal quarter ending prior
to the Termination Date, a ratio of Consolidated Current Assets to
Consolidated Current Liabilities of not less than 2.00:1.00.
Section 10.04. Consolidated Total Liabilities To
Consolidated Tangible Net Worth Ratio. The Co-Borrowers shall not permit,
determined as of the last day of each fiscal quarter ending prior to the
Termination Date, the ratio of Consolidated Total Liabilities minus
Consolidated Subordinated Debt to Consolidated Tangible Net Worth plus
Consolidated Subordinated Debt to be greater than the ratio set forth
opposite the applicable period:
Period Ratio
------- -------
1/2/94-12/31/94 1.40
1/1/95-12/30/95 1.35
12/31/95-12/28/96 1.25
12/29/96 and thereafter 1.00
Section 10.05. Fixed Coverage Ratio. The Co-Borrowers
shall not permit on a consolidated basis determined as of the last day of
each fiscal quarter ending prior to the Termination Date, for the period of
four consecutive fiscal quarters then ended, the ratio of (i) Net Profit
Before Taxes plus Depreciation plus Amortization plus Interest Expense to
(ii) Principal Payments plus Dividends plus Interest Expense plus Capital
Expenditures, and only for periods (i.e., the rolling four-quarter periods)
containing (pursuant to the provisions of this Section 10.05) the results of
the fiscal quarter ending 10/3/93, plus merger and restructuring costs of
$80,911,000 and extraordinary items, to be less than 2.00:1.00; provided,
that
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the Co-Borrowers shall not permit Net Profit Before Taxes for any four
consecutive quarterly periods to be less than or equal to zero ($0) Dollars;
and further provided, that for purposes of this calculation for all periods
through the fiscal quarter ending 10/02/94, the principal amount of any
voluntary prepayments of any of the Debt described in paragraph 3(b) or
paragraph 3(c) of Schedule II will be excluded from clause (ii) above.
Section 10.06. Funded Debt to Consolidated Net Operating
Cash Flow. The Co-Borrowers shall not permit the ratio of Funded Debt to
Consolidated Net Operating Cash Flow to exceed, at any time during the period
from the date hereof to but excluding the Conversion Date, 2.50:1.00, or at
any time from or after the Conversion Date, 2.00:1.00. For purposes of
calculating this ratio, Funded Debt shall be determined on the date of
calculation and Consolidated Net Operating Cash Flow shall be the aggregate
Consolidated Net Operating Cash Flow for the four consecutive quarterly
periods immediately preceding the date of calculation.
Compliance with all of the financial covenants contained
in this Article 10 shall be determined by reference to the consolidated
financial statements of Olsten and its Consolidated Subsidiaries delivered to
the Banks in accordance with Section 8.08 hereof.
ARTICLE 11. EVENTS OF DEFAULT.
Section 11.01. Events of Default. Any of the following
events shall be an "Event of Default":
(a) The Co-Borrowers shall: (i) fail to pay the
principal of any Note as and when due and payable; (ii) fail to pay interest
on any Note or any fee or other amount due hereunder as and when due and
payable; or (iii) fail to pay the Agent any amount when due and payable under
any Letter of Credit Agreement.
(b) Any representation or warranty made or deemed
made by the Co-Borrowers or any of them in this Agreement or in any other
Facility Document or which is contained in any certificate, document,
opinion, financial or other statement furnished at any time under or in
connection with any Facility Document shall prove to have been incorrect in
any material respect on or as of the date made or deemed made;
(c) The Co-Borrowers shall: (i) fail to perform or
observe any term, covenant or agreement contained in Section 2.03, Section
4.02(f) or Articles 9 or 10; or (ii) fail to perform or observe any term,
covenant or agreement on its part to be performed or observed (other than the
obligations specifically referred to in Section 11.01(a), Section 11.01(c)(i)
or any of Sections 11.01(d)-(h)) in any Facility Document and such failure
shall continue for 30 consecutive days;
(d)(i) The Co-Borrowers, or any of them or any of their
respective Subsidiaries shall: (A) fail to pay any Debt, including but not
limited to indebtedness for borrowed money (other than the payment
obligations described in (a) above), of the Co-Borrowers, or such Subsidiary,
as the case may be, or any interest or premium thereon, when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise);
or (B) fail to perform or observe any term, covenant or condition on its part
to be performed or observed under any agreement or instrument relating to any
such Debt, when required to be performed or observed, if the effect of such
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<PAGE> 53
failure to perform or observe is to accelerate, or to permit the acceleration
of, after the giving of notice or passage of time, or both, the maturity of
such Debt, whether or not such failure to perform or observe shall be waived
by the holder of such Debt; or (ii) any such Debt (other than under the
circumstances and with respect to the Debt described in Section 11.01(d)(iii)
hereof) shall be declared due and payable, or shall be required to be prepaid
(other than by a regularly scheduled required prepayment) prior to the stated
maturity thereof; or (iii) the Debentures, or any portion thereof, shall be
declared or deemed due and payable or shall be required, pursuant to a
"Repurchase Event" (as such term is defined in the Indenture) or otherwise,
to be repurchased or prepaid, as the case may be, prior to the stated
maturity thereof (including, without limitation, prior to the "Stated
Maturity" as such term is defined in the Indenture); provided, that, for
purposes of clauses (i) and (ii) hereof only, such events shall only
constitute "Events of Default" if the affected Debt, in any case or in the
aggregate, exceeds $1,000,000 in principal amount outstanding; and further
provided, that for purposes of clause (iii) hereof only, such events shall
only constitute "Events of Default" if the principal amount of Debentures
which are declared due and payable or are required to be repurchased or
prepaid prior to the stated maturity thereof as set forth in such clause
(iii) hereof, in any case or in the aggregate, exceeds $1,000,000.
(e) The Co-Borrowers, or any of them, or any of their
respective Subsidiaries (i) shall generally not, or be unable to, or shall
admit in writing its or their inability to, pay its or their debts as such
debts become due; or (ii) shall make an assignment for the benefit of
creditors, petition or apply to any tribunal for the appointment of a
custodian, receiver or trustee for it or a substantial part of its or their
assets; or (iii) shall commence any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect; or
(iv) shall have had any such petition or application filed or any such
proceeding shall have been commenced, against it or them, in which an
adjudication or appointment is made or order for relief is entered, or which
petition, application or proceeding remains undismissed for a period of 30
days or more; or shall be the subject of any proceeding under which its or
their assets may be subject to seizure, forfeiture or divestiture (other than
a proceeding in respect of a Lien permitted under Section 9.02(b)); or (v) by
any act or omission shall indicate its or their consent to, approval of or
acquiescence in any such petition, application or proceeding or order for
relief or the appointment of a custodian, receiver or trustee for all or any
substantial part of its or their property; (vi) shall suffer any such
custodianship, receivership or trusteeship to continue undischarged for a
period of 30 days or more; or (vii) on a consolidated basis with the other
Co-Borrowers, shall cease to be Solvent;
(f) One or more judgments, decrees or orders for the
payment of money in excess of $1,000,000 in the aggregate shall be rendered
against the Co-Borrowers, or any of them, or any of their respective
Subsidiaries and such judgments, decrees or orders shall continue unsatisfied
and in effect for a period of 30 consecutive days without being vacated,
discharged, satisfied or stayed or bonded pending appeal;
(g) An event or condition specified in Section
8.08(i) hereof shall occur or exist with respect to any Plan or Multiemployer
Plan and, as a result of such event or condition, together with all other
such events or conditions, the Co-Borrowers, or any of them, or any ERISA
Affiliate shall incur or in the opinion of the Required Banks shall be
reasonably likely to incur a liability to a Plan, a Multiemployer Plan or
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<PAGE> 54
PBGC (or any combination of the foregoing) which is, in the determination
of the Required Banks, material in relation to the consolidated financial
condition, operations, business or prospects taken as a whole of the Co-
Borrowers and their Subsidiaries; or
(h) Any Forfeiture Proceeding shall have been
commenced or the Co-Borrowers shall have given the Agent written notice of
the commencement of any Forfeiture Proceeding as provided in Section 8.08(l).
Section 11.02. Remedies. If any Event of Default shall
occur and be continuing, the Agent shall, upon request of the Required Banks,
by notice to the Co-Borrowers, (a) declare the Commitments to be terminated,
whereupon the same shall forthwith terminate, and (b) declare the outstanding
principal of the Notes, all interest thereon and all other amounts payable
under this Agreement and the Notes (including amounts payable in respect to
Letters of Credit whether or not the beneficiaries thereof shall have
presented the drafts or other documents required thereunder) to be forthwith
due and payable, whereupon the Notes, all such interest and all such amounts
shall become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly
waived by the Co-Borrowers; provided that, in the case of an Event of Default
referred to in Section 11.01(d)(iii), 11.01(e) or 11.01(h) above, the
Commitments shall be immediately terminated, and the Notes, all interest
thereon and all other amounts payable under this Agreement and the Notes
(including amounts payable in respect to Letters of Credit whether or not the
beneficiaries thereof shall have presented the drafts or other documents
required thereunder) shall be immediately due and payable without notice,
presentment, demand, protest or other formalities of any kind, all of which
are hereby expressly waived by the Co-Borrowers. With respect to all Letters
of Credit that shall not have matured or with respect to which presentment
for honor shall not have occurred, the Co-Borrowers shall deposit in a Cash
Collateral account opened by the Agent an amount equal to the aggregate
undrawn amount of all such Letters of Credit, and the unused portion thereof,
if any, shall be returned to the Co-Borrowers after the respective expiration
dates of the Letters of Credit and after all obligations of the Co-Borrowers
hereunder and under the Facility Documents are paid in full.
ARTICLE 12. THE AGENT;
RELATIONS AMONG BANKS AND CO-BORROWERS.
Section 12.01. Appointment, Powers and Immunities of
Agent. Each Bank hereby irrevocably (but subject to removal by the Required
Banks pursuant to Section 12.09) appoints and authorizes the Agent to act as
its agent hereunder and under any other Facility Document with such powers as
are specifically delegated to the Agent by the terms of this Agreement and
any other Facility Document, together with such other powers as are
reasonably incidental thereto. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and any
other Facility Document, and shall not by reason of this Agreement be a
trustee for any Bank. The Agent shall not be responsible to the Banks for
any recitals, statements, representations or warranties made by the Co-
Borrowers, of any of them, or any officer or official of the Co-Borrowers, or
any of them, or any other Person contained in this Agreement or any other
Facility Document, or in any certificate or other document or instrument
referred to or provided for in, or received by any of them under, this
Agreement or any other Facility Document, or for the value, legality,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Facility Document or any other document or instrument
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<PAGE> 55
referred to or provided for herein or therein, for the perfection or priority
of any collateral security for the Loans or for any failure by the Co-
Borrowers or any of them to perform any of their or its respective
obligations hereunder or thereunder. The Agent may employ agents and
attorneys-in-fact and shall not be responsible, except as to money or
securities received by it or its authorized agents, for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care. Neither the Agent nor any of its directors, officers,
employees or agents shall be liable or responsible for any action taken or
omitted to be taken by it or them hereunder or under any other Facility
Document or in connection herewith or therewith, except for its or their own
gross negligence or willful misconduct. The Co-Borrowers shall pay any fee
agreed to by the Co-Borrowers and the Agent with respect to the Agent's
services hereunder.
Section 12.02. Reliance by Agent. The Agent shall be
entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telex, telegram or cable) believed by it
to be genuine and correct and to have been signed or sent by or on behalf of
the proper Person or Persons, and upon advice and statements of legal
counsel, independent accountants and other experts selected by the Agent.
The Agent may deem and treat each Bank as the holder of the Loans made by it
for all purposes hereof unless and until a notice of the assignment or
transfer thereof satisfactory to the Agent signed by such Bank shall have
been furnished to the Agent but the Agent shall not be required to deal with
any Person who has acquired a participation in any Loan from a Bank. As to
any matters not expressly provided for by this Agreement or any other
Facility Document, the Agent shall in all cases be fully protected in acting,
or in refraining from acting, hereunder in accordance with instructions
signed by the Required Banks, and such instructions of the Required Banks and
any action taken or failure to act pursuant thereto shall be binding on all
of the Banks and any other holder of all or any portion of any Loan.
Section 12.03. Defaults. The Agent shall not be deemed
to have knowledge of the occurrence of a Default or Event of Default (other
than the non-payment of principal of or interest or fees on the Loans to the
extent the same is required to be paid to the Agent for the account of the
Banks) unless the Agent has received notice from a Bank or the Co-Borrowers
specifying such Default or Event of Default. In the event that the Agent
receives such a notice of the occurrence of a Default or Event of Default,
the Agent shall give prompt notice thereof to the Banks (and shall give each
Bank prompt notice of each such non-payment). The Agent shall (subject to
Section 12.08) take such action with respect to such Default or Event of
Default which is continuing as shall be directed by the Required Banks;
provided that, unless and until the Agent shall have received such
directions, the Agent may take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interest of the Banks; and provided further that the
Agent shall not be required to take any such action which it determines to be
contrary to law.
Section 12.04. Rights of Agent as a Bank. With respect
to its Commitment and the Loans made by it, the Agent in its capacity as a
Bank hereunder shall have the same rights and powers hereunder as any other
Bank and may exercise the same as though it were not acting as the Agent, and
the term "Bank" or "Banks" shall, unless the context otherwise indicates,
include the Agent in its capacity as a Bank. The Agent or any Bank and their
respective Affiliates may (without having to account therefor to any other
Bank) accept deposits from, lend money to (on a secured or unsecured basis),
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and generally engage in any kind of banking, trust or other business with,
the Co-Borrowers or any of them (and any of their Affiliates). In the case
of the Agent, it may do so as if it were not acting as the Agent, and the
Agent may accept fees and other consideration from the Co-Borrowers or any of
them for services in connection with this Agreement or otherwise without
having to account for the same to the Banks. Although the Agent or a Bank or
their respective Affiliates may in the course of such relationships and
relationships with other Persons acquire information about the Co-Borrowers,
their Affiliates and such other Persons, neither the Agent nor such Bank
shall have any duty to disclose such information to the other Banks.
Section 12.05. Indemnification of Agent. The Banks agree
to indemnify the Agent (to the extent not reimbursed under Section 13.03 or
under the applicable provisions of any other Facility Document, but without
limiting the obligations of the Co-Borrowers under Section 13.03 or such
provisions), ratably in accordance with the aggregate unpaid principal amount
of the Loans made by the Banks (without giving effect to any participation,
in all or any portion of such Loans, sold by them to any other Person) (or,
if no Loans are at the time outstanding, ratably in accordance with their
respective Commitments), for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising
out of this Agreement, any other Facility Document or any other documents
contemplated by or referred to herein or the transactions contemplated hereby
or thereby (including, without limitation, the costs and expenses which the
Co-Borrowers are obligated to pay under Section 13.03 or under the applicable
provisions of any other Facility Document but excluding, unless a Default or
Event of Default has occurred, normal administrative costs and expenses
incidental to the performance of its agency duties hereunder) or the
enforcement of any of the terms hereof or thereof or of any such other
documents or instruments; provided that no Bank shall be liable for any of
the foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified.
Section 12.06. Documents. The Agent will forward to each
Bank, promptly after the Agent's receipt thereof, a copy of each report,
notice or other document required by this Agreement or any other Facility
Document to be delivered to the Agent for such Bank.
Section 12.07. Non-Reliance on Agent and Other Banks.
Each Bank agrees that it has, independently and without reliance on the Agent
or any other Bank, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Co-Borrowers and
their Subsidiaries and decision to enter into this Agreement and that it
will, independently and without reliance upon the Agent or any other Bank,
and based on such documents and information as it shall deem appropriate at
the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement or any other Facility Document. The Agent
shall not be required to keep itself informed as to the performance or
observance by the Co-Borrowers of this Agreement or any other Facility
Document or any other document referred to or provided for herein or therein
or to inspect the properties or books of the Co-Borrowers or any Subsidiary.
Except for notices, reports and other documents and information expressly
required to be furnished to the Banks by the Agent hereunder, the Agent shall
not have any duty or responsibility to provide any Bank with any credit or
other information concerning the affairs, financial condition or business of
the Co-Borrower or any Subsidiary (or any of their Affiliates) which may come
into the possession of the Agent or of its Affiliates. The Agent shall not
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be required to file this Agreement, any other Facility Document or any
document or instrument referred to herein or therein, for record or give
notice of this Agreement, any other Facility Document or any document or
instrument referred to herein or therein, to anyone.
Section 12.08. Failure of Agent to Act. Except for
action expressly required of the Agent hereunder, the Agent shall in all
cases be fully justified in failing or refusing to act hereunder unless it
shall have received further assurances (which may include cash collateral) of
the indemnification obligations of the Banks under Section 12.05 in respect
of any and all liability and expense which may be incurred by it by reason of
taking or continuing to take any such action.
Section 12.09. Resignation or Removal of Agent. Subject
to the appointment and acceptance of a successor Agent as provided below, the
Agent may resign at any time by giving written notice thereof at least ten
Banking Days prior thereto to the Banks and the Co-Borrowers, the Agent may
be removed at any time with cause by the Required Banks and the Agent may be
removed at any time without cause by the Required Banks if with the prior
written consent of the Co-Borrowers; provided that the Co-Borrowers and the
other Banks shall be promptly notified thereof. Upon any such resignation or
removal, the Required Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Banks and shall have accepted such appointment within 30 days after the
retiring Agent's giving of notice of resignation or the Required Banks'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent, which shall be a Bank with a Commitment
Proportion hereunder of at least 15%. The Required Banks or the retiring
Agent, as the case may be, shall upon the appointment of a Successor Agent
promptly so notify the Co-Borrowers and the other Banks. Upon the acceptance
of any appointment as Agent hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the retiring Agent
shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article 12 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Agent.
Section 12.10. Amendments Concerning Agency Function.
The Agent shall not be bound by any waiver, amendment, supplement or
modification of this Agreement or any other Facility Document which affects
its duties hereunder or thereunder unless it shall have given its prior
consent thereto.
Section 12.11. Liability of Agent. The Agent shall not
have any liabilities or responsibilities to the Co-Borrowers or any of them
on account of the failure of any Bank to perform its obligations hereunder or
to any Bank on account of the failure of the Co-Borrowers or any of them to
perform their or its obligations hereunder or under any other Facility
Document.
Section 12.12. Transfer of Agency Function. Without the
consent of the Co-Borrowers or any Bank, the Agent may at any time or from
time to time transfer its functions as Agent hereunder to any of its offices
wherever located, provided that the Agent shall promptly notify the Co-
Borrowers and the Banks thereof.
Section 12.13. Non-Receipt of Funds by the Agent. Unless
the Agent shall have been notified by a Bank or the Co- Borrowers (either one
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as appropriate being the "Payor") prior to the date on which such Bank is to
make payment hereunder to the Agent of the proceeds of a Loan or the Co-
Borrowers are to make Payment to the Agent, as the case may be (either such
payment being a "Required Payment"), which notice shall be effective upon
receipt, that the Payor does not intend to make the Required Payment to the
Agent, the Agent may assume that the Required Payment has been made and may,
in reliance upon such assumption (but shall not be required to), make the
amount thereof available to the intended recipient on such date and, if the
Payor has not in fact made the Required Payment to the Agent, the recipient
of such payment shall, on demand, repay to the Agent the amount made
available to it together with interest thereon for the period commencing on
the date such amount was so made available by the Agent until the date the
Agent recovers such amount at a rate per annum equal to the Federal Funds
Rate for such day (when the Agent recovers such amount from a Bank) or equal
to the rate of interest applicable to such Loan (when the Agent recovers such
amount from the Co-Borrowers) and, if such recipient shall fail to make such
payment promptly, the Agent shall be entitled to recover such amount, on
demand, from the Payor, with interest as aforesaid.
Section 12.14. Withholding Taxes. Each Bank represents
that it is entitled to receive any payments to be made to it hereunder
without the withholding of any tax and will furnish to the Agent such forms,
certifications, statements and other documents as the Agent may request from
time to time to evidence such Bank's exemption from the withholding of any
tax imposed by any jurisdiction or to enable the Agent to comply with any
applicable laws or regulations relating thereto. Without limiting the effect
of the foregoing, if any Bank is not created or organized under the laws of
the United States of America or any state thereof, in the event that the
payment of interest by the Co-Borrowers is treated for U.S. income tax
purposes as derived in whole or in part from sources from within the U.S.,
such Bank will furnish to the Agent, no less frequently than annually, Form
4224 or Form 1001 of the Internal Revenue Service, or such other forms,
certifications, statements or documents, duly executed and completed by such
Bank as evidence of such Bank's exemption from the withholding of U.S. tax
with respect thereto. The Agent shall not be obligated to make any payments
hereunder to such Bank in respect of any Loan or such Bank's Commitment until
such Bank shall have furnished to the Agent the requested form,
certification, statement or document.
Section 12.15. Several Obligations and Rights of Banks.
The failure of any Bank to make any Loan to be made by it on the date
specified therefor shall not relieve any other Bank of its obligation to make
its Loan on such date, but no Bank shall be responsible for the failure of
any other Bank to make a Loan to be made by such other Bank. The amounts
payable at any time hereunder to each Bank shall be a separate and
independent debt, and each Bank shall be entitled to protect and enforce its
rights arising out of this Agreement, and it shall not be necessary for any
other Bank to be joined as an additional party in any proceeding for such
purpose.
Section 12.16. Pro Rata Treatment of Loans, Etc. Except
to the extent otherwise provided: (a) each borrowing under Section 2.04 or
Section 3.01 shall be made from the Banks, each reduction or termination of
the amount of the Commitments under Section 2.06 shall be applied to the
Commitments of the Banks, the payment of the fees referenced in Section 4.04,
each payment of Commitment Fee accruing under Section 4.06, and the payment
of the Term Loan Facility Fee under Section 4.08 and each Loan which is the
subject of a continuation or conversion under Section 2.06 or 3.04, shall be
made by and held for the account of the Banks, pro rata in accordance with
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their respective Commitment Proportions; (b) each prepayment and payment of
principal of or interest on Loans of a particular type and a particular
Interest Period shall be made to the Agent for the account of the Banks
holding Loans of such type and Interest Period pro rata in accordance with
the respective unpaid principal amounts of such Loans of such Interest Period
held by such Banks.
Section 12.17. Sharing of Payments Among Banks. If a
Bank shall obtain payment of any principal of or interest on any Loan made by
it through the exercise of any right of setoff, banker's lien, counterclaim,
or by any other means, it shall promptly purchase from the other Banks a
participation in the Loans made by the other Banks in such amounts, and make
such other adjustments from time to time as shall be equitable to the end
that all the Banks shall share the benefit of such payment (net of any
expenses which may be incurred by such Bank in obtaining or preserving such
benefit) pro rata in accordance with the unpaid principal and interest on the
Loans held by each of them. To such end the Banks shall make appropriate
adjustments among themselves (by the resale of any such participation sold or
otherwise) if such payment is rescinded or must otherwise be restored. The
Co-Borrowers agree that any Bank so purchasing a participation in the Loans
made by other Banks may exercise all rights of setoff, banker's lien,
counterclaim or similar rights with respect to such participation. Nothing
contained herein shall require any Bank to exercise any such right or shall
affect the right of any Bank to exercise, and retain the benefits of
exercising, any such right with respect to any other indebtedness of any Co-
Borrower.
ARTICLE 13. MISCELLANEOUS.
Section 13.01. Amendments and Waivers. Except as
otherwise expressly provided in this Agreement, any provision of this
Agreement may be amended or modified only by an instrument in writing signed
by the Co-Borrowers, the Agent and the Banks, and any provision of this
Agreement may be waived by the Co-Borrowers (if such provision requires
performance by the Agent or the Banks) or by the Agent acting with the
consent of the Required Banks (if such provision requires performance by the
Co-Borrowers or any of them); provided that no amendment, modification or
waiver shall, unless by an instrument signed by all of the Banks or by the
Agent acting with the written consent of the all of Banks: (a) increase or
extend the term, or extend the time or waive any requirement for the
reduction or termination of the Commitments, (b) extend the date fixed for
the payment of principal of or interest on any Loan or increase the aggregate
of all Letter of Credit Commitments, any Bank's Commitment or the Total
Commitments, (c) reduce the amount of any payment of principal thereof or the
rate at which interest is payable thereon or any fee payable hereunder or the
amount of any reimbursement obligation with respect to any Letter of Credit,
(d) alter the terms of this Section 13.01, (e) amend the definition of the
term "Required Banks", (f) change the Commitment of any Bank or the fees
payable to any Bank except as otherwise provided herein, (g) permit the Co-
Borrowers to transfer or assign any of their obligations hereunder or under
the Facility Documents, (h) amend the provisions of Article 12 hereof, or (i)
release any of the collateral which may from time to time secure the Co-
Borrowers' obligations hereunder. No failure on the part of the Agent or any
Bank to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof or preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
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<PAGE> 60
Section 13.02. Usury. Anything herein to the contrary
notwithstanding, the obligations of the Co-Borrowers under this Agreement and
the Notes shall be subject to the limitation that payments of interest shall
not be required to the extent that receipt thereof would be contrary to
provisions of law applicable to a Bank limiting rates of interest which may
be charged or collected by such Bank.
Section 13.03. Expenses. The Co-Borrowers shall
reimburse the Agent on demand for all reasonable costs, expenses, and charges
(including, without limitation, reasonable fees and charges of external legal
counsel for the Agent) incurred by the Agent or by the Agent on behalf of the
Banks in connection with the preparation or performance of this Agreement and
the Facility Documents. In addition, the Co-Borrowers shall reimburse the
Agent and, upon the occurrence and during the continuance of an Event of
Default, each Bank for all of its reasonable costs and expenses (including,
without limitation, any Bank's allocated costs of its in-house counsel) in
connection with the enforcement or preservation of any rights under this
Agreement, the Notes or the other Facility Documents. The Co-Borrowers agree
to indemnify the Agent and each Bank and their respective Affiliates,
directors, officers, employees and agents from, and hold each of them
harmless against, any and all losses, liabilities, claims, damages or
expenses incurred by any of them arising out of or by reason of any
investigation or litigation or other proceedings (including any threatened
investigation or litigation or other proceedings) relating to any actual or
proposed use by the Co-Borrowers, or any of them, or any of their respective
Subsidiaries of the proceeds of the Loans, including without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation or litigation or other proceedings (but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the
gross negligence, willful misconduct or bad faith of the Person to be
indemnified).
Section 13.04. Survival. The obligations of the Co-
Borrowers under Section 2.03(b), Article V and Section 13.03 shall survive
the repayment of the Loans and the termination of the Commitments.
Section 13.05. Assignment; Participation. This Agreement
shall be binding upon, and shall inure to the benefit of, the Co-Borrowers,
the Agent, the Banks and their respective successors and assigns, except that
the Co-Borrowers may not assign or transfer their rights or obligations
hereunder. Each Bank may assign, or sell participation in, all or any part
of any Loan or its Commitment to another bank or other entity, in which event
(a) in the case of an assignment, upon notice thereof by the Bank to the Co-
Borrowers with a copy to the Agent, the assignee shall have, to the extent of
such assignment (unless otherwise provided therein), the same rights,
benefits and obligations as it would have if it were a Bank hereunder, and
concomitantly, the assignor shall, to the extent of such assignment (unless
otherwise provided therein), have relinquished such rights and benefits and
be released from such obligations; and (b) in the case of a participation,
the participant shall have no rights under the Facility Documents and all
amounts payable by the Co-Borrowers under Article 4 or Article 5 shall be
determined as if such Bank had not sold such participation. Notwithstanding
the foregoing, no Bank may assign, participate or transfer to another entity
its rights, benefits or obligations with respect to Letters of Credit issued
by the Agent hereunder without the prior consent of the Agent (which consent
shall be in the Agent's sole discretion). The agreement executed by such
Bank in favor of the participant shall not give the participant the right to
require such Bank to take or omit to take any action hereunder except action
directly relating to (i) the extension of a payment date with respect to any
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<PAGE> 61
portion of the principal of or interest on any amount outstanding hereunder
allocated to such participant, (ii) the reduction of the principal amount
outstanding hereunder or (iii) the reduction of the rate of interest payable
on such amount or any amount of fees payable hereunder to a rate or amount,
as the case may be, below that which the participant is entitled to receive
under its agreement with such Bank. Such Bank may furnish any information
concerning the Co-Borrowers in the possession of such Bank from time to time
to assignees and participants (including prospective assignees and
participants); provided that such Bank shall require any such prospective
assignee or such participant (prospective or otherwise) to agree in writing
to maintain the confidentiality of such information.
Section 13.06. Special Provision With Respect To New
Subsidiaries. Upon receiving notice that a Co-Borrower has established a new
Subsidiary in accordance with Section 8.08(m), the Agent may require the Co-
Borrowers to designate such new Subsidiary to act as a Co-Borrower hereunder,
in which case such new Subsidiary shall agree to abide by all of the terms,
covenants, conditions and obligations applicable to the Co-Borrowers herein.
The Co-Borrowers agree to take all action necessary to cause such new
Subsidiary to become a Co-Borrower hereunder promptly upon the request of the
Agent. Alternatively, at the option of the Agent, such new Subsidiary may
become a guarantor of the Co-Borrowers' obligations hereunder in which event
it will execute and deliver a guarantee in form and substance satisfactory to
the Agent. Notwithstanding any other provision of this Agreement, no such
new Subsidiary shall be formed unless Olsten includes such Subsidiary in its
consolidated financial statements required to be delivered hereunder.
Section 13.07. Notices. Unless the party to be notified
otherwise notifies the other party in writing as provided in this Section,
and except as otherwise provided in this Agreement, notices shall be given to
the Agent by telephone, confirmed by telecopy or other writing, and to the
Banks and to the Co-Borrowers by certified or registered mail or by
recognized overnight delivery services to such party at its address on the
signature page of this Agreement provided that notices to the Co-Borrowers,
or to any of them, shall be effective if delivered at the following address:
One Merrick Avenue, Westbury, New York 11590; Attn.: General Counsel.
Notices shall be effective: (a) if given by registered or certified mail, 72
hours after deposit in the mails with postage prepaid, addressed as
aforesaid; (b) if given by recognized overnight delivery service, on the
business day following deposit with such service addressed as aforesaid; and
(c) if given by telecopy, when the telecopy is transmitted to the telecopy
number as aforesaid; provided that all notices to the Agent and the Banks
shall be effective upon receipt.
Section 13.08. Setoff. The Co-Borrowers agree that, in
addition to (and without limitation of) any right of setoff, banker's lien or
counterclaim a Bank may otherwise have, each Bank shall be entitled, at its
option without any prior notice to the Co-Borrowers (any such notice being
expressly waived by the Co-Borrowers to the extent permitted by applicable
law), to offset balances (general or special, time or demand, provisional or
final) held by it for the account of the Co-Borrowers or any of them at any
of such Bank's offices, in Dollars or in any other currency, against any
amount payable by the Co-Borrowers or any of them to such Bank under this
Agreement or such Bank's Note which is not paid when due (regardless of
whether such balances are then due to the Co-Borrowers), in which case it
shall promptly notify the Co-Borrowers and the Agent thereof; provided that
such Bank's failure to give such notice shall not affect the validity
thereof. Payments by the Co-Borrowers hereunder shall be made without setoff
or counterclaim.
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<PAGE> 62
Section 13.09. Jurisdiction; Immunities.
(a) The Co-Borrowers hereby irrevocably submit to the
jurisdiction of any New York State or United States Federal court sitting in
New York County over any action or proceeding arising out of or relating to
this Agreement or the Notes, and the Co-Borrowers hereby irrevocably agree
that all claims in respect of such action or proceeding may be heard and
determined in such New York State or Federal court. The Co-Borrowers
irrevocably consent to the service of any and all process in any such action
or proceeding by the mailing (by certified or registered mail) of copies of
such process to the Co-Borrowers at the address specified in Section 13.07.
The Co-Borrowers agree that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. The Co-Borrowers further
waive any objection to venue in such State and any objection to an action or
proceeding in such State on the basis of forum non conveniens. The Co-
Borrowers further agree that any action or proceeding brought against the
Agent shall be brought only in New York State or United States Federal court
sitting in New York County. Each of the Banks, the Agent and each of the Co-
Borrowers waive any right it may have to a jury trial.
(b) Nothing in this Section 13.09 shall affect the right
of the Agent or any Bank to serve legal process in any other manner permitted
by law or affect the right of the Agent or any Bank to bring any action or
proceeding against the Co-Borrowers, or any of them, or their or its property
in the courts of any other jurisdictions.
(c) To the extent that the Co-Borrowers have or hereafter
may acquire any immunity from jurisdiction of any court or from any legal
process (whether from service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to
itself or its property, the Co-Borrowers hereby irrevocably waive such
immunity in respect of its obligations under this Agreement and the Notes.
Section 13.10. Table of Contents; Headings. Any table of
contents and the headings and captions hereunder are for convenience only and
shall not affect the interpretation or construction of this Agreement.
Section 13.11. Severability. The provisions of this
Agreement are intended to be severable. If for any reason any provision of
this Agreement shall be held invalid or unenforceable in whole or in part in
any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without in
any manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.
Section 13.12. Counterparts. This Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument, and any party hereto may execute this
Agreement by signing any such counterpart.
Section 13.13. Integration. The Facility Documents set
forth the entire agreement among the parties hereto relating to the
transactions contemplated thereby and supersede any prior oral or written
statements or agreements with respect to such transactions.
Section 13.14. Governing Law. This Agreement shall be
governed by, and interpreted and construed in accordance with, the law of the
State of New York.
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<PAGE> 63
Section 13.15. Treatment of Certain Information. The Co-
Borrowers (a) acknowledge that services may be offered or provided to it (in
connection with this Agreement or otherwise) by each Bank or by one or more
of their respective Subsidiaries or Affiliates and (b) acknowledges that
information delivered to each Bank by the Co-Borrowers may be provided to
each such Subsidiary and Affiliate.
Section 13.16. Co-Borrowers' Attorney-in-Fact. Each Co-
Borrower, other than Olsten, hereby irrevocably appoints Olsten as such Co-
Borrower's attorney-in-fact to act on behalf of such Co-Borrower to execute
such documents, instruments or agreements as may be required from such Co-
Borrower from time to time pursuant to the terms of the Facility Documents.
Section 13.17. Joint and Several Obligations. Each of
the Co-Borrowers acknowledges and agrees that the obligations and liabilities
of the Co-Borrowers for the payment and performance of the Obligations shall
be joint and several.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
CO-BORROWERS:
THE OLSTEN CORPORATION
OLSTEN STAFFING SERVICES, INC.
OLSTEN KIMBERLY QUALITYCARE, INC.
OLSTEN CERTIFIED HEALTHCARE CORP.
OLSTEN SERVICES OF NEW YORK, INC.
OLSTEN OF WESTCHESTER, INC.
OLSTEN SERVICES OF DELMAR, INC.
OLS HOLDINGS, INC.
OLSTEN HOME HEALTHCARE, INC.
NEW YORK HEALTHCARE SERVICES, INC.
ALL MEDICARE HOME HEALTH AGENCY, INC.
AMERICAN HOME HEALTH CARE, INC.
FLYING NURSES, INC.
GOLD COAST SOUTH HOME HEALTH AGENCY, INC.
GULF COAST HOME HEALTH SERVICES CENTRAL, INC.
GULF COAST HOME HEALTH SERVICES EAST, INC.
GULF COAST HOME HEALTH SERVICES NORTH, INC.
GULF COAST HOME HEALTH SERVICES OF FLORIDA, INC.
GULF COAST HOME HEALTH SERVICES SOUTH, INC.
GULF COAST HOME HEALTH SERVICES SOUTHWEST, INC.
GULF COAST HOME HEALTH SERVICES WEST, INC.
HHC MANAGEMENT, INC.
HEALTHCARE STAFF RESOURCES, INC.
KIMBERLY HOME HEALTH CARE, INC.
KIMBERLY QUALITY CARE INFUSION THERAPY SERVICES, INC.
KIMBERLY SERVICES, INC.
KIMBERLY SERVICES OF NEW YORK, INC.
QC-MEDI CALIFORNIA, INC.
QC MEDI-ILLINOIS, INC.
QC MEDI-LOUISIANA, INC.
QC-MEDI MASS, INC.
QC-MEDI OF MICHIGAN, INC.
QC-MEDI NEW YORK, INC.
QC MEDI-TENN, INC.
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<PAGE> 64
QUALITY CARE-USA, INC.
QUALITY CARE, INC.
QUALITY CARE HEALTH SERVICES, INC.
QUALITY CARE HOME HEALTH, INC.
QUALITY CARE OF CONNECTICUT, INC.
QUALITY CARE SERVICE CORP.
RAINIER HOME HEALTH CARE, INC.
SUPERIOR CARE, INC.
UHH HOME SERVICES CORPORATION
AMERICAN SERVICE BUREAU, INC.
OLSTEN HOLDING COMPANY
By:_____________________________________
Name: Laurin L. Laderoute, Jr.
Title: Vice President for all of the above Co-Borrowers
Address for Notices: One Merrick Avenue
Westbury, New York 11590
Attn: Laurin L. Laderoute, Jr., Esq.
Assistant General Counsel
Telephone No.: (516) 832-8200
Telefax No.: (516) 832-7737
AGENT:
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By:_____________________________________
Name: Richard G. Williams
Title: Vice President
Lending Office and Address for Notices:
The Chase Manhattan Bank, N.A.
The Long Island Region
135 Pinelawn Road
Melville, New York 11747
Attn: Richard G. Williams
Vice President
Telephone No.: (516) 753-9687
Telefax No.: (516) 753-0878
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<PAGE> 65
BANKS:
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By:_____________________________________
Name: Richard G. Williams
Title: Vice President
Lending Office and Address for Notices:
The Chase Manhattan Bank, N.A.
The Long Island Region
135 Pinelawn Road
Melville, New York 11747
Attn: Richard G. Williams
Vice President
Telephone No.: (516) 753-9687
Telefax No.: (516) 753-0878
CHEMICAL BANK
By:______________________________________
Name: Nancy Ippolito
Title: Vice President
Lending Office and Address for Notices:
Chemical Bank
395 North Service Road, Suite 302
Melville, New York 11747
Attn: Olsten Account Officer
Telephone No.: (516) 755-5164
Telefax No.: (516) 755-0143
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<PAGE> 66
BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY
By:_________________________________________
Name: Linda Jean Cole
Title: Vice President
Lending Office and Address for Notices:
Boatmen's First National Bank of Kansas City
14 W. 10th Street
Kansas City, Missouri 64105
Attn: Linda Jean Cole
Telephone No.: (816) 691-7688
Telefax No.: (816) 691-7561
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
By:_________________________________________
Name: Doug Bontemps
Title: Vice President
Lending Office:
Bank of America National Trust and Savings Association
1850 Gateway Boulevard
Concord, California 94520
Attn: Unit #5693 - Nina Lemmer
Telephone No.: (510) 675-7478
Telefax No.: (510) 675-7531
Address for Notices:
Bank of America National Trust and Savings Association
1850 Gateway Boulevard
Concord, California 94520
Attn: Unit #5693 - Nina Lemmer
Telephone No.: (510) 675-7478
Telefax No.: (510) 675-7531
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<PAGE> 67
With a copy to:
Bank of America National Trust and Savings Association
335 Madison Avenue
New York, New York 10017
Attn: Doug Bontemps
Telephone No.: (212) 503-8074
Telefax No.: (212) 503-7066
FLEET BANK
By:_________________________________________
Name: Robert W. Sievers
Title: Vice President
Lending Office and Address for Notices:
Fleet Bank
300 Broadhollow Road
Corporate Banking Division, 4th Floor
Melville, New York 11747-4852
Attn: Philip A. Davi
Telephone No.: (516) 547-7834
Telefax No.: (516) 547-7701
NATIONAL WESTMINSTER BANK USA
By:_________________________________________
Name: Theodore W. Janeczko
Title: Vice President
Lending Office and Address for Notices:
National Westminster Bank USA
100 Jericho Quadrangle
Jericho, New York 11753
Attn: Martha C. Stark
Telephone No.: (516) 349-2000
Telefax No.: (516) 349-2098
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<PAGE> 1
EXHIBIT 10(o)
August 10, 1994
Dear :
The Olsten Corporation (the "Company") considers it essential to the
best interests of its shareholders to foster the continuous employment of
certain key management personnel. In this connection, the Board of Directors
of the Company (the "Board") recognizes that, as is the case with many publicly
held corporations, the possibility of a Change in Control of the Company, as
hereafter defined, may exist and that such possibility, and the uncertainty and
questions which it may raise, may result in the departure or distraction of
management personnel to the detriment of the Company and its shareholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of
the Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from
the possibility of a Change in Control, although no such change is now
contemplated or foreseen.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement to so remain in the employ of the Company, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement (the "Agreement") in the event your employment with the
Company is terminated subsequent to a Change in Control under the circumstances
described below. Notwithstanding the foregoing, absent a Change in Control,
this agreement does not constitute a commitment to employ you other than as
employed at will.
<PAGE> 2
1. Term of Agreement. This Agreement shall commence
on August 10, 1994 and shall continue in effect through August 9, 1997;
provided, however, that commencing on August 10, 1997 and each August 10
thereafter the term of this Agreement shall automatically be extended for one
additional year unless, no later than August 9 of the preceding year, the
Company shall have given written notice that it does not wish to extend this
Agreement; and provided, further, that, notwithstanding any such notice, if a
Change in Control shall have occurred during the term of this Agreement, this
Agreement shall continue in effect for a period of thirty-six (36) months
beyond the month in which such Change in Control shall have occurred.
2. Change in Control. No benefits shall be payable hereunder unless
there shall have been a Change in Control, as set forth below, and your
employment by the Company shall thereafter have been terminated in accordance
with section 3, below. For purposes of this Agreement, a "Change in Control"
shall be deemed to occur on the date: (a) any person or persons acting together
which would constitute a "group" for purposes of Section 13(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") (other than the Company,
any subsidiary, members of the Olsten family (defined as Miriam Olsten, any
lineal descendent of William and Miriam Olsten, any spouse of any such lineal
descendent, a trust established principally for the benefit of any of the
foregoing) and their "permitted transferees" as defined in the Company's
Restated Certificate of Incorporation) shall beneficially own (as defined in
Rule 13d-3 of the Exchange Act), directly or indirectly, at least 25% of the
total voting power of all classes of capital stock of the Company voting as a
class; (b) either (i) Current Directors (as herein defined) shall cease for any
reason to constitute at least a majority of the members of the Board (for these
purposes, a "Current Director" shall mean any member of the Board as of the
date hereof and any successor of a Current Director whose election, or
nomination for election by the Company's shareholders, was approved by a
majority of the Current Directors then on the Board) or (ii) at any meeting of
shareholders of the Company called for the purpose of electing directors a
majority of the persons nominated by the Board for election as directors shall
fail to be elected; (c) the shareholders of the Company approve an agreement
providing for the merger or consolidation of the Company (A) in which the
Company is not the continuing or surviving corporation (other than a
consolidation or merger with a wholly-owned subsidiary of the Company in which
each share of Common Stock and Class B Stock outstanding immediately prior to
the effectiveness thereof is changed into or exchanged for a share of stock
having the same voting rights in the same percentages as such share had
immediately prior to the effectiveness thereof) or (B) pursuant to which the
Common Stock and Class B Stock are converted into cash, securities or other
property, except a consolidation or merger of the Company under subsection
(c)(A) or (B), above, in which the holders of the Common Stock and Class B
Stock immediately prior to the consolidation or merger shall beneficially own
(as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, at
least a majority of the total voting power of all classes of capital stock of
the continuing or surviving corporation immediately after such consolidation or
merger or in which the Board immediately prior to the merger or consolidation
would, immediately after the merger or consolidation, constitute a majority of
the board of directors of the continuing or surviving corporation; or (d) the
shareholders of the Company approve an agreement (or agreements) providing for
the sale or other disposition (in one transaction or a series of transactions)
of all or substantially all of the assets of the Company, except an asset sale
for voting stock in which the holders of the Common Stock and Class B Stock
immediately prior to the asset sale shall beneficially own (as defined in sale
13d-3 of the Exchange Act), directly or indirectly, a majority of the total
voting power of all classes of capital stock of the continuing or surviving
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<PAGE> 3
corporation immediately after such asset sale or in which the Board immediately
prior to such asset sale would, immediately after such asset sale, constitute a
majority of the board of the continuing or surviving corporation.
Notwithstanding anything contained in subsections 2(b)(i) and (ii), above, if
the Olsten family, at a meeting of shareholders of the Company called for such
purpose, votes to change any or all of the Current Directors for any reason
other than because of any fact or circumstance which would otherwise be deemed
to be a Change in Control under subsections 2(a), (c) or (d), above, a Change
in Control for such limited purpose will not be deemed to have occurred
hereunder and any directors so elected shall be Current Directors for on-going
purposes under section 2(b)(i), above.
3. Termination Following Change in Control. If any of the events
described in section 2 hereof constituting a Change in Control shall have
occurred, you shall be entitled to the benefits provided in section 4 hereof
upon the subsequent termination of your employment during the term of this
Agreement unless such termination is: (a) because of your death, Retirement, or
Disability; (b) by the Company for Cause; or (c) by you other than for Good
Reason, as hereafter defined.
(i) Disability; Retirement. If, (A) as a result of your
incapacity due to physical or mental illness, you shall have been absent from
your duties with the Company on a full-time basis for six (6) consecutive
months, and (B) within thirty (30) days after written Notice of Termination is
given you shall not have returned to the full time performance of your duties,
and (C) you qualify for disability payments under the Company's long-term
disability plan, your employment may be terminated for "Disability".
Termination by the Company or you of your employment based on
"Retirement" shall mean termination in accordance with any retirement
arrangement established with your consent with respect to you.
(ii) Cause. Termination by the Company of your employment for
"Cause" shall mean termination upon: (A) the willful and continued failure by
you to substantially perform your duties with the Company, after a written
demand for substantial performance is delivered to you by the Board which
specifically identifies the manner in which the Board believes that you have
not substantially performed your duties; or (B) the willful engaging by you in
conduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise. For purposes of this subsection, no act, or failure
to act, on your part shall be considered "willful" unless done, or omitted to
be done, by you subsequent to a Change in Control and not in good faith and
without reasonable belief that your action or omission was in the best interest
of the Company. Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not less
than a majority of the entire membership of the Board at a meeting of the Board
called and held for that purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board you engaged in the
prohibited conduct set forth above in clauses (A) or (B) of the first sentence
of this subsection and specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean any of the following undertaken without your express written consent
and not corrected by the Company within two (2) business days of receipt of
written notice from you:
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<PAGE> 4
(A) the assignment to you of any material duties inconsistent
with your status as a senior executive officer of the Company or a
substantial adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to the Change in
Control;
(B) a reduction by the Company in your annual base salary as in
effect on the date hereof or as the same may be increased from time to
time, or the failure to grant you salary increases and bonuses consistent
with the Company's practices prior to the Change in Control, except for
non-performance of your duties as duly documented and substantiated or
from across-the-board failure to give salary increases and bonuses,
similarly affecting all executives of the Company and all executives of
any "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 25% or
more of the combined voting power of the Company's then outstanding
securities;
(C) the knowing failure by the Company to pay to you any
portion of your current compensation, or to pay to you any portion of an
installment of deferred compensation under any deferred compensation
program of the Company, within seven (7) days of the day any such
compensation is due;
(D) the relocation of your principal office to a location
outside a 50 mile radius from its location on the day of the Change in
Control, or the Company's requiring you to be based anywhere outside such
50 mile radius except for required travel on the Company's business to an
extent substantially consistent with your present business travel
patterns;
(E) the failure by the Company, other than because of a change
in enabling legislation which would make the continuation of such a plan
in its present form materially adverse to the Company or because the
Company has had two or more consecutive years of operating loses, to
continue in effect any compensation plan in which you participate,
including but not limited to the Company's stock option plan, bonus plan,
incentive restricted stock plan, and supplemental executive retirement
plan unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such plan in
connection with the Change in Control, or the failure by the Company to
continue your participation therein on a basis not materially less
favorable, both in terms of the amount of benefits provided and the level
of your participation relative to other participants, as existed at the
time of the Change in Control;
(F) the failure by the Company, other than because of a change
in enabling legislation prohibiting such a plan or because the Company
has had two or more consecutive years of operating loses, to continue you
as a participant with benefits similar substantially in the aggregate to
those enjoyed by you in all compensation, benefit and insurance plans in
which you were participating at the time of a Change in Control, the
taking of any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive you of any material
fringe benefit enjoyed by you at the time of the Change in Control, or
the failure by the Company to provide you with the number of paid
vacation days to which you were entitled at the time of the Change in
Control; or
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<PAGE> 5
(G) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in section 5 hereof.
Your right to terminate your employment pursuant to this subsection
3(iii) shall not be affected by your incapacity due to physical or mental
illness.
(iv) Notice of Termination. Any purported termination by the
Company or by you shall be communicated by written Notice of Termination to the
other party hereto in accordance with section 6 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of your employment under the provision so indicated. No
purported termination by the Company shall be effective if such purported
termination is not in compliance with the provisions of this subsection (iv),
unless such noncompliance has been agreed to by you in writing.
(v) Date of Termination, Etc. "Date of Termination" shall mean
(A) if your employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that you shall not have returned to
the performance of your duties on a full-time basis during such thirty (30) day
period), and (B) if your employment is terminated pursuant to subsection 3(ii)
or (iii) above or for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination pursuant to subsection 3(ii)
above shall not be less than thirty (30) days, and in the case of a termination
pursuant to subsection 3(iii) above shall not be less than fifteen (15) days or
more than sixty (60) days from the date such Notice of Termination is given);
provided that if prior to the earlier of the Date of Termination determined in
accordance with Clause (A) or (B) above or the lapse of thirty (30) days after
any Notice of Termination is given, the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally resolved, either by mutual written agreement of the parties, by a
binding arbitration award, or by a final judgment, order or decree of a court
of competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected); and provided further that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence. Notwithstanding the pendency of any
such dispute, the Company will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue you as a participant in all compensation,
benefit and insurance plans in which you were participating when the notice
giving rise to the dispute was given, until the dispute is finally resolved in
accordance with this section. Amounts paid under this section are in addition
to all other amounts due under this Agreement and shall not be offset against
or reduce any other amounts due under this Agreement, subject to the limitation
of subsection 4(iv)(c).
4. Compensation Upon Termination or During Disability.
(i) Prior to the time this Agreement is terminated pursuant to
subsection 3(i), you shall continue to receive your full base salary at the
rate then in effect and all other compensation payable in respect of such
period, together with all other amounts to which you are entitled under any
compensation or other benefit plan of the Company, at the time such payments
- 5 -
<PAGE> 6
are due. Thereafter, your benefits shall be determined in accordance with the
Company's insurance and disability programs then in effect.
(ii) If your employment shall be terminated for Cause or by you
other than for Good Reason, Disability, death or Retirement, the Company shall
pay you your full base salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are entitled under
any compensation, benefit or insurance plan of the Company, at the time such
payments are due, and the Company shall have no further obligations to you
under this Agreement.
(iii) If your employment shall be terminated by the Company or by
you for Retirement, or by reason of your death, your benefits shall be payable
through the Date of Termination and shall be determined in accordance with the
Company's insurance programs then in effect.
(iv) If your employment by the Company shall be terminated (a) by
the Company other than for Cause, Retirement or Disability or (b) by you for
Good Reason within thirty-six (36) months after the occurrence of a Change in
Control, then you shall be entitled to the benefits (the "Severance Benefits")
provided below:
(A) Through the Date of Termination, the Company shall pay you
your full base salary at your then current annual rate of pay, and
continue the benefits in effect at the time Notice of Termination is
given;
(B) In lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance
to you a lump sum payment (the "Severance Payment") equal to 2.99 times
the average of the annual compensation which was payable to you by the
Company (or any corporation affiliated with the Company ("Affiliate")
within the meaning of Section 1504 of the Internal Revenue Code of 1954,
as amended (the "Code")) and includible by you in your gross income for
Federal income tax purposes for the five (5) calendar years or your years
of employment with the Company, whichever is less, preceding the calendar
year in which a Change in Control occurred. Compensation payable to you
by the Company (or an Affiliate) shall include every type and form of
compensation includible in your gross income in respect of your
employment by the Company (or an Affiliate), excluding compensation
income recognized as a result of your exercise of stock options or sale
of the stock so acquired, except to the extent otherwise provided in
Section 280G(d) of the Code. You shall immediately become 100% vested in
all benefit plans of the Company (or an Affiliate) in which you were a
participant immediately prior to the Date of Termination;
(C) The Severance Payment shall be in lieu of any other
severance payment offered by the Company and applicable to you;
(D) In the event that the Severance Payment (and any payments
payable under any other plan, program, or arrangement or agreement
maintained by the Company or an affiliate) would constitute an "excess
parachute payment" (within the meaning of Section 280G of the Code), the
Severance Payment will be reduced (by the minimum possible amount) until
the total "parachute payments" (within the meaning of Section 280G of the
Code) equal $1.00 less than 2.99 times your "base amount" (within the
meaning of Section 280G of the Code); provided, however, that no such
- 6 -
<PAGE> 7
reduction shall be made if the net after-tax benefit (after taking into
account federal, state and local income and excise taxes) to which you
otherwise would be entitled without such reduction would be greater than
the net after-tax benefit (after taking into account federal, state and
local income and excise taxes) to you resulting from the receipt of such
payments with such reduction. For purposes of this calculation, it shall
be assumed that your tax rate is the maximum marginal federal, state and
local income tax rate on earned income, with such maximum federal rate to
be computed with regard to Section 1(g) of the Code, if applicable. In
the event that you and the Company are unable to agree as to the amount
of the reduction described above, if any, you shall select a law firm or
accounting firm from among those regularly consulted by the Company ("Tax
Counsel") and such Tax Counsel shall, at the Company's expense, determine
the amount of such reduction and such determination shall be final and
binding upon you and the Company.
(E) The Company shall also pay to you all legal fees and
expenses incurred by you as a result of such termination (including and
limited to all fees and expenses, if any, incurred in successfully
contesting or disputing any such termination or in seeking to obtain or
enforce any right or benefit provided by this Agreement or any other
right or benefit enjoyed by you during your employment with the Company),
such payments to be made within five (5) days after submission by you to
the Company of a request for payment with such evidence as the Company
may reasonably require;
(F) The payments provided for in subsection 4(iv)(B), above,
shall be made not later than the fifth day following the Date of
Termination; provided, however, that if the amounts of such payments, and
the limitation on such payments set forth in subsection 4(iv)(C), above,
cannot be finally determined on or before such day, the Company shall pay
you on such day an estimate, as determined in good faith by the Company,
of the minimum amount of such payments and shall pay the remainder of
such payments (together with interest at the applicable federal rate as
defined in Section 1274 of the Code or such other minimum rate which will
not cause imputation of income for its purpose, hereafter referred to as
the "Applicable Rate") as soon as the amount thereof can be determined
but in no event later than the thirtieth day after the Date of
Termination. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such excess
shall constitute a loan by the Company to you, payable on the fifth day
after demand by the Company (together with interest at the Applicable
Rate).
(G) If your employment shall be terminated (A) by the Company
other than for Cause, Retirement or Disability or (B) by you for Good
Reason, then for a thirty-six (36) month period after the Date of
Termination, the Company shall, at your request made within 20 days after
the Date of Termination, arrange to provide you with health, life,
disability, and/or accident benefits substantially similar to those which
you were receiving immediately prior to the Notice of Termination unless
and until you receive such benefits from a subsequent employer. The
determination of whether any of such benefits would result in a reduction
of the Severance Payment and, if so, by how much shall be made, at the
Company's expense, by Tax Counsel and transmitted to you within ten (10)
days after the Date of Termination.
- 7 -
<PAGE> 8
(H) You shall not be required to mitigate the amount of any
payment provided for in this section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in
this section 4 be reduced by any compensation earned by you as the result
of employment by another employer or by retirement benefits after the
Date of Termination, or otherwise.
(I) In addition to all other amounts payable to you under this
section 4, you shall be entitled to receive all benefits payable to you
under the Company's profit sharing plan, savings or 401(k) plan, stock
option plan, restricted stock plan, bonus plan and any other plan or
agreement relating to your employment benefits with the Company.
5. Successors; Binding Agreement. (i) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Company in the same amount and on the same terms as you would be entitled
hereunder if you terminated your employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees
to perform this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or if there is no such designee, to your
estate.
6. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Board
with a copy to the Secretary of the Company, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by
the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
- 8 -
<PAGE> 9
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Delaware. All references to sections of
the Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law.
8. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. Survivability. Your right to any payments hereunder shall survive
the termination of this Agreement.
11. Complete Agreement. This letter represents our entire
understanding with you on the matters covered herein and supersedes all prior
negotiations, writings and understandings.
If this letter correctly sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
THE OLSTEN CORPORATION
By:________________________________________
William P. Costantini
Sr. Vice President
Agreed to this 10th
day of August, 1994
By:________________________________________
EXHIBIT 21
<TABLE>
SUBSIDIARIES OF OLSTEN CORPORATION
----------------------------------
<CAPTION>
JURISDICTION
OF
SUBSIDIARY INCORPORATION BUSINESS NAME
<S> <C> <C>
The Accounts Team Limited England/Wales The Accountants Team
All Medicare Home Health Agency, Inc. Florida Olsten Kimberly QualityCare
American Home Health Care, Inc. Georgia Olsten Kimberly QualityCare
American Service Bureau, Inc. Illinois ASB Meditest
Archangel Executive Appointments Limited England/Wales
Bodimetric Health Services, Inc. Illinois
Bodimetric Profiles, Inc. Illinois
Broad Pines Development Corp. Delaware
Dirka Co. Delaware
Gold Coast South Home Health Agency, Inc. Florida
Gulf Coast Home Health Services Central, Inc. Florida
Gulf Coast Home Health Services East, Inc. Florida
Gulf Coast Home Health Services North, Inc. Florida
Gulf Coast Home Health Services of Florida, Inc. Florida
Gulf Coast Home Health Services South, Inc. Florida
Gulf Coast Home Health Services Southwest, Inc. Florida
Gulf Coast Home Health Services West, Inc. Florida
Health Care Services Olsten Limited Delaware
HHC Management, Inc. New York Olsten Kimberly QualityCare
Kimberly California Corporation California Olsten Kimberly QualityCare
Kimberly Home Health Care, Inc. Missouri Olsten Kimberly QualityCare
Kimberly Quality Care, Inc. Delaware Olsten Kimberly QualityCare
Kimberly Quality Care Infusion Therapy
Services, Inc. California Olsten Kimberly QualityCare
Kimberly Services, Inc. Missouri Olsten Kimberly QualityCare
Kimberly Nurses/Meditest, Inc. New Jersey Olsten Kimberly QualityCare
Olsten Kimberly QualityCare Foundation, Inc. Florida
Lifetime Corporation (UK) Limited England/Wales
Meditest Canada, Inc. Canada
New York Healthcare Services, Inc. New York Olsten Kimberly QualityCare
Office Angels Limited England/Wales
Office Angels (Properties) Limited England/Wales
Office Angels (Recruitment) Limited England/Wales
Office Angels (U.K.) Limited England/Wales
Office Legals Limited England/Wales
OLS Holdings, Inc. New York
Olsten Certified Healthcare Corp. Delaware Olsten Kimberly QualityCare
Olsten de Mexico, S.A. de C.V. Mexico
Olsten Flying Nurses Corp. Delaware
Olsten Home Healthcare, Inc. Delaware Olsten Kimberly QualityCare
Olsten Kimberly QualityCare, Inc. Delaware Olsten Kimberly QualityCare
Olsten Melville Corp. Delaware
Olsten of Westchester, Inc. New York Covertemp
Olsten Service Corp. Delaware
Olsten Services Limited Ontario
Olsten Services of New York, Inc. New York Olsten Kimberly QualityCare
Olsten Staffing Services, Inc. Texas
Olsten Staff, S.A. de C.V. Mexico
QC Medi - California, Inc. California Olsten Kimberly QualityCare
QC Medi - Illinois, Inc. Illinois Olsten Kimberly QualityCare
QC Medi - Louisiana, Inc. Louisiana Olsten Kimberly QualityCare
QC Medi - Mass., Inc. Massachusetts Olsten Kimberly QualityCare
QC Medi of Michigan, Inc. Michigan Olsten Kimberly QualityCare
QC Medi - Tenn., Inc. Tennessee Olsten Kimberly QualityCare
QC Medi - New York, Inc. New York Olsten Kimberly QualityCare
QC Medi - Texas, Inc. Texas Olsten Kimberly QualityCare
Quality Care Escort Services, Inc. New York
Quality Care Health Services, Inc. Washington Olsten Kimberly QualityCare
Quality Care Home Health, Inc. New York Olsten Kimberly QualityCare
Quality Care, Inc. New York Olsten Kimberly QualityCare
- i -
Quality Care of Connecticut, Inc. Connecticut Olsten Kimberly QualityCare
Quality Care of Kentucky, Inc. Kentucky Olsten Kimberly QualityCare
Quality Care Service Corp. New York Olsten Kimberly QualityCare
Quality Care - USA., Inc. New York Olsten Kimberly QualityCare
Quality Managed Care, Inc. Delaware Olsten Kimberly QualityCare
Rainier Home Health Care, Inc. Washington Olsten Kimberly QualityCare
Salus Services, Inc. Delaware Olsten Kimberly QualityCare
Sterling Venture, Inc. Massachusetts
Superior Care, Inc. Massachusetts
UHH Home Services Corporation New York Olsten Kimberly QualityCare
</TABLE>
- ii -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Olsten
Corporation and Subsidiaries Consolidated Balance Sheets at January 1, 1995
(unaudited) and Olsten Corporation and Subsidiaries Consolidated Statements
of Income for the year ended January 1, 1995 (unaudited) and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-01-1995
<PERIOD-END> JAN-01-1995
<CASH> 68,338
<SECURITIES> 0
<RECEIVABLES> 333,295
<ALLOWANCES> 13,682
<INVENTORY> 0
<CURRENT-ASSETS> 439,526
<PP&E> 124,600
<DEPRECIATION> 52,057
<TOTAL-ASSETS> 725,958
<CURRENT-LIABILITIES> 165,056
<BONDS> 0
<COMMON> 4,153
0
0
<OTHER-SE> 381,850
<TOTAL-LIABILITY-AND-EQUITY> 725,958
<SALES> 2,260,331
<TOTAL-REVENUES> 2,260,331
<CGS> 1,588,148
<TOTAL-COSTS> 1,588,148
<OTHER-EXPENSES> 546,178
<LOSS-PROVISION> 414
<INTEREST-EXPENSE> 5,106
<INCOME-PRETAX> 120,899
<INCOME-TAX> 50,778
<INCOME-CONTINUING> 70,121
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,121
<EPS-PRIMARY> $1.67
<EPS-DILUTED> $1.61
</TABLE>
