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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 25, 1999
DIGITAL SOLUTIONS, INC.
(Exact name of Registrant as specified in charter)
New Jersey 0-18492 22-1899798
(State or other jurisdic- (Commission (IRS Employer
tion of incorporation) File Number) Identification No.)
300 Atrium Drive, Somerset, N.J. 08873
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (732) 748-1700
(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective as of January 25, 1999, Digital Solutions, Inc.
("Digital or the "Company") consummated its acquisition of the TeamStaff
Companies. As a result of the acquisition, the 10 TeamStaff Companies became
wholly-owned subsidiaries of Digital.
The TeamStaff Companies are comprised of the following corporations:
TeamStaff Holding Company, Inc. ("THC"), The TeamStaff Companies, Inc. ("TSC"),
Employer Support Services, Inc, ("ESS"), TeamStaff U.S.A., Inc. ("TUSA"),
TeamStaff, Inc. ("TSI"), TeamStaff II, Inc. ("TSI II"), TeamStaff III, Inc.
("TSI III"), TeamStaff IV, Inc. ("TSIV"), TeamStaff V, Inc. ("TSV") and
TeamStaff Insurance Service, Inc. ("TIS"). Each of the TeamStaff Companies are
Florida corporations with its principal address at 1211 N. Westshore Blvd.,
Suite 806, Tampa, Florida 33607. TeamStaff has also has offices in
Raleigh/Durham, NC; Dallas, TX; Atlanta, GA; and Jacksonville, FL.
As a result of the acquisition, the combined companies' PEO business
will be based in Tampa. Mr. Kirk Scoggins, president and a principal shareholder
of TeamStaff, has been appointed President of the combined company's
professional employment organization ("PEO") division and joined the Board of
Directors of Digital effective as of January 25, 1999. Effective on the closing,
Digital entered into a two year employment agreement with Mr. Scoggins. In
addition to the foregoing, the Company has agreed to forgive approximately
$135,000 owed by Mr. Scoggins to the TeamStaff Entities provided Mr. Scoggins is
employed by the Company for the next two years.
The combined companies will have revenues of approximately $240 million
and approximately 11,000 worksite employees, ranking the combined company among
the top 15 PEOs in the United States. PEOs provide outsourcing of human
resource, payroll, benefits, and workmen's compensation protection to small and
medium sized businesses. The TeamStaff Companies serve a variety of industries,
including golf course management, resort property management, manufacturing,
distribution and service industries.
Pursuant to the terms of the acquisition, the Company issued 8,233,334
million shares of its common stock in exchange for all of the common stock of
TeamStaff and approximately $3.1 million in cash for all the preferred stock
(and accrued dividends) and for payment of outstanding debt owed by the
TeamStaff Companies to its shareholders. Digital also paid $750,000 for certain
legal, accounting investment banking expenses of the former owners of the
TeamStaff Companies. Additionally, Digital issued approximately 311,000 shares
of common stock to its investment banking firm for services rendered in
connection with the acquisition.
Pursuant to the terms of the acquisition agreements, the former owners
of the TeamStaff Companies agreed to indemnify Digital, subject an initial
"basket' of $100,000, for claims of up to approximately $2,000,000 for various
types of claims for breaches of representations and warranties. The former
owners placed 1,471,800 shares of Common Stock into escrow in order
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to provide limited security for claims of indemnification brought by Digital for
breaches of representations or warranties by the TeamStaff Companies.
In addition, pursuant to the acquisition agreements, the former owners
of the TeamStaff Companies have agreed to vote all shares of Digital owned by
them during the two year period following the acquisition, in favor of
management's nominees to the Board of Directors at all special or annual
meetings of Digital's shareholders.
The shares issued to former TeamStaff Companies' owners are "restricted
shares" under the Securities Act of 1933, as amended (the "Act"). Pursuant to
the terms of the acquisition agreements entered into between the Company and the
former owners, the Company has agreed to use its best efforts to have declared
effective by the SEC, on the first anniversary of the closing, a registration
statement under the Act covering the resale by the former owners of one-third of
the shares of the Company's Common Stock issued to the former owners. In
addition, the Company has agreed to use its best efforts to have registration
statements for one third of the shares declared effective by the SEC on each of
the second and third anniversary dates of the closing.
Digital received an increase in its present lending facility with
Finova Capital Corporation in order to fund the acquisition and to increase its
funding generally. The facility is comprised of a three-year term loan, with a
five-year amortization and balloon payment at the end of three years, in the
amount of $2.5 million; a one-year bridge loan in the amount of $750,000; and
an increase in its revolving line of credit from $2 million to $2.5 million.
The term loan bears an interest rate of prime plus 3 percent; the bridge loan
bears an interest rate of 12 percent; and the revolving loan bears an interest
rate of prime plus 1 percent. In addition, the Company will incur annual
"success" fee payments of $200,000, $225,000 and $250,000, respectively, on the
anniversary date of the loan facility.
At a Special Meeting of Shareholders of Digital Solutions held in
December 1998, the transaction was approved by holders of approximately 60
percent of Digital's common stock, representing 91 percent of the shares voted
at the Special Meeting.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS.
(a)(b) Financial Statements of Businesses Acquired and Pro Forma Financial
Information
The financial statements of the TeamStaff Companies and the pro forma
financial information required in accordance with Form 8K will be filed within
60 days of the filing of this Form 8K.
(c) Exhibits. The exhibits designated with an asterisk (*) are filed herewith.
All other exhibits have been previously filed with the Commission and, pursuant
to 17 C.F.R. Secs. 20l.24 and 240.12b-32, are incorporated by reference to the
document referenced in brackets following the descriptions of such exhibits.
3. Plan and Agreement of Merger and Reorganization dated as of
October 29, 1998 among the Company, the Merger Corporations,
the TeamStaff Entities and certain individuals and trusts as
shareholders of the TeamStaff Entities (previously filed as
Exhibit A to Proxy Statement of Digital Solutions, Inc. dated
November 12, 1998).
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3.1* Amendment No. 1 dated as of January 21 , 1999 to Plan and
Agreement of Merger and Reorganization among Digital
Solutions, Inc., DGAC I, Inc., DGAC II, Inc., DGAC III, Inc.,
DGAC IV, Inc., DGAC VI, Inc., DGAC VII, Inc., DGAC VIII, Inc.,
DGAC IX, Inc., DGAC X, Inc. and TeamStaff, Inc., TeamStaff II,
Inc., TeamStaff III, Inc., TeamStaff IV, Inc., The TeamStaff
Companies, Inc., TeamStaff Holding Company, Inc., Employer
Support Services, Inc., TeamStaff U.S.A., Inc., Teamstaff
Insurance Services, Inc., and Warren M. Cason, Dorothy C.
Cason, Kirk A. Scoggins, Melissa C. Scoggins, as Trustee of
the Kirk Allan Scoggins 1997 Three Year Grantor Retained
Annuity Trust, dated 7/1/97, Warren M. Cason, Jr., as Trustee
of the Dorothy C. Cason 1997 Three Year Grantor Retained
Annuity Trust, dated 7/1/97.
9.* Form of Voting Agreement by and among Digital Solutions, Inc.
Warren M. Cason, Dorothy C. Cason, Kirk A. Scoggins, Melissa
C. Scoggins, as Trustee of the Kirk Allan Scoggins 1997 Three
Year Grantor Retained Annuity Trust, dated 7/1/97, Warren M.
Cason, Jr., as Trustee of the Dorothy C. Cason 1997 Three Year
Grantor Retained Annuity Trust, dated 7/1/97
10.1* Form of Employment Agreement between Digital Solutions, Inc.
and Kirk Scoggins.
10.2* Form of Registration Rights Agreement by and among Digital
Solutions, Inc. and Warren M. Cason, Dorothy C. Cason, Kirk A.
Scoggins, Melissa C. Scoggins, as Trustee of the Kirk Allan
Scoggins 1997 Three Year Grantor Retained Annuity Trust, dated
7/1/97, Warren M. Cason, Jr., as Trustee of the Dorothy C.
Cason 1997 Three Year Grantor Retained Annuity Trust, dated
7/1/97.
10.3* Amended and Restated Loan and Security Agreement among
Digital Solutions, Inc. and its Subsidiaries as Co-Borrowers
and Finova Capital Corporation dated January 25, 1999.
19.4* Amended and Restated Secured Promissory Note A dated January
25, 1999 in the principal amount of $2,166,664 psysble to
Finova Capital Corporation.
10.5* Secured Promissory Note dated January 25, 1999 in the
principal amount of $2,500,000 payable to Finova Capital
Corporation.
10.6* Secured Promissory Note C dated January 25, 1999 in the
principal amount of $75,000 payable to Finova Capital
Corporation.
10.7* Amended and Restated Schedule to Loan and Security Agreement
dated January 25, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
Dated: February 8, 1999 DIGITAL SOLUTIONS, INC.
(Registrant)
By /s/ Donald T. Kelly
----------------------
Donald T. Kelly
Chief Financial Officer
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EXHIBIT 3.1
AMENDMENT NO. 1 TO
PLAN AND AGREEMENT
OF
MERGER AND REORGANIZATION
AMONG
DIGITAL SOLUTIONS, INC.,
DGAC I, INC., DGAC II, INC., DGAC III, INC., DGAC IV, INC., DGAC VI, INC.,
DGAC VII, INC., DGAC VIII, INC., DGAC IX, INC., DGAC X, INC.
AND
TEAMSTAFF, INC.,
TEAMSTAFF II, INC.,
TEAMSTAFF III, INC.,
TEAMSTAFF IV, INC.,
THE TEAMSTAFF COMPANIES, INC.,
TEAMSTAFF HOLDING COMPANY, INC.,
EMPLOYER SUPPORT SERVICES, INC.,
TEAMSTAFF U.S.A., INC.,
TEAMSTAFF INSURANCE SERVICES, INC.,
AND
WARREN M. CASON,
DOROTHY C. CASON,
KIRK A. SCOGGINS,
MELISSA C. SCOGGINS, AS TRUSTEE OF THE
KIRK ALLAN SCOGGINS 1997 THREE YEAR
GRANTOR RETAINED ANNUITY TRUST, DATED 7/1/97,
WARREN M. CASON, JR., AS TRUSTEE OF THE
DOROTHY C. CASON 1997 THREE YEAR
GRANTOR RETAINED ANNUITY TRUST, DATED 7/1/97,
Dated as of January 21, 1999
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AMENDMENT NO. 1 TO PLAN AND AGREEMENT OF
MERGER AND REORGANIZATION
This Amendment No. 1 dated as of January 21, 1999 is entered into by and
among Digital Solutions, Inc., a New Jersey corporation with its principal
address at 300 Atrium Drive, Somerset, New Jersey 08873 ("Digital"), DGAC I,
Inc. ("DGACI"), DGAC II, Inc., ("DGACII"), DGAC III, Inc., ("DGACIII"), DGAC IV,
Inc., ("DGACIV"), DGAC VI, Inc., ("DGACVI"), DGAC VII, Inc., ("DGACVII"), DGAC
VIII, Inc., ("DGACVIII"), DGAC IX, Inc., ("DGACIX"), DGAC X, Inc., ("DGACX"),
each a Florida corporation and a direct wholly-owned subsidiary of Digital with
its principal address at 300 Atrium Drive, Somerset, New Jersey 08873
(collectively, DGACI, DGACII, DGACIII, DGACIV, DGACVI, DGACVII, DGACVIII,
DGACIX, DGACX are referred to as the "Merger Corporations"), TeamStaff Holding
Company, Inc. ("THC"), The TeamStaff Companies, Inc. ("TSC"), Employer Support
Services, Inc. ("ESS"), TeamStaff U.S.A., Inc. ("TUSA"), TeamStaff, Inc.
("TSI"), TeamStaff II, Inc. ("TSI II"), TeamStaff III, Inc. ("TSI III"),
TeamStaff IV, Inc. ("TSIV") and TeamStaff Insurance Services, Inc. ("TIS"), each
a Florida corporation with its principal address at 1211 N. Westshore Blvd.,
Suite 806, Tampa, Florida 33607 (collectively, THC, TSC, ESS, TUSA, TSI, TSII,
TSIII and TSIV are referred to as the ("TeamStaff Entities"), Warren M. Cason
("WC"), Dorothy C. Cason ("DC"), Kirk A. Scoggins ("KS"), Melissa C. Scoggins,
as trustee of the Kirk Allan Scoggins 1997 Three Year Grantor Retained Annuity
Trust, dated July 1, 1997 (the "WC Trust") and Warren M. Cason, Jr., as trustee
of the Dorothy C. Cason 1997 Three Year Grantor Retained Annuity Trust, dated
July 1, 1997 (the "DC Trust") WC, DC, KS, the KS Trust and the DC Trust are
collectively referred to in this Agreement as the "Seller"). Digital, the Merger
Corporations, the TeamStaff Entities and the Sellers are referred to as the
"Parties"
WHEREAS, the Parties have entered into certain Plan and Agreement of Merger
and Reorganization (the "Original Agreement") dated as of October 29, 1998;
WHEREAS, the Parties have determined it to be in their best interests to
resolve certain matters related to the Original Agreement and to amend certain
terms and conditions contained therein.
NOW THEREFORE, in consideration of the foregoing, the Parties hereby agree
as follows:
1. All terms not otherwise defined herein shall have the meanings
ascribed to such terms in the Original Agreement.
2. The definition of Escrow Market price is hereby amended in its
entirety to read as follows:
"Escrow Market Price" means $1.34 per Digital Share.
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3. Section 2(b) is hereby amended in its entirety to read as follows:
(b) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall be deemed to have occurred on January 25,
1999 at the offices of Goldstein & DiGioia LLP at 369 Lexington Avenue in
New York, New York (the "Closing Date"). All documents, certificates and
agreements delivered by the Parties in connection with the Closing shall be
deemed, notwithstanding any other date stated in such documents,
certificates or agreements, to be dated as of the Closing Date.
4. Sections 2(d)(ii) and (iii) shall be deemed amended in their entirety to
read as follows:
(d) Effect of Merger.
(ii) Articles of Incorporation. The Articles of Incorporation of the
respective TeamStaff Entities in effect at the Effective Time shall remain
the Articles of Incorporation of the Surviving Corporations without any
modification or amendment in the Mergers.
(iii) Bylaws. The Bylaws of the respective TeamStaff Entities in effect
at the Effective Time shall remain the Bylaws of the Surviving Corporations
without any modification or amendment in the Mergers.
5. Section 7(a)(xi) is hereby amended in its entirety to read as follows:
(xi) Digital shall have received from the Sellers three separate duly
executed escrow agreements (collectively the "Escrow Agreements"),
substantially in the form of Exhibit H annexed hereto, together with stock
certificates and stock powers properly executed, to effect the following:
(i) in order to provide security for payment by the Sellers of any Adverse
Consequences for which Digital is entitled to indemnification for breach of
any representation or warranty other than as set forth in clauses (ii) and
(iii) below, such number of Digital Shares received by the Sellers as
Merger Consideration as shall equal the quotient determined by dividing
$525,000 by the Escrow Market Price of the Digital Shares; (ii) in order to
provide security for payment by the Sellers of any Adverse Consequences for
which Digital is entitled to indemnification with respect to amounts in
excess of the reserve for USEC as set forth on the Financial Statements of
the TeamStaff Entities such number of Digital Shares received by the
Sellers as Merger Consideration as shall equal the quotient determined by
dividing $1,222,213 by the Escrow Market Price of the Digital Shares;
provided, however, that the initial $50,000 of legal fees incurred by
Digital and the TeamStaff Entities after the Closing for settlement of the
USEC litigation shall not be deemed Adverse Consequences; and (iii) in
order to provide security for payment by the Sellers of any Adverse
Consequences with respect to liability emanating from the CIGNA medical
insurance policy, such number of Digital Shares received by the Sellers as
Merger Consideration as shall equal the quotient determined by dividing
$225,000 by the Escrow Market Price of the Digital Shares.
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6. Section 8(a) is hereby amended in its entirety to read as follows:
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Sellers contained in Section 4 of
this Agreement shall survive the Closing hereunder (unless Digital had
received from Sellers written notice of any misrepresentation or breach of
warranty prior to the time of Closing and expressly waived in writing such
breach or misrepresentation) and continue in full force and effect for a
period of 18 months from the Closing Date; provided, however,
representations and warranties set forth in Section 4(x) regarding USEC
shall continue in full force and effect until the third anniversary of the
Closing Date.
7. Section 8(b) is hereby amended in its entirety to read as follows:
(b) Indemnification Provisions for Benefit of Digital. In the event
any of the Sellers breaches (or in the event any third party alleges facts
that, if true, would mean any of the Sellers has breached) any of their
representations, warranties, and covenants contained herein, and if there
is an applicable survival period pursuant to Section 8(a) above, provided
that Digital makes a written claim for indemnification against any of the
Sellers pursuant to Section 10(g) below within such survival period, then
each of the Sellers agrees to indemnify Digital from and against the
entirety of any Adverse Consequences Digital may suffer through and after
the date of the claim for indemnification (including any Adverse
Consequences Digital may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of, or
caused by the breach (or the alleged breach); provided, however, that the
Sellers shall not have any obligation to indemnify Digital from and against
any Adverse Consequences caused proximately by the breach of any
representation or warranty of the Sellers contained in Section 4 above
until Digital has suffered Adverse Consequences by reason of all such
breaches (or alleged breaches) in excess of a $100,000 aggregate threshold
(the "Threshold") and such indemnification shall be made by the Sellers
only to the extent of any excess over the Threshold. The maximum Liability
that will be payable to Digital by the Sellers pursuant to this Section
8(b) shall be limited as follows (i) for any Adverse Consequences for which
Digital is entitled to indemnification for the breach of any representation
or warranty other than as set forth in clauses (ii) or (iii) below, the sum
of $525,000; and (ii) for any Adverse Consequences for which Digital is
entitled to indemnification with respect to amounts in excess of the
reserve for USEC as set forth on the Financial Statements of the TeamStaff
Entities, the sum of $1,222,213; provided, however, that the initial
$50,000 of legal fees incurred by Digital and the TeamStaff Entities after
the Closing for settlement of the USEC litigation shall not be deemed
Adverse Consequences; and (iii) for any Adverse Consequences for which
Digital is entitled to indemnification with respect to liability emanating
from the CIGNA medical insurance policy, the sum of $225,000; provided,
however, in the event that a court of competent jurisdiction determines
that the Sellers committed fraud with respect to any representation or
warranty, then Digital shall have the right to indemnification from the
Seller or Sellers who has or have committed
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such fraud for the full amount of any Adverse Consequences suffered by
Digital as a result of such fraud. Any liability incurred by the Sellers
pursuant to the terms of this paragraph 8(b) shall be paid by the Sellers
to Digital in cash within 30 days of written demand therefor by Digital;
provided, that in the event such demand shall be served by Digital within
one year from the Closing, the Sellers may, at the option of Digital, pay
such liability by a note payable to the order of Digital bearing interest
at a rate equal to the prime rate plus 5% per annum, and payable 90 days
after the first anniversary of the Closing.
8. All other terms of the Original Agreement shall remain in full force and
effect.
This Amendment No. 1 may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together will constitute one
and the same instrument.
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment No. 1
as of the date first above written.
DIGITAL SOLUTIONS, INC.
By:
------------------------
Name:
Title
THE TEAMSTAFF COMPANIES, INC.
By:
--------------------------
Kirk A. Scoggins
President
TEAMSTAFF HOLDING COMPANY, INC.
By:
--------------------------
Kirk A. Scoggins
President
EMPLOYER SUPPORT SERVICES, INC.
By:
--------------------------
Kirk A. Scoggins
President
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IN WITNESS WHEREOF, the Parties hereto have executed this Amendment No. 1
as of the date first above written.
TEAMSTAFF, INC.
By:
------------------------------------
Kirk A. Scoggins
President
TEAMSTAFF USA, INC.
By:
------------------------------------
Kirk A. Scoggins
President
TEAMSTAFF II, INC.
By:
------------------------------------
Kirk A. Scoggins
President
TEAMSTAFF III, INC.
By:
------------------------------------
Kirk A. Scoggins
President
TEAMSTAFF IV, INC.
By:
------------------------------------
Kirk A. Scoggins
President
TEAMSTAFF INSURANCE SERVICES, INC.
By:
------------------------------------
Kirk A. Scoggins
President
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IN WITNESS WHEREOF, the Parties hereto have executed this Amendment No. 1
as of the date first above written.
SHAREHOLDERS:
- ----------------------------------
Warren M. Cason, Shareholder
- ----------------------------------
Dorothy C. Cason, Shareholder
- ----------------------------------
Kirk A. Scoggins, Shareholder
- ----------------------------------
Melissa C. Scoggins, as Trustee of the Kirk
Allan Scoggins 1997 Three Year Grantor
Retained Annuity Trust, dated 7/1/97,
Shareholder
- ----------------------------------
Warren M. Cason, Jr., Trustee of the
Dorothy C. Cason 1997 Three Year Grantor
Retained Annuity Trust, dated 7/1/97,
Shareholder
DGAC I, INC. DGAC II, INC.
By: By:
--------------------------- --------------------------
Name: Name:
Title: Title:
DGAC III, INC. DGAC IV, INC.
By: By:
--------------------------- ---------------------------
Name: Name:
Title: Title:
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IN WITNESS WHEREOF, the Parties hereto have executed this Amendment No. 1
as of the date first above written.
DGAC VI, INC.
By: ____________________________
Name:
Title:
DGAC VII, INC. DGAC VIII, INC.
By: ____________________________ By: ____________________________
Name: Name:
Title: Title:
DGAC IX, INC. DGAC X, INC.
By: ____________________________ By: ____________________________
Name: Name:
Title: Title:
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EXHIBIT 9
FORM OF VOTING AGREEMENT
The Board of Directors
Digital Solutions, Inc.
300 Atrium Drive
Somerset, New Jersey 08873
Gentlemen:
Reference is made to that certain Plan and Agreement of Merger and
Reorganization, dated as of October 29, 1998 ("Merger Agreement") by and among
the undersigned, Digital Solutions, Inc. ("Digital"), the Merger Corporations
and the TeamStaff Entities. All terms not defined herein shall have the meanings
ascribed to them in the Merger Agreement.
It is a condition to closing the transactions contemplated by the
Merger Agreement, specifically, pursuant to Sections 2(d)(iv)(B), 7(a)(xviii)
and 7(b)(xiv) of the Merger Agreement, that the undersigned deliver this voting
agreement to Digital. The undersigned acknowledges that he, she or it has
received certain consideration from Digital pursuant to the Merger Agreement and
this voting agreement is coupled with an interest.
The undersigned hereby agrees that for a period of two years from the
date hereof, the undersigned shall vote all Digital Shares beneficially owned by
the undersigned (determined in accordance with Section 13 of the Securities and
Exchange Act of 1934, as amended and any rules promulgated thereunder) in favor
of all management nominees to the Digital Board of Directors at any and all
special or annual meetings of shareholders of Digital and in any written consent
delivered by the undersigned to Digital or any third party. In the event that
any Digital Shares owned by the undersigned are transferred in a private
transaction or by the laws of descent, the shares so transferred shall continue
to be subject to this voting agreement. Notwithstanding the foregoing, this
voting agreement shall not be binding upon Digital Shares that are sold by the
undersigned either pursuant to a registration statement or Rule 144 promulgated
by the SEC.
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The undersigned hereby acknowledges and agrees that the share
certificates owned by the undersigned shall bear a legend as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A VOTING
AGREEMENT IN FAVOR OF DIGITAL SOLUTIONS, INC. A COPY OF THE VOTING
AGREEMENT IS RETAINED AT THE OFFICES OF DIGITAL SOLUTIONS, INC. NO
TRANSFER, PLEDGE OR SALE OF THE SALES SHALL BE ALLOWED EXCEPT IN
ACCORDANCE WITH THE VOTING AGREEMENT. THE VOTING AGREEMENT EXPIRES ON
__________, 2000.
IN WITNESS WHEREOF, the undersigned has duly executed this voting
agreement this 25th day of January, 1999.
-----------------------------
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 25th day of January, 1999, by and between Kirk
Scoggins, residing at 1901 Brookline Avenue, Tampa, Florida 33629 (hereinafter
referred to as the "Employee") and DIGITAL SOLUTIONS, INC., a New Jersey
corporation with principal offices located at 300 Atrium Drive, Somerset, New
Jersey 08873 (hereinafter referred to as the "Company").
W I T N E S S E T H :
WHEREAS, the Company and its subsidiaries are engaged in the business
of providing Human Resource Administrative Services; and
WHEREAS, the Company desires to employ the Employee for the purpose of
securing for the Company the experience, ability and services of the Employee;
and
WHEREAS, the Employee desires to be employed with the Company, pursuant
to the terms and conditions herein set forth, superseding all prior agreements
between the Company, its subsidiaries and/or predecessors and Employee;
NOW, THEREFORE, it is mutually agreed by and between the parties hereto
as follows:
ARTICLE I
EMPLOYMENT
Subject to and upon the terms and conditions of this Agreement, the
Company hereby employs and agrees to continue the employment of the Employee,
and the Employee hereby accepts such continued employment in his capacity as
President of the Company's Professional Employer Organization ("PEO").
ARTICLE II
DUTIES
1. The Employee shall, during the term of his employment with the
Company, and subject to the direction and control of the Company's CEO, perform
such duties and functions as he may be called upon to perform by the Company's
CEO during the term of this Agreement.
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2. The Employee agrees to devote full business time and his best
efforts in the performance of his duties for the Company and any subsidiary
corporation of the Company.
3. The Employee shall perform, in conjunction with the Company's
Executive Management, to the best of his ability the following services and
duties for the Company and its subsidiary corporations (by way of example, and
not by way of limitation):
a. Those duties attendant to the position with the Company for which he
is hired;
b. Establish and implement current and long range objectives, plans,
and policies, subject to the approval of the CEO and Board of Directors;
c. Financial planning for the PEO Division;
d. Managerial oversight of the Company's PEO business;
e. Ensure that all Company's PEO activities and operations are carried
out in compliance with local, state and federal regulations and laws governing
business operations;
f. Work with the CEO on business expansion of the PEO Company,
including acquisitions, joint ventures, and other opportunities; and
g. Promotion of the relationships of the Company and its subsidiaries
with their respective employees, customers, suppliers and others in the business
community.
h. Employee shall be based in the Pinellas and Hillsborough, Florida
counties area and shall undertake such travel, within or outside the United
States, as is or may be reasonably necessary in the interests of the Company.
ARTICLE III
COMPENSATION
1. Commencing the date hereof and during the term hereof, Employee
shall be compensated initially at the rate of $175,000 per annum, subject to
such increases to be determined on each 12-month anniversary during the term of
this Agreement (the "Base Salary"), which shall be paid to Employee as in
accordance with the Company's regular payroll periods.
2. Employee shall be entitled to receive a bonus (the "Bonus") in
accordance with the Company's Senior Management Incentive Program to be
determined within 30 days of commencement of this Agreement and thereafter
within 30 days of the beginning of each fiscal
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year.
3. The Company shall deduct from Employee's compensation all federal,
state, and local taxes which it may now or may hereafter be required to deduct.
ARTICLE IV
BENEFITS
1. During the term hereof, the Company shall provide Employee with
group health care and insurance benefits as generally made available to the
Company's senior management; provide such other insurance benefits obtained by
the Company and made generally available to the Company's senior management (the
Company will reimburse the Employee to the extent his health and welfare
benefits are reduced from those in effect at the TeamStaff Companies at the time
of the acquisition by the Company); reimburse the Employee, upon presentation of
appropriate vouchers, for all reasonable business expenses incurred by the
Employee on behalf of the Company upon presentation of suitable documentation;
and pay to Employee the sum of $800 per month as and for an automobile
allowance.
2. In the event the Company wishes to obtain Key Man life insurance on
the life of Employee, Employee agrees to cooperate with the Company in
completing any applications necessary to obtain such insurance and promptly
submit to such physical examinations and furnish such information as any
proposed insurance carrier may request.
3. For each year of the term hereof, Employee shall be initially
entitled to five (5) weeks paid vacation.
ARTICLE V
NON-DISCLOSURE
The Employee shall not, at any time during or after the termination of
his employment hereunder, except when acting on behalf of and with the
authorization of the Company, make use of or disclose to any person,
corporation, or other entity, for any purpose whatsoever, any trade secret or
other confidential information concerning the Company's business, finances,
marketing, computerized payroll, accounting and information business, personnel
and/or employee leasing business of the Company and its subsidiaries, including
information relating to any customer of the
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Company or pool of temporary employees, or any other nonpublic business
information of the Company and/or its subsidiaries learned as a consequence of
Employee's employment with the Company (collectively referred to as the
"Proprietary Information"). For the purposes of this Agreement, trade secrets
and confidential information shall mean information disclosed to the Employee or
known by him as a consequence of his employment by the Company, whether or not
pursuant to this Agreement, and not generally known in the industry. The
Employee acknowledges that trade secrets and other items of confidential
information, as they may exist from time to time, are valuable and unique assets
of the Company, and that disclosure of any such information would cause
substantial injury to the Company.
ARTICLE VI
RESTRICTIVE COVENANT
1. In the event of the voluntary termination of employment with the
Company prior to the expiration of the term hereof, or Employee's discharge in
accordance with Article VIII, or the expiration of the term hereof without
renewal, Employee agrees that he will not, for a period of two (2) years
following such termination (or expiration, as the case may be) directly or
indirectly enter into or become associated with or engage in any other business
(whether as a partner, officer, director, shareholder, employee, consultant, or
otherwise), which business is located in the States of Florida, New Jersey, New
York, and Texas or any other state the Company is operating in and is involved
in the professional employer organization business, or is otherwise engaged in
the same or similar business as the Company shall be engaged and is in direct
competition with the Company, or which the Company is in the process of
developing, during the tenure of Employee's employment by the Company.
Notwithstanding the foregoing, the ownership by Employee of less than 5 percent
of the shares of any publicly held corporation shall not violate the provisions
of this Article VI.
2. In furtherance of the foregoing, Employee shall not during the
aforesaid period of non-competition, directly or indirectly, in connection with
any computerized payroll, employee leasing, or permanent or temporary personnel
business, or any business similar to the business in which the Company was
engaged, or in the process of developing during Employee's tenure with
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the Company, solicit any customer or employee of the Company who was a customer
or employee of the Company during the tenure of his employment.
3. If any court shall hold that the duration of non-competition or any
other restriction contained in this Article is unenforceable, it is our
intention that same shall not thereby be terminated but shall be deemed amended
to delete therefrom such provision or portion adjudicated to be invalid or
unenforceable or, in the alternative, such judicially substituted term may be
substituted therefor.
ARTICLE VII
TERM
1. This Agreement shall be for a term of two (2) years commencing
January 1, 1999 and terminating on December 31, 2000 unless sooner terminated as
provided for herein (the "Expiration Date").
2. Unless this Agreement is earlier terminated pursuant to the terms
hereof, the Company agrees to notify Employee in writing whether it intends to
negotiate a renewal of this Agreement by notice six (6) months prior to the
Expiration Date. In the event the Company fails to so notify the Employee, the
term of this Agreement shall be extended for an additional one (1) year.
ARTICLE VIII
DISABILITY DURING TERM
In the event Employee becomes totally disabled so that he is unable or
prevented from performing any one or all of his usual duties hereunder for a
period of four (4) consecutive months, and the Company elects to terminate this
agreement in accordance with Article IX, paragraph (B) then, and in that event,
Employee shall receive his Base Salary as provided under Article III of this
Agreement for a period of twelve (12) months commencing from the date of such
total disability. The obligation of the Company to make the aforesaid payments
shall be modified and reduced and the Company shall receive a credit for all
disability insurance payments which Employee may receive from insurance policies
provided by the Company.
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ARTICLE IX
TERMINATION
The Company may terminate this Agreement:
a. Upon the death of Employee during the term hereof, except that the
Employee's legal representatives, successors, assigns, and heirs shall have
those rights and interests as otherwise provided in this Agreement, including
the right to receive accrued but unpaid incentive compensation and special bonus
compensation on a pro rata basis.
b. Subject to the terms of Article VIII, upon written notice from the
Company to the Employee, if Employee becomes totally disabled and as a result of
such total disability, has been prevented from and unable to perform all of his
duties hereunder for a consecutive period of four (4) months.
c. Upon written notice from the Company to the Employee, at any time
for "Cause." For purposes of this Agreement, "Cause" shall be defined as:
willful disobedience by the Employee of a material and lawful instruction of the
CEO or the Board of Directors of the Company; conviction of the Employee of any
misdemeanor involving fraud or embezzlement or similar crime, or any felony,
excluding traffic-related offenses; breach by the Employee of any material
provision of this Agreement; or conduct amounting to fraud, dishonesty,
negligence, willful misconduct, recurring insubordination, inattention to or
unsatisfactory performance of duties which adversely affects operations of the
Company, or excessive absences from work, provided that the Company shall not
have the right to terminate the employment of Employee pursuant to the foregoing
clauses (a) and (b) above unless written notice specifying such breach shall
have been given to the Employee and, in the case of breach which is capable of
being cured, the Employee shall have failed to cure such breach within thirty
(30) days after his receipt of such notice.
d. In the event the Company demotes, substantially reduces the duties
of or reduces the salary or benefits of the employee, the employee may elect to
treat this Agreement as terminated for "good reason." In the event of
termination of this Agreement for good reason, the employee shall be entitled to
payment of the greater of all salary, benefits and stock grants or options due
for the remaining term of the Agreement or the severance payments as defined in
Article VII(c) herein, in
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addition to any rights or remedies available to the employee at law or in
equity.
e. In the event of the termination of this Agreement and the discharge
of Employee by the Company in breach and violation of this Agreement, Employee
shall not be obligated to mitigate damages by seeking or obtaining alternate
employment.
ARTICLE X
TERMINATION OF PRIOR AGREEMENTS
This Agreement sets forth the entire agreement between the parties and
supersedes all prior agreements between the parties, whether oral or written
prior to the effective date of this Agreement.
ARTICLE XI
STOCK OPTIONS
As an inducement to Employee to enter into this Agreement the Company
hereby grants to Employee options to purchase shares of the Company's Common
Stock, $.001 par value, upon and subject to the following conditions:
(a) Subject to the terms and conditions of the Company's
Senior Management Incentive Plan (the "Plan"), and the terms and conditions set
forth in the Stock Option Certificate which are incorporated herein by
reference, the Employee is hereby granted options to purchase 100,000 shares of
the Company's Common Stock of which options to purchase 50,000 shares shall be
vested on the second anniversary hereof. The option shall contain such other
terms and conditions as set forth in the stock option agreement. The exercise
price of the options shall be the closing market price of the Common Stock on
the date hereof. The foregoing options shall be qualified as incentive stock
options to the maximum as allowed by law. The Options provided for herein are
not transferable by Employee and shall be exercised only by Employee, or by his
legal representative or executor, as provided in the Plan. Such Option shall
terminate as provided in the Plan.
ARTICLE XII
ARBITRATION AND INDEMNIFICATION
Any dispute arising out of the interpretation, application, and/or
performance of this Agreement with the sole exception of any claim, breach, or
violation arising under Articles V or VI
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hereof shall be settled through final and binding arbitration before a single
arbitrator in the State of Florida in accordance with the Rules of the American
Arbitration Association. The arbitrator shall be selected by the Association and
shall be an attorney-at-law experienced in the field of corporate law. Any
judgment upon any arbitration award may be entered in any court, federal or
state, having competent jurisdiction of the parties.
The Company hereby agrees to indemnify, defend, and hold harmless the
Employee for any and all claims arising from or related to his employment by the
Company at any time asserted, at any place asserted, and to the fullest extent
permitted by law. The Company shall maintain such insurance as is necessary and
reasonable to protect the Employee from any and all claims arising from or in
connection with his employment by the Company, provided such insurance can be
obtained without unreasonable effort and expense.
ARTICLE XIII
SEVERABILITY
If any provision of this Agreement shall be held invalid and
unenforceable, the remainder of this Agreement shall remain in full force and
effect. If any provision is held invalid or unenforceable with respect to
particular circumstances, it shall remain in full force and effect in all other
circumstances.
ARTICLE XIV
NOTICE
All notices required to be given under the terms of this Agreement
shall be in writing and shall be deemed to have been duly given only if
delivered to the addressee in person, with written acknowledgment received, or
mailed by certified mail, return receipt requested, as follows:
IF TO THE COMPANY: Digital Solutions, Inc.
300 Atrium Drive
Somerset, NJ 08873
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IF TO THE EMPLOYEE: Kirk Scoggins
901 Brookline Avenue
Tampa, FL 33629
or to any such other address as the party to receive the notice shall advise by
due notice given in accordance with this paragraph. Notice shall be effective
three (3) days after delivery or mailing.
ARTICLE XV
BENEFIT
This Agreement shall inure to, and shall be binding upon, the parties
hereto, the successors and assigns of the Company, and the heirs and personal
representatives of the Employee.
ARTICLE XVI
WAIVER
The waiver by either party of any breach or violation of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of construction and validity.
ARTICLE XVII
GOVERNING LAW
This Agreement has been negotiated and executed in the State of Florida
shall govern its construction and validity.
ARTICLE XVIII
JURISDICTION
Any or all actions or proceedings which may be brought by the Company
or Employee under this Agreement shall be brought in courts having a situs
within the State of Florida, and Employee and the Company each hereby consent to
the jurisdiction of any local, state, or federal court located within the State
of Florida.
ARTICLE XIX
ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties
hereto. No change, addition, or amendment shall be made hereto, except by
written agreement signed by the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
affixed their hands and seals the day and year first above written.
(Corporate Seal) DIGITAL SOLUTIONS, INC.
By:________________________________
Donald W. Kappauf
President & CEO
-----------------------------------
Kirk Scoggins
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EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
AGREEMENT, dated as of the 25th day of January 1999, between the person
whose name and address appears on the signature page hereto (individually, a
"Holder" or, collectively with each of the holders, the "Holders") and Digital
Solutions, Inc., a New Jersey corporation having its principal executive office
at 300 Atrium Drive, Somerset, New Jersey 08873 (the "Company"). Terms that are
not otherwise defined in this Agreement shall have the meaning given them in the
Plan and Agreement of Merger and Reorganization dated as of October 29, 1998
(the "Merger Agreement") by and among the Company, the TeamStaff Entities and
the Holders.
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Holders have received from the Company shares ("Shares") of the
Company's common stock, par value $.001 per share (the "Common Stock"), pursuant
to the terms of the Merger Agreement; and
WHEREAS, the Company desires to grant to the Holder the registration
rights set forth herein with respect to the Shares.
NOW, THEREFORE, the parties hereto mutually agree as follows:
1. REGISTRABLE SECURITIES. As used herein the term "Registrable
Security" means each of the Shares owned by the Holders as set forth on Exhibit
A annexed hereto; provided, however, that with respect to any particular
Registrable Security, such security shall cease to be a Registrable Security
when, as of the date of determination, (i) it has been effectively registered
under the Securities Act of 1933, as amended (the "Act") and disposed of
pursuant thereto, (ii) registration under the Act is no longer required for the
immediate public distribution of such security, or (iii) it has ceased to be
outstanding. The term "Registrable Securities" means any and/or all of the
securities falling within the foregoing definition of a "Registrable Security."
In the event of any merger, reorganization, consolidation, recapitalization or
other change in corporate structure affecting the Common Stock, such adjustment
shall be made in the definition of "Registrable Security" as is appropriate in
order to prevent any dilution or enlargement of the rights granted pursuant to
this Section 1.
2. AUTOMATIC REGISTRATION. (a) The Company shall use its best efforts
to file a registration statement covering thirty three and one-third percent
(33-1/3%) of the Registrable Securities (registration of 500,000 of such shares
shall be designated by Kirk Scoggins and the remainder by Warren Cason) (the
"Initial Registration Statement") with the Securities and Exchange Commission
(the "SEC") under the Act as soon as practicable following the first anniversary
of this Agreement (the "First Required Filing Date"). The Company shall use its
best efforts to cause such Initial Registration Statement to become effective
under the Act as soon as practicable thereafter and shall maintain the
effectiveness of the Initial Registration Statement until the earlier of (i) the
date that all of the Registrable Securities have been sold or (ii) the date that
all of the Holders thereof receive an opinion of counsel to the Company that the
Registrable
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Securities may be sold under the provisions of Rule 144(k) promulgated under the
Act (or any successor provision), so as to permit the public offer and sale of
the Registrable Securities.
(b) In addition to the First Registration Statement, the Company shall
use its best efforts to file a registration statement covering an additional
thirty three and one-third percent (33-1/3%) of the Registrable Securities
(registration of 1,872,223 of such shares shall be designated by Warren Cason
and the remainder by Kirk Scoggins) (the "Second Registration Statement") with
the Securities and Exchange Commission (the "SEC") under the Act as soon as
practicable following the second anniversary of this Agreement (the "Second
Required Filing Date"). The Company shall use its best efforts to cause such
Second Registration Statement to become effective under the Act as soon as
practicable thereafter and shall maintain the effectiveness of the Second
Registration Statement until the earlier of (i) the date that all of the
Registrable Securities have been sold or (ii) the date that all of the Holders
thereof receive an opinion of counsel to the Company that the Registrable
Securities may be sold under the provisions of Rule 144(k) promulgated under the
Act (or any successor provision), so as to permit the public offer and sale of
the Registrable Securities.
(c) In addition to the Initial Registration Statement and the Second
Registration Statement, the Company shall use its best efforts to file a
registration statement covering the remaining thirty three and one-third percent
(33-1/3%) of the Registrable Securities owned by each Holder (the "Final
Registration Statement") with the SEC under the Act as soon as practicable
following the date which is three years from the date of Closing (as defined in
the Merger Agreement) (the "Final Required Filing Date"). The Company shall use
its best efforts to cause such Final Registration Statement to become effective
under the Act as soon as practicable thereafter and shall maintain the
effectiveness of the Final Registration Statement until the earlier of (i) the
date that all of the Registrable Securities have been sold or (ii) the date that
all of the holders thereof receive an opinion of counsel to the Company that the
Registrable Securities may be sold under the provisions of Rule 144(k)
promulgated under the Act (or any successor provision), so as to permit the
public offer and sale of the Registrable Securities.
(d) Notwithstanding the provision under Section 2(a), 2(b) or 2(c)
hereof, if, at the time of the First Required Filing Date, the Second Required
Filing Date or the Final Required Filing Date, as the case may be, the Company
is negotiating a merger, consolidation, acquisition or sale of all or
substantially all of its assets or a similar transaction and in the written
opinion of counsel to the Company, the Initial Registration Statement, the
Second Registration Statement or the Final Registration Statement, as the case
may be, would be required to include information concerning such transactions or
the parties thereto that is not available at the time, the Company shall
promptly so advise the Holders of the Registrable Securities and, at the
Company's election, to be set forth in such notice ("Notice of Postponement"),
the filing of either the Initial Registration Statement, the Second Registration
Statement or the Final Registration Statement, as the case may be, may be
postponed for a period not to exceed the lesser of (i) the date such information
becomes available to the Company or (ii) ninety (90) days from the First
Required Filing Date, the Second Required Filing Date or the Final Required
Filing Date, as the case may be (the
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"Postponement Period"); provided, however, that the Company shall not be
permitted to give any such Notice of Postponement and to so postpone the filing
of the registration statement more than once.
3. COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. The Company
covenants and agrees as follows:
(a) In connection with any registration under Article 2 hereof, the
Company shall use its best efforts to cause the Initial Registration Statement,
the Second Registration Statement or the Final Registration Statement, as the
case may be, to become effective as promptly as possible and prevent the SEC
from issuing a stop order suspending the effectiveness of the Initial
Registration Statement, the Second Registration Statement or the Final
Registration Statement, as the case may be, or, if any stop order shall be
issued by the SEC in connection therewith, to use its best efforts to obtain the
removal of such order. Following the effective date of the Initial Registration
Statement, the Second Registration Statement or the Final Registration
Statement, as the case may be, the Company shall, upon the request of the
Holder, forthwith supply such reasonable number of copies of the applicable
registration statement, preliminary prospectus and prospectus meeting the
requirements of the Act, and other documents necessary or incidental to the
public offering of the Registrable Securities, as shall be reasonably requested
by the Holder to permit the Holder to make a public distribution of the Holder's
Registrable Securities. The obligations of the Company hereunder with respect to
the Holder's Registrable Securities are subject to the Holder's furnishing to
the Company such appropriate information concerning the Holder, the Holder's
Registrable Securities and the terms of the Holder's offering of such
Registrable Securities as the Company may reasonably request in writing.
(b) The Company shall pay all costs, fees and expenses in connection
with all registration statements filed pursuant to Article 2 hereof, including,
without limitation, the Company's legal and accounting fees, printing expenses,
and blue sky fees and expenses; provided, however, that the Holder shall be
solely responsible for the fees of any counsel retained by the Holder in
connection with such registration and any transfer taxes or underwriting
discounts, commissions or fees applicable to the Registrable Securities sold by
the Holder pursuant thereto.
(c) The Company will take all necessary action which may be required in
qualifying or registering the Registrable Securities included in a registration
statement for offering and sale under the securities or blue sky laws of such
states as are reasonably requested by the Holders of such securities, provided
that the Company shall not be obligated to qualify as a foreign corporation to
do business under the laws of any such jurisdiction.
(d) During the period when a prospectus is required to be delivered
under the Act, promptly file all documents required to be filed by it with the
SEC pursuant to Section 13(a), 13(c), or 14 of the Securities and Exchange Act
of 1934, as amended;
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(e) Promptly notify the Holders in writing of the following: (i) the
date when the registration statement or any post-effective amendment to it
becomes effective, and the date when any amendment to the registration statement
or supplement to a prospectus is filed with the SEC; (ii) the issuance by the
SEC of the stop order suspending the effectiveness of the registration statement
or the initial proceedings for that purpose; (iii) the suspension of
qualification of any Shares for sale in any jurisdiction or the initiation of
any proceedings for that purpose; and (iv) the Company's intention to file an
amendment to the registration statement, or a supplement to any prospectus, that
differs from the prospectus on file when the registration statement became
effective and including documents deemed to be incorporated by reference into a
prospectus.
4. ADDITIONAL TERMS.
(a) The Company shall indemnify and hold harmless the Holder and each
underwriter, within the meaning of the Act, who may purchase from or sell for
the Holder, any Registrable Securities, from and against any and all losses,
claims, damages and liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in the either registration statement
filed pursuant to Article 2 of this Agreement, any other registration statement
filed by the Company under the Act with respect to the registration of the
Registrable Securities, any post-effective amendment to such registration
statements, or any prospectus included therein or caused by any omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission based
upon information furnished or required to be furnished in writing to the Company
by the Holder or underwriter expressly for use therein, which indemnification
shall include each person, if any, who controls either the Holder or underwriter
within the meaning of the Securities Act and each officer, director, employee
and agent of the Holder and underwriter; provided, however, that the
indemnification in this Section 4(a) with respect to any prospectus shall not
inure to the benefit of the Holder or underwriter (or to the benefit of any
person controlling the Holder or underwriter) on account of any such loss,
claim, damage or liability arising from the sale of Registrable Securities by
the Holder or underwriter, if a copy of a subsequent prospectus correcting the
untrue statement or omission in such earlier prospectus was provided to the
Holder or underwriter by the Company prior to the subject sale and the
subsequent prospectus was not delivered or sent by the Holder or underwriter to
the purchaser prior to such sale; and provided further, that the Company shall
not be obligated to so indemnify the Holder or any such underwriter or other
person referred to above unless the Holder or underwriter or other person, as
the case may be, shall at the same time indemnify the Company, its directors,
each officer signing the applicable registration statement and each person, if
any, who controls the Company within the meaning of the Act, from and against
any and all losses, claims, damages and liabilities caused by any untrue
statement of a material fact contained in the applicable registration statement,
any registration statement or any prospectus required to be filed or furnished
by reason of this Agreement or caused by any omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, insofar as such losses, claims, damages or liabilities
are caused by any untrue statement or omission based upon information furnished
in writing to the Company by the Holder
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<PAGE> 5
or underwriter expressly for use therein.
(b) If for any reason the indemnification provided for in the preceding
section is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, claim, damage, liability or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
the indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect not only the relative benefits
received by the indemnified party and the indemnifying party, but also the
relative fault of the indemnified party and the indemnifying party, as well as
any other relevant equitable considerations.
(c) Neither the filing of a registration statement by the Company
pursuant to this Agreement nor the making of any request for prospectuses by the
Holder shall impose upon the Holder any obligation to sell the Holder's
Registrable Securities.
(d) The Holder, upon receipt of notice from the Company that an event
has occurred which requires a post-effective amendment to the registration
statement or a supplement to the prospectus included therein, shall promptly
discontinue the sale of Registrable Securities until the Holder receives a copy
of a supplemented or amended prospectus from the Company, which the Company
shall provide as soon as practicable after such notice.
(e) If the Company fails to keep the registration statement referred to
in Article 2 above continuously effective during the requisite period, then the
Company shall promptly use its best efforts to update the registration statement
or file a new registration statement covering the Registrable Securities
remaining unsold, subject to the terms and provisions hereof.
5. GOVERNING LAW. The Registrable Securities will be, if and when
issued, delivered in New York. This Agreement shall be deemed to have been made
and delivered in the State of New York and shall be governed as to validity,
interpretation, construction, effect and in all other respects by the internal
substantive laws of the State of New Jersey, without giving effect to the choice
of law rules thereof.
6. AMENDMENT. This Agreement may only be amended by a written
instrument executed by the Company and the Holder.
7. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
8. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
9. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication
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hereunder shall be deemed (i) duly given if (and then delivered three business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient or (ii) duly
given if (and then delivered one business day after) it is sent by overnight
courier and addressed to the intended recipient. All notices shall be sent to
the addresses as set forth below:
If to the Sellers: Copy to:
Warren M. Cason Holland & Knight LLP
c/o Holland & Knight LLP 400 North Ashley Drive
400 North Ashley Drive Suite 2300
Suite 2300 Tampa, Florida 33602
Tampa, Florida 336 (Attn: Robert J. Grammig, Esq.)
If to the Sellers: (continued)
Kirk A. Scoggins
1211 North Westshore Boulevard
Suite 806
Tampa, Florida 33607
If to Digital: Copy to:
Digital Solutions, Inc. Goldstein & DiGioia LLP
300 Atrium Drive 369 Lexington Avenue, 18th Fl
Somerset, NJ 08873 New York, NY 10017
Attn: Donald Kappauf Attn: Brian C. Daughney, Esq.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
10. BINDING EFFECT; BENEFITS. The Holder may not assign his or her
rights hereunder. This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their respective heirs, legal representatives and
successors. Nothing herein contained, express or implied, is intended to confer
upon any person other than the parties hereto and their respective heirs, legal
representatives and successors, any rights or remedies under or by reason of
this Agreement.
11. HEADINGS. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
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12. SEVERABILITY. Any provision of this Agreement which is held by a
court of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto as of the date first above written.
- ------------------------------
WARREN M. CASON, Holder
- ------------------------------
DOROTHY C. CASON, Holder
- ------------------------------
KIRK A. SCOGGINS, Holder
- ------------------------------------
MELISSA C. SCOGGINS, as Trustee
of the Kirk Allan Scoggins 1997
Three Year Grantor Retained Annuity
Trust, dated 7/1/97, Holder
- -----------------------------------
WARREN M. CASON, JR., as Trustee
of the Dorothy C. Cason 1997
Three Year Grantor Retained Annuity
Trust, dated 7/1/97, Holder
DIGITAL SOLUTIONS, INC.
By:_______________________________
Name:
Title:
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EXHIBIT 10.3
[FINOVA LOGO]
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
DIGITAL SOLUTIONS, INC.
DSI CONTRACT STAFFING, INC.
DSI STAFF CONNXIONS NORTHEAST, INC.
DSI STAFF CONNXIONS-SOUTHWEST, INC.
DSI STAFF RX, INC.
THE TEAMSTAFF COMPANIES, INC.
TEAMSTAFF, INC.
TEAMSTAFF II, INC.
TEAMSTAFF III, INC.
TEAMSTAFF IV, INC.
TEAMSTAFF V, INC.
TEAMSTAFF U.S.A., INC.
TEAMSTAFF INSURANCE SERVICES, INC.
TEAMSTAFF HOLDING COMPANY, INC.
EMPLOYER SUPPORT SERVICES, INC.
CO-BORROWERS
300 ATRIUM DRIVE, SOMERSET, NEW JERSEY 08873
$8,250,000
CREDIT LIMIT
JANUARY 25, 1999
CORPORATE FINANCE
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THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (collectively
with the Schedule to Loan Agreement (the "SCHEDULE") attached hereto, the
"AGREEMENT") dated the date set forth on the cover page, is entered into by and
between the borrowers named on the cover page (each individually, a "Borrower",
and, collectively, the "Borrowers"), whose address is set forth on the cover
page and FINOVA CAPITAL CORPORATION ("FINOVA"), whose address is 355 South Grand
Avenue, Los Angeles, California 90071 in order to amend and restate the Original
Agreement (as hereinafter defined) to provide increased and additional credit
facilities to the Borrowers on the terms and conditions set forth herein.
1. DEFINITIONS.
1.1 Defined Terms. As used in this Agreement, the following terms have
the definitions set forth below:
"ADA" has the meaning set forth in Section 4.1(aa) hereof.
"Additional Sums" has the meaning set forth in Section 2.9(a) hereof.
"Affiliate" means any Person controlling, controlled by or under common
control with any Borrower. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause direction of
the management and policies of any Person, whether through ownership of common
or preferred stock or other equity interests, by contract or otherwise. Without
limiting the generality of the foregoing, each of the following shall be an
Affiliate: any officer or director of any Borrower, any subsidiary of any
Borrower, any other Person with whom or which any Borrower has common officers
or directors, any Person that owns more than five percent (5%) of the voting
stock of any Borrower (an "affiliate stockholder"), and any Person in which an
affiliate stockholder owns more than five percent (5%) of the voting stock.
"Agreement" has the meaning set forth in the preamble.
"Amendment Closing Date" means January 25, 1999.
"Applicable Usury Law" has the meaning set forth in Section 2.9(b)
hereof.
"Blocked Account" has the meaning set forth in Section 2.10(c) hereof.
"Business Day" means any day on which commercial banks in both Los
Angeles, California and Phoenix, Arizona are open for business.
"Capital Expenditures" means all expenditures made and liabilities
incurred for the acquisition of any fixed asset or improvement, replacement,
substitution or addition thereto which has a useful life of more than one year
and including, without limitation, those arising in connection with Capital
Leases.
"Capital Lease" means any lease of property by a Borrower that, in
accordance with GAAP, should be capitalized for financial reporting purposes and
reflected as a liability on the balance sheet of such Borrower.
"Cash Dominion Event" means (i) with respect to a Blocked Account
containing proceeds of Receivables attributable to the PEO Business, the
occurrence and continuation of an Event of Default described in Section 7.1(a),
7.1(b) (with respect to a breach of Section 2.10, 3.8, 6.1.13, 6.2.1, 6.2.2,
6.2.3, 6.2.5, 6.2.8, 6.2.11, 6.2.12, or 9.1 (b)), or 7.1(c) through 7.1(j) or
(ii) with respect to a Blocked Account not containing proceeds of Receivables
attributable to the PEO Business, either (A) the occurrence and continuation of
an Event of Default or (B) the passage of five (5) days after FINOVA gives
written notice to DSI that FINOVA has determined, in its Permitted Discretion,
that the transfer of Receivables collections to FINOVA is advisable to protect
FINOVA's rights and remedies and FINOVA intends to instruct the bank maintaining
the Blocked Account to transfer funds in the Blocked Account only to FINOVA.
"Change of Control" means (i) a "person" or a "group" (within the
meaning of Sections 13(d) and 14(d)(ii) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of more than 30% of the total
voting power of the voting stock of DSI on a fully diluted basis or (ii) a
majority of the Board of Directors of DSI then in office shall not consist of
individuals who on the Closing Date constitute the Board of Directors of DSI, or
new directors whose election, or whose nomination for election by stockholders,
was approved by at least two thirds of the members of the Board of Directors
then in office who were either members of the Board of Directors on the Closing
Date or whose election or nomination was previously so approved
"Closing Fee" has the meaning set forth in the Schedule.
"Closing Date" means the date of the initial advance made by FINOVA
pursuant to the Original Agreement.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of Arizona from time to time.
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"Collateral" has the meaning set forth in Section 3.1 hereof.
"Current Assets" at any date means the amount at which the current
assets of DSI and its subsidiaries would be shown on a consolidated balance
sheet of DSI and its subsidiaries as at such date, prepared in accordance with
GAAP, provided that amounts due from Affiliates and investments in Affiliates
shall be excluded therefrom.
"Current Liabilities" at any date means the amount at which the current
liabilities of DSI and its subsidiaries would be shown on a consolidated balance
sheet of DSI and its subsidiaries as at such date, prepared in accordance with
GAAP.
"Deposit Accounts" has the meaning set forth in Section 9105 of the
Code.
"Dominion Account" has the meaning set forth in Section 2.10(c) hereof.
"DSI" means Digital Solutions, Inc., a New Jersey corporation.
"Eligible Receivables" of a Borrower means Receivables of such Borrower
arising in the ordinary course of such Borrower's business from the sale of
goods or rendition of services, which FINOVA, in its Permitted Discretion, shall
deem eligible based on such considerations as FINOVA may from time to time deem
appropriate. Without limiting the foregoing, a Receivable shall not be deemed to
be an Eligible Receivable if (i) the account debtor has failed to pay the
Receivable within a period of sixty (60) days after invoice date, to the extent
of any amount remaining unpaid after such period; (ii) the account debtor has
failed to pay more than 25% of all outstanding Receivables owed by it to any
Borrower within sixty (60) days after invoice date; (iii) the account debtor is
an Affiliate of any Borrower; (iv) the services relating thereto are sold on
terms pursuant to which payment by the account debtor may be conditional; (v)
the account debtor is not located in the United States, unless the Receivable is
supported by a letter of credit or other form of guaranty or security, in each
case in form and substance satisfactory to FINOVA; (vi) the account debtor is
the United States or any department, agency or instrumentality thereof, unless
the applicable Borrower has complied with the Federal Assignment of Claims Act
with respect to such Receivable, or the account debtor is any state, city or
municipality of the United States, or any department, agency, or
instrumentability thereof, if any action other than pursuant to the Uniform
Commercial Code is required to perfect FINOVA's security interest in such
Receivable, unless such action has been taken to the satisfaction of FINOVA;
(vii) any Borrower is or may become liable to the account debtor for goods sold
or services rendered by the account debtor to any Borrower; (viii) the account
debtor's total obligations to any Borrower exceed 15% of all Eligible
Receivables of such Borrower, to the extent of such excess; (ix) the account
debtor disputes liability or makes any claim with respect thereto (up to the
amount of such liability or claim), or is subject to any insolvency or
bankruptcy proceeding, or becomes insolvent, fails or goes out of a material
portion of its business; (x) the amount thereof consists of late charges or
finance charges; (xi) the amount thereof consists of a credit balance more than
sixty (60) days past due; (xii) the face amount thereof exceeds $20,000, unless
accompanied by evidence of the performance of the services relating thereto
satisfactory to FINOVA in its Permitted Discretion; (xiii) the invoice
constitutes a progress billing on a project not yet completed, except that the
final billing at such time as the matter has been completed may be deemed an
Eligible Receivable; (xiv) the amount thereof is not yet represented by an
invoice or bill issued in the name of the applicable account debtor; (xv) the
Receivable relates to or arises from the PEO Business; or (xiv) the Receivable
represents amounts subject to any lien, security interest or other encumbrance
(except solely in favor of FINOVA), any trust or fiduciary obligation, or any
claim of beneficial right or interest of any third party, to the extent of the
amount so subject, as determined by FINOVA in its Permitted Discretion.
"Equipment" means all of a Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in such Borrower's operations (to the extent of such Borrower's
interest therein) or owned by such Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter become a
member of a group of which any Borrower is a member and which is treated as a
single employer under ERISA Section 4001(b)(1), or IRC Section 414.
"Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.
"Examination Fee" has the meaning set forth in the Schedule.
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"Excess Availability" means, as of the date of determination thereof,
the amount by which the average daily total principal balance of the Revolving
Credit Loans facility which Borrower would be permitted to have outstanding over
the prior 30 days, based on the formulas and reserves set forth in the Schedule,
plus cash on hand (determined in a manner acceptable to FINOVA) exceeds the sum
of the Revolving Credit Loans then actually outstanding, such excess then being
reduced by an amount necessary to provide for the payment of all accounts
payable of Borrower which are more than 30 days past due date and all book
overdrafts (excluding overdrafts attributable to the PEO Business which are
expected to be funded by customer transfers or payments within three (3) days
after such overdraft is created).
"Excess Cash Flow" means Operating Cash Flow/Permitted less Total
Contractual Debt Service.
"FINOVA Affiliate" has the meaning set forth in Section 9.22 hereof.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Boards which are applicable to the circumstances
as of the date of determination consistently applied, except that, for the
financial covenants set forth in this Agreement, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
"General Intangibles" means all general intangibles of a Borrower,
whether now owned or hereafter created or acquired by such Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, inventions, designs, drawings, blueprints,
Trademarks, Licenses and Patents, names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Borrower against FINOVA, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation
credit, liability, property and other insurance) tax refunds and claims,
computer programs, discs, tapes and tape files, claims under guaranties,
security interests or other security held by or granted to Borrower to secure
payment of any of the Receivables by an account debtor, all rights to
indemnification and all other intangible property of every kind and nature
(other than Receivables).
"Guarantor(s)" has the meaning set forth in the Schedule.
"Indebtedness for Borrowed Money" means all of a Borrower's present and
future obligations, liabilities, debts, claims and indebtedness, contingent,
fixed or otherwise, however evidenced, created, incurred, acquired, owing or
arising, whether under written or oral agreement, operation of law or otherwise:
(i) in respect of borrowed money (including, without limitation, pursuant to the
Loan Documents or Capital Leases); (ii) evidenced by a note, debenture, or
similar instrument (including, without limitation, all interest on the
Obligations); (iii) for the deferred purchase price of property (other than
trade payables arising in the ordinary course of business); or (iv) in respect
of obligations under conditional sales or other title retention agreements; and
all guaranties of any or all of the foregoing; provided, however, that
Indebtedness for Borrowed Money shall not include leases that are not Capital
Leases.
"Initial Term" has the meaning set forth on the Schedule.
"Inventory" means all of a Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease, all raw materials, work
in process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in such Borrower's business
or used in connection with the manufacture, packing, shipping, advertising,
selling or finishing of such goods, merchandise or other personal property, and
all documents of title or other documents representing them.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"L/C Fee" has the meaning set forth in Section 2.4 hereof.
"Letters of Credit" has the meaning set forth in Section 2.4. hereof.
"Loans" has the meaning set forth in Section 2.2 hereof.
"Loan Documents" means, collectively, this Agreement, any note or notes
executed by any Borrower and payable to FINOVA, and any other present or future
agreement entered into in connection with this Agreement, together with all
alterations, amendments, changes, extensions, modifications, refinancings,
refundings, renewals,
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replacements, restatements, or supplements, of or to any of the foregoing.
"Loan Party" means each Borrower, each Guarantor, and each other party
(other than FINOVA) to any Loan Document.
"Loan Reserves" means, as of any date of determination, such amounts as
FINOVA may from time to time establish and revise in good faith reducing the
amount of the facility for Revolving Credit Loans which would otherwise be
available to Borrower under the lending formula(s) provided in the Schedule: (a)
to reflect events, conditions, contingencies or risks which, as determined by
FINOVA in good faith, do or may affect either (i) the Collateral or any other
property which is security for the Obligations or its value, (ii) the assets,
business or prospects of any Borrower or any Guarantor or (iii) the security
interests and other rights of FINOVA in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect FINOVA's good
faith belief that any collateral report or financial information furnished by or
on behalf of any Borrower or any Guarantor to FINOVA is or may have been
incomplete, inaccurate or misleading in any material respect or (c) in respect
of any state of facts which FINOVA determines in good faith constitutes an Event
of Default or may, with notice or passage of time or both, constitute an Event
of Default.
"Maximum Interest Rate" has the meaning set forth in Section 2.9(c)
hereof.
"Merger Agreements" means (i) the Plan and Agreement of Merger and
Reorganization, dated as of October 29, 1998, among Digital Solutions, Inc.,
DGAC I, Inc., DGAC II, Inc., DGAC III, Inc., DGAC IV, Inc., DGAC V, Inc., DGAC
VI, Inc., DGAC VII, Inc., DGAC VIII, Inc., DGAC IX, Inc., DGAC X, Inc., and
Teamstaff, Inc., Teamstaff II, Inc., Teamstaff III, Inc., Teamstaff IV, Inc.,
The Teamstaff Companies, Inc., Teamstaff Holding Company, Inc., Employer Support
Services, Inc., Teamstaff U.S.A., Inc., Teamstaff Insurance Services, Inc., and
Warren M. Cason, Dorothy C. Cason, Kirk A. Scoggins, Melissa C. Scoggins, as
Trustee, Warren M. Cason, Jr., as Trustee, and (ii) the Plan and Agreement of
Merger and Reorganization, dated as of October 29, 1998, among Digital
Solutions, Inc., DGAC V, Inc., and Teamstaff V, Inc., and Warren M. Cason,
Dorothy C. Cason, Kirk A. Scoggins, Melissa C. Scoggins, as Trustee, Warren M.
Cason, Jr., as Trustee.
"Merger Documents" has the meaning set forth in Section 4.2(v) hereof.
"Multiemployer Plan" means a "multiemployer plan" as defined in ERISA
Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees of any
Borrower or any ERISA Affiliate.
"Net Worth" at any date means the net worth of DSI and its subsidiaries
as determined on a consolidated basis in accordance with GAAP.
"New Borrower" means each of The Teamstaff Companies, Inc., Teamstaff,
Inc., Teamstaff II, Inc., Teamstaff III, Inc., Teamstaff IV, Inc., Teamstaff V,
Inc., Teamstaff U.S.A., Inc., Teamstaff Insurance Services, Inc., Teamstaff
Holding Company, Inc., and Employer Support Services, Inc. (collectively the
"New Borrowers")
"Obligations" means all present and future loans, advances, debts,
liabilities, obligations, covenants, duties and indebtedness at any time owing
by any Borrower to FINOVA, whether evidenced by this Agreement, any note or
other instrument or document, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by FINOVA in any
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, Examination Fee, letter of credit fees, Closing Fee,
Termination Fee, Success Fee, and any other sums chargeable to Borrower
hereunder or under any other agreement with FINOVA.
"Operating Cash Flow/Actual" means, for any period net income or loss
of DSI and its subsidiaries (excluding the effect of any gains or losses
classified as extraordinary under GAAP), determined on a consolidated basis in
accordance with GAAP, plus or minus each of the following items, to the extent
deducted from or added to the revenues in the calculation of such net income or
loss: (i) depreciation; (ii) amortization and other non-cash charges; (iii)
interest expense and financing fees (including, without limitation, the Success
Fee, the Unused Line Fee, the L/C Fee, and the Examination Fee) paid or accrued;
and (iv) total federal and state income tax expense determined as the accrued
liability of DSI and its subsidiaries in respect of such period, regardless of
what portion of such expense has actually been paid by any of DSI and its
subsidiaries during such period; and after deduction for each of (a) federal and
state income taxes, to the extent actually paid during such period; (b) any
non-cash income; and (c) all actual Capital Expenditures made during such period
and not financed.
"Operating Cash Flow/Permitted" means, for any period, net income or
loss of DSI and its subsidiaries (excluding the effect of any gains or losses
classified as extraordinary under GAAP), determined on a consolidated basis in
accordance with GAAP, plus or minus each of the following items, to the extent
deducted from or added to the revenues of DSI and its subsidiaries in the
calculation of net
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income or loss: (i) depreciation; (ii) amortization and other non-cash charges;
(iii) interest expense and financing fees (including, without limitation, the
Success Fee, the Unused Line Fee, the L/C Fee, and the Examination Fee) paid or
accrued; and (iv) total federal and state income tax expense determined as the
accrued liability of DSI and its subsidiaries in respect of such period,
regardless of what portion of such expense has actually been paid by any of DSI
and its subsidiaries during such period; and after deduction for each of (a)
federal and state income taxes, to the extent actually paid during such period;
(b) any non-cash income; and (c) all Capital Expenditures permitted hereunder
(without regard to any waiver given by FINOVA with respect to any limitation on
such Capital Expenditures) actually made during such period and not financed.
"Original Agreement" means the Loan and Security Agreement, dated April
28, 1998, between FINOVA and the borrowers party thereto, which is amended and
restated hereby.
"Overadvance" has the meaning set forth in Section 2.3.
"Overline" has the meaning set forth in Section 2.3.
"PBGC" means the Pension Benefit Guarantee Corporation.
"PEO Business" means the professional employer organization, or
"employee leasing", line of business of Borrowers pursuant to which Borrowers
assume the employer responsibilities and obligations with respect a customer's
workforce and provide the services of such workforce to the customer on a
contractual basis.
"Permitted Discretion" means FINOVA's judgment exercised in good faith
based upon its consideration of any factor which FINOVA believes in good faith:
(i) will or could materially, adversely affect the value of any Collateral, the
enforceability or priority of FINOVA's liens thereon or the amount which FINOVA
would be likely to receive (after giving consideration to delays in payment and
costs of enforcement) in the liquidation of such Collateral; (ii) suggests that
any collateral report or financial information delivered to FINOVA by any Person
on behalf of any Borrower is incomplete, inaccurate or misleading in any
material respect; (iii) materially increases the likelihood of a bankruptcy,
reorganization or other insolvency proceeding involving any Borrower, any other
Loan Party or any of the Collateral, or (iv) creates or reasonably could be
expected to create an Event of Default. In exercising such judgment, FINOVA may
consider such factors already included in or tested by the definition of
Eligible Receivables as well as any of the following: (i) the financial and
business climate of the Borrowers' industry and general macroeconomic
conditions, (ii) changes in collection history and dilution with respect to the
Receivables, (iii) changes in demand for, and pricing of, Borrowers' services,
(iv) changes in any concentration of risk with respect to Receivables, and (v)
any other factors that change the credit risk of lending to the Borrowers on the
security of the Receivables or on the basis of the Borrowers' cash flow. The
burden of establishing lack of good faith hereunder shall be on the Borrowers.
"Permitted Encumbrance" means each of the liens, mortgages and other
security interests set forth on the Schedule.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, government, or any agency or political division thereof, or
any other entity.
"Plan" means any plan described in ERISA Section 3(2) maintained for
employees of any Borrower or any ERISA Affiliate, other than a Multiemployer
Plan.
"Prepared Financials" means the consolidated balance sheets of DSI and
its subsidiaries of the date set forth in the Schedule in the section entitled
'Reporting Requirements' , and as of each subsequent date on which audited
balance sheets are delivered to FINOVA from time to time hereunder, and the
related statements of operations, changes in stockholder's equity and changes in
cash flow for the periods ended on such dates.
"Prime Rate" has the meaning set forth in the Schedule.
"Prohibited Transaction" means any transaction described in Section 406
of ERISA which is not exempt by reason of Section 408 of ERISA, and any
transaction described in Section 4975(c) of the IRC which is not exempt by
reason of Section 4975(c)(2) of the IRC.
"Receivables" means all of a Borrower's now owned and hereafter
acquired accounts (whether or not earned by performance), proceeds of any
letters of credit naming such Borrower as beneficiary, contract rights, chattel
paper, instruments, documents and all other forms of obligations at any time
owing to such Borrower, all guaranties and other security therefor, whether
secured or unsecured, all merchandise returned to or repossessed by such
Borrower, and all rights of stoppage in transit and all other rights or remedies
of an unpaid vendor, lienor or secured party.
"Renewal Term" has the meaning set forth on the Schedule.
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"Reportable Event" means a reportable event described in Section 4043
of ERISA or the regulations thereunder, a withdrawal from a Plan described in
Section 4063 of ERISA, or a cessation of operations described in Section 4068(f)
of ERISA.
"Revolving Credit Loans" has the meaning set forth in the Schedule.
"Revolving Credit Limit" has the meaning set forth in the Schedule.
"Revolving Interest Rate" has the meaning set forth in the Schedule.
"Schedule" has the meaning set forth in the preamble.
"Start Date" has the meaning set forth in the Schedule.
"Success Fee" has the meaning set forth in the Schedule.
"Term Loans" has the meaning set forth in the Schedule.
"Termination Fee" has the meaning set forth in Section 9.2(d) hereof.
"Total Contractual Debt Service" means, for any period, the sum of
payments made or required to be made by the Borrowers during such period for (i)
interest and scheduled principal payments due on the Term Loans (excluding
voluntary prepayment and payments made from Excess Cash Flow, as required
pursuant to the Schedule), (ii) interest payments due on the Revolving Credit
Loans plus the Unused Line Fee, the Success Fee, the L/C Fee, and the
Examination Fee, and any other fees due to FINOVA, and (iii) interest and
scheduled principal payments due or any other Indebtedness for Borrowed Money of
Borrower.
"Total Facility" has the meaning set forth in Section 2.1 hereof.
"Trademarks, Copyrights, Licenses and Patents" means all of a
Borrower's right, title and interest in and to, whether now owned or hereafter
acquired: (i) trademarks, trademark registrations, trade names, trade name
registrations, and trademark or trade name applications, including without
limitation such as are listed on the Schedule, as the same may be amended from
time to time, and (a) renewals thereof, (b) all income, royalties, damages and
payments now and hereafter due and/or payable with respect thereto, including
without limitation, damages and payments for past or future infringements
thereof, (c) the right to sue for past, present and future infringements
thereof, (d) all rights corresponding thereto throughout the world, and (e) the
goodwill of the businesses operated by any or all of the Borrowers connected
with and symbolized by any trademarks or trade names; (ii) copyrights, copyright
registrations and copyright applications, including without limitation such as
are listed on the Schedule, as the same may be amended from time to time, and
(a) renewals thereof, (b) all income, royalties, damages and payments now and
hereafter due and/or payable with respect thereto, including without limitation,
damages and payments for past or future infringements thereof, (c) the right to
sue for past, present and future infringements thereof, and (d) all rights
corresponding thereto throughout the world; (iii) license agreements, including
without limitation such as are listed on the Schedule, and the right to prepare
for sale, sell and advertise for sale any services or any Inventory now or
hereafter owned by any Borrower and now or hereafter covered by such licenses;
and (iv) patents and patent applications, registered or pending, including
without limitation such as are listed on the Schedule, together with all income,
royalties, shop rights, damages and payments thereto, the right to sue for
infringements thereof, and all rights thereto throughout the world and all
reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof.
"Unused Line Fee" has the meaning set forth in the Schedule.
1.2 Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
2. LOANS; INTEREST RATE AND OTHER CHARGES.
2.1 Total Facility. Upon the terms and conditions set forth herein and
provided that no Event of Default or event which, with the giving of notice or
the passage of time, or both, would constitute an Event of Default, shall have
occurred and be continuing, FINOVA shall, upon DSI's request on behalf of the
Borrowers, make advances to Borrowers from time to time in an aggregate
outstanding principal amount not to exceed the Total Facility amount (the "TOTAL
FACILITY") set forth on the Schedule hereto, subject to deduction of reserves
for accrued interest and such other reserves as FINOVA deems proper from time to
time, and less amounts FINOVA may be obligated to pay in the future on behalf of
any Borrower. The Schedule is an integral part of this Agreement and all
references to "herein", "herewith" and words of similar import shall for all
purposes be deemed to include the Schedule.
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2.2 Loans. Advances under the Total Facility ("LOANS" and individually,
a "LOAN") shall be comprised of the amounts shown on the Schedule.
2.3 Overlines; Overadvances. If at any time or for any reason the
outstanding amount of advances (including all Letters of Credit) extended or
issued pursuant hereto exceeds any of the dollar limitations ("OVERLINE") or
percentage limitations ("OVERADVANCE") in the Schedule, then the Borrowers
shall, jointly and severally, upon FINOVA's demand, immediately pay to FINOVA,
in cash, the full amount of such Overline or Overadvance which, at FINOVA's
option, may be applied to reduce the outstanding principal balance of the Loans
and/or cash collateralize all or any part of any outstanding Letters of Credit.
Without limiting Borrowers' obligation to repay to FINOVA on demand the amount
of any Overline or Overadvance, each Borrower jointly and severally agrees to
pay FINOVA interest on the outstanding principal amount of any Overline or
Overadvance, on demand, at the rate set forth on the Schedule and applicable to
the Revolving Credit Loans.
2.4 Letters of Credit. At the request of DSI on behalf of Borrowers,
FINOVA may, in its Permitted Discretion, arrange for the issuance of letter of
credit for the account of Borrowers and guarantees of payment of such letters of
credit, in each case in form and substance satisfactory to FINOVA in its sole
discretion (collectively, "LETTERS OF CREDIT"). The aggregate face amount of all
outstanding Letters of Credit from time to time shall not exceed the amount
shown on the Schedule, and shall be reserved against the availability of
Revolving Credit Loans. Borrowers shall jointly and severally pay all bank
charges for the issuance of Letters of Credit, together with an additional fee
to FINOVA equal to the percentage set forth on the Schedule of the aggregate
face amount of each Letter of Credit outstanding from time to time during the
term of this Agreement (the "L/C FEE"). The L/C Fee shall be deemed to be fully
earned upon the issuance of each Letter of Credit and shall be due and payable
on the first Business Day of each month following a month during which any
Letter of Credit is outstanding. Any advance by FINOVA under or in connection
with a Letter of Credit shall constitute an Obligation hereunder. Each Letter of
Credit shall have an expiry date no later than thirty (30) days prior to the
last day of the Initial Term or, if issued during any Renewal Term no later than
thirty (30) days prior to the last day of such Renewal Term. Immediately upon
any termination of this Agreement, Borrowers shall either: (i) provide cash
collateral to FINOVA in an amount equal to 105% of the maximum amount of
FINOVA's obligations under or in connection with all then outstanding Letters of
Credit, or (ii) cause to be delivered to FINOVA releases of all FINOVA's
obligations under outstanding Letters of Credit. At FINOVA's discretion, any
proceeds of Collateral received by FINOVA may be held as the cash collateral
required by this Section 2.4. Each Borrower hereby agrees jointly and severally
to indemnify, save, and hold FINOVA harmless from any loss, cost, expense, or
liability, including payments made by FINOVA, expenses, and reasonable
attorneys' fees incurred by FINOVA arising out of or in connection with any
Letters of Credit. Each Borrower agrees to be bound by the issuing bank's
regulations and interpretations of any Letters of Credit guarantied by FINOVA
and opened for a Borrower's account or by FINOVA's interpretations of any Letter
of Credit issued by FINOVA for a Borrower's account, and each Borrower
understands and agrees that FINOVA shall not be liable for any error,
negligence, or mistake, whether of omission or commission, in following any
Borrower's instructions or those contained in the Letters of Credit or any
modifications, amendments, or supplements thereto. Each Borrower understands
that FINOVA may indemnify the bank issuing a Letter of Credit for certain costs
or liabilities arising out of claims by a Borrower against such issuing bank.
Each Borrower hereby agrees jointly and severally to indemnify and hold FINOVA
harmless with respect to any loss, cost, expense, or liability incurred by
FINOVA under any such indemnification by FINOVA to any issuing bank.
2.5 Loan Account. All advances made hereunder (including without
limitation all advances made by FINOVA under or in connection with any Letter of
Credit) shall be added to and deemed part of the Obligations when made. FINOVA
may from time to time charge all Obligations of Borrower to such Borrower's loan
account with FINOVA.
2.6 Interest; Fees. Borrower shall jointly and severally pay FINOVA
interest on the daily outstanding balance of the Obligations at the per annum
rates set forth on the Schedule. Borrowers shall also jointly and severally pay
FINOVA the fees set forth on the Schedule.
2.7 Default Interest Rate. Upon the occurrence and during the
continuation of an Event of Default, Borrowers shall jointly and severally pay
FINOVA interest on the daily outstanding balance of the Obligations and any L/C
Fee at a rate per annum which is two percent (2%) in excess of the rate which
would otherwise be applicable thereto pursuant to the Schedule.
2.8 Examination Fee. Borrowers agrees to pay jointly and severally to
FINOVA the Examination Fee in the amount set forth on the Schedule in connection
with each audit or examination of Borrowers performed by FINOVA prior to or
after the date hereof. Without limiting the generality of the foregoing,
Borrowers shall jointly and severally pay to FINOVA an initial Examination Fee
in an amount equal to the amount set forth on the Schedule. Such initial
Examination Fee shall be deemed fully earned at the time of payment and due and
payable upon the closing of this transaction, and shall be deducted from any
good faith deposit
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paid by Borrowers to FINOVA prior to the date of this Agreement.
2.9 Excess Interest.
(a) The contracted for rates of interest of the loans contemplated
hereby, without limitation, shall consist of the following: (i) the interest
rates set forth on the Schedule, calculated and applied to the principal balance
of the Obligations in accordance with the provisions of this Agreement; (ii)
interest after an Event of Default, calculated and applied to the amount of the
Obligations in accordance with the provisions hereof; and (iii) all Additional
Sums (as herein defined), if any. Each Borrower agrees to pay an effective
contracted for rate of interest which is the sum of the above-referenced
elements. The Examination Fee, attorneys fees, expert witness fees, letter of
credit fees, Closing Fee, Termination Fee, Success Fee, other charges, goods,
things in action or any other sums or things of value paid or payable by
Borrower (collectively, the "ADDITIONAL SUMS"), whether pursuant to this
Agreement or any other documents or instruments in any way pertaining to this
lending transaction, or otherwise with respect to this lending transaction, that
under any applicable law may be deemed to be interest with respect to this
lending transaction, for the purpose of any applicable law that may limit the
maximum amount of interest to be charged with respect to this lending
transaction, shall be payable by Borrowers as, and shall be deemed to be,
additional interest and for such purposes only, the agreed upon and "contracted
for rate of interest" of this lending transaction shall be deemed to be
increased by the rate of interest resulting from the inclusion of the Additional
Sums.
(b) It is the intent of the parties to comply with the usury laws of
the State of Arizona (the "APPLICABLE USURY LAW"). Accordingly, it is agreed
that notwithstanding any provisions to the contrary in this Agreement, or in any
of the documents securing payment hereof or otherwise relating hereto, in no
event shall this Agreement or such documents require the payment or permit the
collection of interest in excess of the maximum contract rate permitted by the
Applicable Usury Law (the "MAXIMUM INTEREST RATE"). In the event (a) any such
excess of interest otherwise would be contracted for, charged or received from
Borrowers or otherwise in connection with the loans evidenced hereby, or (b) the
maturity of the Obligations is accelerated in whole or in part, or (c) all or
part of the Obligations shall be prepaid, so that under any of such
circumstances the amount of interest contracted for, charged or received in
connection with the loans evidenced hereby, would exceed the Maximum Interest
Rate, then in any such event (1) the provisions of this paragraph shall govern
and control, (2) neither the Borrowers nor any other Person now or hereafter
liable for the payment of the Obligations shall be obligated to pay the amount
of such interest to the extent that it is in excess of the Maximum Interest
Rate, (3) any such excess which may have been collected shall be either applied
as a credit against the then unpaid principal amount of the Obligations or
refunded to Borrowers, at FINOVA's option, and (4) the effective rate of
interest shall be automatically reduced to the Maximum Interest Rate. It is
further agreed, without limiting the generality of the foregoing, that to the
extent permitted by the Applicable Usury Law; (x) all calculations of interest
which are made for the purpose of determining whether such rate would exceed the
Maximum Interest Rate shall be made by amortizing, prorating, allocating and
spreading during the period of the full stated term of the loans evidenced
hereby, all interest at any time contracted for, charged or received from
Borrowers or otherwise in connection with such loan; and (y) in the event that
the effective rate of interest on the loan should at any time exceed the Maximum
Interest Rate, such excess interest that would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law shall be paid to
FINOVA from time to time, if and when the effective interest rate on the loan
otherwise falls below the Maximum Interest Rate, to the extent that interest
paid to the date of calculation does not exceed the Maximum Interest Rate, until
the entire amount of interest which would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law has been paid in full.
Each Borrower further agrees that should the Maximum Interest Rate be increased
at any time hereafter because of a change in the Applicable Usury Law, then to
the extent not prohibited by the Applicable Usury Law, such increases shall
apply to all indebtedness evidenced hereby regardless of when incurred; but,
again to the extent not prohibited by the Applicable Usury Law, should the
Maximum Interest Rate be decreased because of a change in the Applicable Usury
Law, such decreases shall not apply to the indebtedness evidenced hereby
regardless of when incurred.
2.10 Principal Payments; Proceeds of Collateral.
(a) Principal Payments. Except where evidenced by notes or other
instruments issued or made by a Borrower to FINOVA specifically containing
payment provisions which are in conflict with this Section 2.10 (in which event
the conflicting provisions of said notes or other instruments shall govern and
control), that portion of the Obligations consisting of principal payable on
account of Loans shall be payable jointly and severally by Borrowers to FINOVA
immediately upon the earliest of (i) the receipt by FINOVA or Borrowers of any
proceeds of any of the Collateral, to the extent of said proceeds during any
period when funds in a Blocked Account or Dominion Account are being transferred
to FINOVA in accordance with subsections (b) and (c) below, (ii) the occurrence
of an Event of Default in consequence of which FINOVA elects to accelerate the
maturity and payment of such loans, or (iii) any termination of this Agreement
pursuant to Section 9.2 hereof; provided, however, that any Overadvance or
Overline shall be payable on demand pursuant to the provisions of Section 2.3
hereof.
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<PAGE> 10
(b) Collections. Until FINOVA notifies Borrowers to the contrary,
Borrowers may make collection of all Receivables for FINOVA and shall receive
all such payments or sums as trustee of FINOVA and immediately cause all such
payments or sums to be deposited into a Blocked Account. No borrower shall
commingle collections of Receivables attributable to the PEO Business with
collections of any other Collateral. Whenever an Event of Default has occurred
and is continuing, FINOVA or its designee may, at any time, notify account
debtors that the Receivables have been assigned to FINOVA and of FINOVA's
security interest therein, and may collect the Receivables directly and charge
the collection costs and expenses to Borrowers' loan accounts. Each Borrower
agrees that, in computing the charges under this Agreement, all items of payment
shall be deemed applied by FINOVA on account of the Obligations on the Business
Day of receipt by FINOVA of good funds which have been finally credited to
FINOVA's account, whether such funds are received directly from a Borrower or
from the Blocked Account bank, pursuant to Section 2.10(c) hereof, and this
provision shall apply regardless of the amount of the Obligations outstanding or
whether any Obligations are outstanding; provided, that if any such good funds
are received after 12:00 p.m. noon (Los Angeles time) on any Business Day or at
any time on any day not constituting a Business Day, such funds shall be deemed
received on the immediately following Business Day. FINOVA is not, however,
required to credit any Borrower's account for the amount of any item of payment
which is unsatisfactory to FINOVA in its Permitted Discretion and FINOVA may
charge the applicable Borrower's loan account for the amount of any item of
payment which is returned to FINOVA unpaid.
(c) Establishment of a Blocked Account or Dominion Account. Unless each
Borrower shall be otherwise directed by FINOVA in writing, each Borrower shall
cause all proceeds of Collateral to be deposited into or such "blocked accounts"
as FINOVA may require (each, a "BLOCKED ACCOUNT") pursuant to an arrangement
with such bank as may be selected by Borrowers and be acceptable to FINOVA.
Unless otherwise provided herein, all proceeds in the Blocked Accounts shall be
available to Borrowers in accordance with the regulations of such bank for use
in the ordinary course of business. If a Cash Dominion Event has occurred and is
continuing, then upon written notice from FINOVA to the bank maintaining a
Blocked Account all proceeds in such Blocked Account shall be transferred on a
regular basis in immediately available funds only to FINOVA or for its account
as FINOVA may direct, and applied in payment of the Obligations in such order as
FINOVA determines in its sole discretion. Each Borrower shall issue to any such
bank an irrevocable letter of instruction directing said bank to make available
or transfer such funds so deposited as provided in the immediately preceding
sentence. All funds deposited in a Blocked Account shall be at all times subject
to FINOVA's security interest and Borrowers shall obtain the agreement by such
bank to waive any offset rights against the funds so deposited. FINOVA assumes
no responsibility for any Blocked Account arrangement, including without
limitation, any claim of accord and satisfaction or release with respect to
deposits accepted by any bank thereunder. Alternatively, if a Cash Dominion
Event described in clause (i) or (ii) (A) of the definition thereof has occurred
and is continuing, FINOVA may establish depository accounts in the name of
FINOVA at a bank or banks for the deposit of such funds (each, a "DOMINION
ACCOUNT") and each Borrower shall deposit all proceeds of Receivables and all
cash proceeds of any sale, to the extent permitted herein, of Equipment or cause
same to be deposited, in kind, in such Dominion Accounts of FINOVA in lieu of
depositing same to Blocked Accounts, and, unless otherwise provided herein, all
such funds shall be applied by FINOVA to the Obligations in such order as FINOVA
determines in its sole discretion.
(d) Payments Without Deductions. Each Borrower shall pay principal,
interest, and all other amounts payable hereunder, or under any other Loan
Document, without any deduction whatsoever, including, but not limited to, any
deduction for any setoff or counterclaim.
(e) Collection Days Upon Repayment. In the event any Borrower repays
the Obligations in full at any time hereafter, such payment in full shall be
credited (conditioned upon final collection) to such Borrower's loan account on
the Business Day of FINOVA's receipt thereof, determined in accordance with
Section 2.10(b).
(f) Monthly Accountings. FINOVA shall provide Borrowers monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrowers and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by FINOVA), unless DSI
notifies FINOVA in writing to the contrary within thirty (30) days after each
account is rendered, describing the nature of any alleged errors or admissions.
2.11 Application of Collateral. Except as otherwise provided herein,
FINOVA shall have the continuing and exclusive right to apply or reverse and
re-apply any and all payments to any portion of the Obligations in such order
and manner as FINOVA shall determine in its sole discretion; provided, however,
that so long as no Event of Default has occurred and is continuing, any payment
designated by Borrowers as being made in respect of principal of or interest on
the Term Loans shall be applied as designated by Borrowers. To the extent that a
Borrower makes a payment or FINOVA receives any payment or proceeds of the
Collateral for any Borrower's benefit which is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required
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<PAGE> 11
to be repaid to a trustee, debtor in possession, receiver or any other party
under any bankruptcy law, common law or equitable cause, or otherwise, then, to
such extent, all Obligations or part thereof intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
FINOVA.
2.12 Application of Payments. The amount of all payments or amounts
received by FINOVA with respect to the Loans shall be applied to the extent
applicable under this Agreement: (i) first, to accrued interest through the date
of such payment, including any Default Interest; (ii) then, to any late fees,
overdue risk assessments, Examination Fee and expenses, collection fees and
expenses and any other fees and expenses due to FINOVA hereunder; and (iii)
last, the remaining balance, if any, to the unpaid principal balance of the
Loans; provided however, while an Event of Default exists under this Agreement,
or under any other Loan Document, each payment hereunder shall be (x) held as
cash collateral to secure Obligations relating to any Letters of Credit or other
contingent obligations arising under the Loan Documents and/or (y) applied to
amounts owed to FINOVA by Borrowers as FINOVA in its sole discretion may
determine. In calculating interest and applying payments as set forth above: (a)
interest shall be calculated and collected through the date a payment is
actually applied by FINOVA under the terms of this Agreement; (b) interest on
the outstanding balance shall be charged during any grace period permitted
hereunder; (c) at the end of each month, all accrued and unpaid interest and
other charges provided for hereunder shall be added to the principal balance of
the Loan; and (d) to the extent that any Borrower makes a payment or FINOVA
receives any payment or proceeds of the Collateral for such Borrower's benefit
that is subsequently invalidated, set aside or required to be repaid to any
other Person, then, to such extent, all Obligations to which such payment or
proceeds were applied or intended to be applied shall be revived and continue as
if such payment or proceeds had not been received by FINOVA, and FINOVA may
adjust the Loan balances as FINOVA, in its reasonable judgment, deems
appropriate under the circumstances to reverse the effect of such application.
2.13 Notification of Closing. DSI shall provide FINOVA with at least
forty-eight (48) hours prior written notice of the Amendment Closing Date, to
enable FINOVA to arrange for the availability of funds. In the event the closing
does not take place on the date specified in DSI's notice to FINOVA, other than
through the fault of FINOVA, each Borrower agrees jointly and severally to
reimburse FINOVA for FINOVA's costs to maintain the necessary funds available
for the closing, at the respective Term Interest Rates with respect to the
corresponding amounts of the Term Loans, and at the Revolving Interest Rate with
respect to an amount equal to the initial advance under the Revolving Credit
Loans facility which is to be made on the Amendment Closing Date, for the number
of days which elapse between the date specified in DSI's notice and the date
upon which the closing actually occurs (which number of days shall not include
the date specified in DSI's notice, but shall include the Amendment Closing
Date).
3. SECURITY.
3.1 Security Interest in the Collateral. To secure the payment and
performance of the Obligations when due, each Borrower hereby grants to FINOVA a
first priority security interest (subject only to Permitted Encumbrances) in all
of such Borrower's now owned or hereafter acquired or arising Inventory,
Equipment, Receivables, life insurance policies and the proceeds thereof,
Trademarks, Copyrights, Licenses and Patents, Investment Property (as defined in
Section 9-115 of the Code) and General Intangibles, including, without
limitation, all of such Borrower's Deposit Accounts, money, any and all property
now or at any time hereafter in FINOVA's possession (including claims and credit
balances), and all proceeds (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties), all products and all
books and records and computer data related to any of the foregoing (all of the
foregoing, together with all other property in which FINOVA may be granted a
lien or security interest, is referred to herein, collectively, as the
"COLLATERAL").
3.2 Perfection and Protection of Security Interest. Each Borrower
shall, at its expense, take all actions requested by FINOVA at any time to
perfect, maintain, protect and enforce FINOVA's first priority security interest
and other rights in the Collateral and the priority thereof from time to time,
including, without limitation, (i) executing and filing financing or
continuation statements and amendments thereof and executing and delivering such
documents and titles in connection with motor vehicles as FINOVA shall require,
all in form and substance satisfactory to FINOVA, (ii) maintaining a perpetual
inventory and complete and accurate stock records, (iii) delivering to FINOVA
warehouse receipts covering any portion of the Collateral located in warehouses
and for which warehouse receipts are issued, and transferring Inventory to
warehouses designated by FINOVA, (iv) placing notations on such Borrower's books
of account to disclose FINOVA's security interest therein and (v) delivering to
FINOVA all letters of credit on which such Borrower is named beneficiary. FINOVA
may file, without any Borrower's signature, one or more financing statements
disclosing FINOVA's security interest under this Agreement. Each Borrower agrees
that a carbon, photographic, photostatic or other reproduction of this Agreement
or of a financing statement is sufficient as a financing statement. If any
Collateral is at any time in the possession or control of any warehouseman,
bailee or any of a Borrower's agents or processors, the applicable Borrower
shall notify such Person of FINOVA's security interest in such Collateral and,
upon FINOVA's request, instruct them to hold all such Collateral
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<PAGE> 12
for FINOVA's account subject to FINOVA's instructions. From time to time, each
Borrower shall, upon FINOVA's request, execute and deliver confirmatory written
instruments pledging the Collateral to FINOVA, but any Borrower's failure to do
so shall not affect or limit FINOVA's security interest or other rights in and
to the Collateral. Until the Obligations have been fully satisfied and FINOVA's
obligation to make further advances hereunder has terminated, FINOVA's security
interest in the Collateral shall continue in full force and effect.
3.3 Preservation of Collateral. FINOVA may, in its Permitted
Discretion, at any time discharge any lien or encumbrance on the Collateral or
bond the same, pay any insurance, maintain guards, pay any service bureau,
obtain any record or take any other action to preserve the Collateral and charge
the cost thereof to the applicable Borrower's loan account as an Obligation.
3.4 Insurance. Each Borrower will maintain and deliver evidence to
FINOVA of such insurance as is required by FINOVA, written by insurers, in
amounts, and with lender's loss payee, additional insured, and other
endorsements, satisfactory to FINOVA. All premiums with respect to such
insurance shall be paid by each Borrowers as and when due. Accurate and
certified copies of the policies shall be delivered by each Borrower to FINOVA.
If a Borrower fails to comply with this Section, FINOVA may (but shall not be
required to) procure such insurance and endorsements at the Borrowers' expense
and charge the cost thereof to the Borrowers' loan accounts as an Obligation.
3.5 Collateral Reporting; Inventory.
(a) Invoices. No Borrower shall re-date any invoice or sale from the
original date thereof or make sales on extended terms beyond those customary in
Borrowers' industry, or otherwise extend or modify the term of any Receivable.
If a Borrower becomes aware of any matter materially affecting any Receivable,
including information affecting the credit of the account debtor thereon, such
Borrower shall promptly notify FINOVA in writing.
(b) Instruments. In the event any Receivable is or becomes evidenced by
a promissory note, trade acceptance or any other instrument for the payment of
money, the applicable Borrower shall immediately deliver such instrument to
FINOVA appropriately endorsed to FINOVA and, regardless of the form of any
presentment, demand, notice of dishonor, protest and notice of protest with
respect thereto, such Borrower shall remain liable thereon until such instrument
is paid in full.
3.6 Receivables.
(a) Eligibility. (i) Each Borrower represents and warrants that each of
its Receivables covers and shall cover a bona fide sale or lease and delivery by
it of goods or the rendition by it of services in the ordinary course of its
business, and shall be for a liquidated amount and FINOVA's security interest
shall not be subject to any offset, deduction, counterclaim, rights of return or
cancellation, lien or other condition. If any representation or warranty herein
is breached as to any Receivable or any Receivable ceases to be an Eligible
Receivable for any reason other than payment thereof, then FINOVA may, in
addition to its other rights hereunder, designate any and all Receivables owing
by that account debtor as not Eligible Receivables; provided, that FINOVA shall
in any such event retain its security interest in all Receivables, whether or
not Eligible Receivables, until the Obligations have been fully satisfied and
FINOVA's obligation to provide loans hereunder has terminated.
(ii) FINOVA at any time shall be entitled to (i) establish and increase
or decrease reserves against Eligible Receivables, (ii) reduce the advance rates
in the Schedule or restore such advance rates to any level equal to or below the
advance rates set forth in the Schedule or (iii) impose additional restrictions
(or eliminate the same) to the standards of eligibility set forth in the
definitions of "Eligible Receivables", in the exercise of its Permitted
Discretion. FINOVA may but shall not be required to rely on the schedules and/or
reports delivered to FINOVA in connection herewith in determining the then
eligibility of Receivables. Reliance thereon by FINOVA from time to time shall
not be deemed to limit the right of FINOVA to revise advance rates or standards
of eligibility as provided above.
(b) Disputes. Each Borrower shall notify FINOVA promptly of all
material disputes or claims and settle or adjust such disputes or claims at no
expense to FINOVA, but no discount, credit or allowance shall be granted to any
account debtor without FINOVA's consent, except for discounts, credits and
allowances made or given in the ordinary course of a Borrower's business. FINOVA
may, at any time after the occurrence of an Event of Default, settle or adjust
disputes or claims directly with account debtors for amounts and upon terms
which FINOVA considers advisable in its reasonable credit judgment and, in all
cases, FINOVA shall credit Borrowers' loan accounts with only the net amounts
received by FINOVA in payment of any Receivables.
3.7 Equipment. Each Borrower shall keep and maintain the Equipment in
good operating condition and repair and make all necessary replacements thereto
to maintain and preserve the value and operating efficiency thereof at all times
consistent with Borrowers' past practice, ordinary wear and tear excepted. No
Borrower shall permit any item of Equipment to become a fixture (other than a
trade fixture) to real estate or an accession to other property.
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3.8 Other Liens; No Disposition of Collateral. Each Borrower
represents, warrants and covenants that except for FINOVA's security interest,
Permitted Encumbrances, and such other liens, claims and encumbrances as may be
permitted by FINOVA in its sole discretion from time to time in writing, (a) all
Collateral is and shall continue to be owned by it free and clear of all liens,
claims and encumbrances whatsoever and (b) no Borrower shall, without FINOVA's
prior written approval, sell, encumber or dispose of or permit the sale,
encumbrance or disposal of any Collateral or all or any substantial part of any
of its other assets (or any interest of a Borrower therein). In the event FINOVA
gives any such prior written approval with respect to any such sale of
Collateral, the same may be conditioned on the sale price being equal to, or
greater than, an amount acceptable to FINOVA. The proceeds of any such sales of
Collateral shall be remitted to FINOVA pursuant to this Agreement for
application to the Obligations.
3.9 Collateral Security. The Obligations shall constitute one loan
secured by the Collateral. FINOVA may, in its sole discretion, in accordance
with the Loan Documents and applicable law, (i) exchange, enforce, waive or
release any of the Collateral, (ii) apply Collateral and direct the order or
manner of sale thereof as it may determine, and (iii) settle, compromise,
collect or otherwise liquidate any Collateral in any manner without affecting
its right to take any other action with respect to any other Collateral.
4. CONDITIONS OF CLOSING.
4.1 Initial Advance. The obligation of FINOVA to make the initial
advance under the Original Agreement or to issue or arrange for the issuance of
the initial Letter of Credit under the Original Agreement is subject to the
fulfillment, to the satisfaction of FINOVA and its counsel, of each of the
following conditions on or prior to the date set forth on the Schedule:
(a) Loan Documents. FINOVA shall have received each of the following
Loan Documents: (i) the Agreement fully and properly executed by Borrower; (ii)
a promissory note in such amounts and on such terms and conditions as FINOVA
shall specify, executed by Borrower; (iii) Guaranties executed by each of the
Guarantors and Support Agreement executed by the applicable parties; (iv) such
security agreements, intellectual property assignments, pledge agreements,
mortgages and deeds of trust as FINOVA may require with respect to this
Agreement and any Guaranties, executed by each of the parties thereto and, if
applicable, duly acknowledged for recording or filing in the appropriate
governmental offices; (v) such Blocked Account agreements as it shall reasonably
determine; and (vi) such other documents, instruments and agreements in
connection herewith as FINOVA shall require, executed, certified and/or
acknowledged by such parties as FINOVA shall designate;
(b) Minimum Excess Availability. Borrowers shall have Excess
Availability under the Revolving Credit Loans facility of not less than the
amount specified in the Schedule, after giving effect to the initial advance and
the initial Letter of Credit hereunder and after giving effect to any applicable
Loan Reserves against borrowing availability under the Revolving Credit Loans.
(c) Terminations by Existing Lender. Borrowers' existing lender shall
have executed and delivered UCC termination statements and other documentation
evidencing the termination of its liens and security interests in the assets of
Borrowers;
(d) Charter Documents. FINOVA shall have received copies of each
Borrower's By-laws and Articles or Certificate of Incorporation, as amended,
modified, or supplemented to the Closing Date, certified by the Secretary of the
applicable Borrower;
(e) Good Standing. FINOVA shall have received a certificate of
corporate status with respect to each Borrower, dated within ten (10) days of
the Closing Date, by the Secretary of State of the state of incorporation of
such Borrower, which certificate shall indicate that such Borrower is in good
standing in such state;
(f) Foreign Qualification. FINOVA shall have received certificates of
corporate status with respect to each Borrower and each other Loan Party, each
dated within ten (10) days of the Closing Date, issued by the Secretary of State
of each state in which such party's failure to be duly qualified or licensed
would have a material adverse effect on its financial condition or assets,
indicating that such party is in good standing;
(g) Authorizing Resolutions and Incumbency. FINOVA shall have received
a certificate from the Secretary of each Borrower attesting to (i) the adoption
of resolutions of such Borrower's Board of Directors, and shareholders or
members if necessary, authorizing the borrowing of money from FINOVA and
execution and delivery of this Agreement and the other Loan Documents to which
such Borrower is a party, and authorizing specific officers of such Borrower to
execute same, and (ii) the authenticity of original specimen signatures of such
officers;
(h) Insurance. FINOVA shall have received the insurance certificates
and certified copies of policies required by Section 3.4 hereof, in form and
substance satisfactory to FINOVA and its counsel, together with an additional
insured endorsement in favor of FINOVA with respect to all liability policies
and a lender's loss payable endorsement in favor of FINOVA with respect to all
casualty and business interruption
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policies, each in form and substance acceptable to FINOVA and its counsel;
(i) Searches; Certificates of Title. FINOVA shall have received
searches reflecting the filing of its financing statements and fixture filings
in such jurisdictions as it shall determine, and shall have received
certificates of title with respect to the Collateral which shall have been duly
executed in a manner sufficient to perfect all of the security interests granted
to FINOVA;
(j) Landlord, Bailee and Mortgagee Waivers. FINOVA shall have received
landlord, bailee and/or mortgagee waivers from the lessors, bailees and/or
mortgagees of all locations where any Collateral is located;
(k) Fees. Borrowers shall have paid all fees payable by them on the
Closing Date pursuant to this Agreement;
(l) Opinion of Counsel. FINOVA shall have received an opinion of
Borrowers' counsel covering such matters as FINOVA shall determine in its sole
discretion;
(m) Officer Certificate. FINOVA shall have received a certificate of
the President and the Chief Financial Officer or similar officer of DSI,
attesting to the accuracy of each of the representations and warranties of
Borrowers set forth in this Agreement and the fulfillment of all conditions
precedent to the initial advance hereunder;
(n) Solvency Certificate. If requested, FINOVA shall have received a
signed certificate of the DSI's duly elected Chief Financial Officer concerning
the solvency and financial condition of Borrowers, on FINOVA's standard form;
(o) Blocked Account. The Blocked Accounts referred to in Section
2.10(c) hereof shall have been established to the satisfaction of FINOVA in its
sole discretion;
(p) [Intentionally Omitted]
(q) Environmental Certificate. FINOVA shall have received an
Environmental Certificate from Borrowers, in form and substance satisfactory to
FINOVA in its discretion, with respect to all locations of Collateral;
(r) Search and References. FINOVA shall have received and approved the
results of UCC, tax lien, litigation, judgment, and bankruptcy searches
regarding Borrowers, and members of the senior management of Borrowers, and
shall have received satisfactory customer, vendor and credit reference checks on
Borrowers.
(s) No Material Adverse Changes. Prior to the Closing Date, there shall
have occurred no material adverse change in the financial condition of any
Borrower, or in the condition of the assets of any Borrower, from that shown on
the Prepared Financials. At the closing, Borrowers shall deliver to FINOVA an
officer's certification confirming that Borrowers are unaware of the existence
of any such material adverse change.
(t) Material Agreements. FINOVA shall have received, reviewed and
approved all material agreements to which any Borrower shall be a party.
(u) Projections. Borrowers shall submit cash flow projections and pro
forma balance sheet with adjusting entries (i) showing that the proposed
financing will provide sufficient funds for the Borrowers' projected working
capital needs, and (ii) showing: (1) that the Borrowers will have reasonably
sufficient capital for the conduct of business following the initial funding,
and (2) that no Borrower will incur debts beyond its ability to pay such debts
as they mature.
(v) Opinions. To the extent any Person other than Borrowers shall be
parties to the Loan Documents, FINOVA reserves the right to require satisfactory
opinions of counsel for each such Person concerning the proper organization of
such Person and the due authorization, execution, delivery, enforceability,
validity and binding effect of the Loan Documents to which such Person is a
party. Each such opinion of counsel shall confirm, to the satisfaction of
FINOVA, that the opinion is being delivered to FINOVA at the instruction of the
party represented by such counsel, that FINOVA is entitled to rely on such
opinion and that for purposes of such reliance, FINOVA is deemed to be in
privity with the opining counsel.
(w) ADA Compliance. If necessary, as of the Closing Date, each Borrower
shall be in compliance with the Americans with Disabilities Act of 1990 ("ADA"),
or, if any renovations of a Borrower's facilities or modifications of a
Borrower's employment practices shall be required to bring them into compliance
with the ADA, review and approval by FINOVA of such Borrower's proposed plan to
come into such compliance. Each Borrower shall deliver representations and
warranties to FINOVA concerning such Borrower's compliance with the ADA, and no
evidence shall have come to the attention of FINOVA indicating that any Borrower
is not in compliance with the ADA (except to the extent that FINOVA has reviewed
and approved such Borrower's plan to come into compliance).
(x) Transaction Costs. Borrowers shall provide to FINOVA a complete,
itemized summary of all transaction costs paid or incurred by any Person in
connection with the making of the Loans, which transaction costs shall not
exceed the amount set forth in the Schedule, as well as appropriate
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<PAGE> 15
documentation evidencing such costs and the payment thereof. All such
information must be acceptable to FINOVA, in FINOVA's sole discretion, exercised
in good faith.
(y) Schedule Conditions. Borrowers shall have complied with all
additional conditions precedent as set forth in the Schedule attached hereto.
(z) Other Matters. All other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered,
executed and recorded and shall be in form and substance reasonably satisfactory
to FINOVA and its counsel including, without limitation, each of the items
listed on the Closing Checklist attached as EXHIBIT A hereto.
4.2 Amendment and Restatement; Initial Advances Subsequent to
Amendment. The effectiveness of the amendments to the Original Agreement
effectuated by this Agreement and the obligation of FINOVA to make Term Loan B
and Term Loan C (as defined in the Schedule) is subject to the fulfillment, to
the satisfaction of FINOVA and its counsel, of each of the following conditions
on or prior to the date set forth on the Schedule:
(a) Loan Documents. FINOVA shall have received each of the following
Loan Documents: (i) the Amended and Restated Loan and Security Agreement fully
and properly executed by each Borrower; (ii) a promissory note for each of the
Term Loans, in such amounts and on such terms and conditions as FINOVA shall
specify, executed by Borrower; (iii) an affirmation of the Support Agreement of
Donald T. Kelly, dated the Amendment Closing Date, executed by Donald T. Kelly;
(iv) such security agreements, intellectual property assignments, pledge
agreements, mortgages and deeds of trust as FINOVA may require with respect to
this Agreement and any Guaranties, executed by each of the parties thereto and,
if applicable, duly acknowledged for recording or filing in the appropriate
governmental offices; (v) such other documents, instruments and agreements in
connection herewith as FINOVA shall require, executed, certified and/or
acknowledged by such parties as FINOVA shall designate;
(b) Minimum Excess Availability. Borrowers shall have Excess
Availability under the Revolving Credit Loans facility of not less than the
amount specified in the Schedule, after giving effect to the amendments to the
Original Agreement effectuated by this Agreement and after giving effect to any
applicable Loan Reserves against borrowing availability under the Revolving
Credit Loans.
(c) Charter Documents. FINOVA shall have received copies of each
Borrower's By-laws and Articles or Certificate of Incorporation, as amended,
modified, or supplemented to the Amendment Closing Date, certified by the
Secretary of the applicable Borrower;
(d) Good Standing. FINOVA shall have received a certificate of
corporate status with respect to each Borrower, dated within ten (10) days of
the Amendment Closing Date, by the Secretary of State of the state of
incorporation of such Borrower, which certificate shall indicate that such
Borrower is in good standing in such state;
(e) Foreign Qualification. FINOVA shall have received certificates of
corporate status with respect to each Borrower, each dated within ten (10) days
of the Amendment Closing Date, issued by the Secretary of State of each state in
which such party's failure to be duly qualified or licensed would have a
material adverse effect on its financial condition or assets, indicating that
such party is in good standing;
(f) Authorizing Resolutions and Incumbency. FINOVA shall have received
a certificate from the Secretary of each Borrower attesting to (i) the adoption
of resolutions of such Borrower's Board of Directors, and shareholders or
members if necessary, authorizing the borrowing of money from FINOVA and
execution and delivery of this Agreement and the other Loan Documents to which
such Borrower is a party, and authorizing specific officers of such Borrower to
execute same, and (ii) the authenticity of original specimen signatures of such
officers;
(g) Searches; Certificates of Title. FINOVA shall have received
searches reflecting the filing of its financing statements and fixture filings
in such jurisdictions as it shall determine, and shall have received
certificates of title with respect to the Collateral which shall have been duly
executed in a manner sufficient to perfect all of the security interests granted
to FINOVA;
(h) Insurance. FINOVA shall have received the insurance certificates
and certified copies of policies required by Section 3.4 hereof with respect to
the New Borrowers, in form and substance satisfactory to FINOVA and its counsel,
together with an additional insured endorsement in favor of FINOVA with respect
to all liability policies of the New Borrowers and a lender's loss payable
endorsement in favor of FINOVA with respect to all casualty and business
interruption policies, each in form and substance acceptable to FINOVA and its
counsel;
(i) Landlord, Bailee and Mortgagee Waivers. FINOVA shall have received
landlord, bailee and/or mortgagee waivers from the lessors, bailees and/or
mortgagees of all locations where any Collateral of each New Borrower is
located;
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<PAGE> 16
(j) Fees. Borrowers shall have paid all fees payable by them on or
prior to the Amendment Closing Date pursuant to this Agreement;
(k) Opinion of Counsel. FINOVA shall have received an opinion of
Borrowers' counsel covering such matters as FINOVA shall determine in its sole
discretion;
(l) Solvency Certificate. FINOVA shall have received a signed
certificate of DSI's duly elected Chief Financial Officer concerning the
solvency and financial condition of Borrowers after giving effect to this
Agreement and the transactions contemplated by the Merger Documents, on FINOVA's
standard form;
(m) Environmental Certificate. FINOVA shall have received an
Environmental Certificate from New Borrowers, in form and substance to FINOVA in
its discretion, with respect to all location of Collateral of New Borrowers;
(n) Search and References. FINOVA shall have received and approved the
results of UCC, tax lien, litigation, judgment, and bankruptcy searches
regarding the New Borrowers, and members of the senior management of the New
Borrowers, and shall have received satisfactory customer, vendor and credit
reference checks on the New Borrowers.
(o) No Material Adverse Changes. Prior to the Amendment Closing Date,
there shall have occurred no material adverse change in the financial condition
of any Borrower, or in the condition of the assets of any Borrower, from that
shown on the Prepared Financials. At the closing, Borrowers shall deliver to
FINOVA an officer's certification confirming that Borrowers are unaware of the
existence of any such material adverse change.
(p) Material Agreements. FINOVA shall have received, reviewed and
found satisfactory all material agreements to which any New Borrower shall be a
party.
(q) Projections. Borrowers shall submit cash flow projections and pro
forma balance sheets with adjusting entries (i) showing that the proposed
financing will provide sufficient funds for the Borrowers' projected working
capital needs after giving effect to the transactions contemplated by the Merger
Documents, and (ii) showing: (1) that the Borrowers will have reasonably
sufficient capital for the conduct of business following the effectiveness of
this Agreement and the consummation of the financing contemplated hereby and (2)
that no Borrower will incur debts beyond its ability to pay such debts as they
mature;
(r) ADA Compliance. If necessary, as of the Amendment Closing Date,
each New Borrower shall be in compliance with the Americans with Disabilities
Act of 1990 ("ADA"), or, if any renovations of a New Borrower's facilities or
modifications of a New Borrower's employment practices shall be required to
bring them into compliance with the ADA, FINOVA shall have reviewed and found
satisfactory such New Borrower's proposed plan to come into such compliance.
Each New Borrower shall deliver representations and warranties to FINOVA
concerning such New Borrower's compliance with the ADA, and no evidence shall
have come to the attention of FINOVA indicating that any New Borrower is not in
compliance with the ADA (except to the extent that FINOVA has reviewed and found
satisfactory such New Borrower's plan to come into compliance).
(s) Transaction Costs. Borrowers shall provide to FINOVA a complete,
itemized summary of all transaction costs paid or incurred by any Person in
connection with the making of the Loans, which transaction costs shall not
exceed the amount set forth in the Schedule, as well as appropriate
documentation evidencing such costs and the payment thereof. All such
information must be acceptable to FINOVA, in FINOVA's sole discretion, exercised
in good faith.
(t) Schedule Conditions. Borrowers shall have complied with all
additional conditions precedent as set forth in the Schedule attached hereto.
(u) Merger Documents. FINOVA must review and find satisfactory the
Merger Agreements, including copies of all exhibits and schedules thereto, and
all other documents referred to therein, and all other instruments to be
executed between the Borrowers and the sellers named in the Merger Agreements
(the "SELLERS") in connection with the merger contemplated by the Merger
Agreements; all such documents and instruments being referred to herein
collectively as the "MERGER DOCUMENTS"). The Merger Documents must contain
specific representations and warranties, in form and substance satisfactory to
FINOVA, with respect to the accuracy of the financial information submitted by
the Sellers, and shall further contain indemnity provisions acceptable to FINOVA
which shall address, among other items, liability for environmental
contamination and clean up, if any. The transaction contemplated by the Merger
Documents shall have been, or are being simultaneously consummated, in
accordance with the terms and conditions reviewed and approved by FINOVA;
(v) Other Matters. All other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered,
executed and recorded and shall be in form and substance reasonably satisfactory
to FINOVA and its counsel.
4.3 Subsequent Advances. The obligation of FINOVA to make any advance
or issue or cause any Letter of
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Credit to be issued hereunder (including the initial advance or Letter of
Credit) shall be subject to the further conditions precedent that, on and as of
the date of such advance or Letter of Credit issuance: (a) the representations
and warranties of Borrowers set forth in this Agreement shall be accurate,
before and after giving effect to such advance or issuance and to the
application of any proceeds thereof; (b) no Event of Default and no event which,
with notice or passage of time or both, would constitute an Event of Default has
occurred and is continuing, or would result from such advance or issuance or
from the application of any proceeds thereof; (c) no material adverse change has
occurred in any Borrower's business, operations, financial condition, in the
condition of the Collateral or other assets of any Borrower or in the prospect
of repayment of the Obligations; and (d) FINOVA shall have received such other
approvals, opinions or documents as FINOVA shall reasonably request.
5. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants that:
5.1 Due Organization. It is a corporation duly organized, validly
existing and in good standing under the laws of the State set forth on the
Schedule, is qualified and authorized to do business and is in good standing in
all states in which such qualification and good standing are necessary in order
for it to conduct its business and own its property, and has all requisite power
and authority to conduct its business as presently conducted, to own its
property and to execute and deliver each of the Loan Documents to which it is a
party and perform all of its Obligations thereunder, and has not taken any steps
to wind-up, dissolve or otherwise liquidate its assets;
5.2 Other Names. Except as set forth on the Schedule, it has not,
during the preceding five (5) years, been known by or used any other corporate
or fictitious name except as set forth on the Schedule, nor has it been the
surviving corporation of a merger or consolidation or acquired all or
substantially all of the assets of any Person during such time;
5.3 Due Authorization. The execution, delivery and performance by it of
the Loan Documents to which it is a party have been authorized by all necessary
corporate action and do not and shall not constitute a violation of any
applicable law or of its Articles or Certificate of Incorporation or By-Laws or,
after giving effect to the application of the proceeds of the initial Loans, any
other document, agreement or instrument to which any Borrower is a party or by
which any Borrower or its assets are bound;
5.4 Binding Obligation. Each of the Loan Documents to which it is a
party is its legal, valid and binding obligation, enforceable against it in
accordance with its terms;
5.5 Intangible Property. It possesses adequate assets, licenses,
patents, patent applications, copyrights, trademarks, trademark applications and
trade names for the present and planned future conduct of its business without
any known conflict with the rights of others;
5.6 Capital. It has capital sufficient to conduct its business, is able
to pay its debts as they mature, and owns property having a fair salable value
greater than the amount required to pay all of its debts (including contingent
debts);
5.7 Material Litigation. It has no pending or overtly threatened
litigation, actions or proceedings which would materially and adversely affect
its business, assets, operations, prospects or condition, financial or
otherwise, or the Collateral or any of FINOVA's interests therein;
5.8 Title; Security Interests of FINOVA. It has good, indefeasible and
merchantable title to the Collateral and, upon the execution and delivery of the
Loan Documents, the filing of UCC-1 Financing Statements, delivery of the
certificate(s) evidencing any pledged securities, the filing of any collateral
assignments or security agreements regarding Trademarks, Copyrights, Licenses
and Patents, if any, with the appropriate governmental offices, in each case in
the appropriate offices, this Agreement and such documents shall create valid
and perfected first priority liens in the Collateral, subject only to Permitted
Encumbrances;
5.9 Restrictive Agreements; Labor Contracts. It is not a party or
subject to any contract or subject to any charge, corporate restriction,
judgment, decree or order materially and adversely affecting its business,
assets, operations, prospects or condition, financial or otherwise, or which
restricts its right or ability to incur Indebtedness, and it is not party to any
labor dispute. In addition, no labor contract is scheduled to expire during the
Initial Term of this Agreement, except as disclosed to FINOVA in writing prior
to the date hereof;
5.10 Laws. It is not in violation of any applicable statute,
regulation, ordinance or any order of any court, tribunal or governmental
agency, in any respect materially and adversely affecting the Collateral or its
business, assets, operations, prospects or condition, financial or otherwise. It
has all licenses, permits, registrations, and governmental approvals necessary
to conduct its business, and a complete and accurate list thereof is set forth
on the Schedule;
5.11 Consents. It has obtained or caused to be obtained or issued any
required consent of a governmental agency or other Person in connection with the
financing contemplated hereby;
5.12 Defaults. It is not in default with respect to any note,
indenture, loan agreement, mortgage, lease, deed or other agreement to which it
is a party or by which it or its
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assets are bound, nor has any event occurred which, with the giving of notice or
the lapse of time, or both, would cause such a default;
5.13 Financial Condition. The Prepared Financials fairly present the
financial condition and results of operations of DSI and its subsidiaries as of
the date and for the periods thereof in accordance with GAAP; there are no
material omissions from the Prepared Financials or other facts or circumstances
not reflected in the Prepared Financials; and there has been no material and
adverse change in such financial condition or operations since the date of the
initial Prepared Financials delivered to FINOVA hereunder;
5.14 ERISA. None of Borrowers, any ERISA Affiliate, or any Plan is or
has been in violation of any of the provisions of ERISA, any of the
qualification requirements of IRC Section 401(a) or any of the published
interpretations thereunder, nor has any Borrower or any ERISA Affiliate received
any notice to such effect. No notice of intent to terminate a Plan has been
filed under Section 4041 of ERISA, nor has any Plan been terminated under ERISA.
The PBGC has not instituted proceedings to terminate, or appointed a trustee to
administer, a Plan. No lien upon the assets of any Borrower has arisen with
respect to a Plan. No prohibited transaction or Reportable Event has occurred
with respect to a Plan. Neither any Borrower nor any ERISA Affiliate has
incurred any withdrawal liability with respect to any Multiemployer Plan. Each
Borrower and each ERISA Affiliate have made all contributions required to be
made by them to any Plan or Multiemployer Plan when due. There is no accumulated
funding deficiency in any Plan, whether or not waived;
5.15 Taxes. It has filed all tax returns and such other reports as it
is required by law to file and has paid or made adequate provision for the
payment on or prior to the date when due of all taxes, assessments and similar
charges that are due and payable;
5.16 Locations; Federal Tax ID No. Its chief executive office and the
offices and locations where it keeps the Collateral (except for Inventory in
transit) are at the locations set forth on the Schedule, except to the extent
that such locations may have been changed after notice to FINOVA in accordance
with Section 6.4 hereof. Its federal tax identification number is as shown on
the Schedule;
5.17 Business Relationships. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between it and any customer or any group of customers
whose purchases individually or in the aggregate are material to the business of
Borrowers, or with any material supplier, and there exists no present condition
or state of facts or circumstances which would materially and adversely affect
it or prevent it from conducting such business after the consummation of the
transactions contemplated by this Agreement in substantially the same manner in
which it has heretofore been conducted;
5.18 Year 2000. It has taken all action necessary to assure that there
will be no material adverse change to such Borrower's business by reason of the
advent of the year 2000, including without limitation that all computer-based
systems, embedded microchips and other processing capabilities effectively
recognize and process dates after April 1, 1999, except as set forth on
Borrowers' annual report on Form 10-K for the fiscal year ended September 30,
1998;
5.19 Closing of Merger. The transactions contemplated by the Merger
Documents, in the form reviewed and approved by FINOVA, have been consummated
and no party thereto has waived compliance with any of the conditions to its
obligations to consummate such transactions; and
5.20 Reaffirmations. Each request for a loan made by a Borrower
pursuant to this Agreement shall constitute (i) an automatic representation and
warranty by each Borrower to FINOVA that there does not then exist any Event of
Default and (ii) a reaffirmation as of the date of said request of all of the
representations and warranties of each Borrower contained in this Agreement and
the other Loan Documents.
6. COVENANTS.
6.1 AFFIRMATIVE COVENANTS. Each Borrower covenants that, so long as any
Obligation remains outstanding and this Agreement is in effect, it shall:
6.1.1 Taxes. File all tax returns and pay or make adequate provision
for the payment of all taxes, assessments and other charges on or prior to the
date when due;
6.1.2 Notice of Litigation. Promptly notify FINOVA in writing of
any litigation, suit or administrative proceeding which may materially and
adversely affect the Collateral or its business, assets, operations, prospects
or condition, financial or otherwise, whether or not the claim is covered by
insurance;
6.1.3 ERISA. Notify FINOVA in writing (i) promptly upon the
occurrence of any event described in Paragraph 4043 of ERISA, other than a
termination, partial termination or merger of a Plan or a transfer of a Plan's
assets and (ii) prior to any termination, partial termination or merger of a
Plan or a transfer of a Plan's assets;
6.1.4 Change in Location. Notify FINOVA in writing forty-five (45)
days prior to any change in the location of its chief executive office or the
location of any Collateral, or its opening or closing of any other place of
business;
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6.1.5 Corporate Existence. Maintain its corporate existence and its
qualification to do business and good standing in all states necessary for the
conduct of its business and the ownership of its property and maintain adequate
assets, licenses, permits, registrations, governmental approvals, patents,
copyrights, trademarks and trade names for the conduct of its business;
6.1.6 Labor Disputes. Promptly notify FINOVA in writing of any material
labor dispute to which it is or may become subject and the expiration of any
labor contract to which it is a party or bound;
6.1.7 Violations of Law. Promptly notify FINOVA in writing of any
violation of any law, statute, regulation or ordinance of any governmental
entity, or of any agency thereof, applicable to it which may materially and
adversely affect the Collateral or its business, assets, prospects, operations
or condition, financial or otherwise;
6.1.8 Defaults. Notify FINOVA in writing within five (5) Business Days
of its default under any note, indenture, loan agreement, or mortgage, or under
any lease or other agreement material to its business, to which it is a party or
by which it is bound, or of any other default under any of its Indebtedness;
6.1.9 Capital Expenditures. Promptly notify FINOVA in writing of the
making of any Capital Expenditure materially affecting its business, assets,
prospects, operations or condition, financial or otherwise, except to the extent
permitted in the Schedule;
6.1.10 Books and Records. Keep adequate records and books of account
with respect to its business activities in which proper entries are made in
accordance with GAAP, reflecting all of its financial transactions;
6.1.11 Leases; Warehouse Agreements. Provide FINOVA with (i) copies of
all agreements between it and any landlord, warehouseman or bailee which owns
any premises at which any Collateral may, from time to time, be located (whether
for processing, storage or otherwise), and (ii) without limiting the landlord,
bailee and/or mortgagee waivers to be provided pursuant to Section 4.1(j)
hereof, additional landlord, bailee and/or mortgagee waivers in form acceptable
to FINOVA with respect to all locations where any Collateral is hereafter
located;
6.1.13 Additional Documents. At FINOVA's request, promptly execute or
cause to be executed and delivered to FINOVA any and all documents, instruments
or agreements deemed necessary by FINOVA to facilitate the collection of the
Obligations or the Collateral or otherwise to give effect to or carry out the
terms or intent of this Agreement or any of the other Loan Documents. Without
limiting the generality of the foregoing, if any of the Receivables with a face
value in excess of $10,000 arises out of a contract with the United States of
America or any department, agency, subdivision or instrumentality thereof, it
shall promptly notify FINOVA of such fact in writing and shall execute any
instruments and take any other action required or requested by FINOVA to comply
with the provisions of the Federal Assignment of Claims Act; and
6.1.14 Financial Covenants. Comply with the financial covenants set
forth on the Schedule.
6.1.15 Year 2000. Take all action necessary to assure that there will
be no material adverse change to such Borrower's business by reason of the
advent of the year 2000, including without limitation that all computer-based
systems, embedded microchips and other processing capabilities effectively
recognize and process dates after April 1, 1999. At FINOVA's request, each
Borrower shall provide to FINOVA assurance reasonably acceptable to FINOVA that
such Borrower's computer-based systems, embedded microchips and other processing
capabilities are year 2000 compatible.
6.2 Negative Covenants. Without FINOVA's prior written consent, which
consent FINOVA may withhold in its sole discretion, so long as any Obligation
remains outstanding and this Agreement is in effect, it shall not:
6.2.1 Mergers. Merge or consolidate with or acquire any other
Person, or make any other material change in its capital structure or in its
business or operations which might adversely affect the repayment of the
Obligations;
6.2.2 Loans. Make advances, loans or extensions of credit to, or
invest in, any Person, except for loans or cash advances to employees which are
permitted in the Schedule;
6.2.3 Dividends. Declare or pay cash dividends upon any of its stock
or distribute any of its property or redeem, retire, purchase or acquire
directly or indirectly any of its stock;
6.2.4 Adverse Transactions. Enter into any transaction which materially
and adversely affects the Collateral or its ability to repay the Obligations in
full as and when due;
6.2.5 Indebtedness of Others. Guarantee or become directly or
continently liable for the Indebtedness of any Person, except by endorsement of
instruments for deposit and except for the existing guarantees made by it prior
to the date hereof, if any, which are set forth in the Schedule;
6.2.6 Repurchase. Make a sale to any customer on a bill-and-hold,
guaranteed sale, sale and return, sale on
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approval, consignment, or any other repurchase or return basis;
6.2.7 Name. Use any corporate or fictitious name other than its
corporate name as set forth in its Articles or Certificate of Incorporation on
the date hereof or as set forth on the Schedule;
6.2.8 Prepayment. Prepay any Indebtedness other than trade payables and
other than the Obligations;
6.2.9 Capital Expenditure. Make or incur any Capital Expenditure if,
after giving effect thereto, the aggregate amount of all Capital Expenditures by
all Borrowers in any fiscal year would exceed the amount set forth on the
Schedule;
6.2.10 [Intentionally Omitted]
6.2.11 Indebtedness. Create, incur, assume or permit to exist any
Indebtedness for Borrowed Money, (including in connection with Capital Leases)
in excess of the amount set forth on the Schedule, other than (i) the
Obligations, (ii) trade payables and other contractual obligations to suppliers
and customers incurred in the ordinary course of business, and (iii) other
Indebtedness for Borrowed Money existing on the date of this Agreement and
reflected in the Schedule;
6.2.12 Affiliate Transactions. Except as set forth below, sell,
transfer, distribute or pay any money or property to any Affiliate, or invest in
(by capital contribution or otherwise) or purchase or repurchase any stock or
Indebtedness, or any property, of any Affiliate, or become liable on any
guaranty of the indebtedness, dividends or other obligations of any Affiliate.
Notwithstanding the foregoing, it may pay compensation permitted by Section 6.23
to employees who are Affiliates and, if no Event of Default has occurred, it may
engage in transactions with Affiliates in the normal course of business, in
amounts and upon terms which are fully disclosed to FINOVA and which are no less
favorable to it than would be obtainable in a comparable arm's length
transaction with a Person who is not an Affiliate;
6.2.13 Nature of Business. Enter into any new business or make any
material change in any of its business objectives, purposes or operations;
6.2.14 FINOVA's Name. Use the name of FINOVA in connection with any of
its business or activities, except in connection with internal business matters
or as required in dealings with governmental agencies and financial institutions
or with its trade creditors, solely for credit reference purposes;
6.2.15 Margin Security. It will not (and has not in the past) engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation G or Regulation U issued by the Board of Governors of the
Federal Reserve System), and no proceeds of any Loan or other advance will be
used to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock, or in any manner which might
cause such Loan or other advance or the application of such proceeds to violate
(or require any regulatory filing under) Regulation G, Regulation T, Regulation
U, Regulation X or any other regulation of the Board of Governors of the Federal
Reserve System, in each case as in effect on the date or dates of such Loan or
other advance and such use of proceeds. Further, no proceeds of any Loan or
other advance will be used to acquire any security of a class which is
registered pursuant to Section 12 of the Securities Exchange Act of 1934;
6.2.16 Real Property. Purchase or acquire any real property without
FINOVA's prior written consent, a condition of which consent shall include
delivery of appropriate environmental reports and analysis, in form and
substance satisfactory to FINOVA and its counsel; or
6.2.17 Business Activities of Subsidiaries. Permit any Guarantor to
engage in any business activity or own any material assets unless (i) it gives
FINOVA at least 30 days prior written notice thereof and (ii) causes such
Guarantor to execute and deliver such security agreement and other agreements
and instruments as FINOVA may reasonably request to create and perfect in favor
of FINOVA a security interest in the assets of such Guarantor of the type
constituting Collateral hereunder.
6.2.18 Insurance Structure. Change its insurance structure to any type
of non-guaranteed plan without FINOVA's prior written consent.
6 .2.19 Reserving for Insurance Losses. Change its current methods and
practices of reserving for potential insurance losses without FINOVA's prior
written consent.
7. DEFAULT AND REMEDIES.
7.1 Events of Default. Any one or more of the following events shall
constitute an Event of Default under this Agreement:
(a) Any Borrower fails to pay when due and payable any portion of the
Obligations at stated maturity, upon acceleration or otherwise;
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(b) (i) any Borrower or any other Loan Party fails to perform any of
the covenants contained in Section 6.1.1, 6.1.2, 6.1.3, 6.1.6, 6.1.7, 6.1.9,
6.1.10, 6.1.11, and 6.1.13 of this Agreement and such failure shall continue for
ten (10) days; provided, however, that such ten (10) day period shall not apply
in the case of: (A) any failure to observe any such covenant which is not
capable of being cured at all or within such ten (10) day period or which has
been the subject of a prior failure within a six (6) month period or (B) an
intentional breach of a Borrower or any other Loan Party of any such covenant;
or (ii) any Borrower or any other Loan Party fails or neglects to perform, keep,
or observe any Obligation including, but not limited to, any term, provision,
condition, covenant or agreement contained in any Loan Document to which
Borrower or such other Loan Party is a party, other than those described in
Section 7.1(a) or 7.1(b)(i);
(c) Any material adverse change occurs in any Borrower's business,
assets, operations, prospects or condition, financial or otherwise;
(d) The prospect of repayment of any portion of the Obligations or the
value or priority of FINOVA's security interest in the Collateral is materially
impaired;
(e) Any portion of any Borrower's assets is seized, attached, subjected
to a writ or distress warrant, is levied upon or comes into the possession of
any judicial officer;
(f) Any Borrower shall generally not pay its debts as they become due
or shall enter into any agreement (whether written or oral), or offer to enter
into any agreement, with all or a significant number of its creditors regarding
any moratorium or other indulgence with respect to its debts or the
participation of such creditors or their representatives in the supervision,
management or control of its business;
(g) Any bankruptcy or other insolvency proceeding is commenced by any
Borrower, or any such proceeding is commenced against any Borrower and remains
undischarged or unstayed for forty-five (45) days;
(h) Any notice of lien, levy or assessment is filed of record with
respect to any of any Borrower's assets and is not discharged or bonded to
FINOVA's satisfaction within five (5) days after the filing thereof and prior to
any action to enforce or collect such lien, levy or assessment;
(i) Any judgments are entered against any Borrower in an aggregate
amount exceeding $100,000 in any fiscal year and are not vacated or discharged
within 30 days after entry or execution thereon is not effectively stayed;
(j) Any default shall occur under (i) any material agreement between
any Borrower and any third party including, without limitation, any default
which would result in a right by such third party to accelerate the maturity of
any Indebtedness of any Borrower to such third party, or (ii) any Subordinated
Debt;
(k) Any representation or warranty made or deemed to be made by any
Borrower, any Affiliate or any other Loan Party in any Loan Document or any
other statement, document or report made or delivered to FINOVA in connection
therewith shall prove to have been misleading in any material respect;
(l) Any Guarantor terminates or attempts to terminate its Guaranty or
any security therefor or becomes subject to any bankruptcy or other insolvency
proceeding;
(m) Any Prohibited Transaction or Reportable Event shall occur with
respect to a Plan which could have a material adverse effect on the financial
condition of any Borrower; any lien upon the assets of any Borrower in
connection with any Plan shall arise; any Borrower or any of its ERISA
Affiliates shall fail to make full payment when due of all amounts which any
Borrower or any of its ERISA Affiliates may be required to pay to any Plan or
any Multiemployer Plan as one or more contributions thereto; any Borrower or any
of its ERISA Affiliates creates or permits the creation of any accumulated
funding deficiency, whether or not waived
(n) Borrowers fails to satisfy any undertaking in the Conditions
Subsequent Agreement, if any, executed and delivered on the Closing Date;
(o) Donald T. Kelly shall cease to be employed by Borrowers, and his
successor, within thirty (30) days after being employed by Borrowers, shall not
have entered into a Support Agreement substantially identical to the Support
Agreement executed by Donald T. Kelly on the Closing Date; or
(p) Any Change of Control occurs; or any transfer occurs of any
percentage of shares of common stock or other evidence of ownership of any
Borrower other than DSI.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, FINOVA RESERVES THE
RIGHT TO CEASE MAKING ANY LOANS DURING ANY CURE PERIOD STATED ABOVE, AND
THEREAFTER IF AN EVENT OF DEFAULT HAS OCCURRED.
7.2 Remedies. Upon the occurrence of an Event of Default, FINOVA may,
at its option and in its sole discretion and in addition to all of its other
rights under the Loan Documents, cease making Loans, terminate this Agreement
and/or declare all of the Obligations to be immediately payable in full. Each
Borrower agrees that
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FINOVA shall also have all of its rights and remedies under applicable law,
including, without limitation, the default rights and remedies of a secured
party under the Code, and upon the occurrence of an Event of Default each
Borrower hereby consents to the appointment of a receiver by FINOVA in any
action initiated by FINOVA pursuant to this Agreement and to the jurisdiction
and venue set forth in Section 9.25 hereof, and each Borrower waives notice and
posting of a bond in connection therewith. Further, FINOVA may, at any time,
take possession of the Collateral and keep it on each Borrower's premises, at no
cost to FINOVA, or remove any part of it to such other place(s) as FINOVA may
desire, or each Borrower shall, upon FINOVA's demand, at Borrowers' sole cost,
assemble the Collateral and make it available to FINOVA at a place reasonably
convenient to FINOVA. FINOVA may sell and deliver any Collateral at public or
private sales, for cash, upon credit or otherwise, at such prices and upon such
terms as FINOVA deems advisable, at FINOVA's discretion, and may, if FINOVA
deems it reasonable, postpone or adjourn any sale of the Collateral by an
announcement at the time and place of sale or of such postponed or adjourned
sale without giving a new notice of sale. Each Borrower agrees that FINOVA has
no obligation to preserve rights to the Collateral or marshall any Collateral
for the benefit of any Person. FINOVA is hereby granted a license or other right
to use, without charge, each Borrower's labels, patents, copyrights, name, trade
secrets, trade names, trademarks and advertising matter, or any similar
property, in completing production, advertising or selling any Collateral and
each Borrower's rights under all licenses and all franchise agreements shall
inure to FINOVA's benefit. Any requirement of reasonable notice shall be met if
such notice is mailed postage prepaid to DSI at its address set forth in the
heading to this Agreement at least ten (10) days before sale or other
disposition. The proceeds of sale shall be applied, first, to all attorneys fees
and other expenses of sale, and second, to the Obligations in such order as
FINOVA shall elect, in its sole discretion. FINOVA shall return any excess to
the applicable Borrower and each Borrower shall remain jointly and severally
liable for any deficiency to the fullest extent permitted by law.
7.3 Standards for Determining Commercial Reasonableness. Each Borrower
and FINOVA agree that the following conduct by FINOVA with respect to any
disposition of Collateral shall conclusively be deemed commercially reasonable
(but other conduct by FINOVA, including, but not limited to, FINOVA's use in its
sole discretion of other or different times, places and manners of noticing and
conducting any disposition of Collateral shall not be deemed unreasonable): Any
public or private disposition: (i) as to which on no later than the tenth
calendar day prior thereto written notice thereof is mailed or personally
delivered to DSI and, with respect to any public disposition, on no later than
the tenth calendar day prior thereto notice thereof describing in general
non-specific terms, the Collateral to be disposed of is published once in a
newspaper of general circulation in the county where the sale is to be conducted
(provided that no notice of any public or private disposition need be given to
any Borrower or published if the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market); (ii) which is conducted at any place designated by FINOVA, with or
without the Collateral being present; and (iii) which commences at any time
between 8:00 a.m. and 5:00 p.m. Without limiting the generality of the
foregoing, each Borrower expressly agrees that, with respect to any disposition
of accounts, instruments and general intangibles, it shall be commercially
reasonable for FINOVA to direct any prospective purchaser thereof to ascertain
directly from the applicable Borrower any and all information concerning the
same, including, but not limited to, the terms of payment, aging and
delinquency, if any, the financial condition of any obligor or account debtor
thereon or guarantor thereof, and any collateral therefor.
8. EXPENSES AND INDEMNITIES
8.1 Expenses. Each Borrower covenants that, so long as any Obligation
remains outstanding and this Agreement remains in effect, it shall promptly
reimburse FINOVA jointly and severally for all costs, fees and expenses incurred
by FINOVA in connection with the negotiation, preparation, execution, delivery,
administration and enforcement of each of the Loan Documents, including, but not
limited to, the reasonable attorneys' and paralegals' fees of in-house and
outside counsel, expert witness fees, lien, title search and insurance fees,
appraisal fees, all charges and expenses incurred in connection with any and all
environmental reports and environmental remediation activities, and all other
costs, expenses, taxes and filing or recording fees payable in connection with
the transactions contemplated by this Agreement, including without limitation
all such costs, fees and expenses as FINOVA shall incur or for which FINOVA
shall become obligated in connection with (i) any inspection or verification of
the Collateral, (ii) any proceeding relating to the Loan Documents or the
Collateral, (iii) actions taken with respect to the Collateral and FINOVA's
security interest therein, including, without limitation, the defense or
prosecution of any action involving FINOVA and any Borrower or any third party,
(iv) enforcement of any of FINOVA's rights and remedies with respect to the
Obligations or Collateral and (v) consultation with FINOVA's attorneys and
participation in any workout, bankruptcy or other insolvency or other proceeding
involving any Loan Party or any Affiliate, whether or not suit is filed or the
issues are peculiar to federal bankruptcy or state insolvency laws. Each
Borrower shall also jointly and severally pay all FINOVA charges in connection
with bank wire transfers, forwarding of loan proceeds, deposits of checks and
other items of payment, returned checks, establishment and maintenance of
lockboxes and other Blocked Accounts,
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and all other bank and administrative matters, in accordance with FINOVA's
schedule of bank and administrative fees and charges in effect from time to
time.
8.2 Environmental Matters. The Environmental Certificate dated on or
about the date of this Agreement is incorporated herein for all purposes as if
fully stated in this Agreement.
9. MISCELLANEOUS.
9.1 Examination of Records; Financial Reporting.
(a) Examinations. FINOVA shall at all reasonable times have full access
to and the right to examine, audit, make abstracts and copies from and inspect
each Borrower's records, files, books of account and all other documents,
instruments and agreements relating to the Collateral and the right to check,
test and appraise the Collateral. Each Borrower shall deliver to FINOVA any
instrument necessary for FINOVA to obtain records from any service bureau
maintaining records for any Borrower. All instruments and certificates prepared
by any Borrower showing the value of any of the Collateral shall be accompanied,
upon FINOVA's request, by copies of related purchase orders and invoices. FINOVA
may, at any time after the occurrence of an Event of Default, remove from each
Borrower's premises such Borrower's books and records (or copies thereof) or
require such Borrower to deliver such books and records or copies to FINOVA.
FINOVA may, without expense to FINOVA, use such of each Borrower's personnel,
supplies and premises as may be reasonably necessary for maintaining or
enforcing FINOVA's security interest.
(b) Reporting Requirements. Each Borrower shall furnish FINOVA, upon
request, such information and statements as FINOVA shall reasonably request from
time to time regarding such Borrower's business affairs, financial condition and
the results of its operations. Without limiting the generality of the foregoing,
DSI on behalf of all Borrowers shall provide FINOVA with: (i) FINOVA's standard
form collateral and loan report for all Borrowers, weekly, and upon FINOVA's
request, copies of sales journals, cash receipt journals, and deposit slips;
(ii) upon FINOVA's request, copies of sales invoices, customer statements and
credit memoranda issued, remittance advices and reports; (iii) copies of
shipping and delivery documents, upon request; (iv) on or prior to the date set
forth on the Schedule, monthly agings (aged from invoice date) and
reconciliations of all Borrowers' Receivables (with listings of concentrated
accounts), payables reports, compliance certificates and unaudited financial
statements with respect to the prior month prepared on a basis consistent with
such statements prepared in prior months and otherwise in accordance with GAAP;
(v) on or prior to the date set forth in the Schedule, audited annual
consolidated financial statements of DSI and its subsidiaries, prepared in
accordance with GAAP applied on a basis consistent with the most recent Prepared
Financials provided to FINOVA by Borrowers, including balance sheets, income and
cash flow statements, accompanied by the unqualified report thereon of
independent certified public accountants acceptable to FINOVA; and (vi) such
certificates relating to the foregoing as FINOVA may request, including, without
limitation, a monthly certificate from the president and the chief financial
officer of DSI in the form of EXHIBIT B hereto, showing Borrowers' compliance
with each of the financial covenants set forth in this Agreement, and stating
whether any Event of Default has occurred or event which, with giving of notice
or the passage of time, or both, would constitute an Event of Default, and if
so, the steps being taken to prevent or cure such Event of Default. All reports
or financial statements submitted by Borrowers shall be in reasonable detail and
shall be certified by the principal financial officer of DSI or the applicable
Borrower as being complete and correct.
9.2 Term; Termination.
(a) Term. The Initial Term of the Revolving Credit Loans facility and
the obligation of FINOVA to made advances with respect thereto in accordance
with this Agreement shall be as set forth on the Schedule, and the Revolving
Credit Loans facility and this Agreement shall be renewed for one or more
Renewal Term(s) as set forth in the Schedule, unless earlier terminated as
provided herein.
(b) Prior Notice. Each party shall have the right to terminate this
Agreement effective at the end of the Initial Term or at the end of any Renewal
Term by giving the other party written notice not less than sixty (60) days
prior to the effective date of such termination, by registered or certified
mail.
(c) Payment in Full. Upon the effective date of termination, the
Obligations shall become immediately due and payable in full in cash.
(d) Early Termination; Termination Fee. In addition to the procedure
set forth in Section 9.2(b), Borrowers may terminate this Agreement as to all of
the Borrowers (and not less than all of the Borrowers) at any time but only upon
thirty (30) days' prior written notice and prepayment of the Obligations
(including, without limitation, the Term Loans). Upon any such early termination
by Borrowers or any termination of this Agreement by FINOVA upon the occurrence
of an Event of Default, then, and in any such event, Borrowers shall jointly and
severally pay to FINOVA upon the effective date of such termination the Success
Fee and a fee (the "TERMINATION FEE") in an amount equal to the amount shown on
the Schedule.
9.3 Recourse to Security; Certain Waivers. All Obligations shall be
payable by Borrowers as provided for
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herein and, in full, at the termination of this Agreement; recourse to security
shall not be required at any time. Each Borrower waives presentment and protest
of any instrument and notice thereof, notice of default and, to the extent
permitted by applicable law, all other notices to which any Borrower might
otherwise be entitled.
9.4 No Waiver by FINOVA. Neither FINOVA's failure to exercise any
right, remedy or option under this Agreement, any supplement, the Loan Documents
or other agreement between FINOVA and any Borrower nor any delay by FINOVA in
exercising the same shall operate as a waiver. No waiver by FINOVA shall be
effective unless in writing and then only to the extent stated. No waiver by
FINOVA shall affect its right to require strict performance of this Agreement.
FINOVA's rights and remedies shall be cumulative and not exclusive.
9.5 Binding on Successor and Assigns. All terms, conditions, promises,
covenants, provisions and warranties shall inure to the benefit of and bind
FINOVA's and each Borrower's respective representatives, successors and assigns.
9.6 Severability. If any provision of this Agreement shall be
prohibited or invalid under applicable law, it shall be ineffective only to such
extent, without invalidating the remainder of this Agreement.
9.7 Amendments; Assignments. This Agreement may not be modified,
altered or amended, except by an agreement in writing signed by each Borrower
and FINOVA. No Borrower may sell, assign or transfer any interest in this
Agreement or any other Loan Document, or any portion thereof, including, without
limitation, any of a Borrower's rights, title, interests, remedies, powers and
duties hereunder or thereunder. Each Borrower hereby consents to FINOVA's
participation, sale, assignment, transfer or other disposition, at any time or
times hereafter, of this Agreement and any of the other Loan Documents, or of
any portion hereof or thereof, including, without limitation, FINOVA's rights,
title, interests, remedies, powers and duties hereunder or thereunder. In
connection therewith, FINOVA may disclose all documents and information which
FINOVA now or hereafter may have relating to any Borrower or any Borrower's
business. To the extent that FINOVA assigns its rights and obligations hereunder
to a third party, FINOVA shall thereafter be released from such assigned
obligations to Borrowers and such assignment shall effect a novation between
Borrowers and such third party.
9.8 Integration. This Agreement, together with the Schedule (which is a
part hereof) and the other Loan Documents, reflect the entire understanding of
the parties with respect to the transactions contemplated hereby.
9.9 Survival. All of the representations and warranties of each
Borrower contained in this Agreement shall survive the execution, delivery and
acceptance of this Agreement by the parties. No termination of this Agreement or
of any guaranty of the Obligations shall affect or impair the powers,
obligations, duties, rights, representations, warranties or liabilities of the
parties hereto and all shall survive such termination.
9.10 Evidence of Obligations. Each Obligation may, in FINOVA's
discretion, be evidenced by notes or other instruments issued or made by one or
more Borrowers to FINOVA. If not so evidenced, such Obligation shall be
evidenced solely by entries upon FINOVA's books and records.
9.11 Loan Requests. Each oral or written request for a Loan by any
Person who purports to be any employee, officer or authorized agent of DSI shall
be made to FINOVA on or prior to 11:00 a.m., Eastern time on the Business Day on
which the proceeds thereof are requested to be paid to any Borrower and shall be
conclusively presumed to be made by a Person authorized by each Borrower to do
so and the crediting of a loan to a Borrower's operating account shall
conclusively establish each Borrower's obligation to repay such loan. Unless and
until DSI otherwise directs FINOVA in writing, all loans shall be wired to the
applicable Borrower's operating account set forth on the Schedule.
9.12 Notices. Any notice required hereunder shall be in writing and
addressed to the applicable Borrower and FINOVA at their addresses set forth at
the beginning of this Agreement. A copy of any notice to a Borrower shall be
sent to Goldstein & DiGioia LLP, 369 Lexington Avenue, New York, New York 10017,
Attn: Victor J. DiGioia. Notices hereunder shall be deemed received on the
earlier of receipt, whether by mail, personal delivery, facsimile, or otherwise,
or upon deposit in the United States mail, postage prepaid.
9.13 Brokerage Fees. Each Borrower represents and warrants to FINOVA
that, with respect to the financing transaction herein contemplated, no Person,
other than EJ Advisors, is entitled to any brokerage fee or other commission,
and Borrower agrees to indemnify and hold FINOVA harmless against any and all
such claims.
9.14 Disclosure. No representation or warranty made a Borrower in this
Agreement, or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to any
Borrower or which reasonably should be known to any Borrower which Borrowers has
not disclosed to FINOVA in writing with respect to the transactions contemplated
by this Agreement which materially and
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adversely affects the business, assets, operations, prospects or condition
(financial or otherwise), of any Borrower.
9.15 Publicity. FINOVA is hereby authorized to issue appropriate press
releases and to cause a tombstone to be published announcing the consummation of
this transaction and the aggregate amount thereof.
9.16 Captions. The Section titles contained in this Agreement are
without substantive meaning and are not part of this Agreement.
9.17 Injunctive Relief. Each Borrower recognizes that, in the event a
Borrower fails to perform, observe or discharge any of its Obligations under
this Agreement, any remedy at law may prove to be inadequate relief to FINOVA.
Therefore, FINOVA, if it so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
9.18 Counterparts; Facsimile Execution. This Agreement may be executed
in one or more counterparts, each of which taken together shall constitute one
and the same instrument, admissible into evidence. Delivery of an executed
counterpart of this Agreement by telefacsimile shall be equally as effective as
delivery of a manually executed counterpart of this Agreement. Any party
delivering an executed counterpart of this Agreement by telefacsimile shall also
deliver a manually executed counterpart of this Agreement, but the failure to
deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement.
9.19 Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments
or exhibits hereto.
9.20 Time of Essence. Time is of the essence for the performance by
each Borrower of the Obligations set forth in this Agreement.
9.21 Limitation of Actions. Each Borrower agrees that any claim or
cause of action by such Borrower against FINOVA, or any of FINOVA's directors,
officers, employees, agents, accountants or attorneys, based upon, arising from,
or relating to this Agreement, or any other present or future agreement, or any
other transaction contemplated hereby or thereby or relating hereto or thereto,
or any other matter, cause or thing whatsoever, whether or not relating hereto
or thereto, occurred, done, omitted or suffered to be done by FINOVA, or by
FINOVA's directors, officers, employees, agents, accountants or attorneys,
whether sounding in contract or in tort or otherwise, shall be barred unless
asserted by such Borrower by the commencement of an action or proceeding in a
court of competent jurisdiction by the filing of a complaint within one year
after any Borrower has knowledge, or with the exercise of reasonable diligence
should have had knowledge, of the first act, occurrence or omission upon which
such claim or cause of action, or any part thereof, is based and service of a
summons and complaint on an officer of FINOVA or any other Person authorized to
accept service of process on behalf of FINOVA, within 30 days thereafter. Each
Borrower agrees that such one-year period of time is a reasonable and sufficient
time for Borrowers to investigate and act upon any such claim or cause of
action. The one-year period provided herein shall not be waived, tolled, or
extended except by a specific written agreement of FINOVA. This provision shall
survive any termination of this Loan Agreement or any other agreement.
9.22 Liability. Neither FINOVA nor any FINOVA Affiliate shall be liable
for any indirect, special, incidental or consequential damages in connection
with any breach of contract, tort or other wrong relating to this Agreement or
the Obligations or the establishment, administration or collection thereof
(including without limitation damages for loss of profits, business
interruption, or the like), whether such damages are foreseeable or
unforeseeable, even if FINOVA has been advised of the possibility of such
damages. Neither FINOVA, nor any FINOVA Affiliate shall be liable for any
claims, demands, losses or damages, of any kind whatsoever, made, claimed,
incurred or suffered by a Borrower through the ordinary negligence of FINOVA, or
any FINOVA Affiliate. "FINOVA AFFILIATE" shall mean FINOVA's directors,
officers, employees, agents, attorneys or any other Person or entity affiliated
with or representing FINOVA.
9.23 Notice of Breach by FINOVA. Each Borrower agrees to give FINOVA
written notice of (i) any action or inaction by FINOVA or any attorney of FINOVA
in connection with any Loan Documents that may be actionable against FINOVA or
any attorney of FINOVA or (ii) any defense to the payment of the Obligations for
any reason, including, but not limited to, commission of a tort or violation of
any contractual duty or duty implied by law. Each Borrower agrees that unless
such notice is fully given as promptly as possible (and in any event within
thirty (30) days) after any Borrower has knowledge, or with the exercise of
reasonable diligence should have had knowledge, of any such action, inaction or
defense, no Borrower shall assert, and each Borrower shall be deemed to have
waived, any claim or defense arising therefrom.
9.24 Application of Insurance Proceeds. The net proceeds of any
casualty insurance insuring the Collateral, after deducting all costs and
expenses (including attorneys' fees) of collection, shall be applied, at
FINOVA's option, either toward replacing or restoring the Collateral, in a
manner and on terms satisfactory to FINOVA, or toward payment of
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the Obligations. Any proceeds applied to the payment of Obligations shall be
applied in such manner as FINOVA may elect. In no event shall such application
relieve any Borrower from payment in full of all installments of principal and
interest which thereafter become due in the order of maturity thereof.
9.25 Power of Attorney. Each Borrower appoints FINOVA and its designees
as such Borrower's attorney, with the power to endorse such Borrower's name on
any checks, notes, acceptances, money orders or other forms of payment or
security that come into FINOVA's possession; to sign such Borrower's name on any
invoice or bill of lading relating to any Receivable, on drafts against
customers, on assignments of Receivables, on notices of assignment, financing
statements and other public records, on verifications of accounts and on notices
to customers or account debtors; to send requests for verification of
Receivables to customers or account debtors; after the occurrence of any Event
of Default, to notify the post office authorities to change the address for
delivery of such Borrower's mail to an address designated by FINOVA and to open
and dispose of all mail addressed to such Borrower; and to do all other things
FINOVA deems necessary or desirable to carry out the terms of this Agreement.
Each Borrower hereby ratifies and approves all acts of such attorney. Neither
FINOVA nor any of its designees shall be liable for any acts or omissions nor
for any error of judgment or mistake of fact or law while acting as such
Borrower's attorney. This power, being coupled with an interest, is irrevocable
until the Obligations have been fully satisfied and FINOVA's obligation to
provide loans hereunder shall have terminated.
9.26 GOVERNING LAW; WAIVERS. THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION ENFORCEMENT OF THE OBLIGATIONS, SHALL BE INTERPRETED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES) OF THE STATE OF
ARIZONA GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. EACH
BORROWER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COUNTY OF MARICOPA IN THE STATE OF ARIZONA OR, AT THE
SOLE OPTION OF FINOVA, IN ANY OTHER COURT IN WHICH FINOVA SHALL INITIATE LEGAL
OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE
MATTER IN CONTROVERSY. EACH BORROWER WAIVES ANY OBJECTION OF FORUM NON
CONVENIENS AND VENUE. EACH BORROWER FURTHER WAIVES PERSONAL SERVICE OF ANY AND
ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE IN
THE MANNER SET FORTH IN SECTION 9.12 HEREOF FOR THE GIVING OF NOTICE. EACH
BORROWER FURTHER WAIVES ANY RIGHT IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK
ANY JUDGMENT ENTERED AGAINST IT.
9.27 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. FINOVA AND EACH BORROWER
HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT; (II) ANY OTHER
PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN FINOVA AND ANY BORROWER; OR
(III) ANY CONDUCT, ACTS OR OMISSIONS OF FINOVA OR ANY BORROWER OR ANY OF THEIR
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS
AFFILIATED WITH FINOVA OR ANY BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
9.28 Nonpublic Information. FINOVA agrees that if, in the course of the
transactions contemplated by this Agreement, it comes into possession of any
material non-public information regarding DSI and its subsidiaries, it will use
all reasonable efforts to maintain the confidentiality of such information and
will not disclose any of such information to any person except to its employees,
advisors, and agents as necessary or advisable in connection with the
negotiation, administration, and enforcement of the Loan Documents. The
foregoing undertaking will not apply to any such information after such time as
it becomes generally available to the public.
[SIGNATURES FOLLOW]
-25-
<PAGE> 27
BORROWERS:
DIGITAL SOLUTIONS, INC., a New Jersey corporation
Fed. Tax ID #: 22-1899798
By: ______________________________
Name:
Title:
DSI CONTRACT STAFFING, INC., a New York corporation
Fed. Tax ID #: 13-2878077
By: ______________________________
Name:
Title:
DSI STAFF CONNXIONS NORTHEAST, INC., a New Jersey corporation
Fed. Tax ID #: 22-3405060
By: ______________________________
Name:
Title:
DSI STAFF RX, INC., a Texas corporation
Fed. Tax ID #: 76-0451040
By: ______________________________
Name:
Title:
DSI STAFF CONNXIONS-SOUTHWEST, INC., a Texas corporation
Fed. Tax ID #: 76-0422152
By: ______________________________
Name:
Title:
[AMENDED AND RESTATED LOAN AGREEMENT]
<PAGE> 28
THE TEAMSTAFF COMPANIES, INC., a Florida corporation
Fed. Tax ID #: 59-2988438
By: ______________________________
Name:
Title:
TEAMSTAFF, INC., a Florida corporation
Fed. Tax ID #: 59-3067619
By: ______________________________
Name:
Title:
TEAMSTAFF II, INC., a Florida corporation
Fed. Tax ID #: 59-3277121
By: ______________________________
Name:
Title:
TEAMSTAFF III, INC., a Florida corporation
Fed. Tax ID #: 59-3277124
By: ______________________________
Name:
Title:
TEAMSTAFF IV, INC., a Florida corporation
Fed. Tax ID #: 59-3277126
By: ______________________________
Name:
Title:
[AMENDED AND RESTATED LOAN AGREEMENT]
<PAGE> 29
TEAMSTAFF V, INC., a Florida corporation
Fed. Tax ID #: 59-3277127
By: ______________________________
Name:
Title:
TEAMSTAFF U.S.A., INC., a Florida corporation
Fed. Tax ID #: 59-2988440
By: ______________________________
Name:
Title:
TEAMSTAFF INSURANCE SERVICES, INC., a Florida corporation
Fed. Tax ID #: 59-2988436
By: ______________________________
Name:
Title:
TEAMSTAFF HOLDING COMPANY, INC., a Florida corporation
Fed. Tax ID #: 59-3236075
By: ______________________________
Name:
Title:
EMPLOYER SUPPORT SERVICES, INC., a Florida corporation
Fed. Tax ID #: 59-2988443
By: ______________________________
Name:
Title:
[AMENDED AND RESTATED LOAN AGREEMENT]
<PAGE> 30
LENDER:
FINOVA CAPITAL CORPORATION
By: ______________________________
Name: Ilene Gerber
Title: Vice President
[AMENDED AND RESTATED LOAN AGREEMENT]
<PAGE> 1
Exhibit 10.4
AMENDED AND RESTATED SECURED PROMISSORY NOTE A
$2,166,664.00 Phoenix, Arizona
January 25, 1999
FOR VALUE RECEIVED, DIGITAL SOLUTIONS, INC., a New Jersey
Corporation, DSI CONTRACT STAFFING, INC., a New York corporation, DSI STAFF
CONNXIONS NORTHEAST, INC., a New Jersey corporation, DSI STAFF
CONNXIONS-SOUTHWEST, INC., a Texas corporation, DSI STAFF RX, INC., a Texas
corporation, THE TEAMSTAFF COMPANIES, INC., a Florida corporation, TEAMSTAFF,
INC., a Florida corporation, TEAMSTAFF II, Inc., a Florida corporation,
TEAMSTAFF III, Inc., a Florida corporation, TEAMSTAFF IV, Inc., a Florida
corporation, TEAMSTAFF V, Inc., a Florida corporation, TEAMSTAFF U.S.A., Inc., a
Florida corporation, TEAMSTAFF INSURANCE SERVICES, INC., a Florida corporation,
TEAMSTAFF HOLDING COMPANY, INC., a Florida corporation, and EMPLOYER SUPPORT
SERVICES, INC., a Florida corporation (collectively, "Borrower"), jointly and
severally promise to pay to the order of FINOVA CAPITAL CORPORATION, a Delaware
corporation ("FINOVA"), at its offices at 355 South Grand Avenue, Suite 2400,
Los Angeles, California 90071, or at such other place or places as FINOVA may
from time to time designate in writing, the principal sum of TWO MILLION ONE
HUNDRED SIXTY-SIX THOUSAND SIX HUNDRED SIXTY-FOUR Dollars ($2,166,664.00), plus
interest in the manner and upon the terms and conditions set forth below. This
Amended and Restated Secured Promissory Note A ("Note") is made pursuant to that
certain Amended and Restated Loan and Security Agreement of even date herewith
between FINOVA and Borrower (the "Loan Agreement"), the provisions of which are
incorporated herein by this reference. Capitalized terms herein, unless
otherwise noted, shall have the meaning set forth in the Loan Agreement. This
Note represents the outstanding principal balance of the Secured Promissory Note
dated April 28, 1998 in the original amount of $2,500,000 and is being entered
into to restate certain terms thereof not as evidence of new indebtedness.
1.0 SCHEDULE OF PAYMENTS; RATE AND PAYMENT OF INTEREST; PREPAYMENT.
1.1 The principal balance of this Note shall be payable as
follows:
a. Twenty-seven (27) equal successive monthly installments of
principal of Forty-One Thousand Six Hundred Sixty-Seven Dollars ($41,667.00)
each on the first day of each month, beginning February 1, 1999, and continuing
through and including April 1, 2001; and
b. A final installment equal to the then unpaid principal
balance hereof on the last Business Day of April, 2001.
1.2 Prepayment may be made under this Note in whole or in
part, subject to, in the case of prepayment in whole, the Termination Fee and
Success Fee set forth in the Loan Agreement, provided that such prepayment is
preceded by not less than five (5) business days prior written notice to FINOVA
and accompanied by all accrued but unpaid interest and the full amount of the
applicable Termination Fee, if any, and Success Fee. Notwithstanding anything
<PAGE> 2
herein to the contrary, in the event the Loan Agreement is terminated by
Borrower, by FINOVA or by any other person at any time in accordance with its
terms, or the Revolving Credit Loans facility is otherwise terminated for any
reason, then the entire unpaid principal balance of this Note, together with all
accrued and unpaid interest hereon and the full amount of the applicable
Termination Fee and Success Fee, shall become immediately due and payable in
full on the effective date of such termination, without presentment, notice or
demand of any kind.
1.3 Interest shall be computed on the basis of a 360-day year
for the actual number of days elapsed, and shall be at the rate of three (3%)
percentage points above the Prime Rate (as hereinafter defined), computed on the
basis of a 360-day year; provided, however, upon the occurrence and during the
continuance of an Event of Default, interest shall accrue on the outstanding
principal balance of this Note at a default rate (the "Default Rate") of five
(5%) percentage points above the Prime Rate, and shall be payable on demand.
"Prime Rate" means, for any day, the rate of interest per annum (over a year of
360 days) announced by Citibank, N.A. (the "Bank"), from time to time, as its
"base rate" (or any successor thereto) in effect on such day. The Prime Rate is
not necessarily the lowest rate charged by the Bank. As of the date of this
Note, the Prime Rate is seven and three-quarters percent (7.75%) per annum. The
applicable rate of interest assessed hereunder will be increased or decreased
from time to time hereafter in an amount equal to any increase or decrease
hereafter made by the Bank in the Prime Rate. A change in the Prime Rate shall
be effective on the first day following such change. Accrued interest shall be
payable monthly in arrears on the first day of each month, commencing February
1, 1999, and upon the final payment in full of the principal balance hereof.
2.0 EVENTS OF DEFAULTS; REMEDIES.
2.1 Upon the occurrence of any Event of Default under and as
defined in the Loan Agreement, in addition to FINOVA's right to charge interest
on the Obligations at the Default Rate: (a) at the option of FINOVA, the entire
unpaid amount of this Note and all of the other Obligations, including without
limitation the Termination Fee, shall become immediately due and payable without
demand, notice or legal process of any kind; (b) FINOVA may, at its option,
without demand, notice or legal process of any kind, exercise any and all rights
and remedies granted to it by the Loan Agreement or by any other agreement now
or hereafter existing between FINOVA and Borrower or between FINOVA and any
guarantor of part or all of Borrower's liabilities to FINOVA; and (c) FINOVA may
at its option exercise from time to time any other rights and remedies available
to it under the Uniform Commercial Code or other law of the State of Arizona.
2.2 The remedies of FINOVA as provided herein and in the Loan
Agreement shall be cumulative and concurrent, and may be pursued singularly,
successively, or together, at the sole discretion of FINOVA. No act of omission
or commission of FINOVA, including specifically any failure to exercise any
right, remedy or recourse, shall be deemed to be a waiver or release of the
same, such waiver or release to be effected only through a written document
executed by FINOVA and then only to the extent specifically recited therein. A
waiver or release with reference to any one event shall not be construed as
continuing, as a bar to, or as a waiver or release of, any subsequent right,
remedy or recourse as to a subsequent event.
2
<PAGE> 3
3.0 GENERAL PROVISIONS.
3.1 Borrower warrants and represents to FINOVA that Borrower
has used and will continue to use the loans and advances represented by this
Note solely for proper business purposes, and consistent with all applicable
laws and statutes.
3.2 This Note is secured by the Collateral described in the
Loan Agreement.
3.3 Borrower waives presentment, demand and protest, notice of
protest, notice of presentment and all other notices and demands in connection
with the enforcement of FINOVA's rights hereunder, except as specifically
provided and called for by this Note, and hereby consents to, and waives notice
of, the release, addition, or substitution, with or without consideration, of
any collateral or of any person liable for payment of this Note. Any failure of
FINOVA to exercise any right available hereunder or otherwise shall not be
construed as a waiver of the right to exercise the same or as a waiver of any
other right at any other time.
3.4 If this Note is not paid when due or upon the occurrence
of an Event of Default, Borrower further promises to pay all costs of
collection, foreclosure fees, reasonable attorneys fees and expert witness fees
incurred by FINOVA, whether or not suit is filed hereon, and the fees, costs and
expenses as provided in the Loan Agreement.
3.5 The contracted for rate of interest of the loan
contemplated hereby, without limitation, shall consist of the following: (i) the
interest rate set forth on the Schedule, calculated and applied to the principal
balance of this Note in accordance with the provisions of this Note: (ii)
interest after an Event of Default, calculated and applied to the amounts due
under this Note in accordance with the provisions hereof; and (iii) all
Additional Sums (as herein defined), if any. Borrower agrees to pay an effective
contracted for rate of interest which is the sum of the above-referenced
elements. All examination fees, attorneys fees, expert witness fees, letter of
credit fees, collateral monitoring fees, closing fees, facility fees,
Termination Fees, Minimum Interest Charges, other charges, goods, things in
action or any other sums or things of value paid or payable by Borrower
(collectively, the "Additional Sums"), whether pursuant to this Note, the Loan
Agreement or any other documents or instruments in any way pertaining to this
lending transaction, or otherwise with respect to this lending transaction, that
under any applicable law may be deemed to be interest with respect to this
lending transaction, for the purpose of any applicable law that may limit the
maximum amount of interest to be charged with respect to this lending
transaction, shall be payable by Borrower as, and shall be deemed to be,
additional interest and for such purposes only, the agreed upon and "contracted
for rate of interest" of this lending transaction shall be deemed to be
increased by the rate of interest resulting from the inclusion of the Additional
Sums.
3.6 It is the intent of the parties to comply with the usury
law of the State of Arizona (the "Applicable Usury Law"). Accordingly, it is
agreed that notwithstanding any provisions to the contrary in this Note, or in
any of the documents securing payment hereof or otherwise relating hereto, in no
event shall this Note or such documents require the payment or permit the
collection of interest in excess of the maximum Interest Rate, then in any such
event (1) the provisions of the paragraph shall govern and control, (2) neither
Borrower nor any other
3
<PAGE> 4
person or entity now or hereafter liable for the payment hereof shall be
obligated to pay the amount of such interest to the extent that it is in excess
of the Maximum Interest Rate, (3) any such excess which may have been collected
shall be either applied as a credit against the then unpaid principal amount
hereof or refunded to Borrower, at FINOVA's option, and (4) the effective rate
of interest shall be automatically reduced to the Maximum Interest Rate. It is
further agreed, without limiting the generality of the foregoing, that to the
extent permitted by the Applicable Usury Law; (x) all calculations of interest
which are made for the purpose of determining whether such rate would exceed the
Maximum Interest Rate shall be made by amortizing, prorating, allocating and
spreading during the period of the full stated term of the loan evidenced
hereby, all interest at any time contracted for, charged or received from
Borrower or otherwise in connection with such loan; and (y) in the event that
the effective rate of interest on the loan should at any time exceed the Maximum
Interest Rate, such excess interest that would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law shall be paid to
FINOVA from time to time, if and when the effective interest rate on the loan
otherwise fall below the Maximum Interest Rate, until the entire amount of
interest which would otherwise have been collected had there been no ceiling
imposed by the Applicable Usury Law has been paid in full. Borrower further
agrees that should the Maximum Interest Rate be increased at any time hereafter
because of a change in the Applicable Usury Law, then to the extent not
prohibited by the Applicable Usury Law, such increases shall apply to all
indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law, should the maximum Interest
Rate be decreased because of a change in the Applicable Usury Law, such
decreases shall not apply to the indebtedness evidenced hereby regardless of
when incurred.
3.7 FINOVA may at any time transfer this Note and FINOVA's
rights in any or all collateral securing this Note, and FINOVA thereafter shall
be relieved from all liability with respect to such collateral arising after the
date of such transfer.
3.8 This Note shall be binding upon Borrower and its legal
representatives, successors and assigns. Wherever possible, each provision of
this Note shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of the Note shall be prohibited by or
invalid under such law, such provision shall be severable, and be ineffective to
the extent of such prohibition or invalidity, without invalidating the remaining
provision of this Note.
3.9 This Note evidences a term loan made by FINOVA to Borrower
(the "Existing Term Loan") as part of the financing being provided by FINOVA to
Borrower pursuant to the Original Agreement. This Note does not evidence a new
extension of credit, and this Note does not constitute and shall not be
construed as a novation of the Existing Term Loan.
THIS NOTE HAS BEEN DELIVERED FOR ACCEPTANCE BY FINOVA IN
PHOENIX, ARIZONA AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF
ARIZONA, AS THE SAME MAY FROM TIME TO TIME BE IN EFFECT, INCLUDING, WITHOUT
LIMITATION, THE UNIFORM COMMERCIAL CODE AS ADOPTED IN ARIZONA. BORROWER HEREBY
(i)
4
<PAGE> 5
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN
MARICOPA COUNTY, ARIZONA OVER ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
MATTER ARISING FROM OR RELATED TO THIS NOTE; (ii) WAIVES PERSONAL SERVICE OF ANY
AND ALL PROCESS UPON BORROWER, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE
MADE BY MESSENGER, CERTIFIED MAIL OR REGISTERED MAIL DIRECTED TO BORROWER AT THE
ADDRESS SET FORTH BELOW AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON
THE EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN
POSTED TO BORROWER'S ADDRESS; (iii) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
BORROWER MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING; (iv) AGREES THAT A FINAL JUDGMENT
IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY
OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW; (v) AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST FINOVA
OR ANY OF FINOVA'S DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY,
CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS NOTE IN ANY COURT OTHER
THAN ONE LOCATED IN MARICOPA COUNTY, ARIZONA; AND (vi) IRREVOCABLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION ARISING UNDER OR IN CONNECTION WITH THIS
NOTE. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR IMPAIR FINOVA'S RIGHT TO SERVE
LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR FINOVA'S RIGHT TO BRING ANY
ACTION OR PROCEEDING AGAINST BORROWER OR BORROWER'S PROPERTY IN THE COURTS OF
ANY OTHER JURISDICTION.
[This Space Intentionally Left Blank]
5
<PAGE> 6
DIGITAL SOLUTIONS, INC., a New Jersey corporation
Fed. Tax ID #: 22-1899798
By: ______________________________
Name:
Title:
Address: 300 Atrium Drive, Somerset, New Jersey 08773
DSI CONTRACT STAFFING, INC., a New York corporation
Fed. Tax ID #: 13-2878077
By: ______________________________
Name:
Title:
Address: 245 Fifth Avenue, Suite 1003, New York, New York 10016
DSI STAFF CONNXIONS NORTHEAST, INC., a New Jersey corporation
Fed. Tax ID #: 22-3405060
By: ______________________________
Name:
Title:
Address: 300 Atrium Drive, Somerset, New Jersey 08773
DSI STAFF Rx, INC., a Texas corporation
Fed. Tax ID #: 76-0451040
By: ______________________________
Name:
Title:
Address: 2 Northpoint Drive, Suite 110, Houston, Texas 77060
DSI STAFF CONNXIONS-SOUTHWEST, INC., a Texas corporation
Fed. Tax ID #: 76-0422152
By: ______________________________
Name:
Title:
Address: 2 Northpoint Drive, Suite 110, Houston, Texas 77060
[AMENDED & RESTATED SECURED PROMISSORY NOTE A]
<PAGE> 7
THE TEAMSTAFF COMPANIES, INC., a Florida corporation
Fed. Tax ID #: 59-2988438
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF, INC., a Florida corporation
Fed. Tax ID #: 59-3067619
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF II, INC., a Florida corporation
Fed. Tax ID #: 59-3277121
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF III, INC., a Florida corporation
Fed. Tax ID #: 59-3277124
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF IV, INC., a Florida corporation
Fed. Tax ID #: 59-3277126
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
[AMENDED & RESTATED SECURED PROMISSORY NOTE A]
<PAGE> 8
TEAMSTAFF V, INC., a Florida corporation
Fed. Tax ID #: 59-3277127
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF U.S.A., INC., a Florida corporation
Fed. Tax ID #: 59-2988440
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF INSURANCE SERVICES, INC., a Florida corporation
Fed. Tax ID #: 59-2988436
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF HOLDING COMPANY, INC., a Florida corporation
Fed. Tax ID #: 59-3236075
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
EMPLOYER SUPPORT SERVICES, INC., a Florida corporation
Fed. Tax ID #: 59-2988443
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
[AMENDED & RESTATED SECURED PROMISSORY NOTE A]
<PAGE> 1
Exhibit 10.5
SECURED PROMISSORY NOTE B
$2,500,000.00 Phoenix, Arizona
January 25, 1999
FOR VALUE RECEIVED, DIGITAL SOLUTIONS, INC., a New Jersey
Corporation, DSI CONTRACT STAFFING, INC., a New York corporation, DSI STAFF
CONNXIONS NORTHEAST, INC., a New Jersey corporation, DSI STAFF
CONNXIONS-SOUTHWEST, INC., a Texas corporation, DSI STAFF RX, INC., a Texas
corporation, THE TEAMSTAFF COMPANIES, INC., a Florida corporation, TEAMSTAFF,
INC., a Florida corporation, TEAMSTAFF II, Inc., a Florida corporation,
TEAMSTAFF III, Inc., a Florida corporation, TEAMSTAFF IV, Inc., a Florida
corporation, TEAMSTAFF V, Inc., a Florida corporation, TEAMSTAFF U.S.A., Inc., a
Florida corporation, TEAMSTAFF INSURANCE SERVICES, INC., a Florida corporation,
TEAMSTAFF HOLDING COMPANY, INC., a Florida corporation, and EMPLOYER SUPPORT
SERVICES, INC., a Florida corporation (collectively, "Borrower"), jointly and
severally promise to pay to the order of FINOVA CAPITAL CORPORATION, a Delaware
corporation ("FINOVA"), at its offices at 355 South Grand Avenue, Suite 2400,
Los Angeles, California 90071, or at such other place or places as FINOVA may
from time to time designate in writing, the principal sum of TWO MILLION FIVE
HUNDRED THOUSAND Dollars ($2,500,000), plus interest in the manner and upon the
terms and conditions set forth below. This Secured Promissory Note B ("Note") is
made pursuant to that certain Amended and Restated Loan and Security Agreement
of even date herewith between FINOVA and Borrower (the "Loan Agreement"), the
provisions of which are incorporated herein by this reference. Capitalized terms
herein, unless otherwise noted, shall have the meaning set forth in the Loan
Agreement.
1.0 SCHEDULE OF PAYMENTS; RATE AND PAYMENT OF INTEREST; PREPAYMENT.
1.1 The principal balance of this Note shall be payable as
follows:
a. twelve (12) equal successive monthly installments of
principal of Forty-One Thousand Six Hundred Sixty-Seven Dollars ($41,667.00)
each on the first day of each month, beginning March 1, 1999, and continuing
through and including February 1, 2000;
b. twelve (12) equal successive monthly installments of
principal of Fifty Thousand Dollars ($50,000.00) each on the first day of each
month, beginning March 1, 2000, and continuing through and including February 1,
2001;
c. ten (10) equal successive monthly installments of principal
of Fifty-Eight Thousand Three Hundred Thirty-Three Dollars ($58,333.00) each on
the first day of each month, beginning March 1, 2001, and continuing through and
including December 1, 2001;
d. A final installment equal to the then unpaid principal
balance hereof on January 1, 2002.
<PAGE> 2
1.2 Prepayment may be made under this Note in whole or in
part, subject to, in the case of prepayment in whole, the Termination Fee and
Success Fee set forth in the Loan Agreement, provided that such prepayment is
preceded by not less than five (5) business days prior written notice to FINOVA
and accompanied by all accrued but unpaid interest and the full amount of the
applicable Termination Fee, if any, and Success Fee. Notwithstanding anything
herein to the contrary, in the event the Loan Agreement is terminated by
Borrower, by FINOVA or by any other person at any time in accordance with its
terms, or the Revolving Credit Loans facility is otherwise terminated for any
reason, then the entire unpaid principal balance of this Note, together with all
accrued and unpaid interest hereon and the full amount of the applicable
Termination Fee and Success Fee, shall become immediately due and payable in
full on the effective date of such termination, without presentment, notice or
demand of any kind.
1.3 Interest shall be computed on the basis of a 360-day year
for the actual number of days elapsed, and shall be at the rate of three (3%)
percentage points above the Prime Rate (as hereinafter defined), computed on the
basis of a 360-day year; provided, however, upon the occurrence and during the
continuance of an Event of Default, interest shall accrue on the outstanding
principal balance of this Note at a default rate (the "Default Rate") of five
(5%) percentage points above the Prime Rate, and shall be payable on demand.
"Prime Rate" means, for any day, the rate of interest per annum (over a year of
360 days) announced by Citibank, N.A. (the "Bank"), from time to time, as its
"base rate" (or any successor thereto) in effect on such day. The Prime Rate is
not necessarily the lowest rate charged by the Bank. As of the date of this
Note, the Prime Rate is seven and three-quarters percent (7.75%) per annum. The
applicable rate of interest assessed hereunder will be increased or decreased
from time to time hereafter in an amount equal to any increase or decrease
hereafter made by the Bank in the Prime Rate. A change in the Prime Rate shall
be effective on the first day following such change. Accrued interest shall be
payable monthly in arrears on the first day of each month, commencing March 1,
1999, and upon the final payment in full of the principal balance hereof.
2.0 EVENTS OF DEFAULTS; REMEDIES.
2.1 Upon the occurrence of any Event of Default under and as
defined in the Loan Agreement, in addition to FINOVA's right to charge interest
on the Obligations at the Default Rate: (a) at the option of FINOVA, the entire
unpaid amount of this Note and all of the other Obligations, including without
limitation the Termination Fee, shall become immediately due and payable without
demand, notice or legal process of any kind; (b) FINOVA may, at its option,
without demand, notice or legal process of any kind, exercise any and all rights
and remedies granted to it by the Loan Agreement or by any other agreement now
or hereafter existing between FINOVA and Borrower or between FINOVA and any
guarantor of part or all of Borrower's liabilities to FINOVA; and (c) FINOVA may
at its option exercise from time to time any other rights and remedies available
to it under the Uniform Commercial Code or other law of the State of Arizona.
2.2 The remedies of FINOVA as provided herein and in the Loan
Agreement shall be cumulative and concurrent, and may be pursued singularly,
successively, or together, at the sole discretion of FINOVA. No act of omission
or commission of FINOVA, including specifically any failure to exercise any
right, remedy or recourse, shall be deemed to be a waiver
2
<PAGE> 3
or release of the same, such waiver or release to be effected only through a
written document executed by FINOVA and then only to the extent specifically
recited therein. A waiver or release with reference to any one event shall not
be construed as continuing, as a bar to, or as a waiver or release of, any
subsequent right, remedy or recourse as to a subsequent event.
3.0 GENERAL PROVISIONS.
3.1 Borrower warrants and represents to FINOVA that Borrower
has used and will continue to use the loans and advances represented by this
Note solely for proper business purposes, and consistent with all applicable
laws and statutes.
3.2 This Note is secured by the Collateral described in the
Loan Agreement.
3.3 Borrower waives presentment, demand and protest, notice of
protest, notice of presentment and all other notices and demands in connection
with the enforcement of FINOVA's rights hereunder, except as specifically
provided and called for by this Note, and hereby consents to, and waives notice
of, the release, addition, or substitution, with or without consideration, of
any collateral or of any person liable for payment of this Note. Any failure of
FINOVA to exercise any right available hereunder or otherwise shall not be
construed as a waiver of the right to exercise the same or as a waiver of any
other right at any other time.
3.4 If this Note is not paid when due or upon the occurrence
of an Event of Default, Borrower further promises to pay all costs of
collection, foreclosure fees, reasonable attorneys fees and expert witness fees
incurred by FINOVA, whether or not suit is filed hereon, and the fees, costs and
expenses as provided in the Loan Agreement.
3.5 The contracted for rate of interest of the loan
contemplated hereby, without limitation, shall consist of the following: (i) the
interest rate set forth on the Schedule, calculated and applied to the principal
balance of this Note in accordance with the provisions of this Note: (ii)
interest after an Event of Default, calculated and applied to the amounts due
under this Note in accordance with the provisions hereof; and (iii) all
Additional Sums (as herein defined), if any. Borrower agrees to pay an effective
contracted for rate of interest which is the sum of the above-referenced
elements. All examination fees, attorneys fees, expert witness fees, letter of
credit fees, collateral monitoring fees, closing fees, facility fees,
Termination Fees, Minimum Interest Charges, other charges, goods, things in
action or any other sums or things of value paid or payable by Borrower
(collectively, the "Additional Sums"), whether pursuant to this Note, the Loan
Agreement or any other documents or instruments in any way pertaining to this
lending transaction, or otherwise with respect to this lending transaction, that
under any applicable law may be deemed to be interest with respect to this
lending transaction, for the purpose of any applicable law that may limit the
maximum amount of interest to be charged with respect to this lending
transaction, shall be payable by Borrower as, and shall be deemed to be,
additional interest and for such purposes only, the agreed upon and "contracted
for rate of interest" of this lending transaction shall be deemed to be
increased by the rate of interest resulting from the inclusion of the Additional
Sums.
3
<PAGE> 4
3.6 It is the intent of the parties to comply with the usury
law of the State of Arizona (the "Applicable Usury Law"). Accordingly, it is
agreed that notwithstanding any provisions to the contrary in this Note, or in
any of the documents securing payment hereof or otherwise relating hereto, in no
event shall this Note or such documents require the payment or permit the
collection of interest in excess of the maximum Interest Rate, then in any such
event (1) the provisions of the paragraph shall govern and control, (2) neither
Borrower nor any other person or entity now or hereafter liable for the payment
hereof shall be obligated to pay the amount of such interest to the extent that
it is in excess of the Maximum Interest Rate, (3) any such excess which may have
been collected shall be either applied as a credit against the then unpaid
principal amount hereof or refunded to Borrower, at FINOVA's option, and (4) the
effective rate of interest shall be automatically reduced to the Maximum
Interest Rate. It is further agreed, without limiting the generality of the
foregoing, that to the extent permitted by the Applicable Usury Law; (x) all
calculations of interest which are made for the purpose of determining whether
such rate would exceed the Maximum Interest Rate shall be made by amortizing,
prorating, allocating and spreading during the period of the full stated term of
the loan evidenced hereby, all interest at any time contracted for, charged or
received from Borrower or otherwise in connection with such loan; and (y) in the
event that the effective rate of interest on the loan should at any time exceed
the Maximum Interest Rate, such excess interest that would otherwise have been
collected had there been no ceiling imposed by the Applicable Usury Law shall be
paid to FINOVA from time to time, if and when the effective interest rate on the
loan otherwise fall below the Maximum Interest Rate, until the entire amount of
interest which would otherwise have been collected had there been no ceiling
imposed by the Applicable Usury Law has been paid in full. Borrower further
agrees that should the Maximum Interest Rate be increased at any time hereafter
because of a change in the Applicable Usury Law, then to the extent not
prohibited by the Applicable Usury Law, such increases shall apply to all
indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law, should the maximum Interest
Rate be decreased because of a change in the Applicable Usury Law, such
decreases shall not apply to the indebtedness evidenced hereby regardless of
when incurred.
3.7 FINOVA may at any time transfer this Note and FINOVA's
rights in any or all collateral securing this Note, and FINOVA thereafter shall
be relieved from all liability with respect to such collateral arising after the
date of such transfer.
3.8 This Note shall be binding upon Borrower and its legal
representatives, successors and assigns. Wherever possible, each provision of
this Note shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of the Note shall be prohibited by or
invalid under such law, such provision shall be severable, and be ineffective to
the extent of such prohibition or invalidity, without invalidating the remaining
provision of this Note.
THIS NOTE HAS BEEN DELIVERED FOR ACCEPTANCE BY FINOVA IN
PHOENIX, ARIZONA AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF
ARIZONA, AS THE SAME MAY FROM TIME TO TIME BE IN EFFECT, INCLUDING, WITHOUT
LIMITATION, THE UNIFORM
4
<PAGE> 5
COMMERCIAL CODE AS ADOPTED IN ARIZONA. BORROWER HEREBY (i) IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN MARICOPA COUNTY,
ARIZONA OVER ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING
FROM OR RELATED TO THIS NOTE; (ii) WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON BORROWER, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
MESSENGER, CERTIFIED MAIL OR REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS
SET FORTH BELOW AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE
EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN
POSTED TO BORROWER'S ADDRESS; (iii) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
BORROWER MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING; (iv) AGREES THAT A FINAL JUDGMENT
IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY
OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW; (v) AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST FINOVA
OR ANY OF FINOVA'S DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY,
CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS NOTE IN ANY COURT OTHER
THAN ONE LOCATED IN MARICOPA COUNTY, ARIZONA; AND (vi) IRREVOCABLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION ARISING UNDER OR IN CONNECTION WITH THIS
NOTE. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR IMPAIR FINOVA'S RIGHT TO SERVE
LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR FINOVA'S RIGHT TO BRING ANY
ACTION OR PROCEEDING AGAINST BORROWER OR BORROWER'S PROPERTY IN THE COURTS OF
ANY OTHER JURISDICTION.
[This Space Intentionally Left Blank]
5
<PAGE> 6
DIGITAL SOLUTIONS, INC., a New Jersey corporation
Fed. Tax ID #: 22-1899798
By: ______________________________
Name:
Title:
Address: 300 Atrium Drive, Somerset, New Jersey 08773
DSI CONTRACT STAFFING, INC., a New York corporation
Fed. Tax ID #: 13-2878077
By: ______________________________
Name:
Title:
Address: 245 Fifth Avenue, Suite 1003, New York, New York 10016
DSI STAFF CONNXIONS NORTHEAST, INC., a New Jersey corporation
Fed. Tax ID #: 22-3405060
By: ______________________________
Name:
Title:
Address: 300 Atrium Drive, Somerset, New Jersey 08773
DSI STAFF Rx, INC., a Texas corporation
Fed. Tax ID #: 76-0451040
By: ______________________________
Name:
Title:
Address: 2 Northpoint Drive, Suite 110, Houston, Texas 77060
DSI STAFF CONNXIONS-SOUTHWEST, INC., a Texas corporation
Fed. Tax ID #: 76-0422152
By: ______________________________
Name:
Title:
Address: 2 Northpoint Drive, Suite 110, Houston, Texas 77060
[SECURED PROMISSORY NOTE B]
<PAGE> 7
THE TEAMSTAFF COMPANIES, INC., a Florida corporation
Fed. Tax ID #: 59-2988438
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF, INC., a Florida corporation
Fed. Tax ID #: 59-3067619
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF II, INC., a Florida corporation
Fed. Tax ID #: 59-3277121
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF III, INC., a Florida corporation
Fed. Tax ID #: 59-3277124
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF IV, INC., a Florida corporation
Fed. Tax ID #: 59-3277126
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
[SECURED PROMISSORY NOTE B]
<PAGE> 8
TEAMSTAFF V, INC., a Florida corporation
Fed. Tax ID #: 59-3277127
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF U.S.A., INC., a Florida corporation
Fed. Tax ID #: 59-2988440
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF INSURANCE SERVICES, INC., a Florida corporation
Fed. Tax ID #: 59-2988436
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF HOLDING COMPANY, INC., a Florida corporation
Fed. Tax ID #: 59-3236075
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
EMPLOYER SUPPORT SERVICES, INC., a Florida corporation
Fed. Tax ID #: 59-2988443
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
[SECURED PROMISSORY NOTE B]
<PAGE> 1
EXHIBIT 10.6
SECURED PROMISSORY NOTE C
$750,000.00 Phoenix, Arizona
January 25, 1999
FOR VALUE RECEIVED, DIGITAL SOLUTIONS, INC., a New Jersey
Corporation, DSI-CONTRACT STAFFING, INC., a New York corporation, DSI STAFF
CONNXIONS NORTHEAST, INC., a New Jersey corporation, DSI STAFF
CONNXIONS-SOUTHWEST, INC., a Texas corporation, DSI-STAFF RX, INC., a Texas
corporation, THE TEAMSTAFF COMPANIES, INC., a Florida corporation, TEAMSTAFF,
INC., a Florida corporation, TEAMSTAFF II, Inc., a Florida corporation,
TEAMSTAFF III, Inc., a Florida corporation, TEAMSTAFF IV, Inc., a Florida
corporation, TEAMSTAFF V, Inc., a Florida corporation, TEAMSTAFF U.S.A., Inc., a
Florida corporation, TEAMSTAFF INSURANCE SERVICES, INC., a Florida corporation,
TEAMSTAFF HOLDING COMPANY, INC., a Florida corporation, and EMPLOYER SUPPORT
SERVICES, INC., a Florida corporation (collectively, "Borrower"), jointly and
severally promise to pay to the order of FINOVA CAPITAL CORPORATION, a Delaware
corporation ("FINOVA"), at its offices at 355 South Grand Avenue, Suite 2400,
Los Angeles, California 90071, or at such other place or places as FINOVA may
from time to time designate in writing, the principal sum of SEVEN HUNDRED FIFTY
THOUSAND Dollars ($750,000), plus interest in the manner and upon the terms and
conditions set forth below. This Secured Promissory Note C ("Note") is made
pursuant to that certain Amended and Restated Loan and Security Agreement of
even date herewith between FINOVA and Borrower (the "Loan Agreement"), the
provisions of which are incorporated herein by this reference. Capitalized terms
herein, unless otherwise noted, shall have the meaning set forth in the Loan
Agreement.
1.0 SCHEDULE OF PAYMENTS; RATE AND PAYMENT OF INTEREST; PREPAYMENT.
1.1 The principal balance of this Note shall be payable as
follows:
a. Twenty-two (22) equal successive monthly installments of
principal, each equal to one forty-eighth (1/48) of the unpaid principal balance
hereof on March 1, 2000, each on the first day of each month, beginning March 1,
2000, and continuing through and including December 1, 2001;
b. A final installment equal to the then unpaid principal
balance hereof on January 1, 2002.
1.2 Prepayment may be made under this Note in whole or in
part, subject to, in the case of prepayment in whole, the Success Fee set forth
in the Loan Agreement, provided that such prepayment is preceded by not less
than five (5) business days prior written notice to FINOVA and accompanied by
all accrued but unpaid interest and the full amount of the Success Fee.
Notwithstanding anything herein to the contrary, in the event the Loan Agreement
is terminated by Borrower, by FINOVA or by any other person at any time
<PAGE> 2
in accordance with its terms, or the Revolving Credit Loans facility is
otherwise terminated for any reason, then the entire unpaid principal balance of
this Note, together with all accrued and unpaid interest hereon and the full
amount of the Success Fee, shall become immediately due and payable in full on
the effective date of such termination, without presentment, notice or demand of
any kind.
1.3 Interest shall be computed on the basis of a 360-day year
for the actual number of days elapsed, and shall be at the rate of twelve
percent (12%) per annum, computed on the basis of a 360-day year; provided,
however, upon the occurrence and during the continuance of an Event of Default,
interest shall accrue on the outstanding principal balance of this Note at a
default rate (the "Default Rate") of fourteen percent (14%) per annum, and shall
be payable on demand. Accrued interest shall be payable monthly in arrears on
the first day of each month, commencing March 1, 1999, and upon the final
payment in full of the principal balance hereof.
2.0 EVENTS OF DEFAULTS; REMEDIES.
2.1 Upon the occurrence of any Event of Default under and as
defined in the Loan Agreement, in addition to FINOVA's right to charge interest
on the Obligations at the Default Rate: (a) at the option of FINOVA, the entire
unpaid amount of this Note and all of the other Obligations shall become
immediately due and payable without demand, notice or legal process of any kind;
(b) FINOVA may, at its option, without demand, notice or legal process of any
kind, exercise any and all rights and remedies granted to it by the Loan
Agreement or by any other agreement now or hereafter existing between FINOVA and
Borrower or between FINOVA and any guarantor of part or all of Borrower's
liabilities to FINOVA; and (c) FINOVA may at its option exercise from time to
time any other rights and remedies available to it under the Uniform Commercial
Code or other law of the State of Arizona.
2.2 The remedies of FINOVA as provided herein and in the Loan
Agreement shall be cumulative and concurrent, and may be pursued singularly,
successively, or together, at the sole discretion of FINOVA. No act of omission
or commission of FINOVA, including specifically any failure to exercise any
right, remedy or recourse, shall be deemed to be a waiver or release of the
same, such waiver or release to be effected only through a written document
executed by FINOVA and then only to the extent specifically recited therein. A
waiver or release with reference to any one event shall not be construed as
continuing, as a bar to, or as a waiver or release of, any subsequent right,
remedy or recourse as to a subsequent event.
3.0 GENERAL PROVISIONS.
3.1 Borrower warrants and represents to FINOVA that Borrower
has used and will continue to use the loans and advances represented by this
Note solely for proper business purposes, and consistent with all applicable
laws and statutes.
2
<PAGE> 3
3.2 This Note is secured by the Collateral described in the
Loan Agreement.
3.3 Borrower waives presentment, demand and protest, notice of
protest, notice of presentment and all other notices and demands in connection
with the enforcement of FINOVA's rights hereunder, except as specifically
provided and called for by this Note, and hereby consents to, and waives notice
of, the release, addition, or substitution, with or without consideration, of
any collateral or of any person liable for payment of this Note. Any failure of
FINOVA to exercise any right available hereunder or otherwise shall not be
construed as a waiver of the right to exercise the same or as a waiver of any
other right at any other time.
3.4 If this Note is not paid when due or upon the occurrence
of an Event of Default, Borrower further promises to pay all costs of
collection, foreclosure fees, reasonable attorneys fees and expert witness fees
incurred by FINOVA, whether or not suit is filed hereon, and the fees, costs and
expenses as provided in the Loan Agreement.
3.5 The contracted for rate of interest of the loan
contemplated hereby, without limitation, shall consist of the following: (i) the
interest rate set forth on the Schedule, calculated and applied to the principal
balance of this Note in accordance with the provisions of this Note: (ii)
interest after an Event of Default, calculated and applied to the amounts due
under this Note in accordance with the provisions hereof; and (iii) all
Additional Sums (as herein defined), if any. Borrower agrees to pay an effective
contracted for rate of interest which is the sum of the above-referenced
elements. All examination fees, attorneys fees, expert witness fees, letter of
credit fees, collateral monitoring fees, closing fees, facility fees, Minimum
Interest Charges, other charges, goods, things in action or any other sums or
things of value paid or payable by Borrower (collectively, the "Additional
Sums"), whether pursuant to this Note, the Loan Agreement or any other documents
or instruments in any way pertaining to this lending transaction, or otherwise
with respect to this lending transaction, that under any applicable law may be
deemed to be interest with respect to this lending transaction, for the purpose
of any applicable law that may limit the maximum amount of interest to be
charged with respect to this lending transaction, shall be payable by Borrower
as, and shall be deemed to be, additional interest and for such purposes only,
the agreed upon and "contracted for rate of interest" of this lending
transaction shall be deemed to be increased by the rate of interest resulting
from the inclusion of the Additional Sums.
3.6 It is the intent of the parties to comply with the usury
law of the State of Arizona (the "Applicable Usury Law"). Accordingly, it is
agreed that notwithstanding any provisions to the contrary in this Note, or in
any of the documents securing payment hereof or otherwise relating hereto, in no
event shall this Note or such documents require the payment or permit the
collection of interest in excess of the maximum Interest Rate, then in any such
event (1) the provisions of the paragraph shall govern and control, (2) neither
Borrower nor any other person or entity now or hereafter liable for the payment
hereof shall be obligated to
3
<PAGE> 4
pay the amount of such interest to the extent that it is in excess of the
Maximum Interest Rate, (3) any such excess which may have been collected shall
be either applied as a credit against the then unpaid principal amount hereof or
refunded to Borrower, at FINOVA's option, and (4) the effective rate of interest
shall be automatically reduced to the Maximum Interest Rate. It is further
agreed, without limiting the generality of the foregoing, that to the extent
permitted by the Applicable Usury Law; (x) all calculations of interest which
are made for the purpose of determining whether such rate would exceed the
Maximum Interest Rate shall be made by amortizing, prorating, allocating and
spreading during the period of the full stated term of the loan evidenced
hereby, all interest at any time contracted for, charged or received from
Borrower or otherwise in connection with such loan; and (y) in the event that
the effective rate of interest on the loan should at any time exceed the Maximum
Interest Rate, such excess interest that would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law shall be paid to
FINOVA from time to time, if and when the effective interest rate on the loan
otherwise fall below the Maximum Interest Rate, until the entire amount of
interest which would otherwise have been collected had there been no ceiling
imposed by the Applicable Usury Law has been paid in full. Borrower further
agrees that should the Maximum Interest Rate be increased at any time hereafter
because of a change in the Applicable Usury Law, then to the extent not
prohibited by the Applicable Usury Law, such increases shall apply to all
indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law, should the maximum Interest
Rate be decreased because of a change in the Applicable Usury Law, such
decreases shall not apply to the indebtedness evidenced hereby regardless of
when incurred.
3.7 FINOVA may at any time transfer this Note and FINOVA's
rights in any or all collateral securing this Note, and FINOVA thereafter shall
be relieved from all liability with respect to such collateral arising after the
date of such transfer.
3.8 This Note shall be binding upon Borrower and its legal
representatives, successors and assigns. Wherever possible, each provision of
this Note shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of the Note shall be prohibited by or
invalid under such law, such provision shall be severable, and be ineffective to
the extent of such prohibition or invalidity, without invalidating the remaining
provision of this Note.
THIS NOTE HAS BEEN DELIVERED FOR ACCEPTANCE BY FINOVA IN
PHOENIX, ARIZONA AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF
ARIZONA, AS THE SAME MAY FROM TIME TO TIME BE IN EFFECT, INCLUDING, WITHOUT
LIMITATION, THE UNIFORM COMMERCIAL CODE AS ADOPTED IN ARIZONA. BORROWER HEREBY
(i) IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED IN MARICOPA COUNTY, ARIZONA OVER ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY MATTER ARISING FROM OR
4
<PAGE> 5
RELATED TO THIS NOTE; (ii) WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON
BORROWER, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MESSENGER,
CERTIFIED MAIL OR REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS SET FORTH
BELOW AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF
ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN POSTED TO
BORROWER'S ADDRESS; (iii) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT BORROWER MAY
EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
ANY SUCH ACTION OR PROCEEDING; (iv) AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER
JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW; (v)
AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST FINOVA OR ANY OF
FINOVA'S DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY, CONCERNING ANY
MATTER ARISING OUT OF OR RELATING TO THIS NOTE IN ANY COURT OTHER THAN ONE
LOCATED IN MARICOPA COUNTY, ARIZONA; AND (vi) IRREVOCABLY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION ARISING UNDER OR IN CONNECTION WITH THIS NOTE.
NOTHING IN THIS PARAGRAPH SHALL AFFECT OR IMPAIR FINOVA'S RIGHT TO SERVE LEGAL
PROCESS IN ANY MANNER PERMITTED BY LAW OR FINOVA'S RIGHT TO BRING ANY ACTION OR
PROCEEDING AGAINST BORROWER OR BORROWER'S PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
[This Space Intentionally Left Blank]
5
<PAGE> 6
DIGITAL SOLUTIONS, INC., a New Jersey corporation
Fed. Tax ID #: 22-1899798
By: ______________________________
Name:
Title:
Address: 300 Atrium Drive, Somerset, New Jersey 08773
DSI CONTRACT STAFFING, INC., a New York corporation
Fed. Tax ID #: 13-2878077
By: ______________________________
Name:
Title:
Address: 245 Fifth Avenue, Suite 1003, New York, New York 10016
DSI STAFF CONNXIONS NORTHEAST, INC., a New Jersey corporation
Fed. Tax ID #: 22-3405060
By: ______________________________
Name:
Title:
Address: 300 Atrium Drive, Somerset, New Jersey 08773
DSI STAFF RX, INC., a Texas corporation
Fed. Tax ID #: 76-0451040
By: ______________________________
Name:
Title:
Address: 2 Northpoint Drive, Suite 110, Houston, Texas 77060
DSI STAFF CONNXIONS-SOUTHWEST, INC., a Texas corporation
Fed. Tax ID #: 76-0422152
By: ______________________________
Name:
Title:
Address: 2 Northpoint Drive, Suite 110, Houston, Texas 77060
[SECURED PROMISSORY NOTE C]
<PAGE> 7
THE TEAMSTAFF COMPANIES, INC., a Florida corporation
Fed. Tax ID #: 59-2988438
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF, INC., a Florida corporation
Fed. Tax ID #: 59-3067619
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF II, INC., a Florida corporation
Fed. Tax ID #: 59-3277121
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF III, INC., a Florida corporation
Fed. Tax ID #: 59-3277124
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF IV, INC., a Florida corporation
Fed. Tax ID #: 59-3277126
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
[SECURED PROMISSORY NOTE C]
<PAGE> 8
TEAMSTAFF V, INC., a Florida corporation
Fed. Tax ID #: 59-3277127
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF U.S.A., INC., a Florida corporation
Fed. Tax ID #: 59-2988440
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF INSURANCE SERVICES, INC., a Florida corporation
Fed. Tax ID #: 59-2988436
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
TEAMSTAFF HOLDING COMPANY, INC., a Florida corporation
Fed. Tax ID #: 59-3236075
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
EMPLOYER SUPPORT SERVICES, INC., a Florida corporation
Fed. Tax ID #: 59-2988443
By: ______________________________
Name:
Title:
Address: 1211 N. Westshore Blvd., Suite 806, Tampa, FL 33607
[SECURED PROMISSORY NOTE C]
<PAGE> 1
Exhibit 10.7
AMENDED AND RESTATED SCHEDULE TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Borrower Address
- -------- -------
DIGITAL SOLUTIONS, INC. 300 Atrium Drive,
Somerset, NJ 08873
DSI CONTRACT STAFFING, INC. 245 Fifth Avenue, Suite 1003
New York, NY 10016
DSI STAFF CONNXIONS NORTHEAST, INC. 300 Atrium Drive,
Somerset, NJ 08873
DSI STAFF CONNXIONS-SOUTHWEST, INC. 2 Northpoint Drive, Suite 110
Houston, Texas 77060
DSI STAFF Rx, INC. 2 Northpoint Drive, Suite 110
Houston, Texas 77060
THE TEAMSTAFF COMPANIES, INC. 1211 N. Westshore Blvd., Suite 806,
Tampa, FL 33607
TEAMSTAFF, INC. 1211 N. Westshore Blvd., Suite 806,
Tampa, FL 33607
TEAMSTAFF II, INC. 1211 N. Westshore Blvd., Suite 806,
Tampa, FL 33607
TEAMSTAFF III, INC. 1211 N. Westshore Blvd., Suite 806,
Tampa, FL 33607
TEAMSTAFF IV, INC. 1211 N. Westshore Blvd., Suite 806,
Tampa, FL 33607
TEAMSTAFF V, INC. 1211 N. Westshore Blvd., Suite 806,
Tampa, FL 33607
TEAMSTAFF U.S.A., INC. 1211 N. Westshore Blvd., Suite 806,
Tampa, FL 33607
TEAMSTAFF INSURANCE SERVICES, INC. 1211 N. Westshore Blvd., Suite 806,
Tampa, FL 33607
TEAMSTAFF HOLDING COMPANY, INC. 1211 N. Westshore Blvd., Suite 806,
Tampa, FL 33607
EMPLOYER SUPPORT SERVICES, INC. 1211 N. Westshore Blvd., Suite 806,
Tampa, FL 33607
DATE: JANUARY 25, 1999
This Amended and Restated Schedule ("SCHEDULE") forms an integral part of the
Amended and Restated Loan and Security Agreement between the above Borrowers
and FINOVA Capital Corporation dated the above date, and all references herein
and therein to "this Agreement" shall be deemed to refer to said Agreement and
to this Schedule.
<PAGE> 2
DEFINITIONS (SECTION 1):
"Guarantor(s)" means each subsidiary of DSI that is not a Borrower.
- --------------------------------------------------------------------------------
TOTAL FACILITY (SECTION 2.1):
$8,250,000
- --------------------------------------------------------------------------------
LOANS (SECTION 2.2):
REVOLVING CREDIT LOANS: A revolving line of credit consisting of loans
against Borrowers' Eligible Receivables (the "REVOLVING CREDIT LOANS") in
an aggregate outstanding principal amount not to exceed the lesser of (a)
or (b) below:
(a) Two Million Five Hundred Thousand Dollars ($2,500,000) (the
"REVOLVING CREDIT LIMIT"), less any Loan Reserves, or
(b) the sum of an amount equal to (i) 85% of the aggregate net amount
of Eligible Receivables of all Borrowers, less (ii) the aggregate
undrawn face amount of all Letters of Credit issued under Section
2.4 of this Agreement; less any Loan Reserves.
TERM LOANS:
1. TERM LOAN A
A term loan ("TERM LOAN A") is an original principal amount of Two
Million Five Hundred Thousand Dollars ($2,500,000); provided, that Term
Loan A shall be on such terms as are set forth on separate promissory
note of Borrowers in the form attached hereto as Exhibit 2.2(A).
2. TERM LOAN B
A term loan ("TERM LOAN B") in an original principal amount of Two
Million Five Hundred Thousand Dollars ($2,500,000); provided, that Term
Loan B shall be on such terms as are set forth on separate promissory
note of Borrowers in the form attached hereto as Exhibit 2.2(B).
3. TERM LOAN C
A term loan ("TERM LOAN C") in an original principal amount of Seven
Hundred Fifty Thousand Dollars ($750,000); provided, that Term Loan C
shall be on such terms as are set forth on separate promissory note of
Borrowers in the form attached hereto as Exhibit 2.2(C).
2
<PAGE> 3
(Term Loan A, Term Loan B and Term Loan C shall each be referred
to as a "TERM LOAN" and shall be collectively referred to as
the "TERM LOANS")
_______________________________________________________________________________
LETTERS OF CREDIT (SECTION 2.4):
The aggregate face amount of all outstanding Letters of Credit
from time to time shall not exceed $460,000, and shall be
reserved against the availability of Revolving Credit Loans
pursuant to Section 2.4 hereof. The L/C Fee, which is payable to
FINOVA in addition to all applicable bank charges, shall equal
1.5% per annum of the aggregate face amount of each Letter of
Credit outstanding from time to time during the term of this
Agreement. The L/C Fee shall be deemed to be fully earned upon
the issuance of each Letter of Credit and shall be due and
payable on the first Business Day of each month following a month
during which any Letter of Credit is outstanding.
_______________________________________________________________________________
INTEREST AND FEES (SECTION 2.6):
Revolving Interest Rate. Borrowers shall pay jointly and
severally FINOVA interest on the daily outstanding balance of
Borrowers' Revolving Credit Loans at a per annum rate of 1.0% in
excess of the rate of interest announced publicly by Citibank,
N.A., (or any successor thereto), from time to time as its "prime
rate" (the "PRIME RATE") which may not be such institution's
lowest rate. The interest rate chargeable hereunder in respect of
the Revolving Credit Loans (herein, the "REVOLVING INTEREST
RATE") shall be increased or decreased, as the case may be,
without notice or demand of any kind, upon the announcement of
any change in the Prime Rate. Each change in the Prime Rate shall
be effective hereunder on the first day following the
announcement of such change. Interest charges and all other fees
and charges herein shall be computed on the basis of a year of
360 days and actual days elapsed and shall be payable to FINOVA
in arrears on the first day of each month.
_______________________________________________________________________________
Term Interest Rate: Borrowers shall pay jointly and severally
FINOVA interest on the daily outstanding balance of each of the
Term Loans at the following per annum rates (each a "TERM
INTEREST RATE"):
(i) Term Loan A and Term Loan B: 3.0% in excess of the
Prime Rate, and
(ii) Term Loan C: 12.0%.
The Term Interest Rate chargeable hereunder in respect of Term
Loan A and Term Loan B shall be increased or decreased, as the
case may be, without notice or demand of any kind, upon the
announcement of
3
<PAGE> 4
any change in the Prime Rate. Each change in the Prime Rate shall be effective
hereunder on the first day following the announcement of such change. Interest
charges and all other fees and charges here shall be computed on the basis of a
year of 360 days and actual days elapsed and shall be payable to FINOVA in
arrears on the first day of each month.
Closing Fee. Borrowers shall pay jointly and severally to FINOVA a closing fee
in an amount equal to 1.0% of the Total Facility ("CLOSING FEE"), of which
$63,750.00 has been paid prior to the Amendment Closing Date, and the balance
of $18,750.00 shall be paid on the Amendment Closing Date, and which shall be
deemed fully earned on the date such payment is due.
Unused Line Fee. With respect to each fiscal quarter, or portion thereof during
the term of this Agreement, Borrowers shall unconditionally and jointly and
severally pay to FINOVA a fee equal to one-quarter of one percent (0.25%) per
annum of the difference between the Revolving Credit Limit and the average
daily outstanding balance of the Revolving Credit Loans during such quarter, or
portion thereof ("UNUSED LINE FEE"), which fee shall be calculated and payable
quarterly, in arrears, and shall be due and payable, commencing on the first
Business Day of the Borrower's first fiscal quarter following the Closing Date
and continuing on the first Business Day of each fiscal quarter thereafter.
Success Fee. Borrowers shall jointly and severally pay FINOVA a success fee
("SUCCESS FEE") in the following amounts:
1. TERM LOAN A:
$675,000, which is fully earned as of the Closing Date and shall be payable
in three installments as follows: $200,000 on April 27, 1999; $225,000 on
April 27, 2000; and $250,000 on April 30, 2001. If Borrowers prepay in full
the principal balance of Term Loan A prior to April 30, 2001, then all
unpaid installments of the Success Fee due with respect to Term Loan A
shall be immediately due and payable and shall be paid on the date of such
prepayment.
2. TERM LOAN B:
$675,000, which is fully earned as of the Amendment Closing Date and shall
be payable in three installments as follows: $200,000 on January 24, 2000;
$225,000 on January 24, 2001; and $250,000 on January 24, 2002. If
Borrowers prepay in full the principal balance of Term Loan B prior to the
last Business Day of the Initial Term, then all unpaid installments of the
Success Fee due with respect to
4
<PAGE> 5
Term Loan B shall be immediately due and payable and shall be paid on
the date of such prepayment.
3. TERM LOAN C:
$56,250, if Term Loan C is fully repaid within six months after the
Amendment Closing Date, $112,500 if Term Loan C is fully repaid more
than six months after the Amendment Closing Date and within twelve
months after the Amendment Closing Date, or $225,000 if Term Loan C is
fully repaid more than twelve months after the Amendment Closing Date,
in any case which is fully earned as of the Amendment Closing Date,
and shall be payable on the payment or prepayment in full of Term Loan
C.
If the Agreement is terminated for any reason prior to the last Business
Day of the Initial Term, then all unpaid installments of the Success Fee
shall be immediately due and payable and shall be paid on the date of such
termination.
Examination Fee. Borrowers agree to pay jointly and severally to FINOVA an
examination fee in the amount of $600 per person per day in connection with
each audit or examination of Borrower performed by FINOVA prior to or after
the date hereof, plus all costs and expenses incurred in connection
therewith (the "EXAMINATION FEE"). Without limiting the generality of the
foregoing, Borrowers shall jointly and severally pay to FINOVA an initial
Examination Fee in an amount equal to $600 per person per day, plus all
costs and expenses incurred in connection therewith. Such initial
Examination Fee shall be deemed fully earned at the time of payment and due
and payable upon the closing of this transaction, and shall be deducted
from any good faith deposit paid by Borrower to FINOVA prior to the date of
this Agreement.
- --------------------------------------------------------------------------------
CONDITIONS OF CLOSING - INITIAL ADVANCE (SECTION 4.1):
The obligation of FINOVA to make the initial advance hereunder or to issue
or arrange for the issuance of the initial Letter of Credit hereunder is
subject to the fulfillment, to the satisfaction of FINOVA and its counsel,
of each of the following conditions, in addition to the conditions set
forth in Section 4.1 above:
(a) Minimum Excess Availability (Section 4.1(b)). Not less than $300,000.
5
<PAGE> 6
(b) Lease and Landlord's Consent (Section 4.1(j)). Locations: 300 Atrium
Drive, Somerset, New Jersey; 4050 Rio Bravo, El Paso, Texas; 2 Northpoint
Drive, Houston, Texas; and 601 Cleveland Street, Clearwater, Florida.
(c) No Material Adverse Change (Section 4.1(s)). Further, no material
adverse change has occurred in the Borrower's business, operations,
financial condition, or assets or in the respect of repayment of the
Obligations since February 28, 1998.
(d) Support Agreements. Donald T. Kelly shall have delivered a Support
Agreement in favor of FINOVA and in form and substance satisfactory to
FINOVA.
(e) Transaction Costs (Section 4.1(X)). Not to exceed $350,000.
Borrowers shall cause the conditions precedent set forth in Section 4.1 of
this Agreement to be satisfied, and shall provide evidence to FINOVA that
all such conditions precedent have been satisfied, on or before April 28,
1998.
CONDITIONS OF CLOSING - AMENDMENT EFFECTIVENESS (SECTION 4.2):
The effectiveness of the amendments to the Original Agreement effectuated
by this Agreement and the obligation of FINOVA to make Term Loan B and
Term Loan C (as defined in the Schedule) is subject to the fulfillment,
to the satisfaction of FINOVA and its counsel, of each of the following
conditions, in addition to the conditions set forth in Section 4.2 above:
(a) Minimum Excess Availability (Section 4.2(b)). Not less than $500,000.
(b) Lease and Landlord's Consent (Section 4.2(i)). Locations: (i) 1211 N.
Westshore Boulevard, Tampa, Florida 33607, and (ii) HQ Deerwood Park,
10151 Deerwood Park Boulevard, Office #71, Jacksonville, Florida 32256.
(c) No Material Adverse Change (Section 4.2(o)). Further, no material
adverse change has occurred in the Borrower's business, operations,
financial condition, or assets or in the prospect of repayment of the
Obligations since September 30, 1998.
6
<PAGE> 7
(d) Transaction Costs (Section 4.2(s)). Not to exceed $1,200,000
exclusive of any payments made in the form of Borrowers' stock,
of which amount no more than $750,000 will be in reimbursement of
shareholders' expenses under the Merger Documents.
Borrowers shall cause the conditions precedent set forth in
Section 4.2 of this Agreement to be satisfied, and shall provide
evidence to FINOVA that all such conditions precedent have been
satisfied, on or before the Amendment Closing Date.
7
<PAGE> 8
BORROWER INFORMATION:
Borrowers' States of Incorporation (Section 5.1):
<TABLE>
<CAPTION>
BORROWER STATE
-------- -----
<S> <C>
Digital Solutions, Inc. ................................... New Jersey
DSI Contract Staffing, Inc. ............................... New York
DSI Staff ConnXions Northeast, Inc. ....................... New Jersey
DSI Staff ConnXions-Southwest, Inc. ....................... Texas
DSI Staff Rx, Inc. ........................................ Texas
The Teamstaff Companies, Inc. ............................. Florida
Teamstaff Inc. ............................................ Florida
Teamstaff II, Inc. ........................................ Florida
Teamstaff III, Inc. ....................................... Florida
Teamstaff IV, Inc. ........................................ Florida
Teamstaff V, Inc. ......................................... Florida
Teamstaff U.S.A., Inc. .................................... Florida
Teamstaff Insurance Services, Inc. ........................ Florida
Teamstaff Holding Company, Inc. ........................... Florida
Employer Support Services, Inc. ........................... Florida
</TABLE>
BORROWER'S COPYRIGHTS, PATENTS TRADEMARKS, AND LICENSES (SECTION 5.5): None
FICTITIOUS NAMES/PRIOR CORPORATE NAMES (SECTION 5.2):
<TABLE>
<CAPTION>
BORROWER FICTITIOUS NAME
-------- ---------------
<S> <C>
DSI Staff ConnXions-Southwest, Inc. ............... Turnkey Services, Inc.
DSI Staff ConnXions Northeast, Inc. ............... Temp Staff, Inc.
DSI Contract Staffing, Inc. ....................... X-L Technical, Inc.
DSI Staff Rx, Inc. ................................ Healthmark
</TABLE>
<TABLE>
<CAPTION>
BORROWER PRIOR CORPORATE NAMES
-------- --------------------------------
<S> <C>
DSI Staff ConnXions-Southwest, Inc. ...... - Turnkey Services, Inc.
- The Alternative Source
- M & B Staff management, Inc.
DSI Staff Rx, Inc. ....................... - MLB Medical Staffing, Inc.
- Physicians Services
- Staff Rx, Inc.
The Teamstaff Companies, Inc. ............ - Teamstaff, Inc.
Teamstaff, Inc. .......................... - TSC Human Resources of
Florida, Inc. f/k/a Tampa Bay
Consulting, Inc.
Teamstaff U.S.A., Inc. ................... - Team Employment Systems, Inc.
Teamstaff Insurance Services, Inc. ....... - Team Staffing, Inc.
</TABLE>
8
<PAGE> 9
BORROWERS' LOCATIONS (SECTION 5.16)
<TABLE>
<CAPTION>
BORROWER ADDRESS
- -------- -------
<S> <C>
Digital Solutions, Inc. 300 Atrium Drive, Somerset, NJ 08873
DSI Contract Staffing, Inc. 245 Fifth Avenue, Suite 1003
New York, NY 10016
DSI Staff ConnXions Northeast, Inc. 300 Atrium Drive, Somerset, NJ 08873
DSI Staff ConnXions-Southwest, Inc. 2 Northpoint Drive, Suite 110
Houston, TX 77060
4050 Riobravo, Suite 151
El Paso, TX 79902
DSI Staff Rx, Inc. 2 Northpoint Drive, Suite 110
Houston, TX 77060
601 Cleveland Street
Clearwater, FL 34615
The Teamstaff Companies, Inc. 1211 N. Westshore Blvd., Suite 806
Tampa, FL 33607
Teamstaff, Inc. 1211 N. Westshore Blvd., Suite 806
Tampa, FL 33607
Teamstaff II, Inc. 1211 N. Westshore Blvd., Suite 806
Tampa, FL 33607
10151 Deerwood Park Blvd.
Building 300, Suite 150
Jacksonville, FL 32256
Teamstaff III, Inc. 1211 N. Westshore Blvd., Suite 806
Tampa, FL 33607
Teamstaff IV, Inc. 1211 N. Westshore Blvd., Suite 806
Tampa, FL 33607
Teamstaff V, Inc. 1211 N. Westshore Blvd., Suite 806
Tampa, FL 33607
Teamstaff U.S.A., Inc. 1211 N. Westshore Blvd., Suite 806
Tampa, FL 33607
Teamstaff Insurance Services, Inc. 1211 N. Westshore Blvd., Suite 806
Tampa, FL 33607
Teamstaff Holding Company, Inc. 1211 N. Westshore Blvd., Suite 806
Tampa, FL 33607
Employer Support Services, Inc. 1211 N. Westshore Blvd., Suite 806
Tampa, FL 33607
</TABLE>
9
<PAGE> 10
BORROWERS' FEDERAL TAX IDENTIFICATION NUMBERS (SECTION 5.16):
--------------------------------------------------
BORROWER F.T.I.N.
--------------------------------------------------
Digital Solutions, Inc. 22-1899798
--------------------------------------------------
DSI Staff ConnXions-Southwest, Inc. 76-0422152
--------------------------------------------------
DSI Staff ConnXions Northeast, Inc. 22-3405060
--------------------------------------------------
DSI Contract Staffing, Inc. 13-2878077
--------------------------------------------------
DSI Staff Rx, Inc. 76-0451040
--------------------------------------------------
The Teamstaff Companies, Inc. 59-2988438
--------------------------------------------------
Teamstaff, Inc. 59-3067619
--------------------------------------------------
Teamstaff II, Inc. 59-3277121
--------------------------------------------------
Teamstaff III, Inc. 59-3277124
--------------------------------------------------
Teamstaff IV, Inc. 59-3277126
--------------------------------------------------
Teamstaff V, Inc. 59-3277127
--------------------------------------------------
Teamstaff U.S.A., Inc. 59-2988440
--------------------------------------------------
Teamstaff Insurance Services, Inc. 59-2988436
--------------------------------------------------
Teamstaff Holding Company, Inc. 59-3236075
--------------------------------------------------
Employer Support Services, Inc. 59-2988443
--------------------------------------------------
PERMITTED ENCUMBRANCES (SECTION 1.1): The following Capital Leases:
DIGITAL SOLUTIONS, INC.:
------------------------
----------------------------------------------------------------------
LESSOR LEASED PROPERTY MATURITY
DATE
----------------------------------------------------------------------
IBM Credit Corporation, Lease #1 Computers & Printers 05/29/2000
----------------------------------------------------------------------
IBM Credit Corporation, Lease #2 Computers & Printers 05/29/2000
----------------------------------------------------------------------
IBM Credit Corporation, Lease #3 Computers & Printers 05/29/2000
----------------------------------------------------------------------
DSI STAFF Rx, INC.:
-------------------
----------------------------------------------------------------------
LESSOR LEASED PROPERTY MATURITY
DATE
----------------------------------------------------------------------
Monex Leasing Phone Equipment 06/01/2000
----------------------------------------------------------------------
Republic Leasing (Clearwater) Furniture 05/01/2001
----------------------------------------------------------------------
THE TEAMSTAFF COMPANIES, INC.:
------------------------------
----------------------------------------------------------------------
LESSOR LEASED PROPERTY MATURITY
DATE
----------------------------------------------------------------------
Key Credit Corp. Computer Equipment 08/15/1999
----------------------------------------------------------------------
10
<PAGE> 11
EXISTING INDEBTEDNESS (SECTION 6.2.11): Indebtedness for Borrowed Money
represented by the Capital Leases listed above under Permitted Encumbrances, in
an aggregate principal amount not to exceed at any time $141,000 less scheduled
payments thereon in accordance with the terms thereof as of the Closing Date.
FINANCIAL COVENANTS (SECTION 6.1.13):
Borrowers shall comply with all of the following
covenants. Compliance shall be determined as of the end of
each month, except as otherwise specifically provided
below:
Debt to Net Worth. DSI and its subsidiaries shall maintain at the end of each
month in each period set forth below a ratio of
Indebtedness for Borrowed Money to Net Worth of not greater
than the ratio set forth opposite such period below:
Period Ratio
Closing Date - February 28, 1999 1.5 to 1.0
March 1, 1999 - February 29, 2000 1.0 to 1.0
March 1, 2000 - February 28, 2001 0.75 to 1.0
March 1, 2001 and thereafter 0.5 to 1.0
Net Worth. DSI and its subsidiaries shall maintain as to each date set
forth below Net Worth of not less than the amount set forth
opposite such date below:
Measurement Date Amount
June 30, 1998 $5,500,000
September 30, 1998 $5,650,000
December 31, 1998 $5,800,000
March 31, 1999 $14,000,000
June 30, 1999 $14,500,000
September 30, 1999 $15,000,000
December 31, 1999 $15,500,000
March 31, 2000 $16,000,000
June 30, 2000 $16,500,000
September 30, 2000 $17,000,000
December 31, 2000 $17,500,000
March 31, 2001 $18,000,000
June 30, 2001 $18,500,000
September 30, 2001 $19,000,000
December 31, 2001 $19,500,000
March 31, 2002 $20,000,000
11
<PAGE> 12
Debt Service Coverage Ratio As of the last day of each fiscal quarter ending on
- --------------------------- each December 31, March 31, June 30, and September
30, the ratio of Operating Cash Flow/Actual for
the consecutive 12-month period ending as of such
last day to Total Contractual Debt Service for such
12-month period must be not less than the ratio set
forth below for such period:
Measurement Date Ratio
---------------- ----------
June 30, 1998 1.3 to 1.0
September 30, 1998 1.3 to 1.0
December 31, 1998 1.3 to 1.0
March 31, 1999 1.3 to 1.0
June 30, 1999 1.3 to 1.0
September 30, 1999 1.3 to 1.0
December 31, 1999 1.3 to 1.0
March 31, 2000 1.4 to 1.0
June 30, 2000 1.4 to 1.0
September 30, 2000 1.4 to 1.0
December 31, 2000 1.4 to 1.0
March 31, 2001 1.5 to 1.0
June 30, 2001 1.5 to 1.0
September 30, 2001 1.5 to 1.0
December 31, 2001 1.5 to 1.0
March 31, 2002 1.5 to 1.0
provided however, that, with respect to the
calculations set forth herein for the period from
the Closing Date through March 31, 1999, Operating
Cash Flow/Actual and Total Contractual Debt Service
shall be determined beginning as of May 1, 1998
(the "START DATE") and be measured as follows: (w)
the time period from the Start Date through June
30, 1998, shall be for such amounts for such
period, (x) the time period from the Start Date
through September 30, 1998, shall be for such
amounts for such period, and (y) the time period
from the Start Date through December 31, 1998,
shall be for such amounts for such period; and (2)
the time period from the Start Date through March
31, 1999 shall be for amounts for such period; and,
provided further, that all such determinations
shall be made on a consolidated basis.
NEGATIVE COVENANTS (SECTION 6.2):
Employee Advances: Borrowers shall not make any loans or advances to
- ------------------ Employees except (i) in the ordinary course of
business and consistent with past practices of
Borrower in an aggregate amount not exceeding at
any time $10,000 and (ii) loans to
12
<PAGE> 13
employees to finance the exercise of options to
purchase DSI's common stock issued pursuant to employee
stock option plans, so long as all of the proceeds of
such loans are applied to pay to DSI the exercise price
of such options and the loans are secured by the stock
so purchased.
Capital Expenditures: No Borrower shall make or incur any Capital Expenditure
if, after giving effect thereto, the aggregate amount
of all Capital Expenditures by Borrowers in any fiscal
year (beginning with the 1998 fiscal year) would exceed
$300,000.
Indebtedness: Borrowers shall not create, incur, assume or permit to
exist any Indebtedness for Borrowed Money (including
Indebtedness for Borrowed Money in connection with
Capital Leases) in excess of $250,000 other than the
Indebtedness permitted by Section 6.2.11.
________________________________________________________________________________
REPORTING REQUIREMENTS (SECTION 9.1):
1. DSI shall provide FINOVA with Borrowers' monthly agings
aged by invoice date and reconciliations of Receivables
within ten (10) days after the end of each month.
2. DSI shall provide FINOVA with Borrowers' monthly
accounts payable agings aged by invoice date and
outstanding or held check registers within ten (10) days
after the end of each month.
3. DSI shall provide FINOVA with monthly unaudited
financial statements for DSI and its subsidiaries within
thirty (30) days after the end of each month.
4. DSI shall provide FINOVA with audited consolidated
financial statements of DSI and its subsidiaries within
ninety (90) days after the end of each fiscal year, as
more specifically described in Section 9.1(b) hereof,
and with an opinion issued by a Certified Public
Accountant which is acceptable to FINOVA.
5. DSI shall provide FINOVA with Borrowers' annual
operating budgets (including income statements, balance
sheets and cash flow statements, by month) for the
upcoming fiscal year of Borrowers prior to the end of
each fiscal year of Borrowers.
6. Borrowers' balance sheets for purposes of the definition
of Prepared Financials shall be as of September 30,
1998.
13
<PAGE> 14
- -----------------------------------------------------------------------------
TERM (SECTION 9.2):
The initial term of this Agreement shall end on January , 2002 (the
"INITIAL TERM" and shall be renewed for successive periods of one (1)
year each (each a "RENEWAL TERM") at the sole discretion of FINOVA,
unless earlier terminated as provided in Section 7 or 9.2 above or
elsewhere in this Agreement.
- ------------------------------------------------------------------------------
TERMINATION FEE (SECTION 9.2):
(A) Revolving Credit Loans Facility. The Termination Fee applicable to the
Revolving Credit Loans facility provided for in Section 9.2(d) shall be an
amount equal to the following percentage of the Revolving Credit Limit:
(i) three percent (3%), if such early termination occurs during the
period from the Amendment Closing Date through January 25, 2000;
(ii) one percent (1%), if such early termination occurs during the period
from January 25, 2000 through January 24, 2001; and
(iii) zero, if such early termination occurs after January 24, 2001.
(B) Term Loan A. The Termination Fees applicable to any prepayment in
whole or in part of Term Loan A shall be an amount equal to:
(i) three percent (3%) of the amount prepaid if such prepayment is made
during the period from April 28, 1998 through April 27, 1999;
(ii) one percent (1%) of the amount prepaid if such prepayment is made
during the period from April 28, 1999 through April 27, 2000; and
(iii) zero, if such prepayment is made after April 27, 2000; provided,
however, that such Termination Fee shall not be payable in the event of a
prepayment of less than all of Term Loan A which is made with internally
generated cash from operations.
(C) Term Loan B. The Termination Fee applicable to any prepayment in whole
or in part of Term Loan B shall be an amount equal to:
(i) three percent (3%) of the amount prepaid if such prepayment is made
during the period from the Amendment Closing Date through January 24,
2000;
(ii) one percent (1%) of the amount prepaid if such prepayment is made
during the period from January 25, 2000 through January 24, 2001; and
(iii) zero, if such prepayment is made after January 24, 2001;
14
<PAGE> 15
provided, however, that such Termination Fee shall not be
payable in the event of a prepayment of less than all of Term
Loan B which is made with internally generated cash from
operations.
_______________________________________________________________________________
DISBURSEMENT (SECTION 9.11):
Unless and until a Borrower otherwise directs FINOVA in writing,
all loans shall be wired to Borrowers' following operating
account:
Summit Bank
Somerset, NJ
ABA #: 021202162
For Accounts of Digital Solutions, Inc.
Account No.: 967703980
Notify: Donald T. Kelly
_______________________________________________________________________________
ADDITIONAL PROVISIONS:
1. Excess Cash Flow Prepayments. Within sixty (60) days
following receipt by FINOVA of the annual audited financial
statements of DSI and its subsidiaries, commencing with such
financial statements for the fiscal year ending September 30,
1998, FINOVA may deliver a notice to Borrowers requiring
Borrowers jointly and severally to prepay a Term Loan in an
amount up to the lesser of fifty percent (50%) of Borrower's
Excess Cash Flow for such year or the amount by which the
Borrowers' average daily Excess Availability for the thirty (30)
days preceding the date of FINOVA's notice exceeded $750,000.
Any prepayments required under this section are strictly at the
sole option of FINOVA, and are payable with thirty (30) days
following the date of demand by FINOVA. All amounts paid
pursuant to this section shall be applied to the principal
installments of the Term Loans pro rata in the inverse order of
maturity. No Termination Fee shall be applied to any payments
made under this Section.
_______________________________________________________________________________
[Signatures Follow]
15
<PAGE> 16
BORROWERS:
- ----------
DIGITAL SOLUTIONS, INC., a New Jersey corporation
Fed. Tax ID #: 22-1899798
By: ______________________________
Name:
Title:
DSI CONTRACT STAFFING, INC., a New York corporation
Fed. Tax ID #: 13-2878077
By: ______________________________
Name:
Title:
DSI STAFF CONNXIONS NORTHEAST, INC., a New Jersey corporation
Fed. Tax ID #: 22-3405060
By: ______________________________
Name:
Title:
DSI STAFF Rx, INC., a Texas corporation
Fed. Tax ID #: 76-0451040
By: ______________________________
Name:
Title:
DSI STAFF CONNXIONS-SOUTHWEST, INC., a Texas corporation
Fed. Tax ID #: 76-0422152
By: ______________________________
Name:
Title:
[Amended and Restated Schedule to Loan Agreement]
<PAGE> 17
THE TEAMSTAFF COMPANIES, INC., a Florida corporation
Fed. Tax ID #: 59-2988438
By:_____________________________
Name:
Title:
TEAMSTAFF, INC., a Florida corporation
Fed. Tax ID #: 59-3067619
By:_____________________________
Name:
Title:
TEAMSTAFF II, INC., a Florida corporation
Fed. Tax ID #: 59-3277121
By:_____________________________
Name:
Title:
TEAMSTAFF III, INC., a Florida corporation
Fed. Tax ID #: 59-3277124
By:_____________________________
Name:
Title:
TEAMSTAFF IV, INC., a Florida corporation
Fed. Tax ID #: 59-3277126
By:_____________________________
Name:
Title:
[AMENDED AND RESTATED SCHEDULE TO LOAN AGREEMENT]
2
<PAGE> 18
TEAMSTAFF V, INC., a Florida corporation
Fed. Tax ID #: 59-3277127
By: _________________________________
Name:
Title:
TEAMSTAFF U.S.A., INC., a Florida corporation
Fed. Tax ID #: 59-2988440
By: _________________________________
Name:
Title:
TEAMSTAFF INSURANCE SERVICES, INC., a Florida corporation
Fed. Tax ID #: 59-2988436
By: _________________________________
Name:
Title:
TEAMSTAFF HOLDING COMPANY, INC., a Florida corporation
Fed. Tax ID #: 59-3236075
By: _________________________________
Name:
Title:
EMPLOYER SUPPORT SERVICES, INC., a Florida corporation
Fed. Tax ID #: 59-2988443
By: _________________________________
Name:
Title:
[AMENDED AND RESTATED SCHEDULE TO LOAN AGREEMENT]
3
<PAGE> 19
LENDER:
FINOVA CAPITAL CORPORATION
By:
------------------------
Name: Ilene Gerber
Title: Vice President
[AMENDED AND RESTATED SCHEDULE TO LOAN AGREEMENT]
4
