FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
CURRENT REPORT
Pursuant to Section 13 or 15 (d)
of the Securities and Exchange Act of 1934
----------------------
Dated: August 1, 1996
Employee Solutions, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Arizona 0-22600 86-0676898
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
2929 East Camelback Road, Suite 220, Phoenix, Arizona 85016
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 955-5556
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective August 1, 1996, Employee Solutions, Inc. ("ESI") acquired
substantially all the assets of Cleveland-based Leaseway Personnel Corporation
and Leaseway Administrative Personnel (collectively, "Leaseway") for
approximately $24 million cash consideration pursuant to an asset purchase
agreement signed July 5, 1996 and amended effective August 1, 1996. The purchase
price was determined via arms-length negotiations beween the parties. ESI
acquired Leaseway through Logistics Personnel Corp., its wholly owned
subsidiary. Also effective August 1, 1996, ESI secured a three-year, $35 million
revolving credit facility from Bank One, Arizona, NA. The credit facility, which
is secured by substantially all of the assets of ESI and its subsidiaries, may
be used by ESI for acquisitions, working capital and general corporate purposes.
ESI financed the acquisition of Leaseway by obtaining an advance under the
revolving credit facility.
Leaseway currently leases approximately 2,000 permanent employees and
300 temporary employees to its client base consisting primarily of private
carriage fleets, select common carriers, and contract carriers. Leaseway
provides permanent and temporary truck drivers, as well as non-driver employees,
including warehouse workers, mechanics, dispatchers, and administrative
personnel. Leaseway currently serves approximately 180 clients in 41 states.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
See Exhibit Index attached hereto.
At the time of filing this report on Form 8-K, it is impracticable to
provide all of the financial statements and pro forma financial information
required by Item 7 of Form 8-K. The required financial statements and pro forma
financial information which are not included herein or incorporated by reference
will be filed as soon as practicable, but no later than 60 days after this
report on Form 8-K is filed.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
EMPLOYEE SOLUTIONS, INC.
By: /s/ Marvin D. Brody
------------------------
Marvin D. Brody,
Chief Executive Officer
Date: August 13, 1996
3
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit Sequentially Paginated No.
- -------------- --------------------------- --------------------------
2.1 Asset Purchase Agreement dated
July 5, 1996 by and among
Leaseway Transportation Corp.,
Leaseway Personnel Corp.,
Leaseway Administrative
Personnel, Inc. and Employee
Solutions, Inc.
2.2 First Amendment to Asset
Purchase Agreement dated
August 1, 1996 by and among
Leaseway Transportation Corp.,
Leaseway Personnel Corp.,
Leaseway Administrative
Personnel, Inc., Employee
Solutions, Inc. and Logistics
Personnel Corp.
10.1 Loan Agreement dated August 1,
1996 by and between Employee
Solutions, Inc. and Bank One
Arizona, NA
10.2 Secured Promissory Note dated
August 1, 1996 payable by
Employee Solutions, Inc. to
Bank One Arizona, NA
10.3 Security Agreement dated
August 1, 1996 between Bank
One Arizona, Inc. and Employee
Solutions, Inc. and certain of its
subsidiaries
4
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
by and between
EMPLOYEE SOLUTIONS, INC., as Buyer,
and
LEASEWAY PERSONNEL CORP., and
LEASEWAY ADMINISTRATIVE PERSONNEL, INC., as Seller
with
LEASEWAY TRANSPORTATION CORP., Seller's Parent Company
July 5, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Purchase and Sale of Business and Assets. ................................................... 1
----------------------------------------
2. Purchase Price................................................................................ 1
--------------
(a) Calculation of Purchase Price........................................................ 1
-----------------------------
(b) Amount Payable at Closing............................................................ 2
-------------------------
(c) Method of Payment.................................................................... 2
------------------
3. Closing....................................................................................... 2
-------
4. Obligations at Closing; Further Assurances.................................................... 3
------------------------------------------
5. Representations and Warranties by Seller and Parent........................................... 5
---------------------------------------------------
(a) Organization, Standing and Qualification............................................. 5
----------------------------------------
(b) Subsidiaries......................................................................... 5
------------
(c) Transactions with Certain Persons.................................................... 6
---------------------------------
(d) Execution, Delivery and Performance of Agreement; Authority.......................... 6
-----------------------------------------------------------
(e) Intentionally Omitted................................................................ 6
(f) Ownership of Seller's Capital Stock.................................................. 7
-----------------------------------
(g) Financial Statements................................................................. 7
--------------------
(h) Absence of Undisclosed Liabilities................................................... 7
----------------------------------
(i) Taxes................................................................................ 8
-----
(j) Absence of Changes or Events......................................................... 8
----------------------------
(k) Litigation........................................................................... 10
----------
(l) Compliance with Laws and Other Instruments........................................... 10
------------------------------------------
(m) Title to Properties.................................................................. 11
-------------------
(n) Schedules............................................................................ 11
---------
(o) Patents, etc......................................................................... 13
------------
(p) No Guaranties........................................................................ 13
-------------
(q) Inventory and Supplies............................................................... 14
----------------------
(r) Receivables.......................................................................... 14
-----------
(s) Business Description; Material Customer List; Indemnification for Loss
----------------------------------------------------------------------
of Customers......................................................................... 14
------------
(t) Records.............................................................................. 14
-------
(x) Disclosure........................................................................... 18
----------
6. Representations and Warranties by ESI......................................................... 19
-------------------------------------
(a) Organization......................................................................... 19
------------
(b) Authorization and Approval of Agreement.............................................. 19
---------------------------------------
(c) Execution, Delivery and Performance of Agreement..................................... 19
------------------------------------------------
(d) Litigation........................................................................... 19
----------
7. Conduct of Business Prior to Closing.......................................................... 20
------------------------------------
(i)
<PAGE>
8. Access to Information and Documents........................................................... 21
-----------------------------------
9. Employment and Noncompete Agreements; Post-Closing Agreements................................. 21
-------------------------------------------------------------
10. Directors and Shareholders Authorization; Change of Corporate Name; No-
------------------------------------------------------------------------
Shopping...................................................................................... 22
--------
11. Bulk Sales Compliance......................................................................... 22
---------------------
12. Employee Plans; Employees..................................................................... 23
-------------------------
13. Conditions Precedent to ESI's Obligations..................................................... 26
-----------------------------------------
14. Conditions Precedent to Seller's and Parent's Obligations..................................... 27
---------------------------------------------------------
15. Audited Financial Statements.................................................................. 28
----------------------------
16. Indemnification............................................................................... 29
---------------
17. Nature and Survival of Representations and Warranties......................................... 31
-----------------------------------------------------
18. Intentionally Omitted......................................................................... 31
---------------------
19. Allocation of Purchase Price.................................................................. 31
----------------------------
20. Notices....................................................................................... 32
-------
21. Termination................................................................................... 33
------------
22. Miscellaneous................................................................................. 33
-------------
23. Completion of Schedules and Exhibits.......................................................... 35
------------------------------------
(ii)
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement (the "Agreement") dated as of July 5,
1996 is by and among Leaseway Transportation Corp., a Delaware corporation
having its principal offices at Route 10 Green Hills, Reading, Pennsylvania
19603 ("Parent"), Leaseway Personnel Corp., a West Virginia corporation having
its principal office at 3401 Enterprise Parkway, Suite 200, Cleveland, Ohio
44122 ("LPC"), Leaseway Administrative Personnel, Inc., an Ohio corporation
having its principal office at 3401 Enterprise Parkway, Suite 200, Cleveland,
Ohio 44122 ("LAP") and Employee Solutions, Inc., an Arizona corporation having
its principal office at 2929 East Camelback Road, Suite 215, Phoenix, Arizona
85016 ("ESI"). (LPC and LAP sometimes are referred to collectively herein as
"Seller.")
In consideration of the mutual covenants and agreements hereinafter set
forth, the parties hereby agree as follows:
1. Purchase and Sale of Business and Assets.
(a) ESI will take title to the assets purchased pursuant to this
Agreement in a wholly owned subsidiary of ESI. All references hereinafter
contained in this Agreement to ESI shall also include such subsidiary to the
extent appropriate.
(b) Subject to and upon the terms and conditions set forth in this
Agreement, Seller will sell, transfer, convey, assign and deliver to ESI, and
ESI will purchase, at the Closing hereunder, all of the business, assets,
properties, goodwill and rights of Seller as a going concern, of every nature,
kind and description, tangible and intangible, wheresoever located and whether
or not carried or reflected on the books and records of Seller (hereinafter
sometimes collectively called "Seller's Assets") including, without limitation,
(i) the assets referred to in the Conveyance Documents (as defined below) and
(ii) the assets reflected on the Balance Sheet referred to in Section 5(g)
hereof, with only such dispositions of such assets reflected on the Balance
Sheet as shall have occurred in the ordinary course of Seller's business between
the date thereof and the Closing and which are permitted by the terms hereof,
and excluding only Seller's minute books, corporate seal and stock records,
Seller's corporate name and nontransferable governmental licenses. Seller's
Assets shall be conveyed free and clear of all liabilities, obligations, liens
and encumbrances excepting only those liabilities and obligations which are
expressly to be assumed by ESI hereunder and those liens and encumbrances
securing the same which are specifically disclosed herein and expressly
permitted by the terms hereof.
2. Purchase Price.
(a) Calculation of Purchase Price. As full consideration for the sale,
transfer, conveyance, assignment and delivery of Seller's Assets by Seller to
ESI, and in reliance upon the representations and warranties made herein by
Seller and Parent, ESI will, in full payment
<PAGE>
thereof, pay to Seller, in the manner and subject to adjustment as provided
below in this Section, a total purchase price equal to five times Seller's
Adjusted Pretax Income (as defined in the next sentence) for the year ended
December 31, 1995; provided, however, that such total purchase price shall not
be less than $22,500,000 (unless consented to by Seller). "Adjusted Pretax
Income" shall mean Seller's contribution before corporation allocation as
determined in accordance with generally accepted accounting principles
consistently applied, and as reflected on Seller's unaudited financial
statements for the fiscal year ended December 31, 1995, copies of which are
attached hereto as Exhibit "K" (the "Unaudited Statements"), and as further
adjusted for the following items: (i) an allocation of corporate overhead
expense to Seller that is equal to the greater of $300,000 or the Actual
Overhead Amount (as defined in the next sentence), and (ii) the amount of any
Material Income Difference (as defined in the second following sentence).
"Actual Overhead Amount" shall mean all direct costs and all identifiable,
incremental costs incurred by Parent in providing administrative management and
support to Seller; this amount shall be determined by the parties and may be
supported by the conclusions of the parties' accountants, however, the
accountants' calculations of overhead shall not be dispositive of the Actual
Overhead Amount for purposes of calculating the purchase price. "Material Income
Difference" shall mean a difference, without taking into account the allocation
of corporate overhead expense to Seller, of greater than $100,000 between the
Adjusted Pretax Income shown on the Unaudited Statements and the adjusted pretax
income as calculated based upon the audited financial statements for Seller's
fiscal year ended December 31, 1995 (the "Audited Statements"); if the
difference is less than $100,000, no Material Income Difference shall exist and
no adjustment to the purchase price shall be made; if the difference exceeds
$100,000, a Material Income Difference shall exist, and the purchase price shall
be adjusted to account for the entire amount of the Material Income Difference
in the manner set forth above.
(b) Amount Payable at Closing. The amount payable at Closing shall be
determined by taking the purchase price established in Section 2(a) and
adjusting it by adding an amount equal to the net value of certain assets
(consisting solely of the cash and accounts receivable) transferred by Seller to
ESI, and subtracting certain liabilities (consisting solely of accounts payable,
accrued liabilities and, at ESI's sole election, workers compensation reserves)
assumed by ESI from Seller (the "Net Asset Adjustment"). The Net Asset
Adjustment shall be based upon Seller's balance sheet through the last business
day immediately preceding the Closing Date. ESI, in its sole discretion, may
elect not to assume the Seller's workers compensation reserves, in which case
those reserves would remain the sole responsibilities of Seller and the Net
Asset Adjustment would be calculated without giving regard to such reserves.
(c) Method of Payment. The purchase price shall be paid by wire
transfer at the Closing, provided that the amount of the payment shall be
adjusted to reflect the Net Asset Adjustment.
3. Closing. The Closing shall take place at 10:00 A.M., local time, on
or before August 1, 1996, at the offices of Quarles & Brady in Phoenix, Arizona,
or at such other time and place as the parties may agree. The day on which the
Closing actually takes place is sometimes referred to in this Agreement as the
Closing Date. If either of the parties is entitled
-2-
<PAGE>
not to close on the scheduled date because a condition to the Closing set forth
in Section 13 or 14 hereof has not been met (or waived by the party or parties
entitled to waive it), such party may, in its sole discretion, elect to postpone
the Closing from time to time, by giving at least five days' prior notice to the
other party, until the condition has been met (which all parties will use
commercially reasonable efforts to cause to happen), but in no event to a date
later than September 30, 1996.
4. Obligations at Closing; Further Assurances.
(a) At the Closing, Seller and Parent will deliver to ESI:
(i) a cashier's or certified check or wire transfer drawn by
Seller or Parent to the order of ESI in the aggregate amount of all of
Seller's cash on hand and in banks. Seller may deduct from such amounts
the total amount of all uncleared checks which have been drawn by
Seller prior to the Closing in payment of liabilities of Seller which
are assumed by ESI hereunder or, at ESI's option, Seller shall assign
to ESI all of Seller's bank accounts subject to such uncleared checks;
(ii) a Bill of Sale duly executed by Seller, in form to be
agreed upon by the parties and annexed hereto as Exhibit "A" on or
prior to Closing;
(iii) an Assignment of Contract Rights duly executed by
Seller, in form to be agreed upon by the parties and annexed hereto as
Exhibit "B" on or prior to Closing
(iv) an Assignment of Lease for each real property lease
included as part of the Assets, each duly executed by Seller, in form
to be agreed upon by the parties and annexed hereto as Exhibit "C" on
or prior to Closing;
(v) a Liabilities Undertaking Agreement duly executed by
Seller, in form to be agreed upon by the parties and annexed hereto as
Exhibit "D" on or prior to Closing;
(vi) Intentionally omitted.
(vii) the Non-Competition Agreement(s) required pursuant to
Section 9(b) below;
(viii) the Post-Closing Agreement(s) required pursuant to
Section 9(c) below;
(ix) the Opinion of Seller's Counsel required pursuant to
Section 13(f) below;
(x) such third party consents and approvals as may be
necessary to ensure the conveyance of all of the Assets free from the
claims of any third parties;
-3-
<PAGE>
(xi) a Certificate of Seller, as required pursuant to Section
13(d) below, attesting as to, among other things, the completeness and
accuracy of all schedules, exhibits, representations and warranties as
of the Closing Date, and, if necessary in connection therewith, updated
schedules and exhibits to this Agreement, all accurate as of the date
of Closing;
(xii) such other good and sufficient instruments of
conveyance, assignment and transfer, in form and substance reasonably
satisfactory to ESI's and Seller's counsel, as shall be effective to
vest in ESI good and marketable title to Seller's Assets (the documents
referenced in paragraphs (a)(ii)-(iv) of this Section are referred to
collectively as the "Conveyance Documents";
(xiii) all contracts, files and other data and documents
pertaining to Seller's Assets, except Seller's minute books and stock
ledger records (which may be delivered at the offices of Seller); and
(xiv) all other documents required to be delivered to ESI
under the provisions of this Agreement.
(b) At the Closing, ESI will deliver to Seller:
(i) wire transfer drawn by ESI to the order of Seller in the
aggregate amount of the purchase price, as adjusted for the Net Asset
Adjustment, plus or minus, less any other miscellaneous fees and costs
relating to the transaction that are to be deducted from Seller's
proceeds at Closing;
(ii) a Liabilities Undertaking Agreement duly executed by
Buyer;
(iii) a Certificate of ESI, as required pursuant to Section
14(c) below; and
(iv) the Opinion of ESI's Counsel required pursuant to Section
14(d) below.
(c) At any time and from time to time after the Closing, at ESI's
request and without further consideration, Seller and Parent will execute and
deliver such other instruments of sale, transfer, conveyance, assignment and
confirmation and take such action as ESI may reasonably deem necessary or
desirable in order more effectively to transfer, convey and assign to ESI, and
to confirm ESI's title to, all of Seller's Assets, to put ESI in actual
possession and operating control thereof and to assist ESI in exercising all
rights with respect thereto, all subject to and in accordance with the terms and
provisions of the Agreement. After the Closing, at reasonable times and on
reasonable notice, Seller shall have access to the books and records pertaining
to its operations prior to the Closing, and ESI shall retain such books and
records for a period of three years after the Closing.
-4-
<PAGE>
(d) Seller agrees that, effective upon Closing, ESI and its successors
and assigns shall hereby be constituted and appointed the true and lawful
attorney of Seller with full power of substitution in the name of ESI or in the
name of but for the benefit and at the expense of ESI (i) to institute and
prosecute all proceedings which ESI may in its sole discretion deem proper in
order to collect, assert, or enforce any right, title, or interest of any kind
in, to, or under Seller's Assets, to defend or compromise any and all actions,
suits, or proceedings in respect of any of Seller's Assets and to do all such
acts and things in relation thereto as ESI shall deem advisable; and (ii) to
take all actions which ESI may deem proper in order to provide for the benefits
under any contracts, licenses, leases, commitments, or sale or purchase orders
where any required consent of another party thereto to the assignment thereof to
ESI pursuant to this Agreement shall not have been obtained. Seller acknowledges
that the foregoing powers are coupled with an interest in such contracts,
licenses, leases, commitments, and sale and purchase orders and shall be
irrevocable by Seller or by the subsequent dissolution of any of them or in any
manner or for any reason. ESI shall be entitled to retain for its own account
any amounts collected pursuant to the foregoing powers, including any amounts
payable as interest in respect thereof.
(e) Each of the representations and warranties contained herein shall
be true and correct in all respects (except where any such representation or
warranty is qualified as to materiality, in which event it shall be true and
correct in all material respects) as of the date hereof and on the date of
Closing.
5. Representations and Warranties by Seller and Parent. Seller and
Parent jointly and severally represent and warrant to ESI, as of the date hereof
and as of the date of Closing, as follows:
(a) Organization, Standing and Qualification. LPC and LAP are
corporations duly organized, validly existing and in good standing under the
laws of West Virginia and Ohio, respectively; each Seller has all requisite
corporate power and authority and is entitled to carry on its business as now
being conducted and to own, lease or operate its properties as and in the places
where such business is now conducted and such properties are now owned, leased
or operated; and each Seller is duly qualified, licensed or domesticated and in
good standing as a foreign corporation authorized to do business in the
jurisdictions listed on Schedule "5(a)," which Seller shall prepare and annex
hereto as promptly as possible prior to Closing. Seller also is licensed as a
leasing company in the jurisdictions listed on Schedule "5(a)." Seller has not
failed to qualify to do business or to become licensed as a leasing company in
any state where that failure to do so would have a material adverse effect on
Seller or its operations. As of the date of Closing, Seller has delivered to ESI
true and complete copies of Seller's certificate or articles of incorporation
and all amendments thereto, certified by the Secretary of State of the State of
West Virginia and Ohio, respectively, and the by-laws of Seller as presently in
effect, certified as true and correct by Seller's Secretary.
(b) Subsidiaries. Seller has no subsidiaries except those listed on
Schedule "5(b)," which Seller shall prepare and annex hereto as promptly as
possible prior to Closing. Seller has
-5-
<PAGE>
no interest, direct or indirect, and has no commitment to purchase any interest,
direct or indirect, in any other corporation or in any partnership, joint
venture or other business enterprise or entity other than as set forth on
Schedule "5(b)," which Seller shall prepare and annex hereto as promptly as
possible prior to Closing. The business carried on by Seller has not been
conducted through any other direct or indirect subsidiary or affiliate of
Parent.
(c) Transactions with Certain Persons. Except as set forth on Schedule
"5(c)," which Seller shall prepare and annex hereto as promptly as possible
prior to Closing, and except for arms' length transactions entered into on the
substantially the same terms as would have applied in a bona fide, arms' length
transaction with a third party, Seller has not during the past year, and , to
the best of Seller's knowledge, Seller has not during the two years immediately
prior to the past year, directly or indirectly, purchased, leased from others or
otherwise acquired any property or obtained any services from, or sold, leased
to others or otherwise disposed of any property or furnished any services to, or
otherwise dealt with (except with respect to remuneration for services rendered
as a director, officer or employee of Seller), in the ordinary course of
business or otherwise, (i) Parent or (ii) any person, firm or corporation which,
directly or indirectly, alone or together with others, controls, is controlled
by or is under common control with Seller or Parent. Except as set forth on
Schedule "5(c)," which Seller shall prepare and annex hereto as promptly as
possible prior to Closing, Seller does not owe any amount to, or have any
contract with or commitment to, Parent or any of its directors, officers,
employees or consultants (other than compensation for current services not yet
due and payable and reimbursement of expenses arising in the ordinary course of
business), and none of such persons owes any amount to Seller. Except as set
forth on Schedule "5(c)," which Seller shall prepare and annex hereto as
promptly as possible prior to Closing, no part of the property or assets of
Parent or any direct or indirect subsidiary or affiliate of Parent (other than
Seller) has, during the past three years, been used by Seller without fair value
given to Parent in return.
(d) Execution, Delivery and Performance of Agreement; Authority.
Neither the execution, delivery nor performance of this Agreement by Seller or
Parent, will with or without the giving of notice or the passage of time, or
both, conflict with, result in a default, right to accelerate or loss of rights
under, or result in, cause or create any liability, reassessment or revaluation
of assets, lien, charge or encumbrance pursuant to, any provision of Seller's
certificate of incorporation or by-laws or any franchise, mortgage, deed of
trust, lease, license, agreement, understanding, law, ordinance, rule,
regulation, order, judgment, decree or other legal or contractual requirement to
which Seller or Parent is a party or by which any of them or the Seller's Assets
may be bound or affected. Seller and Parent have the full power and authority to
enter into this Agreement and to carry out the transactions contemplated hereby,
all proceedings required to be taken by them or their stockholders to authorize
the execution, delivery and performance of this Agreement and the agreements
relating hereto have been properly taken and this Agreement constitutes a valid
and binding obligation of Seller and Parent, enforceable against them in
accordance with its terms, subject to applicable bankruptcy and insolvency laws,
and principles of equity.
(e) Intentionally Omitted.
-6-
<PAGE>
(f) Ownership of Seller's Capital Stock. Parent is the lawful record
and beneficial owner of 100% of Seller's capital stock, free and clear of any
liens, claims, encumbrances or restrictions of any kind, and all of such shares
are validly issued and outstanding, fully paid and nonassessable. There are no
outstanding subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements or arrangements of any
character or nature whatever under which Seller or Parent is or may become
obligated to issue, assign or transfer any shares of the capital stock of
Seller.
(g) Financial Statements. Seller and Parent have provided the following
financial statements (hereinafter collectively called the "Financial
Statements"), all of which are complete and correct, have been prepared in
accordance with generally accepted accounting principles consistently applied
and maintained throughout the periods indicated and fairly present the financial
condition of Seller as at their respective dates and the results of its
operations for the periods covered thereby:
(i) a balance sheet of Seller (the "Balance Sheet") as at
December 31, 1995 (the "Balance Sheet Date") and the related statements
of earnings and statements of cash flows for the year then ended; and
(ii) the most recent balance sheet of Seller, which in no
event shall be earlier than May 31, 1996, and Seller's statement of
earnings and statement of cash flows for the quarterly period then
ended.
Such statements of earnings do not contain any material items of special or
nonrecurring income or any other income not earned in the ordinary course of
business except as expressly specified therein, and such interim financial
statements include all adjustments, which consist only of normal recurring
accruals, necessary for such fair presentation.
(h) Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against on the face of the Balance Sheet (including the
notes thereto, if delivered to ESI concurrently therewith) or as set forth on
Schedule "5(h)," which Seller shall prepare and annex hereto as promptly as
possible prior to Closing, as of the Balance Sheet Date Seller had no material
debts, liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature whatsoever, including, without limitation, any foreign
or domestic tax liabilities or deferred tax liabilities incurred in respect of
or measured by Seller's income, or its period prior to the close of business on
the Balance Sheet Date or any other debts, liabilities or obligations relating
to or arising out of any act, omission, transaction, circumstance, sale of goods
or services, state of facts or other condition which occurred or existed on or
before the Balance Sheet Date, whether or not then known, due or payable. None
of the Seller's employees is now or, will by the passage of time hereafter
become, entitled to receive any vacation time, vacation pay or severance pay
attributable to services rendered prior to the Balance Sheet Date except as
disclosed on the face of the Balance Sheet (excluding the notes thereto).
-7-
<PAGE>
(i) Taxes. All taxes, including, without limitation, income, property,
sales, use, franchise, added value, employees' income withholding (including
without limitation employer and employee portions of FICA, state unemployment
taxes, federal unemployment taxes, and any other payroll taxes for both
administrative and leased employees) and social security taxes, imposed by the
United States or by any foreign country or by any state, municipality,
subdivision or instrumentality of the United States or of any foreign country,
or by any other taxing authority, which are due or payable by Seller, and all
interest and penalties thereon, whether disputed or not, have been paid in full,
all tax returns required to be filed in connection therewith have been
accurately prepared and duly and timely filed and all deposits required by law
to be made by Seller with respect to employees' withholding and other taxes have
been duly made. Seller has not been delinquent in the past year in the payment
of any foreign or domestic tax, assessment or governmental charge or deposit and
has no tax deficiency or claim outstanding, proposed or assessed against it, and
there is no basis for any such deficiency or claim. Seller is not a "consenting
corporation" within the meaning of Section 341(f)(1) of the Internal Revenue
Code of 1986.
(j) Absence of Changes or Events. Except as set forth in Schedule
"5(j)," which Seller shall prepare and annex hereto as promptly as possible
prior to Closing, annexed hereto, since the Balance Sheet Date, Seller has
conducted its business only in the ordinary course consistent with its prior
practices and has not:
(i) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except current
liabilities for trade or business obligations incurred in connection
with the purchase of goods or services in the ordinary course of
business and consistent with its prior practice, none of which
liabilities, in any case or in the aggregate, materially and adversely
affects the business, liabilities or financial condition of Seller;
(ii) discharged or satisfied any lien, charge or encumbrance
other than those then required to be discharged or satisfied, or paid
any obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due, other than current liabilities
shown on the Balance Sheet and current liabilities incurred since the
Balance Sheet Date in the ordinary course of business and consistent
with its prior practice;
(iii) declared or made any payment of dividends or other
distribution to its shareholders or upon or in respect of any shares of
its capital stock, or purchased, retired or redeemed, or obligated
itself to purchase, retire or redeem, any of its shares of capital
stock or other securities;
(iv) mortgaged, pledged or subjected to lien, charge, security
interest or any other encumbrance or restriction any of its property,
business or assets, tangible or intangible;
-8-
<PAGE>
(v) sold, transferred, leased to others or otherwise disposed
of any of its assets, except for inventory sold in the ordinary course
of business, or canceled or compromised any material debt or material
claim, or waived or released any right of substantial value;
(vi) received any notice of termination of any contract, lease
or other agreement or suffered any damage, destruction or loss (whether
or not covered by insurance) which, in any case or in the aggregate,
has had a materially adverse effect on the assets, operations or
prospects of Seller;
(vii) encountered any labor union organizing activity, had any
actual or threatened employee strikes, work stoppages, slow-downs or
lock-outs, or had any material change in its relations with its
employees, agents, customers or suppliers or with any governmental
authorities or self-regulatory organizations;
(viii) transferred or granted any rights under, or entered
into any settlement regarding the breach or infringement of, any United
States or foreign license, patent, copyright, trademark, trade name,
invention or similar rights, or modified any existing rights with
respect thereto;
(ix) made any material change in the rate of compensation,
commission, bonus or other direct or indirect remuneration payable, or
paid or agreed or orally promised to pay, conditionally or otherwise,
any bonus, extra compensation, pension or severance or vacation pay, to
any shareholder, director, officer, employee, salesman, distributor or
agent of Seller;
(x) issued or sold any shares of its capital stock or other
securities, or issued, granted or sold any options, rights or warrants
with respect thereto, or acquired any capital stock or other securities
of any corporation or any interest in any business enterprise, or
otherwise made any loan or advance to or investment in any person, firm
or corporation;
(xi) made any capital expenditures or capital additions or
betterments in excess of an aggregate of $10,000;
(xii) made any material changes to its banking or safe deposit
arrangements;
(xiii) instituted, settled or agreed to settle any litigation,
action or proceeding before any court or governmental body relating to
Seller or its property;
(xiv) made any purchase commitment in excess of the normal,
ordinary and usual requirements of its business or at any price in
excess of the then current market price or upon terms and conditions
more onerous than those usual and customary in the industry, or made
any change in its selling, pricing, advertising or personnel practices
-9-
<PAGE>
inconsistent with its prior practice and prudent business practices
prevailing in the industry;
(xv) suffered any change, event or condition which, in any
case or in the aggregate, has had or may have a materially adverse
affect on Seller's condition (financial or otherwise), properties,
assets, liabilities, operations or prospects, including, without
limitation, any change in Seller's revenues, costs, backlog or
relations with its employees, agents, customers, or suppliers;
(xvi) entered into any transaction, contract or commitment
other than in the ordinary course of business or paid or agreed to pay
any legal, accounting, brokerage, finder's fee, taxes or other expenses
in connection with, or incurred any severance pay obligations by reason
of, this Agreement or the transactions contemplated hereby; or
(xvii) entered into any agreement or made any commitment to
take any of the types of action described in subparagraphs (i) through
(xvi) above.
(k) Litigation. Except as set forth in Schedule "5(k)," which Seller
shall prepare and annex hereto as promptly as possible prior to Closing, to the
knowledge of Seller and Parent, there is no claim, legal action, suit,
arbitration, governmental investigation or other legal or administrative
proceeding, nor any order, decree or judgment in progress, pending or in effect,
or to the knowledge of Seller or Parent threatened, against or relating to
Seller, its officers, directors or employees, its properties, assets or business
or the transactions contemplated by this Agreement, and neither Seller nor
Parent knows or has reason to be aware of any basis for the same.
(l) Compliance with Laws and Other Instruments. Except as set forth in
Schedule "5(1)," which Seller shall prepare and annex hereto as promptly as
possible prior to Closing, Seller has complied in all material respects with all
existing laws, rules, regulations, ordinances, orders, judgments and decrees now
or hereafter applicable to its business, properties or operations as presently
conducted, to the extent that the failure to do so would have a material,
adverse effect on the business, operations, or financial condition of the
Seller. Neither the ownership nor use of Seller's properties nor the conduct of
its business (i) violates, or with or without the giving of notice or the
passage of time, or both, will violate, conflict with or result in a default,
right to accelerate or loss of rights under, any terms or provisions of its
certificate of incorporation or by-laws as presently in effect, or any lien,
encumbrance, mortgage, deed of trust, lease, license, agreement, understanding,
law, ordinance, rule or regulation, or any order, judgment or decree to which
Seller is a party or by which it may be bound or affected, or (ii) to the best
of Seller's knowledge, conflicts with the rights of any person, firm or
corporation. To the best knowledge of Seller and Parent, neither Seller nor
Parent is aware of any proposed laws, rules, regulations, ordinances, orders,
judgments, decrees, governmental takings, condemnations or other proceedings
which would be applicable to Seller's business, operations or properties and
which might materially adversely affect Seller's properties, assets,
liabilities, operations or prospects, either before or after the Closing.
-10-
<PAGE>
(m) Title to Properties. Seller has good and marketable title to all
the properties and assets it owns or uses in its business or purports to own,
including, without limitation, those reflected in its books and records and in
the Balance Sheet. Except as set forth on Schedule "5(m)," which Seller shall
prepare and annex hereto as promptly as possible prior to Closing, none of such
properties and assets are subject to any mortgage, pledge, lien, charge,
security interest, encumbrance, restriction, lease, license, easement, liability
or adverse claim of any nature whatsoever, direct or indirect, whether accrued,
absolute, contingent or otherwise, except (i) mortgages or security interests
shown on the Balance Sheet as securing specific liabilities or obligations or
(ii) those imperfections of title and encumbrances, if any, which, individually
or in the aggregate, (A) are not substantial in character, amount or extent and
do not materially detract from the value of the properties subject thereto, (B)
do not interfere with either the present and continued use of such property or
the conduct of Seller's normal operations and (C) have arisen only in the
ordinary course of business. All of the properties and assets owned, leased or
used by Seller are, to the best of Seller's knowledge, in good operating
condition and repair, are suitable for the purposes used, are adequate and
sufficient for all current operations of Seller and are directly related to the
business of Seller.
(n) Schedules. Attached hereto as Schedule "5(n)," which Seller shall
prepare and annex hereto as promptly as possible prior to Closing, is a separate
schedule containing an accurate and complete list and description of:
(i) All real property owned by Seller or in which Seller has a
leasehold or other interest or which is used by Seller in connection
with the operation of its business, together with a description of each
lease, sublease, license, or any other instrument under which Seller
claims or holds such leasehold or other interest or right to the use
thereof or pursuant to which Seller has assigned, sublet or granted any
rights therein, identifying the parties thereto, the rental or other
payment terms, expiration date and cancellation and renewal terms
thereof.
(ii) As of a date no earlier than June 15, 1996, all of
Seller's receivables (which shall include accounts receivable, loans
receivable and any advances), together with detailed information as to
each such listed receivable which has been outstanding for more than 30
days.
(iii) All machinery, tools, equipment, motor vehicles and
other tangible personal property (other than inventory and supplies),
owned, leased or used by Seller except for items having a value of less
than $5,000 which do not, in the aggregate, have a total value of more
than $25,000, setting forth with respect to all such listed property a
summary description of all leases, liens, claims, encumbrances,
charges, restrictions, covenants and conditions relating thereto,
identifying the parties thereto, the rental or other payment terms,
expiration date and cancellation and renewal terms thereof.
(iv) All patents, patent applications, licenses, trademarks,
trademark registrations, service marks, service names, trade names,
copyrights and copyright
-11-
<PAGE>
registrations, and applications for any of the foregoing, wholly or
partially owned or held by Seller or used in the operation of Seller's
business (but excluding Seller's corporate name).
(v) All fire, theft, casualty, liability and other insurance
policies insuring Seller or its properties or interests therein,
specifying with respect to each such policy the name of the insurer,
the risk insured against, the limits of coverage, the deductible amount
(if any), the premium rate and the date through which coverage will
continue by virtue of premiums already paid. Except as disclosed in
Schedule "5(n)", such policies are with reputable insurers, provide
adequate coverage for all normal risks incident to Seller's assets,
properties and business operations and are in character and amount at
least equivalent to that carried by persons engaged in a business
subject to the same or similar perils or hazards.
(vi) All sales agency or route distributorship agreements or
franchises or agreements providing for the services of an independent
contractor to which Seller is a party or by which it is bound.
(vii) All contracts, agreements, commitments or licenses
relating to patents, trademarks, trade names, copyrights, inventions,
processes, knowhow, formulae or trade secrets to which Seller is a
party or by which it is bound.
(viii) All loan agreements, indentures, mortgages, pledges,
conditional sale or title retention agreements, security agreements,
equipment obligations, guaranties, leases or lease purchase agreements
to which Seller is a party or by which it is bound.
(ix) All contracts, agreements and commitments, whether or not
fully performed, in respect of the issuance, sale or transfer of the
capital stock, bonds or other securities of Seller or pursuant to which
Seller has acquired any substantial portion of its business or assets.
(x) All contracts, agreements, commitments or other
understandings or arrangements to which Seller is a party or by which
it or any of its property is bound or affected.
(xi) All collective bargaining agreements, employment and
consulting agreements, executive compensation plans, bonus plans,
deferred compensation agreements, employee pension plans or retirement
plans, employee stock options or stock purchase plans and group life,
health and accident insurance and other employee benefit plans
agreements, arrangements or commitments, whether or not legally
binding, including, without limitation, holiday, vacation, Christmas
and other bonus practices, to which Seller is a party or is bound or
which relate to the operation of Seller's business.
-12-
<PAGE>
(xii) The names and current annual salary rates of all persons
(including independent commission agents) whose annual compensation
(direct or indirect) from Seller is in excess of $45,000 and showing
separately for each such person the amounts paid or payable as salary,
bonus payments and any indirect compensation for the year ended June
30, 1996, and any accrued amounts as of the Closing that may or will
become payable after the Closing.
(xiii) The names of all of Seller's directors and officers;
the name of each bank in which Seller has an account or safe deposit
box and the names of all persons authorized to draw thereon or have
access thereto; and the names of all persons, if any, holding tax or
other powers of attorney from Seller and a summary of the terms
thereof.
All of the contracts, agreements, leases, licenses and commitments required to
be listed on Schedule "5(n)," which Seller shall prepare and annex hereto as
promptly as possible prior to Closing (other than those which have been fully
performed) are valid and binding, enforceable in accordance with their
respective terms (subject to applicable bankruptcy and insolvency laws and
principles of equity), in full force and effect and, except as otherwise
specified in Schedule "5(n)," which Seller shall prepare and annex hereto as
promptly as possible prior to Closing, validly assignable to ESI without the
consent of any other party so that, after the assignment thereof to ESI pursuant
hereto, ESI will be entitled to the full benefits of Seller thereof. Except as
disclosed in Schedule "5(n)," which Seller shall prepare and annex hereto as
promptly as possible prior to Closing, none of the payments required to be made
under any such contract, agreement, lease, license or commitment has been
prepaid more than 30 days prior to the due date of such payment thereunder, and
there is not thereunder any existing default, or event which, after notice or
lapse of time, or both, would constitute a default or a basis for force majeure
or other claim of excusable delay or non-performance thereunder or result in a
right to accelerate or loss of rights. To the best of Seller's knowledge, none
of Seller's existing or completed contracts is subject to renegotiation with any
governmental body. True and complete copies of all such contracts, agreements,
leases, licenses and other documents listed on Schedule "5(n)" (together with
any and all amendments thereto) shall be delivered to ESI as promptly as
possible after the execution hereof.
(o) Patents, etc. Except as set forth in Schedule "5(o)," which Seller
shall prepare and annex hereto as promptly as possible prior to Closing, Seller
owns or possesses the royalty free licenses or other rights to use all
copyrights, trademarks, service marks, service names, trade names, patents,
trade secrets and other proprietary rights necessary to conduct its business as
it is presently operated. To the best of Seller's knowledge, Seller is not
infringing upon or otherwise acting adversely to any copyrights, trademarks,
trademark rights, service marks, service names, trade names, patents, patent
rights, licenses, trade secrets or other proprietary rights owned by any other
person or persons, and there is no claim or action by any such person pending,
or to the knowledge of Seller or Parent threatened, with respect thereto.
(p) No Guaranties. None of the obligations or liabilities of Seller is
guaranteed by, or subject to a similar contingent liability of, any other
person, firm or corporation, nor has
-13-
<PAGE>
Seller guaranteed, or otherwise become contingently liable for, the obligations
or liabilities of any other person, firm or corporation.
(q) Inventory and Supplies. Seller does not own any inventory or work
in process items. Seller's supplies reflected on the Balance Sheet or thereafter
acquired (and not subsequently disposed of in the ordinary course of business)
are suitable and usable for their intended purpose, none of such items is
obsolete or below standard quality.
(r) Receivables. All receivables of Seller (including accounts
receivable, loans receivable and advances) which are reflected in the Balance
Sheet, and all such receivables which will have arisen since the date thereof,
shall have arisen only from bona fide transactions in the ordinary course of
Seller's business and shall be (or have been) fully collected when due, or in
the case of each account receivable within 90 days after it arose, without
resort to litigation and without offset or counterclaim, in the aggregate face
amounts thereof except to the extent of the normal allowance for doubtful
accounts with respect to accounts receivable computed consistently with Seller's
prior practices as reflected on the most recent annual Financial Statement.
(s) Business Description; Material Customer List; Indemnification for
Loss of Customers. Exhibit "E" attached hereto contains an accurate and complete
list of the names of the 15 largest customers of Seller during the past year on
the basis of revenues generated. Except as set forth on Schedule 5(s), which
Seller shall prepare and annex hereto as promptly as possible prior to Closing,
Seller represents and warrants, with respect to Seller's top 15 customers, to
the best of Seller's knowledge, that it is not aware of any circumstance or
reason why any such customer would terminate its relationship or materially
decrease its business with ESI after the Closing.
(t) Records. The books of account, minute books, stock record books and
other records of Seller are complete and correct in all material respects and
have been maintained in accordance with sound business practices, and there have
been no transactions involving the business of Seller which properly should have
been set forth therein and which have not been accurately so set forth.
(u) Employees; Employee Benefit Plans.
(i) Employees. Seller has provided ESI with a complete list of
all permanent and full-time employees of the Seller not subject to collective
bargaining agreements ("Nonunion Employees"), their salaried and wage rates,
vacation pay schedule as of July 1, 1996, positions, and length of service.
Except as disclosed in Schedule 5(u)(i), which Seller shall prepare and annex
hereto as promptly as possible prior to Closing, no Nonunion Employee has any
agreement as to length of notice required to terminate his or her employment,
other than such as results by law from the employment of an employee without
agreement as to such notice or as to length of service.
-14-
<PAGE>
(ii) Employee Benefit Plans. Schedule 5(u)(ii), which Seller
shall prepare and annex hereto as promptly as possible prior to Closing, lists
all deferred compensation, pension, profit sharing, stock option, stock
purchase, savings, group insurance and retirement plans, and all medical,
dental, vision, life, disability, vacation pay, severance pay, incentive
compensation, consulting, bonus and other employee benefit or fringe benefit
plans, policies, or arrangements, both formal and informal, funded and unfunded,
maintained by the Seller or Parent or with respect to which contributions are
made by the Seller or Parent (including health, life insurance and other benefit
plans maintained for retirees) on behalf of employees or former employees of the
Seller. Said plans, including but not limited to all plans or programs that
constitute "employee benefit plans" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), are sometimes
collectively referred to in this Section as "Benefit Plans" and each
individually is sometimes referred to as a "Benefit Plan". True and complete
copies of all Benefit Plans, including any insurance contracts under which
benefits are provided, as currently in effect will be made available to ESI upon
request. A true and complete copy of the current summary plan description, if
any was required by ERISA to be prepared and distributed to participants, for
each Benefit Plan will be made available to ESI upon request. Except as set
forth in Schedule 5(u)(ii):
(1) There has not been any (A) termination or partial
termination of any "employee pension benefit plan" (as defined in Section 3(2)
of ERISA) maintained by the Seller or any affiliate of the Seller, as determined
under Code Section 414(b),(c),(m) or (o) (hereinafter referred to as an "ERISA
Affiliate"), at a time when Section 4021 of ERISA applied to such plan, (B)
commencement of any proceeding to terminate any such plan pursuant to ERISA, or
otherwise, or (C) written notice given to the Seller or any ERISA Affiliate of
the intention to commence or seek the commencement of any such proceeding, which
(under (A)) resulted or (under (B) or (C)) would result in any insufficiency of
plan assets necessary to satisfy benefit liabilities under the plan. No
"reportable event" as defined in Section 4043 of ERISA has occurred with respect
to any employee pension benefit plan and neither the Seller nor any ERISA
Affiliate has any liability to the Pension Benefit Guaranty Corporation (PBGC)
with respect to or arising from the maintenance of any employee pension benefit
plan (including, but not limited to, liability under Sections 302, 4062, 4063,
4064 or 4069 of ERISA). No event has occurred which would permit the PBGC to
impose a lien against any of the Seller's Assets under Section 302(f) or Title
IV of ERISA or which would require the Seller or an ERISA Affiliate to become
subject to the provisions of Section 307 of ERISA.
(2) All Benefit Plans are currently in force and
effect and comply with all applicable agreements, arrangements and
understandings between Seller and its present and former employees. All
contributions, premiums or other payments due from the Seller or any ERISA
Affiliate to (or under) any Benefit Plan on or prior to the Closing Date have
been fully paid or adequately provided for on the books and consolidated
financial statements of the Seller. All accruals (including, where appropriate,
proportional accruals for partial periods) have been made in accordance with
prior practices.
-15-
<PAGE>
(3) Each Benefit Plan that provides medical benefits
has been operated in compliance with all requirements of Sections 601 through
608 of ERISA and either (A) Section 162(i)(2) and (k) of the Code and
regulations thereunder (prior to 1989) or (B) Section 4980B of the Code and
regulations thereunder (after 1988), relating to the continuation of coverage
under certain circumstances in which coverage would otherwise cease, as well as
any applicable state law health continuation of coverage provisions.
(4) Schedule 5(u)(ii) discloses, and separately
indicates, each plan, fund or program maintained by the Seller or by an ERISA
Affiliate on behalf of any employees or former employees of the Seller that
provides post retirement medical benefits, post retirement death benefits or
other post retirement welfare benefits. A copy of any written description of
post retirement welfare benefits that has been provided to employees has been
furnished to ESI. A copy of each plan document, insurance contract or other
written instrument providing for post retirement welfare benefits has been
provided to ESI, together with a description of any advance funding arrangement
that has been established to fund post retirement welfare benefits.
(5) the Seller shall not make or cause to be made to
any current employee, officer, director or independent contractor and there has
not been made to any former employee, officer, director or independent
contractor of the Seller, any payment in the form of wages or other
consideration pursuant to any employment agreement, Benefit Plan, or other
arrangement that was (in the case of payments made prior to Closing) or will (in
the case of payments made after Closing), constitute in the aggregate an "excess
parachute payment" (within the meaning of Section 280G(b) of the Code) as a
consequence in whole or in part of this Agreement, or thereafter, as a
consequence of any change in the ownership or effective control of the Seller or
any change in the ownership of a substantial portion of the Seller's assets.
(6) There have been no statements or communications
made or materials provided to any employee or former employee of the Seller by
any person (including any ERISA Affiliate or any employee, officer or director
of any ERISA Affiliate) which provide for or could be construed as a contract or
promise by the Seller or any ERISA Affiliate to provide for any pension,
welfare, or other insurance-type benefits to any such employee or former
employee, whether before or after retirement, other than benefits under Benefit
Plans set forth on Schedule 5(u)(ii).
(7) There are no current or former employees who are
(A) absent on a military leave or absence and eligible for rehire under the
terms of the Uniformed Services Employment and Reemployment Rights Act, or (B)
absent on a leave of absence under the Family and Medical Leave Act, which in
either case would allow any such employee to obtain restoration of any employee
benefit plan contributions or accruals related to the period of such leave.
(8) The consummation of the transactions contemplated
by the Agreement will not (A) give rise to any liability or obligation of the
Seller pursuant to any Benefit Plan, including but not limited to, the payment
of severance pay or benefits,
-16-
<PAGE>
(B) accelerate the time of payment or vesting or increase the amount of
compensation due under any Benefit Plan, (C) cause any individual to accrue or
receive additional benefits, service or accelerated rights to payment of
benefits under any Benefit Plan, or (D) directly or indirectly cause the Seller
or any ERISA Affiliate to transfer or set aside any assets to fund or otherwise
provide for benefits for any individual.
(iii) Multiemployer Plans.
(1) Except as disclosed on Schedule 5(u)(iii):
(A) Seller is not a party to any pension
plan or welfare benefit plan that is a "Multiemployer Plan" within the meaning
of Section 4001(a)(3) of ERISA;
(B) Neither Seller, Parent, nor any ERISA
Affiliate has incurred a withdrawal (either complete or partial) (as defined in
Section 4203 or 4205 of ERISA) from any Multiemployer Plan;
(C) Neither Seller, Parent, nor any ERISA
Affiliate is delinquent in making any contributions required to be paid to any
Multiemployer Plan;
(D) There is no pending dispute between
Seller, Parent or any ERISA Affiliate and any Multiemployer Plan concerning
payment of contributions or payment of withdrawal liability payments; and
(E) Seller has not incurred a decline in
contributions to any Multiemployer Plan such that, if the current rate of
contributions continues, a seventy-percent decline in contributions (as defined
in Section 4205 of ERISA) will occur within the next three plan years.
(2) For each Multiemployer Plan (including each
welfare benefit plan which, pursuant to its trust agreement, contract, or
otherwise, imposes any post-withdrawal liability or contribution obligations
upon employers withdrawing from such plan) to which Seller has an obligation to
contribute with respect to the Seller's Assets, the Seller has requested, or
will so request, one of the following which will be provided to Buyer promptly
upon receipt:
(A) a letter from the Administrator of the
Multiemployer Plan setting forth the estimated withdrawal liability which would
be imposed by the Plan if LPC were to withdraw from the Plan in a complete
withdrawal, as of the most recently-available information, and the factors used
to determine such estimate; or
(B) a letter from the Administrator of the
Multiemployer Plan, or the most recently-available Form 5500 and/or actuarial
report of the Multiemployer Plan, which in either case sets forth the actuarial
assumptions used in determining the present value
-17-
<PAGE>
of unfunded vested benefits, and which shows that the Plan had no unfunded
vested benefits as of the date of such report or form; or
(C) a letter from the Administrator of the
Multiemployer Plan and/or the most recently-available actuarial report of the
Plan, which sets forth the allocation method used by the Plan under Section 4211
of ERISA, the present value of unfunded vested benefits of the Plan for
withdrawal liability purposes as of each plan year relevant under such
allocation method, and the total employer contributions (net of withdrawn
employers) for each such relevant plan year, and (from the Administrator or from
the Seller) a listing by relevant year of the total contributions to the Plan
which LPC and all its ERISA Affiliates were obligated to make for such plan
year.
(v) Absence of Certain Business Practices. Neither Seller nor any
officer, employee or agent of Seller, nor any other person acting on its behalf,
has, directly or indirectly, within the last year, or to the best of Seller's
knowledge, at any time prior thereto within the five year period immediately
preceding the Closing Date, given or agreed to give any gift or similar benefit
to any customer, supplier, governmental employee or other person who is or may
be in a position to help or hinder the business of Seller (or assist Seller in
connection with any actual or proposed transaction) which (A) might subject
Seller to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (B), if not given in the past, might have had an
adverse effect on the assets, business or operations of Seller as reflected in
the Financial Statements or (C), if not continued in the future, might adversely
affect Seller's assets, business, operations or prospects or which might subject
Seller to suit or penalty in any private or governmental litigation or
proceeding.
(w) Labor Matters; Workers' Compensation.
(i) Except as set forth on Schedule 5(w) and except for those
contracts that arise pursuant to applicable local law as of the date hereof (A)
there are no collective bargaining or other labor union contracts applicable to
employees of Seller, and (B)to Seller's knowledge, there is no organizational
activity currently under way with respect to the business being acquired by the
Buyer.
(ii) Except as set forth on Schedule 5(w), Seller has not
engaged in, and has not received any written notice of any unfair labor
practices, discrimination or other complaint or threat to file same arising
under any statute, regulation, administrative or executive order or regulation
relating to any aspect of employment or labor law affecting any of the
facilities being purchased by Seller and no such complaints are pending before
any agency or court having jurisdiction thereof. Schedule 5(w) also lists all
labor and employment litigation that pertains to any of the facilities being
acquired by Seller pursuant to this Agreement.
(iii) Except as set forth on Schedule 5(w) and except for
those contracts that arise pursuant to applicable local law, as of the date
hereof there are no employment, severance or consulting agreements between
Seller and any of its current or former employees.
-18-
<PAGE>
(iv) Seller is in compliance with all rules and regulations
regarding workers' compensation and all requirements of Seller's workers'
compensation insurance carrier, if any.
(x) Disclosure. No representation or warranty by Seller or Parent
contained in this Agreement, nor any statement or certificate furnished or to be
furnished by Seller or Parent to ESI or its representatives in connection
herewith or pursuant hereto, contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact required to make
the statements herein or therein contained not misleading.
When a representation or warranty is given to "the best of Seller's or Parent's
knowledge," it includes all information that is known or that reasonably should
be known by any one or more of the Senior Officers of Parent, the Vice
President-General Counsel of Parent, and the Officers of Seller.
6. Representations and Warranties by ESI. ESI represents and warrants
to Seller, as of the date hereof and as of the Closing, and Parent as follows:
(a) Organization. ESI is a corporation duly organized, validly existing
and in good standing under the laws of Arizona and has full corporate power and
authority to enter into this Agreement and the related agreements referred to
herein and to carry out the transactions contemplated by this Agreement and to
carry on its business as now being conducted and to own, lease or operate its
properties.
(b) Authorization and Approval of Agreement. All proceedings or
corporate action required to be taken by ESI relating to the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby shall have been taken at or prior to the Closing.
(c) Execution, Delivery and Performance of Agreement. Neither the
execution, delivery nor performance of this Agreement by ESI will, with or
without the giving of notice or the passage of time, or both, conflict with,
result in a default, right to accelerate or loss of rights under, or result in
the creation of any lien, charge or encumbrance pursuant to, any provision of
ESI's certificate of incorporation or by-laws or any franchise, mortgage, deed
of trust, lease, license, agreement, understanding, law, ordinance, rule or
regulation or any order, judgment or decree to which ESI is a party or by which
it may be bound or affected. ESI has full power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby, all proceedings
required to be taken by ESI to authorize the execution, delivery and performance
of this Agreement and the agreements relating hereto, have been properly taken
and this Agreement constitutes a valid and binding obligation of ESI.
(d) Litigation. There is no legal action, suit, arbitration,
governmental investigation or other legal or administrative proceeding, nor any
order, decree or judgment in progress, pending or in effect, or to the knowledge
of ESI threatened, against or relating to ESI in
-19-
<PAGE>
connection with or relating to the transactions contemplated by this Agreement,
and ESI does not know or have any reason to be aware of any basis for the same.
(e) Compliance with Laws. Each of ESI and its subsidiaries has complied
in all material aspects with all applicable laws, statutes, rules and
regulations, orders of federal, state, local and foreign governments and
governmental agencies applicable to it and its business, assets, properties and
operations and no claim of violation of any such laws or regulations exists on
the date hereof.
(f) Disclosure. Neither this Agreement nor any other document,
certificate, exhibit, statement or schedule furnished or to be furnished by or
on behalf of ESI to Seller in connection with the transactions contemplated
hereby contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the factual
statements contained therein, in light of the circumstances under which made,
not misleading.
(g) ESI shall use commercially reasonable efforts to obtain financing
sufficient for the consummation of the transactions contemplated hereby.
When a representation or warranty is given to "the best of ESI's knowledge," it
includes all information that is known or that reasonably should be known by any
one or more of the Senior Officers of ESI.
7. Conduct of Business Prior to Closing. (a) Prior to the Closing,
Seller shall conduct its business and affairs only in the ordinary course and
consistent with its prior practice and shall maintain, keep and preserve its
assets and properties in good condition and repair and maintain insurance
thereon in accordance with present practices, and Seller and Parent will use all
commercially reasonable efforts (i) to preserve the business and organization of
Seller intact, (ii) to keep available to ESI the services of Seller's present
officers, employees, agents and independent contractors, (iii) to preserve for
the benefit of ESI the goodwill of Seller's suppliers, customers, landlords and
others having business relations with it, (iv) to cooperate with ESI and use
reasonable efforts to assist ESI in obtaining the consent of any landlord or
other party to any lease or contract with Seller where the consent of such
landlord or other party may be required by reason of the transactions
contemplated hereby and (v) to cooperate with ESI in its efforts to obtain the
financing of the cash portion of the purchase price in accordance with the
provisions of Section 13(i) below. Without limiting the generality of the
foregoing, prior to the Closing Seller will not without ESI's prior written
approval:
(i) change its certificate or articles of incorporation or
by-laws or merge or consolidate or obligate itself to do so with or
into any other entity;
(ii) intentionally omitted; or
(iii) perform, take any action or incur or permit to exist any
or the acts, transactions, events or occurrences of the type (1)
described in subparagraphs (i)-(v),
-20-
<PAGE>
(viii)-(xiv), (xvi) or (xvii) of Section 5(j) of this Agreement which
would have been inconsistent with the representations and warranties
set forth therein had the same occurred after the Balance Sheet Date
and prior to the date hereof or (2) described in Section 5(c) of this
Agreement which would be required to be set forth on Schedule "5(c)"
hereof if it had taken place during the past three years.
(b) Seller shall give ESI prompt written notice of (i) any change in
any of the information contained in the representations and warranties made in
Section 5 or elsewhere in this Agreement or the Schedules referred to herein
which occurs prior to the Closing, or (ii) any material contract, agreement,
commitment or other understanding or arrangement entered into by Seller, or any
material modification of or amendment to any of the foregoing.
(c) Parent will cause Seller to consult with and will consider the
recommendations of ESI with respect to (i) the cancellation of contracts,
agreements, commitments or other understandings or arrangements to which Seller
is a party, including, without limitation, purchase orders for any item of
inventory and commitments for capital expenditures or improvements, (ii) the
commencement in one or more of Seller's locations of the orderly and gradual
discontinuance of particular items or operations and (iii) purchasing, pricing
or selling policy; provided, however, that nothing contained in this subsection
(c) shall require Seller to take or fail to take any action that, in Seller's
reasonable judgment, is likely to give rise to a substantial penalty or a claim
for damages by any third party against Seller, or is likely to result in
material losses or reduced profits to Seller, or is otherwise likely to
prejudice in any material respect or unduly interfere with the conduct of
Seller's business and operations in the ordinary course consistent with prior
practice, or is likely to result in a breach by Seller of any of its
representations, warranties or covenants contained in this Agreement (unless any
such breach is first waived in writing by ESI).
8. Access to Information and Documents. Upon reasonable notice and
during regular business hours, Seller will give ESI and ESI's attorneys,
accountants and other representatives full access to Seller's key personnel, and
distributors (with prior approval of Seller management) and all properties,
documents, contracts, books and records of Seller and will furnish ESI with
copies of such documents (certified as complete and correct by Seller's officers
if so requested) and with such information with respect to the affairs of Seller
as ESI may from time to time request, and ESI will not improperly disclose the
same prior to the Closing. ESI's right of access shall include the right to copy
and review the workpapers and other relevant records in connection with the
audit referred to in Section 15 hereof. Any such furnishing of information to
ESI or any investigation by ESI shall not affect ESI's right to rely on any
representations and warranties made in this Agreement or in connection herewith
or pursuant hereto. Nothing herein shall limit the terms of the Disclosure
Agreement previously executed by the parties, which shall remain in full force
and effect.
9. Employment and Noncompete Agreements; Post-Closing Agreements.
(a) Intentionally omitted.
-21-
<PAGE>
(b) Seller and Parent shall execute and deliver, and shall cause Penske
Truck Leasing Co., L.P. ("Penske") on its behalf and on behalf of its
subsidiaries to execute and deliver, to ESI at the Closing a Non-Competition
Agreement in the form to be agreed upon by the parties and annexed hereto as
Exhibit "G." The Non-Competition Agreement, to the extent enforceable under
applicable laws, shall be for a period of 3 years and the applicable territory
shall be the entire United States. Each party providing a Non-Competition
Agreement shall agree not to solicit or contract with any customers of ESI (and
any ESI affiliate that consummates the purchase of Seller's assets) for the
purpose of employee leasing or to engage in the business of employee leasing.
Seller, Parent and ESI agree to use their best efforts, and Seller and Parent
agree to cause Penske to use its best efforts, as promptly as possible after the
execution hereof, to clarify the effect of the Non-Competition Agreement on
logistics operations of Parent and its subsidiaries and to finalize the exact
scope and terms of the Non-Competition Agreement.
(c) Parent shall execute and deliver to ESI at the Closing such
agreements for post- Closing services and the use of rental space after Closing
(the "Post-Closing Agreements") as may be required by ESI to ensure the
continuation of certain accounting and other services provided by Parent and
relating to the business.
10. Directors and Shareholders Authorization; Change of Corporate Name;
No- Shopping.
(a) At or prior to the Closing, Seller will deliver to ESI a copy of
the resolutions of the Board of Directors and the resolutions or consents of
Parent, approving the execution and delivery of this Agreement and the
consummation of all of the transactions contemplated hereby, duly certified by
an officer of Seller or Parent, as appropriate.
(b) Intentionally omitted.
(c) In consideration of the substantial expenditures of time, effort
and expense to be undertaken by ESI in connection with the various
investigations referred to in this Agreement, Parent and Seller shall not (nor
will either permit any of their respective officers, directors, shareholders,
agents, representatives or affiliates to), directly or indirectly, take any of
the following actions with any party other than ESI and its designees: (i)
solicit, encourage, initiate or participate in any negotiations or discussions
with respect to any offer or proposal to acquire all or substantially all of
LPC's business and properties or capital stock whether by merger, purchase of
assets, tender offer or otherwise; (ii) disclose any information not customarily
disclosed to any person concerning LPC's business and properties or afford
access to its property, books or records to any person or entity not customarily
having access thereto; or (iii) assist or cooperate with any person to make any
proposal to consummate a transaction of the type referred to in clause (i).
11. Bulk Sales Compliance. ESI hereby waives compliance by Seller with
the provisions of the Bulk Sales Law of any state, and Seller warrants and
agrees to pay and
-22-
<PAGE>
discharge when due all claims of creditors which could be asserted against ESI
by reason of such non-compliance to the extent that such liabilities are not
specifically assumed by ESI under this Agreement. Seller and Parent, jointly and
severally, hereby indemnify and agree to hold ESI harmless from, against and in
respect of (and shall on demand reimburse ESI for) any loss, liability, cost or
expense, including, without limitation, attorneys' fees, suffered or incurred by
ESI by reason of the failure of Seller to pay or discharge such claims. Seller
shall furnish to ESI such evidence as ESI may reasonably request in order to
confirm that the provisions of this Section 11 have been complied with.
12. Employee Plans; Employees.
(a) Benefit Plans and Pension Plans. ESI shall not be obligated to
assume any obligations arising under any "employee benefit plan" (as such term
is defined in section 3(3) of ERISA) which Seller maintains relating to any
Nonunion Employee (collectively, the "Nonunion Plans"). The participation of the
Nonunion Employees in the Nonunion Plans shall be terminated as of the Closing
Date, in each case except to the extent that any rights under such plans shall
have vested, or may vest upon fulfillment of certain conditions, in accordance
with the terms contained therein. Seller shall be responsible for providing
health continuation coverage in accordance with Code Section 4980B to qualified
beneficiaries resulting from any qualifying events that occur under Seller's
group health plan(s).
(b) Assumed Plans. Any Benefit Plan which will be assumed by ESI in
connection with the acquisition (hereinafter referred to as an "Assumed Benefit
Plan") is listed on Schedule 12(b), which ESI shall prepare and annex hereto as
promptly as possible prior to Closing. With respect to each Assumed Benefit Plan
under this Agreement:
(i) Each Assumed Benefit Plan complies, in form and operation,
with all applicable statutes, laws and regulations of any public body or
authority, including, but not limited to, ERISA and the Code and all applicable
requirements of (A) the Age Discrimination in Employment Act of 1967, as
amended, and regulations thereunder, (B) Title VII of the Civil Rights Act of
1964, as amended, and regulations thereunder, and (C) the Americans with
Disabilities Act of 1990, as amended, and regulations thereunder.
(ii) The funds available under each Assumed Benefit Plan which
is intended to be a funded plan equal or exceed the amounts required to be paid,
or which would be required to be paid, if such Assumed Benefit Plan were
terminated, on account of rights vested or accrued as of the Closing Date.
(iii) Any Assumed Benefit Plan that is intended to qualify
under Section 401(a) of the Code meets in all material respects all requirements
for qualification under Section 401(a) of the Code and the regulations
thereunder, and the Seller has provided ESI with a copy of the most recent
favorable determination letter issued by the Internal Revenue Service concerning
the Plan's qualification. Each such Assumed Benefit Plan has been administered
in accordance with
-23-
<PAGE>
its terms and the applicable provisions of ERISA and the Code and the
regulations thereunder and no matter exists which would adversely affect the
qualified tax-exempt status of such Assumed Benefit Plan and any related trust.
(iv) With respect to each Assumed Benefit Plan, except as set
forth on Schedule 12(b)(iv), there have been no "prohibited transactions" within
the meaning of Section 406 or 407 of ERISA or Section 4975 of the Code for which
a statutory or administrative exemption does not exist with respect to such
Assumed Benefit Plan; all reports and information relating to each such Assumed
Benefit Plan required to be filed with any governmental entity have been
accurately and timely filed; all reports and information relating to each such
Assumed Benefit Plan required to be disclosed or provided to participants or
their beneficiaries have been timely disclosed or provided; each trust related
to any Assumed Benefit Plan which is a voluntary employee beneficiary
association pursuant to Section 501(c)(9) of the Code has received a favorable
determination letter from the Internal Revenue Service with respect to its
tax-exempt status, and nothing has occurred since the date of such letter that
has or is likely to adversely affect such qualification or exemption; there
exist no restrictions on ESI's right to terminate or decrease prospectively the
level of benefits under any Assumed Benefit Plan after the Closing Date without
liability to any employee or former employee of Seller; no event has occurred or
circumstance exists that could result in a material increase in premium costs of
any Assumed Benefit Plan that is insured or a material increase in benefit costs
of any Assumed Benefit Plan that is self-insured; no officer, employee or
director of the Seller or other fiduciary of any Assumed Benefit Plan has
committed a breach of any responsibility or obligation imposed upon fiduciaries
under Title I of ERISA with respect to such Assumed Benefit Plan.
(v) There has been delivered to ESI, or shall be delivered to
ESI as promptly as possible after the date hereof, with respect to each Assumed
Benefit Plan the following: a copy of the annual report (if required under
ERISA) with respect to each such Assumed Benefit Plan for the last three years
(including all schedules and attachments); a copy of the summary plan
description, together with each summary of material modifications, required
under ERISA with respect to such Assumed Benefit Plan; all material employee
communications relating to such Assumed Benefit Plan; a true and complete copy
of such Assumed Benefit Plan; all trust agreements, insurance contracts,
accounts or other documents which establish the funding vehicle for any Assumed
Benefit Plan and the latest financial statements thereof; any investment
management agreements, administrative services contracts, or other agreements
and documents relating to the ongoing administration and investment of any
Assumed Benefit Plan.
(vi) With respect to each such Assumed Benefit Plan for which
an annual report has been filed and delivered to ESI pursuant to Section
12(b)(v) above, no material adverse change has occurred with respect to the
matters covered by the latest such annual report since the date thereof.
(vii) There are no actions, suits, proceedings, investigations
or hearings pending with respect to any Assumed Benefit Plan, or to the Seller's
or Parent's knowledge any claims (other than claims for benefits arising in the
ordinary course of an Assumed Benefit Plan)
-24-
<PAGE>
threatened against or with respect to any Assumed Benefit Plan or any fiduciary
or assets thereof, and there are no facts known to the Seller or Parent which
could reasonably give rise to any such actions, suits, proceedings,
investigations, hearings or claims.
(c) Multiemployer Plans. This Section 12(c) applies to the following
Multiemployer Plans, which shall be referred to in this Section 12(c) as "the
Plan:" New England Teamsters and Trucking Industry Pension Plan; Central States
Southeast and Southwest Areas Pension Fund; Teamsters Pension Trust Fund of
Philadelphia and Vicinity; New York State Teamsters Conference Pension and
Retirement Fund; and Western Pennsylvania Teamsters and Employers Pension
Plan--provided, however, if it is determined upon information received by, and
satisfactory to, both Seller and ESI, that any withdrawal liability that would
be imposed upon Seller by a Plan by reason of the sale of assets hereunder,
would be zero pursuant to the de minimis rule of Section 4209 of ERISA, then
this Section 12(c) shall not apply to such Plan. It is intended that the
purchase of Assets under this Agreement will not result in a complete or partial
withdrawal from the Plan. Accordingly, ESI and Seller agree as follows:
(i) ESI shall assume an obligation to contribute to the Plan
with respect to the Seller's Assets for substantially the same number of
contribution base units (as defined by the Plan) for which the Seller had an
obligation to contribute to the Plan with respect to such Assets as of the day
before the Closing Date.
(ii) Prior to the first day of the first plan year after
Closing, ESI and Seller shall jointly apply to the Plan for a variance from the
requirement of Section 4204(a)(1)(B) of ERISA, that a bond be obtained or an
amount be held in escrow as provided in said Section. In the event that the Plan
determines that the request does not qualify for such variance, ESI shall obtain
any required bond or establish any required escrow within 30 days after the date
on which Seller or ESI receives notice of the Plan's decision, and shall
maintain such bond or escrow until the earliest of:
a. the date a variance is obtained from the Plan;
b. the date a variance or exemption is obtained from
the Pension Benefit Guaranty Corporation; or
c. the last day of the fifth plan year commencing
after the Closing;
which bond or escrow shall be paid to the Plan if ESI withdraws therefrom or
fails to make a contribution to the Plan when due, at any time during the first
five plan years beginning after the date of Closing.
(iii) If ESI withdraws from the Plan in a complete withdrawal
or a partial withdrawal with respect to the Seller's Assets, on or before the
last day of the fifth plan year commencing after the Closing Date, Seller shall
be secondarily liable for any withdrawal liability it would have had to the Plan
with respect to such Assets (but for the provisions of section 4204
-25-
<PAGE>
of ERISA) if the liability of the ESI is not paid. ESI shall notify Seller, in
writing, not less than fifteen (15) days after the date on which ESI receives
from the Plan an assessment for any withdrawal liability resulting from a
partial or complete withdrawal from the Plan. Seller shall have the right to
pay, on behalf of ESI, all or any part of any withdrawal liability assessed
against ESI as a result of such partial or complete withdrawal, in which case
ESI shall become liable to Seller for any such payment made by Seller.
(iv) In the event of any withdrawal by ESI during the five
plan years commencing after the Closing Date, or in the event of any breach by
ESI of its commitments under paragraphs (i), (ii) or (iii) above, ESI shall
indemnify Seller for any withdrawal liability, whether complete or partial
(including all reasonable accounting, actuarial, and legal expenses incident
thereto), assessed against Seller on account of the purchased Assets. Seller
shall indemnify ESI for any withdrawal liability, whether complete or partial
(including all reasonable accounting, actuarial, and legal expenses incident
thereto), assessed against ESI as a result of any failure by Seller to comply
with the obligations imposed on Seller by section 4204(a) of ERISA or paragraph
(ii) above.
(v) At any time on or before ninety (90) days after the
Closing hereunder, Seller may provide written notice to ESI that it desires to
add one or more Multiemployer Plans to the Plans identified in the first
sentence of this Section 12(c). ESI agrees that such plans may be included
within the preceding provisions hereof, subject to the following modifications
of this Section 12(c) with respect to any such additional plans: (A) Seller
shall prepare any required application for variance at its expense, and shall
pay the cost of any required bond or establish any required escrow, if
necessary, pursuant to Section 12(c)(ii) above; and (B) in the event of any
withdrawal by ESI from any such additional plan during the five plan years
commencing after the Closing Date, Seller shall, in addition to the
indemnification set forth in Section 12(c)(iv), also indemnify and hold harmless
ESI from that portion of ESI's withdrawal liability allocated on the basis of
contributions made by Seller but attributed to ESI pursuant to the operation of
Section 4204 of ERISA.
(d) Treatment of Employees at Closing. Seller's employees shall be, at
ESI's election, either (i) deemed as terminated by Seller as of the Closing
Date, and ESI shall offer employment to all such employees as of the Closing
Date on substantially the same employment terms as existed with Seller, or (ii)
otherwise transferred from Seller to ESI in a manner acceptable to ESI.
13. Conditions Precedent to ESI's Obligations. All obligations of ESI
hereunder are subject, at the option of ESI, to the fulfillment of each of the
following conditions at or prior to the Closing:
(a) All representations and warranties of Seller and Parent contained
herein or in any document delivered pursuant hereto shall be true and correct in
all material respects when made
-26-
<PAGE>
and shall be deemed to have been made again at and as of the date of the
Closing, modified as needed and as disclosed by Seller to ESI, and shall then be
true and correct in all material respects.
(b) All covenants, agreements and obligations required by the terms of
this Agreement to be performed by Seller or by Parent at or before the Closing
shall have been duly and properly performed in all material respects.
(c) Since the Balance Sheet Date, there shall not have occurred any
material adverse change in the condition (financial or otherwise), business,
properties, assets or prospects of Seller.
(d) There shall be delivered to ESI a certificate executed by President
and Assistant Secretary of Seller and by Parent, dated the date of the Closing,
certifying that the conditions set forth in paragraphs (a), (b), and (c) of this
Section 13 have been fulfilled, and that the schedules and exhibits to be
attached hereto are complete and accurate as of the Closing Date.
(e) All documents required to be delivered to ESI at or prior to the
Closing shall have been so delivered.
(f) ESI shall have received an Opinion of Seller's Counsel, dated the
date of the Closing, in form and content to be agreed upon by the parties and
annexed hereto as Exhibit "H."
(g) Seller shall have obtained written consents to the transfer or
assignment to ESI of all consignment agreements, licenses, leases and other
material contracts of Seller (other than immaterial purchase and sales orders in
the ordinary course of business) where the consent of any other party to any
such contract may, in the opinion of ESI's counsel, be required for such
assignment or transfer.
(h) All applicable filings, consents and expirations of waiting periods
required by law, regulatory authorities or contracts shall have been obtained,
including without limitation the completion of any required filings under the
HSR Act (as defined in the following sentence) and the expiration or early
termination of all applicable waiting periods thereunder.The parties shall have
filed with the Federal Trade Commission and the Antitrust Division of the
Department of Justice notification and report forms with respect to the
transactions contemplated hereby pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 ("HSR Act") and the rules promulgated thereunder, if
necessary.
(i) ESI shall have obtained financing sufficient for the consummation
of the transactions contemplated hereby on terms and conditions acceptable to
ESI in its sole discretion.
(j) ESI's due diligence investigation and review of Seller's business,
prospects, capitalization and properties, including, but not limited to, an
evaluation of the minute books,
-27-
<PAGE>
financial records, tax returns, contracts, leases, governmental authorizations,
employment agreements, employee benefit plans, all other contracts material to
the operation of its business and compliance with laws shall have been completed
and shall not have disclosed any material breach of any of Seller's
representations and warranties set forth in Section 5 hereof.
(k) ESI's due diligence investigation and review of (i) Seller's
participation in the Multiemployer Plans identified in Schedule 12(c), (ii)
ESI's undertakings pursuant to Section 12(c), and (iii) Seller's employee
benefit plans and employee benefit liabilities as described in Section 5(u),
shall have been completed to ESI's reasonable satisfaction.
(l) Seller's auditor, Deloitte & Touche L.L.P. ("Deloitte & Touche"),
shall have completed its audit of Seller's financial statements for the year
ended December 31, 1995, and, with respect to the other financial statements
described in Section 15 hereof, shall have indicated in writing to ESI's
satisfaction that an audit can be completed and that Deloitte & Touche will be
able to give a clean and unqualified audit opinion on such financial statements
(i.e. an unqualified opinion that said financial statements present fairly the
financial condition of and circumstances relating to Seller, in accordance with
generally accepted accounting principles, consistently applied).
(m) ESI's review of the schedules and exhibits to be prepared by Seller
and attached hereto shall have been completed to ESI's reasonable satisfaction.
(n) Intentionally omitted.
14. Conditions Precedent to Seller's and Parent's Obligations. All
obligations of Seller and Parent at the Closing are subject, at the option of
Seller, to the fulfillment of each of the following conditions at or prior to
the Closing:
(a) All representations and warranties of ESI contained herein or in
any document delivered pursuant hereto shall be true and correct in all material
respects when made and as of the Closing.
(b) All obligations required by the terms of this Agreement to be
performed by ESI at or before the Closing shall have been duly and properly
performed in all material respects.
(c) There shall be delivered to Seller a certificate executed by the
President and Secretary of ESI, dated the date of the Closing, certifying that
the conditions set forth in paragraphs (a) and (b) of this Section 14 have been
fulfilled.
(d) Seller shall have received an Opinion of ESI's Counsel, dated the
date of the Closing, in the form and content to be agreed upon by the parties
and annexed hereto as Exhibit "I."
(e) Seller shall have received the Liabilities Undertaking Agreement.
-28-
<PAGE>
(f) There shall be no action, proceeding, or investigation which shall
have been instituted or threatened to set aside the transactions provided for
herein or to enjoin or prevent the consummation of the transactions contemplated
hereby and all consents, authorizations, orders and approvals required to be
obtained by ESI for the consummation of the transactions shall have been
secured.
(g) The parties shall have filed with the Federal Trade Commission and
the Antitrust Division of the Department of Justice notification and report
forms with respect to the transactions contemplated hereby pursuant to the HSR
Act and the rules promulgated thereunder, if necessary, and the waiting periods
thereunder shall have expired or been early terminated.
15. Audited Financial Statements. Seller shall use its best efforts to
complete its audit and deliver to ESI as soon as possible, the following
financial statements:
(a) Seller's audited balance sheets as of December 31, 1994 and 1995,
and audited income statements, statements of cash flows, and related notes,
prepared in accordance with GAAP and SEC Regulation S-X for the related one year
periods ended on December 31, 1993, 1994 and 1995, accompanied by a clean and
unqualified report of Seller's auditor, Deloitte & Touche LLP ("Deloitte &
Touche") thereon; and
(b) Seller's unaudited balance sheets as of June 30, 1996 and unaudited
income statements, statements of cash flows, and related notes, prepared in
accordance with GAAP and SEC Regulation S-X for the related six month periods
ended June 30, 1995 and 1996 and for any such period that might be required to
keep the statements current under Regulation S-X.
Seller has instructed Deloitte & Touche to discuss fully with ESI's auditor,
Arthur Andersen, as part of the auditing process use of applicable accounting
principles to be used in the completion of the financial statements. Seller
shall make available to Arthur Andersen, and shall instruct Deloitte & Touche to
make available to Arthur Andersen, all materials, notes, work papers, etc.,
being utilized in preparation of the audit, after receiving customary
representations from ESI and Arthur Andersen.
16. Indemnification.
(a) Seller and Parent, jointly and severally, hereby indemnify and
agree to hold ESI harmless from, against and in respect of (and shall on demand
reimburse ESI for):
(i) any and all losses, liabilities or damages suffered or
incurred by ESI (a) by reason of any untrue representation, breach of
warranty or nonfulfillment of any covenant by Seller or Parent
contained herein or in any certificate, document or instrument
delivered to ESI pursuant hereto or in connection herewith or (b) which
would not have been suffered or incurred if such representation were
true and not breached or if such covenant were fully performed;
-29-
<PAGE>
(ii) any and all losses, liabilities or damages suffered or
incurred by ESI in respect of or in connection with any liabilities of
Seller or Parent or their respective affiliates not expressly assumed
by ESI pursuant to the terms of the Liabilities Undertaking;
(iii) any and all losses, damages, debts, liabilities or
obligations of Seller or Parent or their respective affiliates, direct
or indirect, fixed, contingent or otherwise, which exist at or as of
the date of the Closing hereunder or which arise after the Closing but
which are based upon or arise from any act, omission, transaction,
circumstance, providing of goods or services, state of facts or other
condition which occurred or existed on or before the date of the
Closing, whether or not then known, due or payable, except to the
extent (A) reflected or reserved against on the face of the Balance
Sheet (excluding the notes thereto) or incurred after the Balance Sheet
Date in connection with the purchase of goods or services in the
ordinary course of Seller's business and in conformity with the
representations, warranties and covenants of Seller contained in this
Agreement (or a Schedule hereto) and (B) expressly assumed by ESI
pursuant to the terms of the Liabilities Undertaking;
(iv) The amount of any and all receivables which are not
collected in accordance with the provisions of Section 5(r) hereof;
(v) any and all losses, liabilities or damages suffered or
incurred by ESI by reason of or in connection with any claim for a
finder's fee or brokerage or other commission arising by reason of any
services alleged to have been rendered to or at the instance of Seller
or Parent with respect to this Agreement or any of the transactions
contemplated hereby;
(vi) any and all losses, liabilities or damages suffered or
incurred by ESI relating to employee benefits (excluding vacation pay
and any severance obligations toward employees that are retained by ESI
prior to severance) attributable to services performed prior to the
Closing, except to the extent set forth on Schedule 16(a)(vi) annexed
hereto; and
(vii) any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs and expenses, including, without
limitation, legal fees and expenses, incident to any of the foregoing
or incurred in investigating or attempting to avoid the same or to
oppose the imposition thereof, or in enforcing this indemnity.
Notwithstanding the above provisions of this Section 16(a), the indemnification
obligations of Seller shall not apply to any losses, liabilities, damages,
debts, obligations, fees or expenses which in the aggregate are less than
$20,000.
(b) ESI hereby agrees to indemnify and hold Seller and Parent harmless
from, against and in respect of (and shall on demand reimburse them for):
-30-
<PAGE>
(i) Any and all losses, liabilities or damages resulting from
any untrue representation, breach of warranty or non-fulfillment of any
covenant or agreement by ESI contained herein or in any certificate,
document or instrument delivered to Seller hereunder;
(ii) Any and all liabilities or obligations of Seller
specifically assumed by ESI pursuant to this Agreement;
(iii) Any and all actions, suits, proceedings, claims,
demands, assessments, judgements, costs and expenses, including,
without limitation, legal fees and expenses, incident to any of the
foregoing or incurred in investigating or attempting to avoid the same
or to oppose the imposition thereof, or in enforcing this indemnity;
and
(iv) Any and all losses, liabilities or damages suffered or
incurred by Seller or Parent by reason of or in connection with any
claim for a finder's fee or brokerage or other commission arising by
reason of services alleged to have been rendered to or at the instance
of ESI with respect to this Agreement or any transactions contemplated
hereby.
(c) Upon Seller's payment to ESI of the face amount of any uncollected
receivable by reason of the failure of such receivable to be fully collected as
warranted pursuant to the provisions contained in Section 5(r) hereof, ESI shall
assign such receivable to Seller, without recourse.
Notwithstanding the above provisions of this Section 16(b), the indemnification
obligations of ESI shall not apply to any losses, liabilities, damages, debts,
obligations, fees or expenses which in the aggregate are less than $20,000.
17. Nature and Survival of Representations and Warranties. Each
statement, representation, warranty, indemnity, covenant and agreement made by
Seller or Parent in this Agreement or in any document, certificate or other
instrument delivered by or on behalf of Seller pursuant to this Agreement or in
connection herewith shall be deemed the joint and several statement,
representation, warranty, indemnity, covenant and agreement of Seller and
Parent. Except as set forth in the following sentence, all statements,
representations, warranties, indemnities, covenants and agreements made by each
of the parties hereto shall survive the Closing for a period of one (1) year
from the date of Closing. Notwithstanding the previous sentence, the following
representations shall survive the Closing for the following periods of time: (i)
any representations and warranties relating to tax matters shall survive until
the later of (A) six (6) years from the date of Closing or (B) 90 days after the
expiration of the applicable statute of limitations for the tax matter in
question, (ii) any representations and warranties relating to the Plan
(including without limitation those contained in Sections 5(u)(iii) and 12(c)
hereof) shall survive until the later of (A) six (6) years from the Closing Date
or (B) termination of the bond or escrow referenced in Section 12(c) hereof and
the fulfillment of the necessary condition(s) for termination of the bond or
escrow, also set forth in Section 12(c) hereof, and (iii) any claim of fraud
with respect to the violation of any representation or warranty shall
-31-
<PAGE>
survive the Closing forever. Any party may make a claim for indemnification by
sending written notice to the other party or parties hereto on or before
midnight on the last date of the time period for survival of the representation
and warranty in question. The termination of the rights of an indemnified party
to receive indemnification as provided in the Agreement shall not affect any
person's right to prosecute to conclusion any claim made by that person prior to
the time that the relevant right of indemnity terminates.
18. Intentionally omitted.
19. Allocation of Purchase Price. Although ESI would not purchase less
than all of Seller's Assets separately, the total Purchase Price described in
Section 2 above shall be allocated among said purchased items in the manner
provided in Exhibit "J."
The parties have made a mutual good faith determination of the
respective values of the components of Seller's Assets and the Noncompetiton
Agreement and the allocations set forth in Exhibit "J" are based on such
determination. Each party agrees that it will not take any position for purposes
of computing federal or state income or franchise taxes that is inconsistent
with the foregoing allocations. If any party fails to comply with the provisions
of the preceding sentence, such party shall be liable for all taxes, reasonable
legal and accounting fees, and other expenses actually incurred by the other
parties as a consequence of such failure; provided, however, that should such
fees and other expenses be incurred in connection with any audit or other
inquiry involving issues beyond the scope of this Agreement, any party liable
for reimbursement of such fees and expenses hereunder shall be responsible only
for the portion of the total fees and expenses incurred that are reasonably
related to the issues arising hereunder.
20. Notices. All notices and other communications required or permitted
under this Agreement shall be in writing and shall be delivered or sent to the
parties at the address set forth below, or at such other address that they
designate by notice to all other parties in accordance with this Section 20. Any
party delivering notice to Parent, LPC or LAP shall deliver it to:
Leaseway Transportation Corp.
Route 10 Green Hills
Reading, Pennsylvania 19603
Attention: Frank Cocuzza
Senior Vice President - Finance
Fax No. (610) 775-5064
with a copy to:
Michael A. Duff, Esq.
Assistant General Counsel
Penske Truck Leasing
Route 10 Green Hills
Reading, Pennsylvania 19603
-32-
<PAGE>
Fax No. (610) 775-6330
Any party delivering notice to ESI shall deliver it to:
Marvin D. Brody
Chairman of the Board
EMPLOYEE SOLUTIONS, INC.
2929 E. Camelback Road, Suite 220
Phoenix, Arizona 85016
Fax No. (602) 955-1235
with a copy to:
Paul M. Gales, Esq.
QUARLES & BRADY
One E. Camelback, Suite 400
Phoenix, Arizona 85012
Fax No. (602) 230-5598
All notices and communications shall be deemed to have been received:
(1) in the case of personal delivery, on the date of such delivery; (2) in the
case of telex or facsimile transmission, on the date on which the sender
receives confirmation by telex or facsimile transmission that such notice was
received by the addressee, provided that a copy of such transmission is
additionally sent by mail as set forth in (4) below; (3) in the case of
overnight air courier, on the second business day following the day sent, with
receipt confirmed by the courier; and (4) in the case of mailing by first class
certified or registered mail, postage prepaid, return receipt requested, on the
date of delivery, as evidenced by the certified or registered mail receipt.
21. Termination.
(a) This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:
(i) by Parent or ESI if the Closing has not occurred by
September 30, 1996;
(ii) by mutual consent of Parent and ESI;
(iii) by ESI, if any representation or warranty of Parent, LPC
or LAP made in or pursuant to this Agreement is untrue or incorrect in any
material respect; Parent, LPC or LAP materially breaches the covenants or other
terms of this Agreement; or any of the conditions precedent to Closing contained
in Section 13 cannot be satisfied;
-33-
<PAGE>
(iv) by Parent, if any representation or warranty of ESI made
in or pursuant to this Agreement is untrue or incorrect in any material respect;
ESI materially breaches the covenants or other terms of this Agreement; or any
of the conditions precedent to Closing contained in Section 14 cannot be
satisfied;
(v) by Seller or Parent, if the total purchase price, as
defined in Section 2 hereof, is less than $22,500,000 (without taking into
account the Net Asset Adjustment).
(b) A party terminating this Agreement pursuant to Section 21(a) shall
give written notice thereof to each other party thereto, whereupon this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned without further action by any party; provided, however, that if such
termination is by ESI pursuant to Section 21(a)(iii), or if such termination is
by Parent pursuant to Section 21(a)(iv), such termination shall not affect the
right, if any, of the non-defaulting parties to damages on account of breach by
any other party; and further provided that if such termination is pursuant to
Section 21(a)(v), Seller and Parent shall reimburse ESI for all of ESI's
out-of-pocket expenses (including attorneys' fees) incurred in furtherance of
the transactions contemplated herein prior to the effective time of the
termination, in an amount not to exceed $100,000.
22. Miscellaneous.
(a) This writing constitutes the entire agreement of the parties with
respect to the subject matter hereof and may not be modified, amended or
terminated except by a written agreement specifically referring to this
Agreement signed by all of the parties hereto.
(b) No waiver of any breach or default hereunder shall be considered
valid unless in writing and signed by the party giving such waiver, and no such
waiver shall be deemed a waiver of any subsequent breach or default of the same
or similar nature.
(c) This Agreement shall be binding upon and inure to the benefit of
each corporate party hereto, its successors and assigns, and each individual
party hereto and his heirs, personal representatives, successors and assigns.
(d) The paragraph headings contained herein are for the purposes of
convenience only and are not intended to define or limit the contents of said
paragraphs.
(e) Each party hereto shall cooperate, shall take such further action
and shall execute and deliver such further documents as may be reasonably
requested by any other party in order to carry out the provisions and purposes
of this Agreement.
(f) Seller will pay all sales, transfer and documentary taxes, if any,
payable in connection with the sale, conveyances, assignments, transfers and
deliveries to be made to ESI hereunder.
-34-
<PAGE>
(g) This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed one original.
(h) This Agreement and all amendments thereof shall be governed by and
construed in accordance with the law of the State of Arizona applicable to
contracts made and to be performed therein, without regard to principles
relating to conflicts of laws.
(i) Any controversy or claim arising out of or relating to this
agreement or the breach or validity thereof shall be settled exclusively by
arbitration in Phoenix, Arizona, by a panel of three arbitrators in accordance
with the rules of the American Arbitration Association. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof, and the parties consent to the exclusive jurisdiction of the Maricopa
County, Arizona courts for this purpose.
(j) Seller and Parent hereby consent to the exclusive jurisdiction of
the State and Federal courts sitting in Maricopa County, Arizona in any action
arising out of or connected in any way with this Agreement, and Seller and
Parent further agree that the service of process or of any other papers upon
them or any of them by registered mail at their respective addresses set forth
herein shall be deemed good, proper and effective service upon them.
(j) Each party agrees that neither it nor any of its affiliates will
make any public statement regarding the transactions contemplated by this
Agreement without first consulting the other parties hereto in order than such
public statement shall be jointly worded and issued by the parties, except that
ESI shall be entitled to make such disclosures as it reasonably concludes are
required of it by law.
(k) If any party (the "Defaulting Party") defaults in its obligations
under this Agreement and, as a result thereof, the other party (the
"Non-Defaulting Party") seeks to legally enforce its rights hereunder against
the Defaulting Party, then, in addition to all damages and other remedies to
which the Non-Defaulting Party is entitled by reason of such default, the
Defaulting Party shall promptly pay to the Non-Defaulting Party an amount equal
to all costs and expenses (including reasonable attorneys' fees) paid or
incurred by the Non-Defaulting Party in connection with such enforcement.
23. Completion of Schedules and Exhibits. The parties shall use their
best efforts to complete the exhibits referred to herein, and Seller shall use
its best efforts to complete the schedules referred to herein, all on or before
July 22, 1996.
-35-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
LEASEWAY PERSONNEL CORP.
By________________________________
Its_______________________________
EMPLOYEE SOLUTIONS, INC.
By________________________________
Marvin D. Brody
Chairman and CEO
LEASEWAY TRANSPORTATION CORP.
By________________________________
Its_______________________________
LEASEWAY ADMINISTRATIVE PERSONNEL,
INC.
By________________________________
Its_______________________________
-36-
<PAGE>
EXHIBIT LIST
EXHIBIT SECTION REFERENCE
A - Bill of Sale 1(b); 4(a)(ii)
B - Assignment of Contract Rights 4(a)(iii)
C - Assignment of Lease 4(a)(iv)
D - Liabilities Undertaking 16(ii), (iii)
E - Business Description; Material Customer List 5(m), (s)
F - Form of Employment Agreement 9(a)
G - Non-Competition and Continuity of
Business Dealings Undertaking 9(b)
H - Form of Opinion of Seller's Counsel 13(f)
I - Form of Opinion of ESI's Counsel 14(d)
J - Allocation of Purchase Price 19
-37-
EXHIBIT 2.2
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
This First Amendment to Asset Purchase Agreement (this "Amendment"),
dated as of August 1, 1996, is by and among LEASEWAY TRANSPORTATION CORP., a
Delaware corporation ("Parent"), LEASEWAY PERSONNEL CORP., a West Virginia
corporation ("LPC"), LEASEWAY ADMINISTRATIVE PERSONNEL, INC., an Ohio
corporation ("LAP, together with LPC, "Seller"), EMPLOYEE SOLUTIONS, INC., an
Arizona corporation ("ESI"), and LOGISTICS PERSONNEL CORP., a Nevada corporation
("Buyer").
For valid consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree that the Asset Purchase Agreement
(the "Agreement") dated as of July 5, 1996, by and among them, is amended as
follows:
1. Purchaser. Pursuant to Section 1(a) of the Agreement, ESI hereby
nominates Buyer to complete the purchase contemplated by the Agreement. All
references to ESI in the Agreement shall be deemed as references to both ESI and
Buyer, unless the context clearly requires otherwise.
2. Purchase Price. The parties agree that the purchase price, as
established pursuant to Section 2(a) of the Agreement, shall be $23,975,730.
3. Net Asset Adjustment. Buyer shall pay the sum of $23,500,000 by wire
transfer at the Closing. The parties still shall implement the Net Asset
Adjustment required under Section 2(b) of the Agreement on a post-Closing basis;
provided that the Net Asset Adjustment shall not take into account any cash,
accounts receivable owing on or prior to the Closing, and accrued liabilities
other than accrued vacation, bonuses and long-term payouts, and any other
liabilities agreed to by the parties. The parties shall use diligent efforts to
complete the Net Asset Adjustment as promptly as possible after Closing, and in
any event within thirty (30) days after Closing. Immediately upon completion of
the Net Asset Adjustment, any party obligated to make a payment as a result
thereof shall promptly make such payment.
4. Exclusion of Worker's Compensation Reserves. Pursuant to Section
2(b) of the Agreement, Buyer elects not to assume Seller's worker's compensation
reserves. The Net Asset Adjustment shall be calculated in accordance with this
election by Buyer.
5. Exclusion of Partial Withdrawal Liability and Other Claims. The
parties agree that Buyer shall not assume the claim asserted by the New England
Teamsters and Trucking Industry Pension Fund for a partial withdrawal liability
against Parent and Seller, for the three (3) year period ending September 30,
1994, in the amount of $2,689,954, and such claim shall be an excluded liability
retained by Seller and Parent. The parties also agree that any debts,
obligations or liabilities arising from any claims asserted by the Teamsters
Joint Counsel #83 of Virginia Pension Fund shall be excluded liabilities
retained by Seller and Parent, and Seller and Parent agree to indemnify and hold
harmless Buyer and ESI for any liability arising therefrom
<PAGE>
(including all reasonable accounting, actuarial, and legal expenses incident
thereto). Buyer shall, however, be subject to the assessment of future
withdrawal liability, whether partial or complete, by this fund with respect to
such contribution base units as are transferred from Seller to Buyer pursuant to
Section 4204 of ERISA. In conjunction with the first exclusion referenced above
in this paragraph, the parties also agree to the following additional amendments
to the Agreement:
a. The following provision is hereby inserted at the end of
Section 12(c)(v) of the Agreement:
Notwithstanding the foregoing, Buyer shall not be required to comply
with Section 4204 of ERISA with respect to the New England Teamsters &
Trucking Industry Pension Fund if the Fund does not agree that the
application of Section 4204 to this transaction shall not cause Buyer
to become liable for the assessment of partial withdrawal liability
referenced in Section 12(c)(vi). ESI shall, however, be subject to the
assessment of future withdrawal liability, whether partial or complete,
by the Fund with respect to such contribution base units as are
transferred from Seller to ESI pursuant to Section 4204 of ERISA.
b. The following provision is hereby inserted as Section
12(c)(vi) of the Agreement:
In the event the New England Teamsters & Trucking Pension Fund asserts
that the Buyer is responsible in full or in part for payment of the
partial withdrawal liability assessed against Seller in a demand
received by Seller on or about July 3, 1996, Seller and Parent agree to
indemnify and hold harmless Buyer for any such liability (including all
reasonable accounting, actuarial, and legal expenses incident thereto).
6. Inclusion of Additional Plans. The first sentence of Section 12(c)
of the Agreement is hereby amended to include the following additional
Multi-Employer Plans within the definition of "the Plan" set forth therein: (i)
Central Pennsylvania Teamsters Fund, and (ii) Teamsters Joint Counsel No. 83 of
Virginia Pension Fund.
7. Treatment of Medical and Benefit Plans. With respect to Buyer's
assumption of Seller's obligations under certain medical and benefit plans, the
parties agree to the provisions set forth on Exhibit "A".
8. Closing Obligations. Seller's and Parent's obligation to provide a
separate Liabilities Undertaking to Buyer pursuant to Section 4(a)(v) of the
Agreement is hereby deleted.
9. Transitional Services. The parties acknowledge that the Agreement
also is modified to incorporate the terms of the letter agreement dated as of
July 26, 1996, a copy of which is attached hereto as Exhibit "B."
-2-
<PAGE>
10. Extension of Certain Time Periods. The deadline for completion of
the following items shall be as promptly as possible after the completion of the
balance sheet prepared as of the date of Closing, but in no event shall such
items be completed more than thirty (30) days from the date of Closing without
the prior written consent of ESI: (i) third party consents and estoppel
certificates from Seller's real estate landlords; and (ii) the allocation of
purchase price to be attached as Exhibit "J" to the Agreement.
All other terms and conditions of the Agreement are incorporated herein
by this reference. Except to the extent amended hereby, the Agreement shall
remain unchanged, and shall continue in full force and effect.
All references to the Agreement in any other documents are hereby
amended to refer to the Agreement as amended hereby.
This Amendment may be executed in counterparts. Delivery by any party
of a facsimile signature shall constitute effective and binding delivery of an
original signature hereto.
-3-
<PAGE>
DATED as of the day and year first above written.
LEASEWAY TRANSPORTATION CORP., a
Delaware corporation
By________________________________
Its________________________
LEASEWAY PERSONNEL CORP., a West
Virginia corporation
By________________________________
Its________________________
LEASEWAY ADMINISTRATIVE PERSONNEL,
an Ohio corporation
By________________________________
Its________________________
EMPLOYEE SOLUTIONS, INC., an Arizona
corporation
By________________________________
Its________________________
LOGISTICS PERSONNEL CORP., a Nevada
corporation
By________________________________
Its________________________
-4-
EXHIBIT 10.1
LOAN AGREEMENT
DATE: August 1, 1996
- ----
PARTIES: Borrower: EMPLOYEE SOLUTIONS, INC., an Arizona corporation.
- ------- --------
Borrower Address:2929 East Camelback Road, Suite 220
---------------- Phoenix, Arizona 85016-4426.
Bank: BANK ONE, ARIZONA, NA, a national banking association.
----
Bank Address: P.O. Box 71
------------ Phoenix, Arizona 85001
Attention: Mary Kennedy Martuscelli (A781).
AGREEMENT: For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Borrower and Bank agree as follows:
1. SCHEDULE OF TERMS.
-----------------
2. Commitment Amount: $35,000,000.00; provided, however, commencing
February 1, 1998, the Commitment Amount shall be automatically reduced by
$1,500,000.00, and thereafter shall automatically be reduced by $1,500,000.00
every calendar quarter until the Scheduled Commitment Expiration Date.
3.1 Scheduled Commitment Expiration Date:
August 1, 1999.
3.1 and 5.1.6 Purpose of Advances: To provide financing for
acquisitions, working capital and general corporate purposes of Borrower.
3.2 Each of the following Persons acting alone is authorized to request
Advances:
Roy Flegenheimer
----------------------------- --------------------------------
Typed Name and Title (if any) Sample Signature
Morris Aaron /s/ Morris Aaron
----------------------------- --------------------------------
Typed Name and Title (if any) Sample Signature
Brenda White
----------------------------- --------------------------------
Typed Name and Title (if any) Sample Signature
3.3.1 Commitment fee: $350,000.00.
1
<PAGE>
3.3.2 Non-utilization fee rate: 3/8%.
3.3.3 Agency fee: $30,000.00.
5.1.5, 6.2, 6.3.1, and 6.3.2. Financial statements and accounting
system requirements: Accrual Basis and GAAP.
5.1.5 Fiscal year of Borrower: From January 1 to December 31.
6.3.1 Financial statements due within 45 days after the end of each
fiscal quarter of Borrower.
Certification requirements: Borrower prepared financial
statements.
Person(s) to sign financial statements on behalf of Borrower:
Morris Aaron, Chief Financial Officer.
6.3.2 Financial statements due within 120 days after the end of each
fiscal year of Borrower.
Certification requirements: Independent certified public
accountant satisfactory to Bank to
audit financial statements and
deliver an unqualified opinion on
the financial statements
Person(s) to sign financial statements on behalf of Borrower:
Morris Aaron, Chief Financial Officer.
6.3.4 Covenant Compliance Certificate within 55 days after the end
of the first three fiscal quarters of Borrower, and within 130
days after the end of the last fiscal quarter of Borrower.
2. DEFINITIONS. In this Agreement, the following terms shall have the following
meanings:
"Advance" means an advance by Bank to Borrower hereunder.
"Agreement" means this Loan Agreement as it may be amended, modified, extended,
renewed, restated, or supplemented from time to time.
"Approvals and Permits" means each and all approvals, authorizations, bonds,
consents, certificates, franchises, licenses, permits, registrations,
qualifications, and other actions and rights granted by or filings with any
Persons necessary, appropriate, or desirable for ownership or lease by Borrower
of its assets and property or for the conduct of the business and operations of
Borrower.
"Bank" means Bank One, Arizona, NA, a national banking association.
2
<PAGE>
"Borrower Loan Documents" means the Loan Documents executed or delivered by
Borrower from time to time.
"Collateral" means the property, interests in property, and rights to property
securing any or all Obligations from time to time.
"Commitment" means the agreement of Bank in Section 3.1 to make Advances
pursuant to the terms and conditions herein.
"Commitment Amount" means the amount specified in Section 1.
"ERISA" means the Employee Retirement Income Security Act of 1974 and the
regulations and published interpretations thereunder, as in effect from time to
time.
"Event of Default" has the meaning specified in the Note and the other Loan
Documents.
"GAAP" means generally accepted accounting principles consistently applied.
"Governmental Authority" means any government, any court, and any agency,
authority, body, bureau, department, or instrumentality of any government.
"Lien or Encumbrance" and "Liens and Encumbrances" mean, respectively, each and
all of the following: (i) any lease or other right to use; (ii) any assignment
as security, conditional sale, grant in trust, lien, mortgage, pledge, security
interest, title retention arrangement, other encumbrance, or other interest or
right securing the payment of money or the performance of any other liability or
obligation, whether voluntarily or involuntarily created and whether arising by
agreement, document, or instrument, under any law, ordinance, regulation, or
rule (federal, state, or local), or otherwise; and (iii) any option, right of
first refusal, other right to acquire, or other interest or right.
"Loan Documents" means this Agreement, the Note, and any other agreements,
documents, or instruments from time to time evidencing, guarantying, securing,
or otherwise relating to the Note, as they may be amended, modified, extended,
renewed, or supplemented from time to time.
"Loan Party" means Borrower and each other Person that from time to time is or
becomes obligated to Bank under any Loan Document or grants any Collateral.
"Material Adverse Change" means any material change in the assets, business,
financial condition, operations, prospects, or results of operations of any Loan
Party or any other material event or condition that in the reasonable opinion of
Bank (i) could materially affect the likelihood of performance by any Loan Party
of any of the Obligations, (ii) could materially affect the ability of any Loan
Party to perform any of the Obligations, (iii) could materially affect the
legality, validity, or binding nature of any of the Obligations or any Lien or
Encumbrance securing any of the Obligations, or (iv) could materially affect the
priority of any Lien or Encumbrance securing any of the Obligations.
3
<PAGE>
"Note" means the Promissory Note, dated of even date herewith, of Borrower
payable to Bank, as it may be amended, modified, extended, renewed, restated, or
supplemented from time to time.
"Obligations" means the obligations of the Loan Parties under the Loan
Documents.
"Permitted Exceptions" means Liens and Encumbrances in favor of Bank, leases of
Inventory to Customers for fair consideration in the ordinary course of
Borrower's business, Liens and Encumbrances shown on financial statements of
Borrower delivered to Bank prior to the date of this Agreement, Liens and
Encumbrances otherwise disclosed to Bank in writing prior to the date of this
Agreement, and other Liens and Encumbrances consented to by Bank in writing from
time to time in its absolute and sole discretion.
"Person" means a natural person, a partnership, a joint venture, an
unincorporated association, a limited liability company, a corporation, a trust,
any other legal entity, or any Governmental Authority.
"Unmatured Event of Default" means any condition or event that with notice,
passage of time, or both would be an Event of Default.
3. LOAN FACILITY.
3.1 Loan Facility. Subject to the terms and conditions of this
Agreement, Bank agrees to make Advances to Borrower from time to time on or
before the Scheduled Commitment Expiration Date specified in Section 1, provided
that the aggregate amount of Advances outstanding at any one time shall not
exceed the Commitment Amount. Advances shall be on a revolving basis. Advances
prepaid may be re-borrowed subject to the terms and the conditions herein.
Proceeds of Advances may be used only for the purposes described in Section 1.
Although the outstanding principal of the Note may be zero from time to time,
the Loan Documents shall remain in full force and effect until the Commitment
terminates and all Obligations are paid and performed in full. Upon occurrence
of an Event of Default or an Unmatured Event of Default, Bank, in its absolute
and sole discretion and without notice, may suspend the commitment to make
Advances. In addition, upon occurrence of an Event of Default, Bank, in its
absolute and sole discretion and without notice, may terminate the commitment to
make Advances. The obligation of Borrower to repay Advances is evidenced by the
Note.
3.2 Request for the Advances. Advances may be made by Bank at the oral
or written request of the Person or Persons designated in Section 1. Such Person
or Persons are hereby authorized by Borrower to request Advances and to direct
disposition of the proceeds of Advances until written notice of the revocation
of such authority is received from Borrower by Bank and Bank has had a
reasonable time to act upon such notice. Bank shall have no duty to monitor for
Borrower or to report to Borrower the use of proceeds of Advances. Advances
shall be disbursed by Bank into an account of Borrower with Bank.
3.3 Fees. As additional consideration for the Commitment, Borrower
agrees to pay to Bank the following fees, which shall be earned by Bank on the
date due under the Loan Documents and shall be non-refundable to Borrower:
4
<PAGE>
3.3.1 Commitment Fee. A fee for the Commitment in the amount
set forth in Section 1, payable on or before the date hereof.
3.3.2 Non-Utilization Fee. A non-utilization fee computed at
the rate per annum set forth in Section 1 on the unused portion of the
Commitment Amount, calculated from the date hereof and payable quarterly in
arrears. The phrase, "unused portion of the Commitment Amount", means the
average difference between (i) the Commitment Amount and (ii) the amount of
Advances outstanding on each day during the respective quarter.
3.3.3 Agency Fee. An agency fee to Bank in the amount
specified in Section 1, payable on or before the date hereof.
3.3.4 Attorneys' Costs, Expenses, and Fees. Reasonable
attorneys' costs, expenses, and fees for Bank's counsel, payable on or before
the date hereof.
3.4 Termination. Notwithstanding anything contained herein or in the
Loan Documents to the contrary, Bank and Borrower agree that Borrower, at any
time, may fully repay all sums due and owing to Bank and terminate this credit
facility, provided, however, Borrower shall (a) be subject to any prepayment
penalty set forth in the Note, and (b) shall remain obligated to pay the
non-utilization fee described in Section 3.3.2 for the remaining quarterly
period after any such termination, and (c) shall not be entitled to a refund of
any fees previously paid to Bank.
4. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT, TO EFFECTIVENESS OF
THE COMMITMENT, AND TO EACH ADVANCE. This Agreement and the Commitment shall
become effective only upon satisfaction of the following conditions precedent
and Bank shall be obligated to make an Advance when requested by Borrower only
if the following conditions precedent are satisfied, as determined by Bank in
its absolute and sole discretion.
4.1 Representations and Warranties Accurate. The representations and
warranties by each Loan Party in the Loan Documents are correct on and as of the
date of this Agreement and on and as of the date of each Advance, before and
after giving effect to such Advance and to the application of the proceeds
thereof, as though made on and as of such date.
4.2 Documents. Bank has received on the date of this Agreement the Loan
Documents, which shall include all agreements, documents, and instruments
specified by Bank. In addition, Bank has received a recent audit performed by
Arthur Andersen to Bank's satisfaction.
4.3 Leaseway Closing. Concurrently herewith, Borrower shall have
consummated its purchase of assets from Leaseway Personnel Corp., Leaseway
Administrative Personnel, Inc. in accordance with the terms and conditions of
that certain Asset Purchase Agreement dated July 5, 1996.
4.4 Participation. Bank has entered into a participation agreement with
NBD Bank, whereby Bank agrees to sell, and NBD Bank agrees to purchase an
undivided 42.86% in this credit facility.
5
<PAGE>
Borrower hereby authorizes Bank, and Bank reserves the right in its absolute and
sole discretion, to verify any documents and information submitted to Bank in
connection with this Agreement. Bank may elect, in its absolute and sole
discretion, to waive any of the foregoing conditions precedent. Any such waiver
shall be effective only if (i) it is in writing executed by Bank, (ii) it
specifically identifies the condition precedent, and (iii) it states whether the
condition precedent is waived as a requirement of the effectiveness of this
Agreement, the effectiveness of the Commitment, and/or as a requirement for a
particular Advance. Any such waiver shall be limited to the condition(s)
precedent specifically described therein and the requirements therein. Delay or
failure by Bank to insist on satisfaction of any condition of an Advance shall
not be a waiver of such condition precedent or any other condition precedent. If
Borrower is unable to satisfy any condition precedent of an Advance, the making
of such Advance shall not preclude Bank from thereafter declaring the condition
or event causing such inability to be an Event of Default.
5. BORROWER REPRESENTATIONS AND WARRANTIES.
5.1 Closing Representations and Warranties. Borrower represents and
warrants to Bank as of the date of this Agreement:
5.1.1 Corporate, Limited Liability Company, or Partnership
Existence and Authorization. If Borrower is a corporation, a limited liability
company, or a partnership, Borrower is validly existing, and in the case of a
corporation or limited liability company is in good standing, under the laws of
the jurisdiction of its formation or organization and has the requisite power
and authority to execute, deliver, and perform the Borrower Loan Documents. The
execution, delivery, and performance by Borrower of the Borrower Loan Documents
have been duly authorized by all requisite action by or on behalf of Borrower
and will not conflict with, or result in a violation of or a default under, the
certificate of incorporation and bylaws, the limited liability company operating
agreement, or the partnership agreement of Borrower, as the case may be. If
Borrower is not formed or organized under the law of the State of Arizona,
Borrower is qualified to do business as a foreign corporation, limited liability
company, or partnership, as the case may be, and in the case of a corporation or
limited liability company is in good standing, under the law of the State of
Arizona.
5.1.2 No Approvals. No approval, authorization, bond, consent,
certificate, franchise, license, permit, registration, qualification, or other
action or grant by or filing with any Person is required in connection with the
execution, delivery, or performance by Borrower of the Borrower Loan Documents.
5.1.3 No Conflicts. The execution, delivery, and performance
by Borrower of the Borrower Loan Documents will not conflict with, or result in
a violation of or a default under: any applicable law, ordinance, regulation, or
rule (federal, state, or local); any judgment, order, or decree of any
arbitrator, other private adjudicator, or Governmental Authority to which
Borrower is a party or by which Borrower or any of the assets or property of
Borrower is bound; any of the Approvals or Permits; or any agreement, document,
or instrument to which Borrower is a party or by which Borrower or any of the
assets or property of Borrower is bound.
5.1.4 Execution and Delivery and Binding Nature of Borrower
Loan Documents. The Borrower Loan Documents have been duly executed and
delivered by or on behalf of
6
<PAGE>
Borrower. The Borrower Loan Documents are legal, valid, and binding obligations
of Borrower, enforceable in accordance with their terms against Borrower, except
as such enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization, or similar laws and by equitable principles of general
application.
5.1.5 Accurate Information. All information in any loan
application, financial statement, certificate, or other document and all other
information delivered by or on behalf of Borrower to Bank in obtaining the
Commitment is correct and complete, and there are no omissions therefrom that
result in any such information being incomplete, incorrect, or misleading as of
the date thereof. There has been no Material Adverse Change as to Borrower since
the date of such information. All financial statements heretofore delivered to
Bank by Borrower were prepared in accordance with the requirements set forth in
Section 1 and accurately present the financial condition and results of
operations of Borrower as at the dates thereof and for the periods covered
thereby. The fiscal year of Borrower is as set forth in Section 1.
5.1.6 Purpose of Advances. The purpose of the Advances is as
set forth in Section 1.
5.1.7 Legal Proceedings; Hearings, Inquiries, and
Investigations. Except as disclosed to Bank in writing prior to the date of this
Agreement, (i) no legal proceeding is pending or, to best knowledge of Borrower,
threatened before any arbitrator, other private adjudicator, or Governmental
Authority to which Borrower is a party or by which Borrower or any assets or
property of Borrower may be bound or affected that if resolved adversely to
Borrower could result in a Material Adverse Change, and to the best knowledge of
Borrower, there exist no facts that would form any basis for any of the
foregoing, and (ii) no hearing, inquiry, or investigation relating to Borrower
or any assets or property of Borrower is pending or, to the best knowledge of
Borrower, threatened by any Governmental Authority.
5.1.8 No Event of Default or Unmatured Event of Default. No
Event of Default and no Unmatured Event of Default has occurred and is
continuing.
5.1.9 Approvals and Permits; Assets and Property. Borrower has
obtained and there are in full force and effect all Approvals and Permits.
Borrower owns or leases all assets and property necessary for conduct of the
business and operations of Borrower. Such assets and property are not subject to
any Liens and Encumbrances, other than Permitted Exceptions.
5.1.10 Taxes. Borrower has filed or caused to be filed all tax
returns (federal, state, and local) required to be filed by Borrower and has
paid all taxes and other amounts shown thereon to be due (including, without
limitation, any interest and penalties).
5.1.11 ERISA. Borrower is in compliance with ERISA. No
Reportable Event or Prohibited Transaction (as defined in ERISA) or termination
of any plan has occurred and no notice of termination has been filed with
respect to any plan established or maintained by Borrower and subject to ERISA.
Borrower has not incurred any material funding deficiency within the meaning of
ERISA or any material liability to the Pension Benefit Guaranty Corporation in
connection with any such plan established or maintained by Borrower. Borrower is
not a party to any Multiemployer Plan (as defined in ERISA).
7
<PAGE>
5.1.12 Environmental Matters. The information in any
environmental questionnaire delivered to Bank is accurate and complete with no
material omissions therefrom as of the date thereof. To the best knowledge of
Borrower after due investigation, Borrower is in compliance in all material
respects with all environmental, all health, and all safety laws, ordinances,
regulations, and rules (federal, state, and local) applicable to Borrower, the
assets or property of Borrower, the business or operations of Borrower, or the
products or services of Borrower. Borrower does not have any material existing
or contingent liability in connection with any disposal, generation,
manufacture, processing, production, release, storage, transportation,
treatment, or use of any hazardous or toxic substance or waste.
5.1.13 Investment Company Act. Borrower is not an "investment
company" or a company controlled by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended. Borrower is not a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
5.1.14 Margin Securities. Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the Board of Governors of
the Federal Reserve System), and no proceeds of Advances will be used to
purchase or carry any margin stock or extend credit to others for the purpose of
purchasing or carrying margin stock or for any purpose that violates or is
inconsistent with Regulation X of the Board of Governors.
5.2 Representations and Warranties Upon Requests for Advances. Each
request for an Advance shall be a representation and warranty by Borrower to
Bank that the representations and warranties in this Section 5 are correct and
complete as of the date of the Advance and that the conditions precedent in
Section 4 are satisfied as of the date of the Advance.
5.3 Representations and Warranties Upon Delivery of Financial
Statements, Documents, and Other Information. Each delivery by Borrower to Bank
of financial statements, other documents, or information after the date of this
Agreement (including, without limitation, any documents and information
delivered in obtaining an Advance) shall be a representation and warranty that
such financial statements, other documents, or information is correct and
complete, that there are no omissions therefrom that result in such financial
statements, other documents, or information being incomplete, incorrect, or
misleading as of the date thereof, and that such financial statements accurately
present the financial condition and results of operations of Borrower as at the
dates thereof and for the periods covered thereby.
6. BORROWER AFFIRMATIVE COVENANTS. Until the Commitment terminates in full and
until the Obligations are paid and performed in full, Borrower agrees that,
unless Bank otherwise agrees in writing in Bank's absolute and sole discretion:
6.1 Corporate, Limited Liability Company, or Partnership Existence. If
Borrower is a corporation, a limited liability company, or a partnership,
Borrower shall continue to be validly existing, and in the case of a corporation
or a limited liability company in good standing, under the law of the
jurisdiction of its organization or formation. If Borrower is not formed or
organized under the laws of the State of Arizona, Borrower shall continue to be
qualified to do business as a foreign corporation, limited liability company, or
partnership, as the case may be, and in the case of a corporation or limited
liability company to be in good standing, under the law of the State of Arizona.
8
<PAGE>
6.2 Books and Records; Access By Bank. Borrower will maintain a single,
standard, modern system of accounting, in accordance with the requirements in
Section 1 (including, without limitation, a single, complete, and accurate set
of books and records of its assets, business, financial condition, operations,
property, prospects, and results of operations) in accordance with good
accounting practices. During business hours Borrower will give representatives
of Bank access to all assets, property, books, records, and documents of
Borrower and will permit such representatives to inspect such assets and
property and to audit, copy, examine, and make excerpts from such books,
records, and documents.
6.3 Information and Statements. Borrower shall furnish to Bank:
6.3.1 Fiscal Period Financial Statements. As soon as available
and in any event within the number of days set forth in Section 1 after the end
of each fiscal period of Borrower set forth in Section 1, except the last period
in each fiscal year of Borrower, copies of the balance sheet of Borrower as of
the end of such fiscal period and statements of income and retained earnings and
a statement of cash flow of Borrower for such fiscal period and for the portion
of the fiscal year of Borrower ending with such fiscal period, on a consolidated
basis in consolidating form for Borrower and any subsidiary of Borrower, in each
case setting forth in comparative form the figures for the corresponding period
for the preceding fiscal year, all in reasonable detail, prepared in accordance
with the requirements in Section 1, containing the certifications specified in
Section 1, and signed on behalf of Borrower by the person(s) named in Section 1.
6.3.2 Annual Financial Statements. As soon as available and in
any event within the number of days set forth in Section 1 after the end of each
fiscal year of Borrower, copies of the balance sheet of Borrower as of the end
of such fiscal year and statements of income and retained earnings and a
statement of cash flow of Borrower for such fiscal year, on a consolidated basis
in consolidating form for Borrower and any subsidiary of Borrower, in each case
setting forth in comparative form the figures for the preceding fiscal year of
Borrower, all in reasonable detail and prepared in accordance with the
requirements in Section 1, containing the certifications specified in Section 1,
and signed on behalf of by the person(s) named in Section 1.
6.3.3 SEC Filings. Promptly upon their becoming available,
copies of all registration statements and regular periodic reports, if any,
which Borrower shall have filed with the Securities and Exchange Commission (or
any governmental agency substituted therefor) or any national securities
exchange.
6.3.4 Covenant Compliance Certificate. Within the number of
days set forth in Section 1 after the end of each fiscal quarter of Borrower, a
covenant compliance certificate, certifying Borrower's compliance with all
financial covenants set forth herein, in form and substance reasonably
acceptable to the Bank.
6.3.5 Insurance Subsidiaries. Promptly upon their becoming
available, copies of all statutory statements for any insurance subsidiary on an
annual basis, together with any actuarial opinions provided to Borrower for
regulatory purposes on any insurance subsidiary.
9
<PAGE>
6.3.6 Other Information. Such other information concerning
Borrower and the assets, business, financial condition, operations, property,
prospects, and results of operations of Borrower as Bank reasonably requests
from time to time.
6.4 Law; Judgments; Material Agreements; Approvals and Permits.
Borrower shall comply with all laws, ordinances, regulations, and rules
(federal, state, and local) and all judgments, orders, and decrees of any
arbitrator, other private adjudicator, or Government Authority relating to
Borrower or the assets, business, operations, or property of Borrower. Borrower
shall comply in all material respects with all material agreements, documents,
and instruments to which Borrower is a party or by which Borrower or any of the
assets or property of Borrower is bound or affected. Borrower shall obtain and
maintain in full force and effect all Approvals and Permits and shall comply
with all conditions and requirements of all Approvals and Permits.
6.5 Taxes and Other Indebtedness. Borrower will pay and discharge (i)
before delinquency all taxes, assessments, and governmental charges or levies
("Impositions") imposed upon it, upon its income or profits, or upon any of its
assets or property, (ii) when due all lawful claims (including, without
limitation, claims for labor, materials, and supplies), that, if unpaid, might
become a Lien or Encumbrance upon any of its assets or property, and (iii) when
due all its other indebtedness, provided, however, Borrower shall have the right
before any delinquency occurs to contest or object to the amount or validity of
any Imposition by appropriate proceedings, but this shall not be deemed or
construed in any way as relieving, modifying, or extending Borrower's covenant
to pay any such Imposition, unless Borrower has given prior written notice to
Bank of Borrower's intent to so contest or object to an Imposition, and unless,
in Bank's absolute and sole discretion, (i) Borrower shall demonstrate to Bank's
satisfaction that the proceedings to be initiated by Borrower shall conclusively
operate to prevent the sale of the Collateral or any part thereof or interest
therein to satisfy such Imposition.
6.6 Assets and Property. Borrower will maintain, keep, and preserve all
of its assets and property (tangible and intangible) necessary or useful in the
proper conduct of its business and operations in good working order and
condition, ordinary wear and tear excepted.
6.7 Insurance. In addition to any insurance required under any of the
other Loan Documents, Borrower shall maintain workmen's compensation insurance,
general liability insurance, insurance on its assets and property now or
hereafter owned, and such other forms of insurance as is customary in the
industry of Borrower, against such casualties, risks, and contingencies, in such
amounts, and with such insurance companies as are satisfactory to Bank, in its
reasonable discretion. Borrower shall deliver to Bank from time to time as Bank
may request, schedules setting forth all insurance then in effect and copies of
the policies.
6.8 Environmental Laws. Without limiting the generality of Section 6.4,
Borrower shall comply with all environmental, all health, and all safety laws,
ordinances, regulations, and rules (federal, state, local, and foreign)
applicable to Borrower, the business or operations of Borrower, the assets or
property of Borrower, or the products or services of Borrower. Borrower may use
and store for its own use hazardous or toxic substances. Borrower shall not
dispose of, generate, manufacture, process, produce, release, transport, or
treat or otherwise store or use any hazardous or toxic substances or wastes.
Borrower shall notify Bank immediately of any environmental inquiry or claim
from any Governmental Authority or other
10
<PAGE>
Person relating to Borrower or any assets, property, business, operations,
product, or service of Borrower.
6.9 ERISA. Borrower will fund each Defined Benefit Plan and Defined
Contribution Plan (as such terms are defined in ERISA) so that there is never an
Accumulated Funding Deficiency (as defined in Section 412 of the Internal
Revenue Code of 1986, as amended).
6.10 Further Assurances. Borrower shall promptly execute, acknowledge,
and deliver and, as appropriate, cause to be duly filed and recorded such
additional agreements, documents, and instruments and do or cause to be done
such other acts as Bank may reasonably request from time to time to better
assure, perfect, preserve, and protect the interest of Bank in the Collateral
and the rights and remedies of Bank under the Loan Documents.
6.11 Costs and Expenses of Borrower's Performance of Covenants and
Satisfaction of Conditions. Borrower will perform all of its obligations and
satisfy all conditions under the Loan Documents at its sole cost and expense.
6.12 Financial Covenants. Except as otherwise noted, all capitalized
terms in this Section 6.12 not defined in this Agreement shall have the meanings
determined in accordance with GAAP. On a consolidated basis, Borrower shall
maintain:
6.12.1 Current Ratio. A minimum current ratio, calculated by
dividing Borrower's current assets by Borrower's current liabilities, of 1.40 to
1.00. For purposes of this calculation, this credit facility will be considered
a current liability except the portion which was used for cash acquisitions.
6.12.2 Total Leverage. Total Liabilities divided by Net Worth
not at any time greater than 2.00 to 1.00, with "Total Liabilities" defined as
the aggregate of current liabilities and non-current liabilities, and with "Net
Worth" defined as the aggregate of total stockholders' equity.
6.12.3 Minimum EBITDA. EBITDA not less than $10,000,000.00 as
of each fiscal year end, with "EBITDA" defined as net profit before tax plus
interest expense (net of capitalized interest expense), depreciation expense and
amortization expense. This minimum EBITDA covenant shall be increased by 50% of
the pro forma EBITDA of all companies acquired by Borrower from time to time.
6.12.4 Funded Debt to EBITDA. Total Funded Debt divided by
EBITDA not at any time greater than 2.00 to 1.00, with "Total Funded Debt"
defined as current and long term portions of all debt, excluding accounts
payables, bank overdrafts, contingent liabilities, income taxes payable, accrued
expenses and deferred income taxes. This covenant shall be tested as of the end
of each fiscal quarter, commencing for the fiscal quarter ending September 30,
1996, for such fiscal quarter and the immediately preceding three (3) fiscal
quarters taken as a whole. In addition, pro forma EBITDA of all companies
acquired with cash by Borrower from time to time shall be included in the
calculation of this covenant, provided pro forma EBITDA shall be substantiated
by audited financial statements or other financial statements acceptable to
Bank.
11
<PAGE>
6.13 Additional Guarantors. Borrower will take such action, and will
cause each of its subsidiaries to take such action, from time to time as shall
be necessary to ensure that all subsidiaries of Borrower are guarantors of this
credit facility. Such additional guarantors shall execute Bank's form of
guaranty.
7. BORROWER NEGATIVE COVENANTS. Until the Commitment terminates in full and
until the Obligations are paid and performed in full, Borrower agrees that,
unless Bank otherwise agrees in Bank's absolute and sole discretion:
7.1 Corporate, Limited Liability Company, and Partnership Restrictions.
If Borrower is a corporation, a limited liability company, or a partnership,
Borrower shall not issue any capital stock or other securities of or any limited
liability company interest or partnership interest in Borrower or grant any
option, right-of-first-refusal, warrant, or other right to purchase any capital
stock or other securities of or any limited liability company interest or
partnership interest in Borrower without Bank's consent, excluding, however, (i)
stock option plans for Borrower, and (ii) the issuance of stock in connection
with an Acquisition described in Section 7.5 below. Borrower shall not be
dissolved or liquidated. Borrower shall not amend, modify, restate, supplement,
or terminate its certificate of incorporation or bylaws, its limited liability
company operating agreement, or its partnership agreement, as the case may be,
without Bank's consent. If a corporation, Borrower shall not reorganize itself
or consolidate with or merge into any other corporation or permit any other
corporation to be merged into Borrower. If a limited liability company, Borrower
shall not consolidate or merge with any corporation, any other limited liability
company, or any other legal entity.
7.2 Change in or Reacquisition of Ownership Interests in Borrower. In
addition to any requirement in any other Loan Document, if Borrower is a
corporation, a limited liability company, or a partnership, Borrower will not
repurchase any capital stock of or any limited liability company interest or
partnership interest in Borrower or any option, right-of-first refusal, warrant
or other right to purchase any capital stock or other securities of or any
limited liability company interest or partnership interest in Borrower,
excluding, however, the repurchase of capital stock in connection with an
Acquisition described in Section 7.5 below.
7.3 Name, Fiscal Year, Accounting Method, and Lines of Business.
Borrower shall not change its name, fiscal year, or method of accounting.
Borrower shall not directly or indirectly, engage in any business other than the
line(s) of business in which Borrower is engaged on the date of this Agreement,
discontinue any existing line(s) of business, or substantially alter its method
of doing business.
7.4 Loans, Investments, Guaranties, Subordinations. Without Bank's
consent, and except as provided herein, Borrower shall not directly or
indirectly (i) make any loan or advance to any other Person in excess of
$250,000.00, (ii) purchase or otherwise acquire any capital stock or other
securities of any other Person, any limited liability company interest or
partnership interest in any other Person, or any warrants or other options or
rights to acquire any capital stock or securities of any other Person or any
limited liability company interest or partnership interest in any other Person,
(iii) make any capital contribution to any other Person, (iv) otherwise invest
in or acquire any interest in any other Person, (v) guaranty or otherwise become
obligated in respect of any indebtedness of any other Person, or (vi)
subordinate any
12
<PAGE>
claim against or obligation of any other Person to Borrower to any other
indebtedness of such Person.
7.5 Acquisition or Disposition of All or Substantially All Assets.
Borrower shall not acquire by purchase, lease, or otherwise all or substantially
all the assets of any other Person. Borrower shall not sell, transfer, lease, or
otherwise dispose of all or any substantial part of the assets, business,
operations, or property of Borrower. Notwithstanding the preceding, Borrower
shall have the right to acquire all or substantially all the assets of any other
Person (an "Acquisition") provided, however, (a) any individual Acquisition
shall not exceed $10,000,000.00 and shall not exceed five times EBITDA, and (b)
any Acquisition whereby Borrower will expend $1,000,000.00 or more of cash or
any Acquisition whereby Borrower will assume worker's compensation liabilities
of $1,000,000.00 or more shall require the prior written consent of Bank.
7.6 Negative Pledge. Except for Permitted Exceptions, Borrower shall
not grant or suffer to exist any Lien or Encumbrance upon any assets or property
of Borrower.
8. BANK'S OBLIGATIONS TO BORROWER ONLY. The obligations of Bank under this
Agreement are for the benefit of Borrower only. No other Person shall have any
rights hereunder or be a third-party beneficiary hereof.
9. PROVISIONS IN THE NOTE GOVERN THIS AGREEMENT. This Agreement is subject to
certain terms and provisions in the Note, to which reference is made for a
statement of such terms and provisions.
10. COUNTERPART EXECUTION. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same document. Signature pages may be
detached from the counterparts and attached to a single copy of this Agreement
to physically form one document.
11. OBLIGATIONS.
11.1 Nature of Obligations. The action of Borrower and the requests,
notices, reports and other materials submitted by Borrower shall bind all of the
Borrower.
11.2 Direct Obligations; Waivers. Borrower represents, warrants,
covenants and agrees as follows:
(a) Bank may enforce any Loan Document against any Collateral
without first having sought enforcement of any Loan Documents against Borrower
or any other Loan Party or any other Collateral.
(b) The Obligations shall not be affected by any of the
following: (i) the bankruptcy, disability, dissolution, incompetence,
insolvency, liquidation, or reorganization of any Loan Party; (ii) any defense
of any or all other Loan Parties to payment or performance of any or all
obligations or enforcement of any and all Liens and Encumbrances; (iii) the
discharge, modification of the terms of, reduction in the amount of, or stay of
enforcement of any or all Liens and Encumbrances or any or all Obligations in
any bankruptcy, insolvency,
13
<PAGE>
reorganization, or other legal proceeding or by law, ordinance, regulation, or
rule (federal, state, or local); (iv) the cessation of liability of any or all
other Loan Parties or any or all Obligations; (v) any claim or dispute by any
other Loan Party concerning the occurrence of an Event of Default, performance
of any Obligations, or any other matter.
(c) Bank may do the following acts or omissions from time to
time without notice to or consent of Borrower and without receiving payment or
other value, nor shall the following acts or omissions affect, delay or impair
any of the Obligations or any or all Liens and Encumbrances: (i) obtain
Collateral or additional Collateral; (ii) substitute for any or all Collateral
regardless of whether the same type or greater or lesser value; (iii) release
Borrower or any or all Collateral; (iv) compromise, delay enforcement, fail to
enforce, release, settle or waive any rights or remedies of Bank as to Borrower
or all Collateral; (v) sell or otherwise dispose of any Collateral in accordance
with the Loan Documents and in such manner or order as Bank determines; (vi)
fail to perfect, fail to protect the priority of, and fail to ensure any or all
Liens or Encumbrances; (vii) fail to inspect, insure, maintain, preserve or
protect any or all Collateral; (viii) obtain additional obligors for any or all
Obligations; (ix) increase or decrease any or all obligations or otherwise
change terms of any or all obligations; (x) release any Loan Party; (xi)
compromise, delay enforcement, fail to enforce, release, settle or waive any
obligations of any Loan Party with the agreement of that Loan Party; (xii) make
advances, or grant other financial accommodations for any Loan Party; (xiii)
fail to file or pursue a claim in any bankruptcy, insolvency, reorganization or
other proceeding as to any or all liens and encumbrances or any or all
obligations; (xiv) amend, modify, extend, renew, restate, supplement or
terminate in whole or in part the obligation of any Loan Party with the
agreement of that Loan Party; (xv) take or fail to take any other action with
respect to any Loan Document or Loan Party; and (xvi) do any other acts or make
any other omissions that result in the extinguishment of the obligation of any
Loan Party.
(d) Borrower waives any and all rights and benefits under
Arizona Revised Statutes Sections 12-1641, 12-1642, 12-1643, 12-1644, 44-142,
47-3606, 16 A.R.S. Rules of Civil Procedure Rule 17(f) and any other similar or
replacement statutes or rules now or hereafter in effect and any other statutes
or rules now or hereafter in effect that purport to confer specific rights upon
or make specific defenses or procedures available to Borrower. To the extent
that the laws of any other jurisdiction may be applicable to Borrower, Borrower
waives any and all such laws that may conflict with or limit the obligations of
Borrower under the Loan Documents.
(e) Borrower waives any rights that require Bank, and Bank
shall have no obligation to, provide to Borrower any information concerning the
performance of any other Borrower, the Obligations, or the ability of any other
Borrower to perform the Obligations or any other matter, regardless of what
information Bank may from time to time have.
(f) Borrower waives, and agrees not to claim or assert any and
all present and future claims, remedies and rights against any other Borrower or
any other Loan Party, the Collateral and any other property, interest in
property or rights to property of any other Loan Party (i) arising from any
performance hereunder, (ii) arising from any application of any Collateral, or
any other property, interest in property or rights to property of Borrower, or
(iii) otherwise arising in respect of the Loan Documents, regardless of whether
such claims, remedies and rights arise under any present or future agreement,
document or instrument or are provided by any law, ordinance, regulation or rule
(federal, state or local) (including, without limitation,
14
<PAGE>
any and all rights of contribution, exoneration, indemnity, reimbursement, and
subrogation and any and all rights to participate in the rights and remedies of
Bank, against any Loan Party).
DATED as of the date first above stated.
EMPLOYEE SOLUTIONS, INC., an Arizona corporation
By: /s/ Marvin D. Brody
--------------------------------------------------
Name: Marvin D. Brody
----------------------------------------------
Title: CEO
----------------------------------------------
"Borrower"
BANK ONE, ARIZONA, NA, a national banking association
By: /s/ Mary K. Martuscolli
-------------------------------------------------
Name: Mary K. Martuscolli
---------------------------------------------
Title: Vice President
---------------------------------------------
"Bank One"
15
Approved By: Officer: Name: ___________________ Number: ____________ Dept./Br.:
Name: __________________________ No.: _________ CLN No.: ____________ Future No.
_______ Current No. _______ Borrower Name:
______________________________________________ Interest Rate:
___________________ Interest From: ___________ Renewal of Current No.: _______
ABOVE INFORMATION IS FOR INTERNAL BANK USE ONLY AND IS NOT PART OF THE
- --------------------------------------------------------------------------------
PROMISSORY NOTE.
- ---------------
________________________________________________________________________
SECURED PROMISSORY NOTE
Revolving Line of Credit
Principal Amount: $35,000,000.00 Date: August 1, 1996
Headquarters Phoenix, Arizona.
- ---------------------------------------------
(Office) (City)
PROMISE TO PAY AND INTEREST. For value received, the undersigned ("Borrower"),
promises to pay to BANK ONE, ARIZONA, NA, a national banking association, or
order (the "Bank") at 241 N. Central Avenue, Phoenix, Arizona 85004, or at such
other place as Bank may designate in writing, in lawful money of the United
States of America, the aggregate principal sum of $35,000,000.00, or such lesser
amount as shall have been disbursed and is unpaid as shown on the records of
Bank which shall be conclusive as to such amount, with interest from time to
time on each advance ("Advance") under the Loan Agreement, dated of even date
herewith, between Borrower and Bank, as amended, modified, extended, renewed,
restated, and supplemented from time to time ("Loan Agreement"), from the date
advanced as follows:
(a) Except to the extent that an Advance bears interest at the Fixed Rate,
as defined herein, pursuant to this Note, interest shall accrue on the unpaid
principal of each Advance at the Variable Rate. Interest at the Variable Rate
shall be computed on the basis of a 360 day year and accrue on a daily basis for
the actual number of days elapsed.
(b) To the extent Borrower shall elect as provided in this Note, interest
shall accrue on the unpaid principal of an Advance at the Fixed Rate. Interest
at the Fixed Rate shall be computed on the basis of a 360 day year and accrue on
a daily basis for the actual number of days elapsed.
As used in this Note:
"Business Day" means a day of the year on which banks are not required or
authorized to close in Phoenix, Arizona, and, with respect to a Fixed Rate
Advance, a day on which dealings are carried on in the London interbank market.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors to the Federal Reserve System, as in
effect from time to time.
"Eurodollar Rate Reserve Percentage" for the Interest Period for each Fixed
Rate Advance means the reserve percentage applicable two (2) Business Days
before the first day of such Interest Period under regulations issued from time
to time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including, but not
limited to, any emergency, supplemental, or other marginal reserve requirement)
for a member bank of the Federal Reserve System in San Francisco with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities (or
with respect to any other category of liabilities which includes deposits by
reference to which the interest rate on Fixed Rate Advances is determined)
having a term equal to such Interest Period.
1
<PAGE>
"Fixed Rate" means the rate per annum equal to the sum of (i) two and
one-half percent (2.5%) per annum, and (ii) the rate per annum obtained by
dividing (A) the rate of interest determined by Bank, based on Telerate System
reports or such other source as may be selected by Bank, to be the "London
Interbank Offered Rate" at which deposits in United States dollars are offered
by major banks in London, England, one (1) Business Day before the first day of
the respective Interest Period by (B) a percentage equal to one hundred percent
(100%) minus the Eurodollar Rate Reserve Percentage for the period equal to such
Interest Period.
"Fixed Rate Advance" means an Advance that bears or is requested to bear
interest at the Fixed Rate.
"Interest Period" means, for each Fixed Rate Advance, the period commencing
on the date of such Fixed Rate Advance and ending on the last day of the period
selected by Borrower pursuant to the provisions herein and, thereafter, each
subsequent period commencing on the last day of the immediately preceding
Interest Period and ending on the last day of the period selected by Borrower
pursuant to the provisions herein. The duration of each Interest Period shall be
one (1) month, two (2) months, or three (3) months, as selected by Borrower in
the request for a Fixed Rate Advance, provided, however, that:
(i) Interest Periods commencing on the same date shall be of the same duration;
(ii) Whenever the last day of any Interest Period would otherwise occur on a day
other than a Business Day, the last day of such Interest Period shall be
extended to occur on the next succeeding Business Day, provided that if
such extension would cause the last day of such Interest Period to occur in
the next following calendar month, the last day of such Interest Period
shall occur on the last preceding Business Day; and
(iii)No Interest Period with respect to any Advance shall extend beyond the
Maturity Date.
"Regulatory Change" means any change effective after the date of this Note
in United States federal, state, or foreign law, regulations, or rules or the
adoption or making after such date of any interpretation, directive, or request
applying to a class of banks including Bank, of or under any United States
federal, state, or foreign law, regulation, or rule (whether or not having the
force of law) by any court or governmental or monetary authority charged with
the interpretation or administration thereof.
"Variable Rate" means the rate per annum one-quarter of one percent (0.25%)
above the rate per annum most recently publicly announced by Bank, or its
successors, in Phoenix, Arizona, as its "prime rate", as in effect from time to
time. The Variable Rate will change on each day that the "prime rate" changes.
The "prime rate" is not necessarily the best or lowest rate offered by Bank, and
Bank may lend to its customers at rates that are at, above, or below its "prime
rate".
"Variable Rate Advance" means an Advance that bears or that is requested to
bear interest at the Variable Rate.
Each request for an Advance under the Loan Agreement shall, in addition to
complying with the other requirements in the Loan Agreement, (i) specify the
date and amount of the requested Advance, (ii) specify whether the Advance shall
be an Advance that bears interest at the Variable Rate or shall be an Advance
that bears interest at the Fixed Rate, and (iii) if the Advance is to bear
interest at the Fixed Rate, (A) specify the Interest Period, (B) be delivered to
Bank at least three (3) Business Days prior to the date of the requested
Advance, and (C) be in a minimum amount of $1,000,000.00 with integral multiples
of $500,000.00 in excess thereof. Any Advance not complying with the foregoing
requirements for an Advance bearing interest at the Fixed Rate shall bear
interest at the Variable Rate.
Borrower may on any Business Day, upon written notice to and received by Bank
not later than 12:00 p.m.
2
<PAGE>
(Phoenix, Arizona local time) (i) on the third Business Day, in the case of any
conversion of a Variable Rate Advance into a Fixed Rate Advance and (ii) on the
first Business Day in the case of any conversion of a Fixed Rate Advance into a
Variable Rate Advance, prior to the date of the proposed conversion, convert any
Advance of one type into an Advance of the other type, provided, however, that
any conversion of a Fixed Rate Advance shall only be made on the last day of the
applicable Interest Period. Each such notice of a conversion shall specify the
date of such conversion and the Advance(s) to be converted.
Notwithstanding any provision of the Loan Documents to the contrary, Bank shall
be entitled to fund and maintain its funding of all or any part of any Advance
in any manner it sees fit, provided, however, that for the purposes of this
Note, all determinations hereunder shall be made as if Bank had actually funded
and maintained each Fixed Rate Advance during the Interest Period therefor
through the purchase of deposits having a maturity corresponding to the last day
of the Interest Period and bearing an interest rate equal to the Fixed Rate for
such Interest Period.
If, due to any Regulatory Change, there shall be any increase in the cost to
Bank of agreeing to make or making, funding, or maintaining Fixed Rate Advances
(including, without limitation, any increase in any applicable reserve
requirement), then Borrower shall from time to time, upon demand by Bank, pay to
Bank such amounts as Bank may reasonably determine to be necessary to compensate
Bank for any additional costs that Bank reasonably determines are attributable
to such Regulatory Change and Bank will notify the Borrower of any Regulatory
Change that will entitle Bank to compensation pursuant to this paragraph as
promptly as practicable, but in any event within 90 days after Bank obtains
knowledge thereof, provided, however, that if Bank fails to give such notice
within 90 days after it obtains knowledge of such a Regulatory Change, Bank
shall, with respect to compensation payable in respect of any costs resulting
from such Regulatory Change, only be entitled to payment for costs incurred from
and after the date that Bank does give such notice. Bank will furnish to
Borrower a certificate setting forth in reasonable detail the basis for the
amount of each request by Bank for compensation under this paragraph.
Determinations by Bank of the amounts required to compensate Bank shall be
conclusive, absent manifest error. Bank shall be entitled to compensation in
connection with any Regulatory Change only for costs actually incurred by Bank.
Notwithstanding any provision of the Loan Documents, if Bank shall notify
Borrower that as a result of a Regulatory Change it is unlawful for Bank to make
Advances at the Fixed Rate, or to fund or maintain Fixed Rate Advances, (i) the
obligations of Bank to make Advances at the Fixed Rate and to convert Advances
to the Fixed Rate shall be suspended until Bank shall notify Borrower that the
circumstances causing such suspension no longer exist, and (ii) in the event
such Regulatory Change makes the maintenance of Advances at the Fixed Rate
unlawful, Borrower shall forthwith prepay in full all Fixed Rate Advances then
outstanding, together with interest accrued thereon and all amounts in
connection with such prepayment specified in the paragraph in this Note titled
"Prepayment", unless Borrower, within five (5) Business Days of notice from
Bank, converts all Fixed Rate Advances then outstanding into Variable Rate
Advances pursuant to the conversion procedures in this Note and pays all amounts
in connection with such prepayments or conversions specified in the paragraph in
this Note titled "Prepayment".
Notwithstanding any other provision of the Loan Documents, if prior to the
commencement of any Interest Period, Bank shall determine (i) that United States
dollar deposits in the amount of any Fixed Rate Advance to be outstanding during
such Interest Period are not readily available to Bank in the London interbank
market, or (ii) by reason of circumstances affecting the London interbank
market, adequate and reasonable means do not exist for ascertaining the Fixed
Rate, then Bank shall promptly give notice thereof to Borrower and the
obligation of Bank to create, continue, or effect by conversion any Fixed Rate
Advance in such amount and for such Interest Period shall terminate until United
States dollar deposits in such amount and for the Interest Period shall again be
readily available in the London interbank market and adequate and reasonable
means exist for ascertaining the Fixed Rate.
3
<PAGE>
Interest shall be due and payable commencing on September 1, 1996, and
continuing on the same day of each successive month thereafter until August 1,
1999 ("Maturity Date"). No payments of principal shall be due and payable until
the Maturity Date.
On the Maturity Date Borrower shall pay to Bank the unpaid principal, all
accrued and unpaid interest, and all other amounts ("Other Amounts") payable by
Borrower to Bank under the Loan Documents. "Loan Documents" means this Note, any
related loan agreements, any related letter of credit agreements, and any other
agreements, documents, and instruments evidencing, guarantying, securing, or
otherwise relating to this Note, as they may be amended, modified, extended,
renewed, restated, or supplemented from time to time.
Principal shall bear interest at the Interest Rate from the date of
disbursement until the due date thereof, whether due by acceleration or
otherwise. Principal, interest, and Other Amounts not paid when due and any
judgment therefor shall bear interest from its due date or the judgment date, as
applicable, until paid at a rate ("Default Rate") equal to the sum of (i) four
percent (4%) per annum and (ii) the Interest Rate, and such interest shall be
immediately due and payable.
Borrower agrees to pay an effective rate of interest that is the sum of (i)
the interest rate provided herein and (ii) any additional rate of interest
resulting from any other charges or fees paid or to be paid in connection
herewith that are determined to be interest or in the nature of interest.
APPLICATION OF PAYMENTS. At the option of Bank, payments shall be applied to
principal, interest, and Other Amounts in such order as Bank shall determine.
PREPAYMENT. Except as to payments due under this paragraph with respect to
payment or conversion of a Fixed Rate Advance on a day other than the last
Business Day in the Interest Period for such Fixed Rate Advance, Borrower may,
upon at least three (3) Business Days' notice in the case of Fixed Rate Advances
and one (1) Business Day's notice in the case of Variable Rate Advances to Bank
stating the proposed date and aggregate principal amount of the prepayment, and
if such notice is given Borrower shall, prepay the outstanding principal of
balance hereof in whole or in part at any time prior to the Maturity Date
without penalty or premium as stated in such notice by Borrower, provided that
such prepayment also includes accrued interest to the date of such prepayment on
the principal amount prepaid, and provided however, that if any payment of all
or any portion of a Fixed Rate Advance shall be made other than on the last day
of the Interest Period for such Fixed Rate Advance (such last day, the
"Termination Date"), or if Borrower shall convert a Fixed Rate Advance to a
Variable Rate Advance other than on the Termination Date for any reason
(including, without limitation, any optional or required prepayment under this
Note and any acceleration of the Maturity Date) then, anything in the Loan
Documents to the contrary notwithstanding, Borrower shall also pay a prepayment
premium, if any, equal to the product of (i) the Average Lost Monthly Interest
Income and (ii) the number of months from the date of prepayment to the
Termination Date (with any fraction of a month counted as a month), discounted
to present value at the Discount Rate over a period equal to one-half of the
number of months in (ii) above. As used in this paragraph:
"Average Lost Monthly Interest Income" means the amount determined by
dividing (i) the product of the Average Principal and the Lost Rate, by
(ii) 12, where:
"Average Principal" means the amount equal to either (i) one-half the sum
of (A) the amount of principal being prepaid and (B) the amount of
principal that is scheduled to be subject to the Fixed Rate Advance in
question immediately before the Termination Date ("Balloon Amount"), or
(ii) the amount of principal being prepaid, if such amount is less than the
Balloon Amount; and
"Lost Rate" means the rate per annum equal to the percentage, if any, by
which (i) the yield to maturity of United States Treasury debt obligations
having a maturity date nearest to the Termination Date ("Treasury
Obligations") determined as of the first day of the respective Interest
4
<PAGE>
Period exceeds (ii) the yield to maturity of Treasury Obligations
determined on the date of prepayment.
"Discount Rate" means the rate per annum equal to the yield to maturity of
Treasury Obligations determined on the date of prepayment.
The maturity date and yield to maturity of Treasury Obligations shall be
determined by Lender, in its reasonable discretion, on the basis of
quotations published in The Wall Street Journal or other comparable sources
generally used in the banking industry.
This Note evidences a revolving line of credit. Borrower shall be entitled
to reborrow any amounts prepaid pursuant to this Section.
LATE CHARGE. If any payment of interest is not received by Bank within fifteen
(15) days after its due date, then, in addition to the other rights and remedies
of Bank, a late charge of four percent (4%) of the amount due and unpaid will be
charged to Borrower without notice to Borrower. Such late charge shall be
immediately due and payable.
NO COUNTERCLAIMS, DEDUCTIONS, ETC. All payments and other obligations of
Borrower under the Loan Documents will be made and performed without
counterclaim, deduction, defense, deferment, reduction, or set-off.
SECURITY. This Note is secured by, inter alia, the Security Agreement, which
Security Agreement creates a lien on that certain personal property described
therein.
EVENTS OF DEFAULT. Each of the following shall be an event of default ("Event of
Default"):
1. Failure by any Loan Party to pay within five (5) days after the date due
(i) any amount payable by such Loan Party under any of the Loan Documents, or
(ii) any other indebtedness of such Loan Party to Bank. "Loan Party" means
Borrower and any other person that from time to time is obligated to Bank under
any of the Loan Documents or grants any property, interests in property, or
rights to property to secure any or all obligations of any person under the Loan
Documents.
2. Failure by any Loan Party to perform any obligation not involving the
payment of money, or to comply with any other term or condition applicable to
such Loan Party, in any of the Loan Documents and the expiration of fifteen (15)
days after written notice of such failure by Bank to such Loan Party.
3. Any representation or warranty made by any Loan Party in any of the Loan
Documents or otherwise or any information delivered by any Loan Party to Bank in
obtaining or hereafter in connection with the credit evidenced by this Note is
materially incomplete, incorrect, or misleading as of the date made or
delivered.
4. Bank believes in good faith that a Material Adverse Change has occurred
after the date of the financial statements and other information provided by any
Loan Party in obtaining the credit evidenced by this Note. "Material Adverse
Change" means any material change in the assets, business, financial condition,
operations, prospects, or results of operations of any Loan Party or any other
material event or condition that in the reasonable opinion of Bank (i) could
materially affect the likelihood of performance by any Loan Party of any of the
obligations in the Loan Documents, (ii) could materially affect the ability of
any Loan Party to perform any of the obligations in any of the Loan Documents,
(iii) could materially affect the legality, validity, or binding nature of any
of the obligations in the Loan Documents or any lien or encumbrance securing any
of the obligations under the Loan Documents, or (iv) could materially affect the
priority of any lien, security interest, or other encumbrance securing any of
the obligations in the Loan Documents.
5
<PAGE>
5. Any Loan Party (i) is unable or admits in writing such Loan Party's
inability to pay such Loan Party's monetary obligations as they become due, (ii)
makes a general assignment for the benefit of creditors, or (iii) applies for,
consents to, or acquiesces in, appointment of a trustee, receiver, or other
custodian for such Loan Party or any or all of the property of such Loan Party,
or in the absence of such application, consent, or acquiescence by such Loan
Party a trustee, receiver, or other custodian is appointed for such Loan Party
or any or all of the property of such Loan Party.
6. Commencement of any case under the Bankruptcy Code (Title 11 of the
United States Code) or commencement of any other bankruptcy, arrangement,
reorganization, receivership, custodianship, or similar proceeding under any
federal, state, or foreign law by or against any Loan Party and with respect to
any such case or proceeding that is involuntary, such case or proceeding is not
dismissed within ninety (90) days of the filing thereof.
7. The death, incompetence, dissolution, or liquidation of any Loan Party;
the consolidation or merger of any Loan Party with any other Person; or the
taking of any action by any Loan Party toward a dissolution, liquidation,
consolidation, or merger.
8. Any Loan Party or any other person on behalf of any Loan Party claims
that any Loan Document is not legal, valid, binding, and enforceable against any
Loan Party, that any lien, security interest, or other encumbrance securing any
of the obligations under the Loan Documents is not legal, valid, binding, and
enforceable, or that the priority of any lien, security interest, or other
encumbrance securing any of the obligations in the Loan Documents is different
than the priority represented and warranted in the Loan Documents.
9. The occurrence of any condition or event that is a default or is
designated as a default, an event of default, or an Event of Default in any
other Loan Document or in any agreement, document, or instrument relating to any
other indebtedness of any Loan Party to Bank.
RIGHTS AND REMEDIES OF BANK. Upon occurrence of an Event of Default, Bank may,
at its option, in its absolute and sole discretion, and without demand or
notice, (i) declare the obligations in the Loan Documents to be immediately due
and payable, whereupon the obligations in the Loan Documents shall be
immediately due and payable, and (ii) exercise any or all other rights and
remedies of Bank concurrently or consecutively in such order as Bank elects. The
rights and remedies of Bank shall be cumulative and non-exclusive. Delay,
discontinuance, or failure to exercise any right or remedy of Bank shall not be
a waiver thereof, or of any other right or remedy of Bank, or of the time of the
essence provision. Exercise of any right or remedy of Bank shall not cure or
waive any Event of Default or invalidate any act done in response to any Event
of Default.
LIMIT OF LIABILITY OF BANK. In exercising rights and remedies, neither Bank nor
any stockholder, director, officer, employee, agent, or representative of Bank
shall have any liability for any injury to the assets, business, operations, or
property of Borrower or any other liability to Borrower, other than for its own
gross negligence or willful misconduct.
SURVIVAL. The representations, warranties, and covenants of the Loan Parties in
the Loan Documents shall survive the execution and delivery of the Loan
Documents and the making of advances to Borrower.
INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, WAIVER, APPROVAL,
CONSENT, ETC. The Loan Documents contain the complete understanding and
agreement of Borrower and Bank and supersede all prior representations,
warranties, agreements, arrangements, understandings, and negotiations. No
provision of the Loan Documents may be changed, discharged, supplemented,
terminated, or waived except in a writing signed by the parties thereto. Delay
or failure by Bank to insist on performance of any obligation when due or
compliance with any other term or condition in the Loan Documents shall not
operate as a waiver thereof or of any
6
<PAGE>
other obligation, term, or condition or of the time of the essence provision.
Acceptance of late payments shall not be a waiver of the time of the essence
provision, the right of Bank to require that subsequent payments be made when
due, or the right of Bank to declare an Event of Default if subsequent payments
are not made when due. Any approval, consent, or statement that a matter is
satisfactory by Bank under the Loan Documents must be in writing executed by
Bank and shall be construed to apply only to the person(s) and facts
specifically set forth in the writing.
BINDING EFFECT. The Loan Documents shall be binding upon and shall inure to the
benefit of Bank and the Loan Parties and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of the Loan Parties, provided, however, that the Loan Parties may
not assign any of their rights or delegate any of their obligations under the
Loan Documents and any purported assignment or delegation shall be void. Bank
may from time to time in its absolute and sole discretion assign it rights and
delegate its obligations under the Loan Documents, in whole or in part, without
notice to or consent by any Loan Party (including, without limitation,
participations). In addition to any greater or lesser limitation provided by
law, no Loan Party shall assert against any assignee of Bank any claims or
defenses such Loan Party may have against Bank, except claims and defenses
arising under the Loan Documents.
COSTS, EXPENSES, AND FEES. Borrower agrees to pay on demand all external and
internal costs, expenses, and fees (including, without limitation, as
applicable, inside and outside attorneys, paralegals, document clerks and
specialists, appraisal, appraisal review, environmental assessment,
environmental testing, environmental cleanup, other inspection, processing,
title, filing, and recording costs, expenses, and fees) of Bank (i) in the
negotiation, execution, delivery, and modification of the Loan Documents, (ii)
in enforcement of the Loan Documents and exercise of the rights and remedies of
Bank, (iii) in defense of the legality, validity, binding nature, and
enforceability of the Loan Documents and the perfection and priority of the
liens and encumbrances granted in the Loan Documents, (iv) in gaining possession
of, holding, repairing, maintaining, preserving, and protecting the property
("Collateral") securing the obligations in the Loan Documents, (v) in selling or
otherwise disposing of the Collateral, (vi) otherwise in relation to the Loan
Documents, the Collateral, or the rights and remedies of Bank under the Loan
Documents or relating to the Collateral, and (vii) in preparing for the
foregoing, whether or not any legal proceeding is brought or other action is
taken. Such costs, expenses, and fees shall include, without limitation, all
such costs, expenses, and fees incurred in connection with any bankruptcy,
receivership, replevin, or other court proceedings (whether at the trial or
appellate level). Borrower agrees to pay interest on such costs, expenses, and
fees at the Default Rate from the date incurred by Bank until paid in full.
SEVERABILITY. If any provision or any part of any provision of the Loan
Documents is unenforceable, the enforceability of the other provisions or the
other provisions and the remainder of the subject provision, respectively, shall
not be affected and they shall remain in full force and effect.
CHOICE OF LAW. The Loan Documents shall be governed by the laws of the State of
Arizona, without giving effect to conflict of laws principles.
TIME OF ESSENCE. Time is of the essence with regard to each provision of the
Loan Documents as to which time is a factor.
NOTICES AND DEMANDS. All demands or notices under the Loan Documents shall be in
writing (including, without limitation, telecopy, telegraphic, telex, or cable
communication) and mailed, telecopied, telegraphed, telexed, cabled, or
delivered to the respective party hereto at the address specified at the end of
this paragraph or such other address as shall have been specified in a written
notice. Any demand or notice mailed shall be mailed first-class mail,
postage-prepaid, return-receipt-requested and shall be effective upon the
earlier of (i) actual receipt by the addressee, and (ii) the date shown on the
return-receipt. Any demand or notice not mailed will be effective upon the
earlier of (i) actual receipt by the addressee, and (ii) the time the receipt of
the telecopy, telegram, telex, or cable is
7
<PAGE>
mechanically confirmed.
Address for Notices to Borrower: 2929 East Camelback Road, Suite 220, Phoenix,
Arizona 85016-4426.
Address for Notices to Bank: Bank One, Arizona, NA, Commercial Banking Group,
Post Office Box 71, Phoenix, Arizona 85001, Attention: Mary Kennedy Martuscelli
(Dept. A-781).
BANK'S RIGHT OF SET-OFF. Borrower grants to Bank (i) the right at any time and
from time to time after the occurrence and continuation of an Event of Default,
in the absolute and sole discretion of Bank and without demand or notice to the
Borrower, to set-off and apply deposits (whether certificates of deposit,
demand, general, savings, special, time, or other, and whether provisional or
final) held by Bank for Borrower and any other liabilities or other obligations
of Bank to Borrower ("Deposits, Liabilities, and Obligations") against or to the
obligations of Borrower under the Loan Documents, regardless of whether the
Deposits, Liabilities, and Obligations are contingent, matured, or unmatured,
and (ii) a security interest in the Deposits, Liabilities, and Obligations to
secure the obligations of Borrower under the Loan Documents. In addition,
Borrower grants to Bank the right upon the occurrence of an event that with
notice, passage of time, or both would be an Event of Default to segregate all
Deposits, Liabilities, and Obligations into an account or otherwise under the
sole control of Bank. In addition, upon the occurrence and continuation of any
Unmatured Event of Default (as defined in the Loan Agreement), Bank shall have
the right to restrict transfers from any Deposits, Liabilities, and Obligations,
except for transfers relating to the payment of (i) Borrower's payroll
obligations, Borrower's accounts payable in the ordinary course of Borrower's
business, and (iii) Borrower's current tax obligations.
INDEMNIFICATION OF BANK. Borrower agrees to indemnify, hold harmless, and on
demand defend Bank and its stockholders, directors, officers, employees, agents,
and representatives for, from, and against any and all damages, losses,
liabilities, costs, and expenses (including, without limitation, costs and
expenses of litigation and reasonable attorneys' fees) arising from any claim or
demand in respect of the Loan Documents, the Collateral, or the transaction
described in the Loan Documents and arising at any time, whether before or after
payment and performance of the Obligations in full, excepting any such matters
arising solely from the gross negligence or willful misconduct of Bank. The
obligations of Borrower and the rights of Bank under this paragraph shall
survive payment and performance of the Obligations in full and shall remain in
full force and effect without termination.
RESCISSION OR RETURN OF PAYMENTS. If at any time or from time to time, whether
before or after payment and performance of the obligations of the Loan Parties
under the Loan Documents in full, all or any part of any amount received by Bank
in payment of, or on account of, any obligation of the Loan Parties under the
Loan Documents is or must be, or is claimed to be, avoided, rescinded, or
returned by Bank to Borrower or any other Person for any reason whatsoever
(including, without limitation, bankruptcy, insolvency, or reorganization of
Borrower or any other Person), such obligation and any liens, security
interests, and other encumbrances that secured such obligations at the time such
avoided, rescinded, or returned payment was received by Bank shall be deemed to
have continued in existence or shall be reinstated, as the case may be, all as
though such payment had not been received.
HEADINGS. The headings at the beginning of each section of the Loan Documents
are solely for convenience and are not part of the Loan Documents.
NUMBER AND GENDER. In the Loan Documents the singular shall include the plural
and vice versa and each gender shall include the other genders.
MULTIPLE CREDIT ACCOMMODATIONS. If from time to time Borrower has more than one
loan or other credit accommodation with Bank, Borrower agrees that, unless
otherwise agreed by Bank and Borrower in writing, (i) the Loan Documents and the
agreements, documents, and instruments evidencing and relating to such other
loan(s) and credit accommodation(s) shall all remain in effect and
8
<PAGE>
neither shall supersede the other, regardless of whether the Loan Documents and
such other agreements, documents, and instruments have differing terms,
conditions, and requirements, and (ii), regardless of any such differences,
Borrower shall comply with all the terms, conditions, and requirements of the
Loan Documents and of such other agreements, documents, and instruments.
WAIVER OF STATUTE OF LIMITATIONS. Borrower waives, to the full extent permitted
by law, the right to plead any statutes of limitations as a defense to any or
all obligations under the Loan Documents.
9
<PAGE>
WAIVERS BY BORROWER. Borrower (i) waives, to the full extent permitted by law,
presentment, notice of dishonor, protest, notice of protest, notice of intent to
accelerate, notice of acceleration, notice of dishonor, and all other notices or
demands of any kind (except notices specifically provided for in the Loan
Documents), and (ii) agrees that Bank may enforce this Note and any other Loan
Documents against any person included in Borrower without first having sought
enforcement against any other Loan Party or any Collateral.
EMPLOYEE SOLUTIONS, INC., an Arizona
corporation
By:______________________________________
Its:______________________________________
10
SECURITY AGREEMENT
(Revolving Line of Credit)
DATE: August 1, 1996
- -----
PARTIES: Obligor: EMPLOYEE SOLUTIONS, INC.,
- ------- ------- an Arizona corporation
2929 East Camelback Road, Suite 220
Phoenix, Arizona 85016-4426
Attention: Morris Aaron
Telecopier No.: (602) 955-3311
LOGISTICS PERSONNEL CORP.
a Nevada corporation
The Corporation Trust Company of Nevada
1 East First Street
Reno, Nevada 89501
Attention: Morris Aaron
Telecopier No.: (602) 955-3311
EMPLOYEE SOLUTIONS OF TEXAS, INC.,
a Texas corporation
7100 Gateway East
El Paso, Texas 70015
Attention: Morris Aaron
Telecopier No.: (602) 955-3311
EMPLOYEE SOLUTIONS-EAST, INC.,
a Georgia corporation
2 Ravinia Drive, Suite 1470
Atlanta, Georgia 30346
Attention: Morris Aaron
Telecopier No.: (602) 955-3311
EMPLOYEE SOLUTIONS - MIDWEST, INC.,
a Michigan corporation
3295 E. State St., Suite 120
Freemont, Indiana 46737
Attention: Morris Aaron_
Telecopier No.: (602) 955-3311
<PAGE>
ESI AMERICA, INC.,
a Nevada corporation
The Corporation Trust Company of Nevada
1 East First Street
Reno, Nevada 89501
Attention: Morris Aaron
Telecopier No.: (602) 955-3311
ESI-MIDWEST, INC.,
a Nevada corporation
The Corporation Trust Company of Nevada
1 East First Street
Reno, Nevada 89501
Attention: Morris Aaron
Telecopier No.: (602) 955-3311
EMPLOYEE SOLUTIONS OF CALIFORNIA,
INC., a Nevada corporation
The Corporation Trust Company of Nevada
1 East First Street
Reno, Nevada 89501
Attention: Morris Aaron
Telecopier No.: (602) 955-3311
POKAGON OFFICE SERVICES, INC. dba
EMPLOYEE SOLUTIONS-OHIO, INC.,
an Indiana corporation
3295 E. State St., Suite 120
Freemont, Indiana 46737
Attention: Morris Aaron
Telecopier No.: (602) 955-3311
CAMELBACK INSURANCE LTD.,
a Bermuda corporation
P. O. Box HN 152
Hamilton, HMAX Bermuda
Attention: Morris Aaron
Telecopier No.: (602) 955-3311
2
<PAGE>
ESI RISK MANAGEMENT AGENCY, INC.,
an Arizona corporation
Lawdock, Inc.
One East Camelback Road, Suite 400
Phoenix, Arizona 85012-1649
Attention: Morris Aaron
Telecopier No.: (602) 955-3311
Bank: BANK ONE, ARIZONA, NA,
----
a national banking association
Commercial Banking Group
Post Office Box 71
Phoenix, Arizona 85001
Attention: Department A781
Telecopier No.: (602) 221-1761
AGREEMENT: For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Obligor agrees for the benefit of
Bank as follows:
1. DEFINITIONS. In this Agreement, the following terms shall have the
following meanings, and all capitalized terms used in this Agreement not defined
herein and (a) used or defined in the Uniform Commercial Code will have their
respective meanings in the Uniform Commercial Code or (b) used or defined in the
Loan Agreement will have their respective meanings in the Loan Agreement:
1.1 "Accounts, Rights to Payment and Other Receivables" means
(i) all accounts receivable, rights to payment, all indebtedness and all
obligations payable to Obligor by any Person (including, without limitation
Affiliates of Obligor) relating to any of the Property and the sale, lease or
other disposition thereof, whether now existing or hereafter arising, due or to
become due and including, without limitation, any such accounts, rights,
indebtedness and obligations evidenced by Chattel Paper or other Instruments;
(ii) all other fees, income, issues, profits, receipts, revenues, payments,
royalties and other benefits owing to or derived by Obligor from the sale of any
of the Property; (iii) all other rights of Obligor to payment and performance,
including, without limitation, arising in connection with, or relating to, the
Property; (iv) all guaranties of any of the foregoing rights; (v) all interests
and rights of Obligor in property, interests in property, and rights to property
securing such rights to payment and performance (including, without limitation,
any statutory lien rights of Obligor); (vi) all invoices, leases, sale
agreements, option agreements, escrow instructions, and accounts, whether now
existing or hereafter arising, evidencing or representing any such accounts,
rights, indebtedness and obligations; (vii) all amendments, extensions,
modifications, additions and supplements to any such invoice, lease, sale
agreement, Chattel Paper, contract, claim, instrument, agreement or account;
(viii) all claims for damages arising out of the breach thereof; (ix) all rights
to terminate, perform and compel performance thereunder and all rights to
exercise any security interest granted therein; and (x) all rights in any
returned goods and other property, together with all rights, titles, securities
and guaranties with respect thereto, including any rights to stoppage in
transit, replevin,
3
<PAGE>
reclamation and resales, and all related security interest, liens and pledges,
whether voluntary or involuntary.
1.2 "Agreement" means this Security Agreement, as it may be
amended, modified, extended, renewed, restated, or supplemented from time to
time.
1.3 "Approvals and Permits" means each and all of the
approvals, authorizations, bonds, consents, certificates, franchises, licenses,
permits, registrations, qualifications, and other actions and rights granted by
and filings with any Persons necessary, appropriate, or desirable for the
occupancy, operation, ownership, use, sale or other disposition of any Property.
1.4 "Borrower" means Employee Solutions, Inc., an Arizona
corporation.
1.5 "Cash Receipts" means all existing and future cash and
other payments and receipts in respect of Accounts and Rights to Payment to, of,
or for the benefit of Obligor and all checks, drafts, and other Instruments
evidencing any such payment or receipt existing now or in the future.
1.6 "Chattel Paper" means that portion of the Accounts and
Other Receivables and Related Documents which constitute leases, conditional
sale agreements, and other documents evidencing monetary obligations together
with a lease of or security interest in specific goods.
1.7 "Claims" means all present and future claims relating to
any of the Property, including, without limitation, claims for any condemnation
or eminent domain proceeding, claims for any damage to or destruction of any of
the Property, claims for any defect in the design or construction of, or any
breach of warranty or obligation relating to, any of the Property, claims for
any condition on or of the Property or relating to the Property, claims under
casualty, liability and other insurance policies, and claims relating to any of
the Intangibles.
1.8 "Collateral" means any and all present and future right,
title, interest, and claims of Obligor in and to the following property,
interests in property, and rights to property, regardless of whether such
property, interests, and rights now exist or arise or come into existence
hereafter and regardless of whether such property, interests, and rights are in
the possession of Obligor, a bailee, or any other Person:
1.8.1 Deposits;
1.8.2 Improvements, Equipment, Fixtures and
Other Tangible Personal Property;
1.8.3 Intellectual Property;
1.8.4 Inventory;
1.8.5 Accounts and Other Receivables;
4
<PAGE>
1.8.6 Intangibles;
1.8.7 Cash Receipts, Deposit Accounts, and
Rights to Payment Agreements, Documents,
and Instruments;
1.8.8 Any and all of the following to the extent
evidencing, representing, or otherwise
relating to Rights to Payment or other
Collateral: (1) all Claims; (2) other
rights, remedies, and privileges of
Obligor; and (3) books and records,
computer software, computer disks,
computer tapes, and other record keeping
media;
1.8.9 Rents;
1.8.10 Approvals and Permits;
1.8.11 Other Rights;
1.8.12 Related Documents; and
1.8.13 Proceeds of any of the foregoing
(including, without limitation, proceeds
that are Accounts, Chattel Paper,
Documents, Equipment, General Intangibles,
Goods, Instruments, Inventory or
Securities).
1.9 "Commitment" means any and all obligations of Bank from
time to time to make advances to Obligor or to make other financial
accommodations for Obligor.
1.10 "Copyright License" shall mean any written agreement, now
or hereafter in effect, (i) granting any right to any third party under any
Copyright now or hereafter owned by any Obligor or which such Obligor otherwise
has the right to license, or (ii) granting any right to such Obligor under any
right, registration or application described in the definition of "Copyright",
now or hereafter owned by any third party, and all rights of such Obligor under
any such agreement.
1.11 "Copyrights" shall mean all of the following now owned or
hereafter acquired by any Obligor: (i) all copyright rights in any work subject
to the copyright laws of the United States or any other country, whether as
author, assignee, transferee or otherwise, and (ii) all registrations and
applications for registration of any such copyright in the United States or any
other country, including registrations, recordings, supplemental registrations
and pending applications for registration in the United States Copyright Office,
including those listed on Schedule I.
1.12 "Default Rate" shall have the meaning specified in the
Loan Agreement.
1.13 "Deposits" means all present and future deposits of
security or advance payments made by or on behalf of Obligor to others from time
to time in respect of (a) insurance policies, (b) taxes and other impositions,
(c) maintenance, repair, utility or
5
<PAGE>
other services for the Property, (d) tangible personal property to be used to
construct Improvements or to be installed in or used in the operation, occupancy
or use of the Property, (e) construction of Improvements, and (f) any other
agreement, document, instrument, arrangement, or understanding, written or oral,
relating to the operation, occupancy, or use of or otherwise relating to the
Property.
1.14 "Deposit Accounts" shall mean any and all demand, time,
savings, passbook or other accounts with a bank or other financial institution,
including general deposit and cash concentration accounts, in which any Cash
Receipts or other Proceeds are or are to be deposited, and all deposits therein
and investments thereof, whether now or at any time hereafter existing, and all
property, assets and interests therein or with respect thereto.
1.15 "Equipment, Fixtures and Other Tangible Personal
Property" means all Equipment, all Fixtures, and all other tangible personal
property now or in the future (a) attached to, installed in, or located on the
Property, (b) used in the construction of Improvements, or (c) used in the
operation, occupancy or use of the Property, all accessions and additions
thereto, all replacements thereof, all substitutions therefor, all spare parts
and supplies therefor, and all engineering drawings and diagrams therefor.
Equipment, Fixtures and Other Tangible Personal Property includes, among other
items, building, construction, and other materials and supplies used in
constructing Improvements, and located on or used in connection with any of the
Property.
1.16 "Event of Default" shall have the meaning specified in
Section 6.
1.17 "Governmental Authority" means any government, any court,
and any agency, authority, body, bureau, department, or instrumentality of any
government.
1.18 "Instruments" means all promissory notes, negotiable
instruments and any other writings which evidence a right to the payment of
money, whether now existing or hereafter arising.
1.19 "Intangibles" means all present and future General
Intangibles of Obligor, including, without limitation, those relating to the
ownership, operation, occupancy, or use of the Property (including, without
limitation, all architectural, cleaning, construction, development, engineering,
environmental, franchise, leasing, license, maintenance, management, repair,
service, utility, and other agreements, arrangements and understandings, rights
of declarant under conditions, covenants and restrictions, warranties, customer
lists, goodwill, computer software, insurance policies, patents, copyrights,
patent and copyright applications and registrations, patterns, designs,
drawings, plans and specifications, other proprietary information and
intellectual property, royalties, license fees, tax refunds, and all Approvals
and Permits).
1.20 "Intellectual Property" shall mean all intellectual and
similar property of any Obligor of every kind and nature now owned or hereafter
acquired by any Obligor, including, without limitation, inventions, designs,
Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential or
proprietary technical and business information, know-how, show-how or other data
or information, software and databases and all embodiments or fixations thereof
and related documentation, registrations and
6
<PAGE>
franchises, and all additions, improvements and accessions to, and books and
records describing or used in connection with, any of the foregoing.
1.21 "Inventory" means all goods now owned or hereafter
acquired or held by Obligor for sale (whether or not such goods have been
delivered by Obligor to another under a sale, lease or contract of service),
materials used in the manufacture of Obligor's goods, all other raw materials,
work in process and other materials used or consumed by Obligor in connection
with the manufacture or production of such goods and all additions and
accessions thereto.
1.22 "License" shall mean any Patent License, Trademark
License, Copyright License or other license or sublicense to which any Obligor
is a party, including, without limitation, those listed or referenced on
Schedule II.
1.23 "Lien or Encumbrance" and "Liens and Encumbrances" mean,
respectively, each and all of the following: (a) any lease or other right to
use; (b) any assignment as security, conditional sale, grant in trust, lien,
mortgage, pledge, security interest, title retention arrangement, other
encumbrance, or other interest or right securing the payment of money or the
performance of any other liability or obligation, whether voluntarily or
involuntarily created and whether arising by agreement, document, or instrument,
under any law, ordinance, regulation, or rule (federal, state, or local), or
otherwise; and (c) any option, right of first refusal, other right to acquire,
or other interest or right.
1.24 "Loan Agreement" means that certain Loan Agreement, dated
of even date herewith, by and between Obligor and Bank (as such Loan Agreement
may be amended, modified, extended, renewed, restated or supplemented from time
to time) pursuant to which loans may be made on a revolving basis in the maximum
principal amount of up to $35,000,000.00 at any time outstanding.
1.25 "Loan Documents" shall have the meaning specified in the
Loan Agreement.
1.26 "Note" shall have the meaning specified in the Loan
Agreement.
1.27 "Obligations" means the following:
(a) Payment of principal, interest, costs,
expenses, fees, and other amounts owing
under the Note, the Loan Agreement, this
Agreement and the other Loan Documents;
(b) Payment and performance of each other
obligation of, and compliance with each
term and condition applicable to, Obligor
under the Note, this Agreement, the Loan
Agreement and the other Loan Documents;
(c) Compliance with and performance of all
Requirements; and
(d) Payment and performance of all obligations
of each
7
<PAGE>
Guarantor (as defined in the Loan
Agreement) pursuant to the Loan Documents.
1.28 "Other Rights" means all of Obligor's right, title and
interest as lessee in, to and under all leases and lease agreements, whether now
existing or hereafter arising, pursuant to which Obligor has leased or shall
lease personal property of any kind whatsoever from any other Person, as such
leases and lease agreements may at any time be amended, modified or
supplemented.
1.29 "Patent License" shall mean any written agreement, now or
hereafter in effect, (i) granting to any third party any right to make, use or
sell any invention on which a Patent, now or hereafter owned by any Obligor or
which such Obligor otherwise has the right to license, is in existence, or (ii)
granting to such Obligor any right to make, use or sell any invention on which a
letter of patent or other item of like nature described in the definition of
"Patents", now or hereafter owned by any third party, is in existence, and all
rights of such Obligor under any such agreement.
1.30 "Patents" shall mean all of the following now owned or
hereafter acquired by any Obligor: (i) all letters patent of the United States
or any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or any other country,
including registrations, recordings and pending applications in the United
States Patent and Trademark Office or any similar offices in any other country,
including those listed on Schedule III, and (ii) all reissues, continuations,
divisions, continuations-in-part, renewals or extensions thereof, and the
inventions disclosed or claimed therein, including the right to make, use and/or
sell the inventions disclosed or claimed therein.
1.31 "Perfection Certificate" means a certificate
substantially in the form of Annex 1 hereto, completed and supplemented with the
schedules and attachments contemplated thereby, and duly executed by a Financial
Officer and the chief legal officer of the Obligor.
1.32 "Permitted Exceptions" means Liens and Encumbrances in
favor of Bank.
1.33 "Person" means a natural person, a partnership, a joint
venture, an unincorporated association, a corporation, a limited liability
company, a trust, any other legal entity, or any Governmental Authority.
1.34 "Property" means all real property, fixtures,
appurtenances and property of Obligor, in each case whether now owned or
hereafter acquired.
1.35 "Related Documents" means all instruments, manufacturers'
agreements, suppliers' agreements and documents covering or relating to the
Collateral.
1.36 "Rents" means all present and future avails, fees,
income, issues, profits, receipts, rents, revenues, royalties and other benefits
owing to or derived by Obligor from the Property (including, without limitation,
all security deposits and advance rents and all amounts payable to Obligor under
any leases).
8
<PAGE>
1.37 "Requirements" means any and all obligations, other terms
and conditions, requirements, and restrictions in effect now or in the future
relating to any or all Collateral (including, without limitation, such
obligations, other terms and conditions, restrictions, and requirements imposed
by: (a) any law, ordinance, regulation, or rule (federal, state, or local); (b)
any Approvals and Permits; (c) any Permitted Exceptions; (d) any insurance
policies; (e) any other agreement, document, or instrument; or (f) any judgment,
order, or decree of any arbitrator, other private adjudicator, or Governmental
Authority).
1.38 "Rights to Payment Agreements, Documents, and
Instruments" means all agreements, documents, and instruments from time to time
evidencing, guarantying, securing, or otherwise relating to the Accounts, Rights
to Payment and Other Receivables, as they heretofore may have been and hereafter
from time to time may be amended, modified, extended, renewed, supplemented, and
restated from time to time.
1.39 "Rights to Payment Debtor" means a Person obligated to
pay one or more of the Accounts, Rights to Payment and Other Receivables to
Obligor.
1.40 "Trademark License" shall mean any written agreement, now
or hereafter in effect, (i) granting to any third party any right to use any
Trademark now or hereafter owned by any Obligor or which such Obligor otherwise
has the right to license, or (ii) granting to such Obligor any right to use any
mark, name, style, dress, logo or other item of like nature (and associated
goodwill, registrations, assets, rights and interests) described in the
definition of "Trademark", now or hereafter owned by any third party, and all
rights of such Obligor under any such agreement.
1.41 "Trademarks" shall mean all of the following now owned or
hereafter acquired by any Obligor: (i) all trademarks, service marks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, trade dress, logos, other source or business identifiers,
designs and general intangibles of like nature, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
registration and recording applications filed in connection therewith, including
registrations and registration applications in the United States Patent and
Trademark Office, any State of the United States or any similar offices in any
other country or any political subdivision thereof, and all extensions or
renewals thereof, including those listed on Schedule IV, (ii) all goodwill
associated therewith or symbolized thereby and (iii) all other assets, rights
and interests that uniquely reflect or embody such goodwill.
1.42 "Transfer" means the occurrence of any of the following:
any or all Collateral, or any interest or right of Obligor in or to any or all
Collateral, is conveyed to, or becomes vested in, any Person, other than
Obligor, or the Bank voluntarily or involuntarily; except for the disposition of
any Equipment, Fixtures and Other Tangible Personal Property that are worn out
and are replaced by similar property of equal or greater value.
1.43 "Uniform Commercial Code" means the Uniform Commercial
Code
9
<PAGE>
as in effect from time to time in the State of Arizona (currently, Arizona
Revised Statutes Sections 47-1101 through 47-9507).
2. ASSIGNMENT, PLEDGE, AND GRANT OF SECURITY INTEREST. Obligor assigns
to Bank, as security, pledges to Bank, and grants to Bank, a security interest
in the Collateral to secure the full and timely payment and performance of the
Obligations.
3. OBLIGOR REPRESENTATIONS AND WARRANTIES. Obligor represents and
warrants to Bank as of the date of this Agreement:
3.1 Ownership and Possession of Collateral. Obligor is the
legal and beneficial owner of the Collateral, except for the Permitted
Exceptions. There are no Liens and Encumbrances on the Collateral or claims
thereof, except the Permitted Exceptions. There is no Financing Statement now
filed or recorded covering any of the Collateral, except Financing Statements
related to the Permitted Exceptions. Obligor is in exclusive possession of the
Collateral.
3.2 Validity, Perfection, and Priority of Security Interest.
The Security Interest granted in this Agreement (a) is legal, valid, binding,
and enforceable, (b) is a Perfected Security Interest in all Collateral, and (c)
is a first priority Security Interest in all Collateral. No consent or approval
of any party is required with respect to Obligor's granting of a security
interest therein in favor of Bank, or, if such consent is required, Obligor has
taken or will take all actions necessary to obtain such consent.
3.3 Filings.
3.3.1 The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein is
correct and complete. Fully executed Uniform Commercial Code financing
statements or other appropriate filings, recordings or registrations containing
a description of the Collateral have been, or will be, filed of record (or
delivered to the Bank for filing of record) in each governmental, municipal or
other office specified in Schedule 8 to the Perfection Certificate, which are
all the filings, recordings and registrations (other than filings required to be
made in the United States Patent and Trademark Office and the United States
Copyright Office in order to perfect the security interest in Collateral
consisting of United States Patents, registered Trademarks and registered
Copyrights) that are necessary to establish and maintain a legal, valid and
perfected security interest in favor of the Bank in respect of all Collateral in
which the Security Interest may be perfected by filing, recording or
registration in the United States (or any political subdivision thereof) and its
territories and possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of continuation statements. Notwithstanding the preceding, filings will not be
made with respect to tangible personal property of Obligor which as a minimal
value.
3.3.2 Fully executed security agreements in the form
hereof and containing a description of all Collateral consisting of Intellectual
Property shall have been received and recorded within three months after the
execution of this Agreement
10
<PAGE>
with respect to United States Patents and United States registered Trademarks
(and Trademarks for which United States registration applications are pending)
and within one month after the execution of this Agreement with respect to
United States registered Copyrights by the United States Patent and Trademark
Office and the United States Copyright Office pursuant to 35 U.S.C. ' 261, 15
U.S.C. ' 1060 or 17 U.S.C. ' 205 and the regulations thereunder, as applicable,
to protect the validity of and to establish a legal, valid and perfected
security interest in favor of the Bank in respect of all Collateral consisting
of Patents, Trademarks and Copyrights in which a security interest may be
perfected by filing, recording or registration in the United States (or any
political subdivision thereof) and its territories and possessions, and no
further or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary.
3.3.3 Attached hereto as Schedule V is a true and
complete list that sets forth as of the date hereof each bank or other financial
institution with which an Obligor maintains a Deposit Account. Obligor has
taken, or will take, all action necessary to perfect the Security Interest of
Bank in and to the Deposit Accounts, including, without limitation, notification
of the financial institutions holding such Deposit Accounts, and the execution
and delivery of directions to such financial institutions to reflect such
Security Interest on its books and records and to pay all amounts due under such
Deposit Accounts to Bank upon the receipt of notice thereof by Bank.
4. OBLIGOR COVENANTS. Until any Commitment terminates in full, and
until the Obligations are paid and performed in full, Obligor agrees that,
unless Bank otherwise agrees in writing in Bank's absolute and sole discretion:
4.1 Obligations; Requirements; Approvals and Permits. Obligor
shall pay and perform the Obligations, shall comply with and perform the
Requirements, shall obtain and maintain the Approvals and Permits (except for
any failure to obtain and maintain in full force and effect any Approval or
Permit that would not, individually or in the aggregate, be materially adverse
to the business, properties, assets, operation or condition (financial or
otherwise) of Obligor, taken as a whole, or materially and adversely affect any
Eligible Collateral (as defined in the Loan Agreement) or any of the Collateral,
and shall do so at Obligor's sole cost and expense.
4.2 Transfer; Liens and Encumbrances; Defense of Obligor's
Title and of Security Interest; Possession of Collateral.
4.2.1 Restrictions on Transfers and Liens and
Encumbrances. Obligor shall not suffer to occur any Transfer. Except for
Permitted Exceptions, Obligor shall not suffer to exist any Lien or Encumbrance
on any or all Collateral, regardless of whether junior or senior to the Security
Interest granted herein. Obligor shall notify Bank immediately of any claim of
any Lien or Encumbrance on any or all Collateral. Except for Financing
Statements relating to Permitted Exceptions, Obligor shall not execute or suffer
to exist or to be filed or recorded any Financing Statement that covers any or
all Collateral.
4.2.2 Defense of Obligor's Title and of Security
Interest. Obligor shall defend the Collateral, the title and interest therein of
Obligor represented and warranted in this Agreement, and the legality, validity,
binding nature, and
11
<PAGE>
enforceability of the Security Interest granted herein, the Perfection thereof,
and the first priority thereof against all matters, including, without
limitation, (i) any attachment, levy, or other seizure by legal process or
otherwise of any or all Collateral, (ii) except for Permitted Exceptions, any
Lien or Encumbrance or claim thereof on any or all Collateral, (iii) any attempt
to realize upon any or all Collateral under any Lien or Encumbrance, regardless
of whether a Permitted Exception and regardless of whether junior or senior to
the Security Interest herein, and (iv) any claim questioning the legality,
validity, binding nature, enforceability, Perfection, or priority of the
Security Interest herein. Obligor shall notify Bank promptly in writing of any
of the foregoing.
4.2.3 Proceeds of Rights to Payment and Notification
of Rights to Payment Debtors. Upon the occurrence and continuation of an Event
of Default, Obligor shall instruct all Rights to Payment Debtors to make all
payments with respect to Accounts, Rights to Payment and Other Receivables to
Bank, and Obligor hereby authorizes and directs Bank, at its sole option, to
give such notice and direction to such Rights to Payment Debtors. No further
notice shall be required to be given to such Rights to Payment Debtors, and any
such notice shall be irrevocable and shall not be subject to change or objection
by Obligor. Obligor hereby indemnifies and holds harmless each Rights to Payment
Debtor from any claims, damages, loss, liability, costs and expenses arising
from any such directions and any payment of Accounts, Rights to Payment and
Other Receivables to Bank. If any such payment is received by Obligor, Obligor
shall, within one (1) Business Day of the day of receipt by Obligor transmit the
same to Bank in the form received by Obligor, properly assigned or endorsed to
Bank. Obligor agrees to account to Bank for all such payments of Accounts,
Rights to Payment and Other Receivables received by Obligor, and, pending
transmittal of any such payments to Bank, to hold the same in the form received
separate and apart from, and not commingled with, any other property of Obligor
and in trust for Bank. All payments of Accounts, Rights to Payment and Other
Receivables will be applied periodically by Bank to payment of the Obligations
as provided in the Loan Agreement.
4.3 Books and Records; Names; Place of Business, Chief
Executive Office, or Residence. Obligor shall maintain complete and accurate
books and records relating to the Collateral. Unless Obligor obtains the prior
written consent of Bank and takes in advance all actions and makes all filings
and recordings necessary or appropriate to assure the Perfection and priority of
the Security Interest granted herein, Obligor (1) shall not change its name, (2)
shall conduct its business and other activities solely in the name(s), trade
name(s), and fictitious name(s) in the Perfection Certificate, and (3) shall
keep (i) its sole place of business, chief executive office, or, if Obligor has
no place of business, its residence, and (ii) its books and records relating to
the Collateral at the location(s) in the Perfection Certificate.
4.4 Inspection and Verification. Bank and such Persons as Bank
may designate shall have the right, at any reasonable time from time to time,
(1) to enter upon the premises at which any of the Collateral or any of the
books and records included in the Collateral or relating to the business,
operations, or financial condition of Obligor is located, (2) to inspect the
Collateral and such books and records, (3) to make copies and extracts from such
books and records, and (4) to verify under reasonable procedures determined by
the Bank the amount, condition, quality, quantity, status, validity, and value
of, or any other matter relating to, the Collateral. Obligor shall provide
access to
12
<PAGE>
such premises and information, whether or not under the control of Obligor.
Obligor hereby authorizes all Rights to Payment Debtors and all Persons that
have possession of any of the Collateral, any such books and records, or any
information concerning the matters set forth in this Section 4.4 to furnish Bank
with such information and with access to such Collateral and such books and
records and to cooperate with Bank in the exercise of its rights under this
Agreement. Bank shall have the absolute right to share any information it gains
from any such inspection or verification with any other Person holding an
interest or a participation in any of the Obligations.
4.5 Further Assurances. Obligor shall promptly execute,
acknowledge, deliver, and permit to be duly filed and recorded all such
additional agreements, documents, and instruments (including, without
limitation, Financing Statements) and take all such other actions as Bank may
reasonably request from time to time to better assure, perfect, preserve, and
protect the Security Interest granted herein, the priority thereof, and the
rights and remedies of Bank on behalf of Bank hereunder.
4.6 Maintenance of Collateral. Obligor shall diligently
enforce all of its rights and remedies with respect to the Collateral. All
Equipment, Fixtures, and Other Tangible Personal Property shall be kept in good
working order and shall be properly serviced, maintained and repaired. Obligor
shall not remove or dispose of any Equipment, Fixtures and Other Tangible
Personal Property except as permitted in the definition of the term "Transfer".
Obligor shall not commit or permit any waste or deterioration of the Equipment,
Fixtures and Other Tangible Personal Property and shall not do any act that
would injure or depreciate the value or marketability of such property.
4.7 Taxes and Claims. Obligor shall promptly pay when due any
and all property, excise, and other taxes and all assessments, duties, and other
charges levied or imposed on any or all Collateral or imposed on Obligor in
respect of any or all Collateral, this Agreement, or the Security Interest
granted herein. Obligor shall also pay when due any and all lawful claims that,
if unpaid, might become a Lien or Encumbrance on any or all Collateral.
4.8 Covenants Regarding Patent, Trademark and Copyright
Collateral.
4.8.1 Protection of Patents. Obligor agrees that it
will not, nor will it permit any of its licensees to, do any act, or omit to do
any act, whereby any Patent which is material to the conduct of Obligor's
business may become invalidated or dedicated to the public, and agrees that it
shall continue to mark any products covered by a Patent with the relevant patent
number as necessary and sufficient to establish and preserve its maximum rights
under applicable patent laws.
4.8.2 Protection of Trademarks. Obligor (either
itself or through its licensees or sublicensees) will, for each Trademark, (i)
maintain such Trademark in full force free from any claim of abandonment or
invalidity for non-use, (ii) maintain the quality of products and services
offered under such Trademark, (iii) display such Trademark with notice of
federal or foreign registration to the extent necessary and sufficient to
establish and preserve its maximum rights under applicable law and (iv) not
knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights.
13
<PAGE>
4.8.3 Protection of Copyrights. Obligor (either
itself or through licensees) will, for each work covered by a material
Copyright, continue to publish, reproduce, display, adopt and distribute the
work with appropriate copyright notice as necessary and sufficient to establish
and preserve its maximum rights under applicable copyright laws.
4.8.4 Notification. Obligor shall notify Bank
immediately if it knows or has reason to know that any Patent, Trademark or
Copyright material to the conduct of its business may become abandoned, lost or
dedicated to the public, or of any adverse determination or development
(including the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, United States
Copyright Office or any court or similar office of any country) regarding such
Obligor's ownership of any Patent, Trademark or Copyright, its right to register
the same, or to keep and maintain the same.
4.8.5 Further Applications. In no event shall
Obligor, either itself or through any agent, employee, licensee or designee,
file an application for any Patent, Trademark or Copyright (or for the
registration of any Trademark or Copyright) with the United States Patent and
Trademark Office, United States Copyright Office or any office or agency in any
political subdivision of the United States or in any other country or any
political subdivision thereof, unless it promptly informs Bank, and, upon
request of Bank, executes and delivers any and all agreements, instruments,
documents and papers as Bank may request to evidence the Bank's security
interest in such Patent, Trademark or Copyright, and each Obligor hereby
appoints Bank as its attorney-in-fact to execute and file such writings for the
foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; such power, being coupled with an interest, is irrevocable.
4.8.6 Pursuit of Applications and Renewals. Obligor
will take all necessary steps that are consistent with the practice in any
proceeding before the United States Patent and Trademark Office, United States
Copyright Office or any office or agency in any political subdivision of the
United States or in any other country or any political subdivision thereof, to
maintain and pursue each material application relating to the Patents,
Trademarks and/or Copyrights (and to obtain the relevant grant or registration)
and to maintain each issued Patent and each registration of the Trademarks and
Copyrights which is material to the conduct of any Obligor's business, including
timely filings of applications for renewal, affidavits of use, affidavits of
incontestability and payment of maintenance fees, and, if consistent with good
business judgment, to initiate opposition, interference and cancellation
proceedings against third parties.
4.8.7 Infringement, etc. In the event that any
Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of any Obligor's business is believed infringed, misappropriated or
diluted by a third party, such Obligor promptly shall notify Bank after it
obtains knowledge thereof and shall, if consistent with good business judgment,
promptly sue for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and take
such other actions as are appropriate under the circumstances to protect such
Collateral.
14
<PAGE>
4.8.8 Additional Consents and Approvals. Upon and
during the continuation of an Event of Default, Obligor shall use its best
efforts to obtain all requisite consents or approvals by the licensor of each
Copyright License, Patent License or Trademark License to effect the assignment
of all of the Obligors' rights, title and interest thereunder to Bank or its
designee.
4.9 No Obligations and Limit of Liability. Bank do not assume
and shall have no liability or obligation for any liabilities or obligations of
Obligor relating to the Collateral. In exercising rights and remedies in the
Loan Documents and under applicable law, in performing any obligations to
Obligor, and in acting or omitting to act in respect of the Collateral and this
Agreement, Bank and their respective stockholders, directors, officers,
employees, agents, and representatives shall have no liability or responsibility
whatsoever (including, without limitation, any liability or obligation for any
injury to the assets, business, operations, or property of Obligor), other than
for gross negligence or willful misconduct. Notwithstanding the foregoing and
any other requirements applicable to Bank under the Loan Documents or applicable
law, Bank shall not be obligated and the standard of care shall not include an
obligation to take any of the following actions, even if demanded by Obligor,
(i) to sell or otherwise dispose of any Collateral that is fluctuating in value,
(ii) to make any inquiry as to the nature or sufficiency of any payment received
by Bank, (iii) to present or file any claim or notice, (iv) to enforce or
preserve the rights of Obligor against any other Person, (v) to notify Obligor
with respect to the payment or performance or non-payment or non-performance of
any third Person obligations included in the Collateral, (vi) to enforce the
payment or performance by any third Person of obligations included in the
Collateral, (vii) to ascertain or take any action with respect to due dates,
maturities, or other matters relating to the Collateral, whether or not Bank
actually have or are deemed to have knowledge of such matters, or (viii) to
notify Obligor of any other occurrence relating to the Collateral or any obligor
of the Collateral.
4.10 Costs and Expenses of Performance of Obligor's Covenants.
Obligor will perform all its obligations under this Agreement at its sole cost
and expense.
4.11 Actions by Bank; Power of Attorney.
4.11.1 Actions by Bank. If Obligor fails to pay or
perform any of the Obligations of Obligor, and with notice to Obligor with an
opportunity to cure, Bank, in its absolute and sole discretion, may pay or
perform the same in such manner and to such extent as Bank determines necessary
or appropriate in its absolute and sole discretion (i) without obligation so to
do, (ii) without releasing Obligor from such Obligations, (iii) without
affecting the failure to perform such Obligations as an Event of Default, (iv)
without affecting the other rights and remedies of Bank under the Loan Documents
and at law, and (v) without notice to or demand upon Obligor.
4.11.2 Powers. Without limiting the general powers of
Bank, whether conferred herein, in any other Loan Document, or by law, upon an
Event of Default or in exercising its rights under Section 4.11.1, Bank, acting
alone on behalf of the Bank, shall have the right but not the obligation to take
any or all actions (in its own name or in the name of Obligor at the risk of
Obligor) that Bank may deem (in its sole and absolute discretion) necessary for
the maintenance, preservation, or protection of any of
15
<PAGE>
the Collateral or the interest of Bank therein, which actions may include,
without limitation, (i) entering upon the Property or any other premises where
any Collateral is located, to take possession of any or all Collateral, to
remove any or all Collateral, to exclude therefrom Obligor and all others
claiming under Obligor, and in this regard Obligor agrees and hereby authorizes
any Person having possession of any or all Collateral to grant Bank access to
such premises, to give Bank possession of such Collateral, and to permit Bank to
remove such Collateral; (ii) maintaining, managing, operating, preserving,
protecting, reclaiming, recovering, refurbishing, repairing, restoring,
shipping, and storing the Collateral; (iii) making additions, alterations, and
improvements to the Collateral to keep the Collateral in good condition and
repair and to facilitate lease, sale, or other disposition of the Collateral;
(iv) exercising and enforcing the rights, remedies, and privileges of Obligor
with respect to the Collateral; (v) adjusting, compromising, defending,
depositing a bond or giving security in connection with, discharge, enforce,
make demands related to, pay or otherwise obtain the discharge or release,
prosecute, release, settle, terminate, or waive any rights and remedies of
Obligor with respect to the Collateral, any obligations of any Person included
in the Collateral, or any claim or legal proceeding by or against Obligor
relating to any or all Collateral (including, without limitation, claims under
any insurance policies, claims for any Taking, and claims against Obligor or the
Collateral that Bank believes to be valid, regardless of whether actually
valid); (vi) commencing, appearing and participating in, prosecuting, and
terminating any legal proceeding relating to (A) the Collateral, (B) any or all
Grants, (C) the Perfection or priority of any or all Grants, or (D) the rights
or remedies of Bank under the Loan Documents or the law; and (vii) paying from
Bank's own funds or paying from proceeds of advances pursuant to the Loan
Agreement, which advances Obligor hereby authorizes Bank to make for account of
Obligor, all costs, expenses, and fees (including, without limitation,
reasonable attorneys' fees and costs of legal proceedings) related to any of the
foregoing incurred by Bank, which costs, expenses, and fees, if paid from Bank's
own funds, Obligor agrees to pay to Bank on demand together with interest
thereon at the Default Rate from the date incurred until paid in full. All
monies advanced by Bank in connection with any of the foregoing, together with
interest thereon shall constitute additional Obligations secured hereby. The
making of any such advance by Bank shall not, however, relieve Obligor of
liability for any default hereunder until the full amount of all such monies so
advanced and such interest thereon shall have been repaid by Obligor to Bank and
such default shall have otherwise been cured.
4.11.3 Power of Attorney. Obligor hereby appoints
Bank as Obligor's attorney-in-fact to perform the obligations of Obligor under
this Agreement upon a failure by Obligor to do so. This power of attorney is
coupled with an interest and is irrevocable. This power of attorney shall not be
affected by the disability of the principal. Any Person may rely conclusively
upon an oral or written statement by Bank that this appointment as
attorney-in-fact remains in full force and effect and that the conditions for
Bank to exercise the powers granted herein are satisfied. No confirmation by
Obligor of any such statement by Bank shall be required.
4.11.4 No Limitation on Rights or Remedies. Nothing
in this Agreement shall relieve Obligor of any of its obligations under any Loan
Document or under any other agreement, document, or instrument or in any way
limit the rights or remedies of the Bank.
16
<PAGE>
4.12 Filing or Recording as a Financing Statement. Bank may
file or record a photographic, or other copy or reproduction of this Agreement
as a Financing Statement.
5. EVENTS OF DEFAULT. Each of the Events of Default specified in the
Loan Agreement shall be an Event of Default hereunder.
6. RIGHTS AND REMEDIES. Upon occurrence of an Event of Default, Bank
may, at its option, in its absolute and sole discretion and without demand or
notice, do any or all of the following:
6.1 Acceleration of Obligations. Declare any or all
Obligations to be immediately due and payable, whereupon such Obligations shall
be immediately due and payable.
6.2 Possession and Other Actions Concerning Collateral. Either
in person or by agent, with or without bringing any action or legal proceeding,
without regard to the adequacy of the security now or hereafter granted to Bank,
enter upon any premises in which any or all Collateral is located, take
possession of any or all Collateral, remove any or all Collateral not attached
to the Property, exclude therefrom Obligor and all others claiming under
Obligor, and take any or all actions described in Section 4.11 above. If Bank
demands, or attempts to take possession of any or all Collateral, Obligor shall
promptly assemble such Collateral and turn over and deliver possession of such
Collateral to Bank at a place designated by Bank and convenient to Bank and
Obligor. At such time, if any, an Event of Default exists hereunder, then if
Bank shall request, Obligor shall mark all Chattel Paper constituting Accounts
as having been assigned to Bank.
6.3 Replevin. To the extent permitted by applicable law, as a
matter of right and without notice to Obligor or anyone claiming under Obligor,
Bank shall be entitled to orders of replevin by a court of any or all Collateral
from time to time.
6.4 Appointment of Receiver. As a matter of right and without
notice to Obligor or any one claiming under Obligor, without regard to the then
value of the Collateral or any other property, interests in property, or rights
to property securing the Obligations, without regard to the solvency of Obligor,
and without regard to any other matters normally taken into account by courts in
the discretionary appointment of a receiver, Bank shall be entitled to
appointment of a receiver to take possession of any or all Collateral. Any such
receiver or receivers shall have all the usual powers and duties of receivers in
like or similar cases and shall also have all the powers of Bank set forth in
Section 4.11 above. It is the intention of Obligor that Bank, on behalf of the
Bank, be entitled to appointment of a receiver with the foregoing powers upon
occurrence of an Event of Default and application by Bank therefor. Obligor
hereby irrevocably consents to the appointment as receiver of such Person as is
designated by Bank, which Person may be an officer or employee of Bank, and to
the grant of the above referenced powers to such receiver. To the extent
permitted by applicable law, Obligor agrees that a receiver may be appointed
without notice to Obligor whatsoever and hereby waives notice. Obligor waives
any right to suggest or nominate any Person as receiver in opposition to the
Person designated by Bank.
17
<PAGE>
6.5 Retain the Collateral as Payment. Upon written notice to
Obligor, retain the Collateral in satisfaction of the Obligations in accordance
with the Uniform Commercial Code in effect in the jurisdiction in which any of
the Collateral is located. Unless such written notice is given, retention of the
Collateral by Bank shall not be in satisfaction of any of the Obligations.
6.6 Delivery of Chattel Paper and Accounts. Obligor will, at
the request of Bank, which request may be given at any time and from time to
time, deliver all Chattel Paper to Bank for the benefit of the Bank. Obligor
will, at the request of Bank, which request may be given at any time and from
time to time, mark any invoices or other documents evidencing Accounts, Rights
to Payment and Other Receivables (whether Chattel Paper or other rights) as
having been assigned to Bank and will, if requested by Bank, deliver all such
invoices and other documents or copies thereof to Bank along with such lists,
computer printouts and other information as may be necessary or desirable in
order to enable Bank to identify, verify and collect the Accounts.
6.7 Other Rights and Remedies. Exercise any and all other
rights and remedies of Bank under the Loan Documents and the law. In this
regard, Bank may, among any other rights and remedies, sell or otherwise dispose
of any or all Collateral at public or private sale for cash, upon credit (with
or without security), in exchange in whole or in part for other property, or for
future delivery as Bank shall deem appropriate. As to sale or other disposition
of the Collateral, except as to the Collateral that is perishable, threatens to
decline speedily in value, or is of a type customarily sold on a recognized
market as to which no notice shall be required, Bank will give Obligor
reasonable notice of the time and place of any public sale or of the time after
which any private sale or any other intended disposition is to be made. Obligor
agrees that any such notice shall be sufficient if given at least ten (10) days
prior to such sale or other disposition. Bank may be a purchaser at any sale.
Bank may pay the purchase price at any sale by crediting the amount of the
purchase price against the Obligations.
6.8 Grant of License to Use Intellectual Property. For the
purpose of enabling Bank to exercise rights and remedies under this Article at
such time as the Bank shall be lawfully entitled to exercise such rights and
remedies, each Obligor hereby grants to the Bank an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation to the
Obligors) to use, license or sub-license any of the Collateral consisting of
Intellectual Property now owned or hereafter acquired by such Obligor, and
wherever the same may be located, and including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation or printout
thereof. The use of such license by Bank shall be exercised, at the option of
Bank, solely upon the occurrence and during the continuation of an Event of
Default; provided that any license, sub-license or other transaction entered
into by Bank in accordance herewith shall be binding upon the Obligors
notwithstanding any subsequent cure of an Event of Default.
7. APPLICATION OF PROCEEDS. After an Event of Default, all cash and all
cash Proceeds of Collateral received by Bank will be applied by Bank to the
Obligations, whether or not due, in such order as Bank shall determine in its
absolute and sole discretion, subject to any requirements of law. Any other
Proceeds of Collateral will be credited against the Obligations only upon
conversion into cash and receipt of such cash
18
<PAGE>
by Bank. Bank may elect to delay crediting any checks and other non-cash items
against the Obligations until the expiration of such period of time after
receipt thereof by Bank as Bank determines is sufficient to allow for clearance
and final payment thereof. Any credit to the Obligations prior to such time
shall be conditional upon final payment to Bank of the check or other non-cash
item giving rise to such credit. If application of the Collateral is not
sufficient to pay the Obligations in full, Obligor shall remain obligated for
the remaining Obligations.
8. CONTINUATION AND TERMINATION. This Agreement shall continue in
effect until (a) the termination of the Commitment, and (b) payment and
performance of the Obligations in full. Upon the occurrence of all of the events
described in (a) through (b) above, this Agreement shall terminate and Bank
shall return any Collateral then held by Bank to Obligor, its successors, or
assigns, or as the law or a court of competent jurisdiction may direct. Prior to
payment or performance in full of the Obligations, the Security Interests
granted hereunder shall be deemed released as to any portion of the Property
released pursuant to the Loan Agreement.
9. FURTHER ASSURANCES. Obligor shall, from time to time and at its own
expense, promptly execute, acknowledge, witness, deliver, file and record, or
procure the execution, acknowledgement, witnessing, and delivery of, such
documents or instruments and shall take or cause to be taken such other actions
(including, but not limited to, the delivery of possession of Collateral to
Bank), as Bank may request for the perfection against Obligor and third parties
whomsoever of the security interest created hereby in the Collateral and for the
continuation and protection thereof and promptly give to Bank evidence
satisfactory to Bank of any such filing and recording. Without limiting the
generality of the foregoing, Obligor shall execute, acknowledge, witness and
deliver such financing and continuation statements, notices, and additional
security agreements, make such notations on its records, and take such other
action as Bank may request for the purpose of so perfecting, maintaining and
protecting such security interests of the Bank. Obligor hereby authorizes Bank
to effect any filing or recording which Bank has requested pursuant to this
Section 10 without the signature of Obligor, to the extent permitted by
applicable law. The reasonable costs and expenses of Bank with respect to such
actions shall be payable by Obligor on demand.
10. INSPECTION OF COLLATERAL. Bank shall at all reasonable times have
the right to enter into and upon any premises wherein any of the Collateral may
be situated for the purpose of locating and inspecting the same, observing its
use, and otherwise protecting the security interest created hereby, to the
extent Obligor has such right.
11. INDEMNIFICATION. Obligor agrees to assume liability for and to
indemnify, protect, save and keep harmless Bank and its respective successors,
assigns, agents and servants, in any way relating to or arising out of this
Agreement, or the manufacture, purchase, acceptance, rejection, ownership,
delivery, lease, possession, use, operation, condition, sale, return or other
disposition of any Collateral (including, without limitation, latent and other
defects, whether or not discoverable by Bank or Obligor, and any claim for
patent, trademark or copyright infringement).
12. INSURANCE. Obligor shall at all times maintain or cause to be
19
<PAGE>
maintained, at its own cost and expense, property damage insurance with respect
to the amounts, against such risks, in such form and with such insurance
companies, underwriters or funds as shall be required pursuant to the Loan
Agreement.
13. COUNTERPARTS. This Agreement may be executed in counterparts, all
of which executed counterparts shall together constitute a single document.
Signature pages may be detached from the counterparts and attached to a single
copy of this Agreement to form physically one document.
14. WAIVER OF PERSONAL PROPERTY EXEMPTIONS. OBLIGOR ACKNOWLEDGES
OBLIGOR'S EXPRESS INTENT TO HEREBY WAIVE AND ABANDON ALL PERSONAL PROPERTY
EXEMPTIONS GRANTED BY LAW UPON ANY OR ALL COLLATERAL. NOTICE: BY SIGNING THIS
AGREEMENT, OBLIGOR WAIVES ALL RIGHTS PROVIDED BY LAW TO CLAIM ANY OR ALL
COLLATERAL EXEMPT FROM PROCESS.
15. NOTICES. Except to the extent that telephonic notice by Bank to
Obligor may be permitted pursuant to the Loan Agreement, all demands or notices
under this Agreement shall be given in accordance with the Loan Agreement and
shall be effective as provided in the Loan Agreement.
16. GOVERNING LAW. THIS AGREEMENT AND ITS VALIDITY, CONSTRUCTION AND
PERFORMANCE SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF
ARIZONA.
17. BANK'S RIGHTS. Obligor authorizes Bank, from time to time, without
notice or demand and without affecting their liability hereunder, to: (a) renew,
compromise, extend, revise, accelerate or otherwise change the time for payment
of, or otherwise change the terms of, the Obligations or any part thereof,
including increase or decrease of the rate of interest thereon; (b) take and
hold security for the payment and performance of the Obligations, and exchange,
enforce, waive and release any such security, or take additional security; (c)
apply such security and direct the order or manner of sale thereof as Bank, in
their discretion, may determine; and (d) release or substitute any one or more
of the endorsers or obligors or acquire additional obligors. Bank may without
notice, assign this Agreement in whole or in part.
18. WAIVERS. Obligors waive (a) any right to require Bank to proceed
against Borrower, Obligors, or other guarantors; (b) any right to require Bank
to proceed against or exhaust any security held from Borrower; (c) any right to
require Bank to pursue any other remedy in Bank' power whatsoever; (d) any
defense based upon any legal disability or other defense of Borrower, any other
guarantor or other person, or by reason of the cessation or limitation of the
liability of Borrower from any cause other than full payment and performance of
those obligations of Borrower which are guaranteed hereunder; (e) any defense
based upon any lack of authority of the officers, directors, partners or agents
acting or purporting to act on behalf of Borrower or any principal of Borrower
or any defect in the formation of Borrower or any principal of Borrower; (f) any
defense based upon the application by Borrower of the proceeds of the
Indebtedness for purposes other than the purposes represented by Borrower to
Bank or intended or understood by Bank or Obligors; (g) any defense based upon
Bank' failure to disclose to Obligors any
20
<PAGE>
information concerning Borrower's financial condition or any other circumstances
bearing on Borrower's ability to pay and perform its obligations under the terms
of the Indebtedness; (h) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor in
any other respects more burdensome than that of a principal; (i) any defense
based upon Bank' election, in any proceeding instituted under the Federal
Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal
Bankruptcy Code or any successor statute; (j) any defense based upon any
borrowing or any grant of a security interest under Section 364 of the Federal
Bankruptcy Code; (k) any right of subrogation, any right to enforce any remedy
which Bank may have against Borrower and any right to participate in, or benefit
from, any security for the Indebtedness now or hereafter held by Bank; and (l)
the benefit of any statute of limitations affecting the liability of Obligors
hereunder or the enforcement hereof. Obligors agree that the payment or
performance of any act which tolls any statute of limitations applicable to the
Indebtedness shall similarly operate to toll the statute of limitations
applicable to Obligors' liability hereunder. Until all Indebtedness of Borrower
to Bank shall have been paid in full and all commitments of Bank in connection
therewith shall have terminated in full, even though such Indebtedness is in
excess of Obligors' liability hereunder, Obligors shall have no right of
subrogation unless Bank, at their option, so elect, and hereby waive any right
to enforce any remedy which Bank now have, or may hereafter have, against
Borrower, and hereby waive any benefit of, and any right to participate in, any
security now or hereafter held by Bank. Obligors waive all presentments, demands
for performance, notices of non-performance, protests, notices of protest,
notices of dishonor and notices of acceptance of this Guaranty and of the
existence, creation, or incurring of new or additional Indebtedness.
21
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
OBLIGOR: EMPLOYEE SOLUTIONS, INC., an Arizona
corporation
By:___________________________________________
Name:_________________________________________
Title:________________________________________
LOGISTICS PERSONNEL CORP., a Nevada
corporation
By:___________________________________________
Name:_________________________________________
Title:________________________________________
EMPLOYEE SOLUTIONS OF TEXAS, INC., a
Texas corporation
By:___________________________________________
Name:_________________________________________
Title:________________________________________
EMPLOYEE SOLUTIONS-EAST INC., a
Georgia corporation
By:___________________________________________
Name:_________________________________________
Title:________________________________________
22
<PAGE>
EMPLOYEE SOLUTIONS - MIDWEST, INC., a
Michigan corporation
By:___________________________________________
Name:_________________________________________
Title:________________________________________
ESI AMERICA, INC., a Nevada corporation
By:___________________________________________
Name:_________________________________________
Title:________________________________________
ESI-MIDWEST, INC., a Nevada corporation
By:___________________________________________
Name:_________________________________________
Title:________________________________________
EMPLOYEE SOLUTIONS OF CALIFORNIA,
INC., a Nevada corporation
By:___________________________________________
Name:_________________________________________
Title:________________________________________
POKAGON OFFICE SERVICES, INC. d/b/a
EMPLOYEE SOLUTIONS-OHIO INC., an
Indiana corporation
By:___________________________________________
Name:_________________________________________
Title:________________________________________
CAMELBACK INSURANCE LTD., a Bermuda
corporation
By:___________________________________________
23
<PAGE>
Name:_________________________________________
Title:________________________________________
ESI RISK MANAGEMENT AGENCY, INC., an
Arizona corporation
By:___________________________________________
Name:_________________________________________
Title:________________________________________
24
<PAGE>
SCHEDULE I
----------
COPYRIGHTS
NONE
----
<PAGE>
SCHEDULE II
-----------
LICENSES
NONE
----
<PAGE>
SCHEDULE III
------------
PATENTS
NONE
----
<PAGE>
SCHEDULE IV
-----------
TRADEMARKS
NONE
----
<PAGE>
SCHEDULE V
----------
DEPOSIT ACCOUNTS
<PAGE>
ANNEX 1
-------
PERFECTION CERTIFICATE
The undersigned, the [Financial Officer] of _______________________(the
"Obligor"), with reference to (a) Loan Agreement dated as of __________________
(the "Loan Agreement"), among the Obligor, the lenders party thereto and Bank
One, Arizona, NA, a national banking association, as agent, and (b) the Security
Agreement (such term and all other terms used but not defined herein having the
meaning given them in the Loan Agreement and the Security Agreement), hereby
certifies to the Bank as follows:
1. Names.
------
(a) The exact corporate name of Obligor, as such name appears
in its respective certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name Obligor has
had within the past five years, together with the date of the relevant change:
(c) Except as set forth in Schedule 1 hereto, Obligor has not
changed its identity or corporate structure in any way within the past five
years.1
(d) The following is a list of all other names (including trade
names or similar appellations) used by Obligor or any of its divisions or other
business units in connection with the conduct of its business or the ownership
of its properties at any time during the past five years:
2. Current Locations.
------------------
(a) The chief executive office of Obligor is located at the
following address:
Mailing Address County State
--------------- ------ -----
(b) The following are all locations where each Obligor
maintains any books or records relating to any Accounts, Rights to Payments and
Other Receivables, Intangibles, Cash Receipts and Rents:
________________________________________
1
Changes in identity or corporate structure would include mergers,
consolidations and acquisitions, as well as any change in the
form, nature or jurisdiction of corporate organization. If any
such change has occurred, include in Schedule 1 the information
required by Sections 1 and 2 of this certificate as to each
acquiree or constituent party to a merger or consolidation.
<PAGE>
Mailing Address County State
--------------- ------ -----
(c) The following are all the places of business of Obligor not
identified above:
Mailing Address County State
--------------- ------ -----
(d) The following are other locations at which any Collateral
(other than tangible personal property of immaterial value) is located:
Mailing Address County State
--------------- ------ -----
3. Unusual Transactions. All Accounts, Rights to Payment and
Other Receivables have been originated by the Obligor in the ordinary course of
its business.
4. UCC Filings. A duly signed financing statement on Form UCC-1
has been, or will be, duly filed in the Uniform Commercial Code filing office in
each jurisdiction identified in Section 2 hereof with respect to which a filing
is necessary for Bank to obtain a perfected security interest in all Collateral
in which a security interest may be perfected by the filing of a financing
statement on Form UCC-1. The originals of acknowledgment copies of all such
financing statements as filed in such filing offices have been, or will be,
delivered to Bank, to the extent that the outside filing service has returned
such acknowledgment copies to the Borrower. All other acknowledgment copies will
be furnished to Bank promptly following the Borrower's receipt thereof.
IN WITNESS WHEREOF, we have hereunder set our hands this ___
day of __________, 1996.
_______________________________________________
Title:
_______________________________________________
Title:
2
<PAGE>
SCHEDULE 1
----------
