SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of event reported): March 19, 1998
HEADWAY CORPORATE RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Commission File Number: 0-23170
DELAWARE 75-2134871
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
850 Third Avenue, 11th Floor
New York, NY 10022
(Address of principal executive (Zip Code)
offices)
Registrant's Telephone Number: (212) 508-3560
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 19, 1998, Headway Corporate Resources, Inc. ("Company"),
completed debt and equity financing totaling $105,000,000. The
financing includes a $75,000,000 syndicated senior credit
facility, $10,000,000 of senior subordinated notes, and
$20,000,000 of Series F Convertible Preferred Stock. NationsBank
N.A. acted as agent for the senior credit facility, and
NationsBanc Montgomery Securities, LLC, acted as placement agent
for the senior subordinated notes and Series F Convertible
Preferred Stock. With the new financing the Company retired its
credit facility with ING (U.S.) Capital Corporation, made the
acquisitions described below, and will use the remaining
availability for additional acquisitions and general corporate
purposes.
On March 23, 1998, the Company acquired directly and through its
subsidiaries three businesses in three separate transactions.
The Company acquired substantially all of the assets of Cheney
Associates and Cheney Consulting Group of New Haven, Connecticut,
for approximately $3,772,000 paid at closing, plus an earnout for
certain periods through the end of 2000 equal to a percentage of
the earnings for those periods before interest taxes and
amortization attributable to the assets acquired. The Company
also acquired substantially all of the assets of the Southern
Virginia offices of Select Staffing Services, Inc., based in
McLean, Virginia, for approximately $2,993,000 paid at closing,
plus an earnout for certain periods through the end of March
2001, equal to a percentage of the earnings for those periods
before interest taxes and amortization attributable to the assets
acquired. The Company acquired all of the outstanding capital
stock of Shore Resources, Incorporated, of Los Angeles,
California, for approximately $5,051,000 paid at closing, plus an
earnout for certain periods through the end of March 2001, equal
to a percentage of the earnings for those periods before interest
taxes and amortization attributable to the assets acquired.
The purchase price was determined through arms-length
negotiations between the Company and each of the acquired
businesses. The acquired businesses were owned by one person in
two cases and two persons in the remaining case, from whom the
Company acquired the assets and capital stock. None of the
sellers was affiliated or associated with the Company or its
affiliates prior to the acquisitions.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements: none required.
(b) Pro Forma Financial Information: none required.
(c) Exhibits. Included in this report are the following
exhibits.
Exhibit SEC Ref. Title of Document Page
No. No.
1 (2) Asset Purchase Agreement dated March 23, E-1
1998 for Cheney Associates, L.L.C.
2 (2) Asset Purchase Agreement dated March 23, E-31
1998, Select Staffing Services, Inc.
3 (2) Stock Purchase Agreement dated March 23, E-58
1998 for Shore Resources, Incorporated
4 (4) Series F Preferred Stock Designation E-85
5 (4) Bylaw Amendments E-113
6 (4) Securities Purchase Agreement E-116
dated March 19, 1998
7 (4) Registration Rights Agreement E-164
dated March 19, 1998
8 (4) Indenture dated March 19, 1998 E-183
9 (4) Form of Senior Subordinated Note E-271
10 (4) Guaranty Agreement dated March 19, 1998 E-282
11 (4) Credit Agreement dated March 19, 1998 E-291
including Exhibit A - Commitment
Percentage, and Exhibit F - Form of
Revolving Note
12 (4) Guaranty Agreement dated March 19, 1998 E-393
13 (4) Security Agreement dated March 19, 1998 E-402
14 (4) Pledge Agreement dated March 19, 1998 E-423
15 (4) LC Account Agreement dated March 19, 1998 E-435
16 (4) Intellectual Property Security Agreement E-445
dated March 19, 1998
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the Registrant has duly caused this report
to be signed on its behalf by the undersigned hereunto duly
authorized.
HEADWAY CORPORATE RESOURCES, INC.
DATED: April 3, 1998 By: /s/ Barry Roseman
President
E-30
Exhibit No. 1
Form 8-K
Headway Corporate Resources, Inc.
SEC File No. 0-23170
[Each of the schedules to this Agreement described in Sections 1,
6, and 15 are omitted, and will be provided supplementally to the
Commission on request.]
ASSET PURCHASE AGREEMENT
AGREEMENT, dated as of March 23, 1998, among HEADWAY
CORPORATE RESOURCES, INC., a Delaware corporation ("Headway"),
CHENEY ASSOCIATES, L.L.C., a Delaware limited liability company
("Buyer"), and TIMOTHY CHENEY, an individual doing business under
the names Cheney Associates and Cheney Consulting Group
("Cheney").
W I T N E S S E T H:
WHEREAS, Buyer wishes to purchase, and Cheney wishes to
sell, the Acquired Assets and the Business (as such terms are
defined in Section 1.1), upon the terms and conditions set forth
below;
NOW, THEREFORE, the parties agree as follows:
1. Purchase and Sale of the Acquired Assets.
1.1 Acquired Assets. Subject to the terms and
conditions of this Agreement, and in reliance on the
representations, warranties and agreements set forth herein, on
the Closing Date (as defined in Section 2), Cheney shall sell,
convey, transfer, assign and put Buyer into possession of, and
Buyer shall purchase from Cheney, effective as of the Closing
Date, all of Cheney's right, title and interest in and to all of
the assets used by Cheney in connection with the operation of his
business which consists of the placement or provision of
temporary, permanent, leased or payrolled (as defined in Section
1.3(e)) personnel, including, without limitation, self-
incorporated personnel (the "Business"), of every kind, tangible
and intangible, wherever located (excepting only those assets
specifically excluded in Section 1.2), and including, without
limitation:
(a) the office furniture, equipment, computers and
fixtures of Cheney pertaining to the Business listed in
Schedule 1.1.A;
(b) all computer software, programs and databases
owned by Cheney pertaining to the Business and Cheney's
interest, in connection with the Business, in any
transferable computer software licensed by Cheney or the
Business from others;
(c) all office supplies owned by Cheney pertaining to
the Business;
(d) the client agreements and arrangements of Cheney
pertaining to the Business set forth in Schedule 1.1.B;
(e) the equipment leases and other agreements,
contracts and instruments of Cheney pertaining to the
Business listed in Schedule 1.1.C;
(f) all rights of Cheney or the Business with respect
to any of the temporary, permanent, leased or payrolled
personnel, including, without limitation, self-incorporated
personnel, who are placed or provided by Cheney in
connection with the Business through corporations or other
entities of which he is a shareholder or other owner;
(g) all prepayments and deposits of Cheney pertaining
to the Business, including without limitation, security
deposits under leases set forth in Schedule 1.1.D;
(h) the names "Cheney Associates" and "Cheney
Consulting Group", all assumed names, logos, trademarks,
service marks, domain names, trade names and copyrights and
registrations and applications for registration of any of
them, and any other intellectual property rights of Cheney
pertaining to the Business, all of which are listed in
Schedule 1.1.E;
(i) originals or true copies of all books and records
of Cheney pertaining to the assets referred to in
subparagraphs (a) through (h) above, as appropriate,
including customer lists and credit files, and all those
pertaining to the employees of Cheney who are hired by Buyer
pursuant to Section 10.2;
(j) all permits, licenses, approvals and other
governmental authorizations relating to the Business which
are transferable to Buyer, all of which are listed in
Schedule 1.1.F;
(k) any other assets that are used by Cheney in
connection with the Business and that are not referred to in
Section 1.2, including, without limitation, telephone and
facsimile numbers, internet and e-mail addresses; and
(l) the goodwill pertaining to the Business;
all as the same exist on the date hereof and shall exist on the
Closing Date, subject only to changes occurring in the ordinary
course of business. All such assets as are described in
subparagraphs (a) through (l) above to be acquired are referred
to together as the "Acquired Assets". For purposes of this
Agreement, assets used by Cheney in connection with the Business
shall be deemed to be Cheney's regardless of whether they are
held in his name, in the name of Cheney Associates or Cheney
Consulting Group or the name of any affiliate of Cheney.
1.2 Excluded Assets. The following assets of Cheney
shall be retained by Cheney as his sole and exclusive property
and are excluded from the Acquired Assets: (a) the consideration
(including the Purchase Price, (as defined in Section 1.3(a)))
payable to Cheney by Buyer, (b) any cash, bank deposits,
certificates of deposit, marketable securities, notes, drafts,
checks or other cash equivalents or similar instruments owned by
Cheney pertaining to the Business, (c) accounts receivable of the
Business as of the Closing Date (the "Accounts Receivable") and
any amounts accrued by the Business for services rendered prior
to the Closing Date, but which have not been billed as of the
Closing Date (the "Accruals"), including, without limitation, the
proceeds of the Accounts Receivables and the Accruals, (d) all
claims and rights of Cheney or the Business to any federal, state
or local refunds, credits, rebates, claims, repayments or
benefits of Taxes (as defined in Section 6.12) pertaining to the
Business, (e) any loans receivable of Cheney or the Business, (f)
any refundable portions of paid insurance premiums and prepaid
federal, state or local income taxes pertaining to the Business,
(g) Cheney's interest in any life insurance policies (and the
proceeds thereof) maintained on the life of any employee of the
Business, (h) the books and records of the Business or Cheney
(with respect to the Business), (i) the tax records pertaining to
the Business and any books and records pertaining to the Business
which Cheney shall be required to retain pursuant to any
applicable law, rule or regulation (provided, that at Buyer's
request and expense, Cheney shall provide Buyer with copies of
any such record or document retained by Cheney and, similarly,
Buyer, at Cheney's request and expense, shall provide Cheney with
copies of any record or document transferred to Buyer hereunder),
(j) all records and correspondence relating to the foregoing
excluded assets and (k) any and all other assets of Cheney of
every kind, nature or description, tangible or intangible, known
or unknown, real or personal, not used or utilized by Cheney in
connection with or pertaining to the Business, including without
limitation, the assets set forth on Schedule 1.2.
1.3 Purchase Price.
(a) As consideration for the sale, conveyance,
transfer, assignment and delivery to Buyer of the Acquired
Assets, Buyer shall pay to Cheney a purchase price (the "Purchase
Price") determined as follows:
(i) $3,752,868 payable on the Closing Date (the "Down
Payment"); and
(ii) the Earnouts on the Earnout Payment Dates (as
defined in Sections 1.3(b) and (d), respectively).
All amounts payable by Buyer pursuant to Sections 1.3(a) and
1.3(b) shall be paid by wire transfer in immediately available
funds to an account or accounts designated by Cheney to Buyer not
later than two business days prior to the scheduled date of such
payment.
(b) The period from January 1, 1997 until December 31,
1998 shall be referred to as the "First Earnout Period", the
period from the Closing Date until December 31, 1999 shall be
referred to as the "Second Earnout Period", the period from the
Closing Date until December 31, 2000 shall be referred to as the
"Third Earnout Period", and each of such periods shall be
referred to as an "Earnout Period". Subject to Section 1.3(f),
Buyer shall pay to Cheney an amount for each of such Earnout
Periods (each, an "Earnout") as follows:
(i) On February 28, 1999, an amount equal to 80% of
the excess, if any, of that amount equal to (A) 5 times the
Average Annualized EBITA (as is defined in Section 1.3(c))
of the Buyer for the First Earnout Period over (B) the Down
Payment;
(ii) On February 28, 2000, an amount equal to 75% of
the excess, if any, of that amount equal to (A) 5 times the
Average Annualized EBITA of the Buyer for the Second Earnout
Period over (B) the sum of (I) the Down Payment plus (II)
the Earnout, if any, paid pursuant to clause (i) above; and
(iii) On March 31, 2001, an amount equal to the
excess, if any, of that amount equal to (A) 5 times the
Average Annualized EBITA of the Buyer for the Third Earnout
Period over (B) the sum of (I) the Down Payment, plus (II)
the Earnouts, if any, paid pursuant to clauses (i) and/or
(ii) above.
(c) For the purposes of this Agreement, (i) "EBITA"
means, for each Earnout Period, Net Income (as defined below)
without deductions for (A) interest expense, (B) provisions for
and/or payments of income taxes, and (C) amortization of goodwill
and other intangible assets resulting from Buyer's purchase of
the Acquired Assets and the Business, and (ii) "Average
Annualized EBITA" means the EBITA of the Business for the
applicable Earnout Period, divided by the number of months
comprising such Earnout Period, and multiplied by 12. During the
Earnout Periods, the operations of Buyer shall consist solely of
the conduct of the Business.
"Net Income" means the net income (or loss) of Buyer
for an Earnout Period determined by Buyer in accordance with
generally accepted accounting principles applied on a basis
consistent with (i) the Financial Statements (as defined in
Section 3.6) and (ii) the accounting treatment, practices and
principles elected, utilized and employed by Cheney for the
twelve-month period ended December 31, 1997, as set forth in
Schedule 1.3. Subject to the foregoing, the calculation of Net
Income shall take into account the following expenses to the
extent incurred in the ordinary course of the Business: (i)
wage, salary and commission expense of all temporary, payrolled
and full-time employees directly associated with the Business,
including, without limitation, salary and other compensation paid
to Cheney pursuant to the Employment Agreement (as defined in
Section 3.4); (ii) reasonable travel and entertainment expenses
approved by Cheney and incurred by employees directly associated
with the Business; (iii) bonuses paid to employees directly
associated with the Business and approved by Cheney; (iv) all
amounts attributable to FICA and any other federal, state and
local taxes on behalf of the employees directly associated with
the Business; (v) all unemployment insurance premiums, workers'
compensation premiums, medical and disability coverage and any
other benefits provided to the employees directly associated with
the Business; (vi) sales commissions directly attributable to the
Business; (vii) any fall-offs, rebates, discounts, offsets or
concessions granted by Buyer to clients of the Business; (viii)
Buyer's general and administrative expenses directly attributable
to the operation of the Business in the ordinary course; (ix)
depreciation in connection with the acquisition by Headway, Buyer
or any other subsidiary of Headway of computer and
telecommunications equipment for use in the Business consistent
with that used by the Headway group of companies; (x) any
expenses reasonably and necessarily incurred by Headway, Buyer or
any other subsidiary of Headway in connection with any technical
and financial support provided to the Business; (xi) any expenses
reasonably and necessarily incurred by Headway, Buyer or any
other subsidiary of Headway in connection with the transition of
the operation of the Business to Buyer as part of the Headway
group of companies, including, without limitation, expenses for
the installation and implementation at Buyer of the third party
accounting and operating software used by Headway; provided, that
any expenses allocated to the Business pursuant to clauses (ix),
(x) and (xi) above shall be mutually agreed upon by Headway and
Cheney prior to the incurrence thereof, and to the extent that
Headway and Cheney further agree that all or part of any such
allocation is incremental to the cost structure of the Business
as conducted by Cheney on the Closing Date, such incremental
amount shall be deducted from the Earnout, if any, for the
applicable Earnout Period and not from EBITA, Net Income or
Average Annualized EBITA for such Earnout Period. For the
purpose of determining Net Income, write-offs of bad debts and/or
any reserves established by Buyer for bad debts with respect to
its receivables during any Earnout Period shall be added to Net
Income to the extent deducted therefrom.
(d) Each of February 28, 1999, February 28, 2000 and
March 31, 2001 is referred to as an "Earnout Payment Date". If
any such day is not a business day, the Earnout Payment Date
shall be the next succeeding business day. Subject to the last
sentence of this Section 1.3(d), if, as of the close of business
on the day prior to any Earnout Payment Date, any account
receivable included as income in the calculation of Net Income
(with respect to the Earnout Period applicable to such Earnout
Payment Date) has not been fully collected, the uncollected
amount of such account receivable shall be deducted from Net
Income and EBITA and the Earnout shall be reduced accordingly.
To the extent that any such account receivable is deducted from
Net Income and EBITA, if such account receivable is thereafter
collected after the Earnout Payment Date, the Net Income and
EBITA for the applicable Earnout Period shall be adjusted by the
amount of such account receivable, net of any direct collection
costs and net of an interest charge for any account receivable
paid more than 90 days after the date of invoice (a "Restoration
Amount"), with the interest rate determined by reference to the
interest rate then in effect for Eurodollar Rate Loans under the
Credit Agreement, dated as of March 12, 1998, by and among
Headway, as Borrower, NationsBank, National Association, as Agent
and as Lender, and the lenders from time to time parties thereto,
and the Earnout shall be recalculated accordingly and the excess
of such recalculated Earnout over the amount of the Earnout
previously paid to Cheney shall be paid to Cheney; provided, that
with respect to the Earnout Payment Date for the Third Earnout
Period, Buyer shall be obligated to pay Cheney a Restoration
Amount with respect to any such account receivable only if such
account receivable is collected within 90 days of such Earnout
Payment Date (the "Final Restoration Date"). Any payments due to
Cheney pursuant to the provisions of the preceding sentence shall
be paid on the last business day of each month. Any such
accounts receivable remaining uncollected on the day following
the Final Restoration Date shall be deemed to be conveyed,
transferred and assigned to Cheney on such day, and Cheney shall
have the right to institute collection proceedings with respect
thereto and to keep any proceeds received therefrom. Cheney
shall notify Buyer of any such action not less than five days
before it is instituted.
(e) For the purposes of this Agreement, "payrolled"
personnel means (i) those employees of Headway, Buyer or Cheney
(in connection with the Business), as the case may be, who are
hired by Headway, Buyer or Cheney on behalf of a client and are
considered as full-time "permanent" employees of such client, but
whose compensation is paid by Headway, Buyer or Cheney or (ii)
those employees of Headway, Buyer or Cheney who are considered to
be payrolled employees under industry practice or understandings
prevailing at the time.
(f) In the event Buyer terminates Cheney's employment
under the Employment Agreement without cause ("cause" being
exclusively defined in Section 3.1 of the Employment Agreement)
and not as a result of Cheney's death or disability pursuant to
Section 3.3 of the Employment Agreement, and such determination
is so confirmed by arbitration pursuant to Section 8.1 of the
Employment Agreement, Headway shall determine the Average
Annualized EBITA of Buyer as of such termination date (as if such
termination date were the end of the applicable Earnout Period)
for the Earnout Period then in effect, such amount being referred
to as the "Base Annualized EBITA". For any Earnout Periods
occurring and/or any Earnouts payable after such termination
date, the Average Annualized EBITA of Buyer for the Earnout
Period to which such Earnout relates shall be the greater of (a)
Base Annualized EBITA or (b) the actual Annualized EBITA
determined with respect to such Earnout Period.
1.4 Assumption of Liabilities. As additional
consideration for the purchase of the Acquired Assets, Buyer
shall, on the Closing Date, assume and agree to pay, perform and
discharge in full the following debts, contracts, obligations and
liabilities of Cheney (the "Assumed Liabilities"), and no others,
as and when due, and to indemnify and hold Cheney harmless
therefrom:
(a) all obligations and liabilities of Cheney or the
Business arising on or after the Closing Date under the office
lease for the premises located at One Laurel Square, Hamden,
Connecticut; and
(b) all obligations or liabilities arising on or after
the Closing Date under the client agreements and arrangements set
forth in Schedule 1.1.B and the equipment leases and other
agreements, contracts and instruments set forth in Schedule
1.1.C.
1.5 Liabilities Not Assumed. Other than the
liabilities referred to in Section 1.4, Buyer shall not assume or
be deemed to have assumed any of the liabilities or obligations
of Cheney of any kind arising prior to, on, or after the Closing
Date, or of the Business arising prior to the Closing Date
(together, the "Unassumed Liabilities"), including, without
limitation:
(a) any liability claims with respect to the business
and affairs of Cheney or the Business or the acts and omissions
of current or former employees and agents of Cheney or the
Business;
(b) any obligation or liability of Cheney or the
Business to any current or former employee of Cheney or the
Business;
(c) any obligation or liability of Cheney or the
Business for federal, state, local or foreign income or other
taxes (including any related penalties, fines and interest),
including, without limitation, any and all taxes arising out of
the transactions contemplated hereby;
(d) any obligation or liability arising out of the
operation of the Business prior to the Closing Date, including
any rebates, discounts, offsets or concessions attributable to
amounts invoiced to the Business's clients prior to the Closing
Date;
(e) any claim, action, suit or proceeding against
Cheney or the Business for employment discrimination or sexual
harassment by any present or former employee (temporary or
permanent) or agent of Cheney or the Business;
(f) any obligation or liability of Cheney or the
Business arising out of any surrender charges incurred in
connection with the rollover to Buyer of any Benefit Plan (as
defined in Section 6.16(a)) of Cheney or the Business;
(g) any obligation or liability to the temporary,
payrolled, leased or full-time employees of Cheney or the
Business for salary, wages, bonuses or other compensation or
benefits, including any with respect to retirement plans, and
accrued vacation, sick and holiday time and pay incurred prior to
the Closing Date, including, without limitation, any liabilities
contemplated by Section 10.2 but excluding any liabilities set
forth in Schedule 1.7;
(h) any liabilities of Cheney or the Business with
respect to any pension, retirement, savings, profit-sharing or
other benefit plan;
(i) any obligation or liability which is inconsistent
with any representation or warranty of Cheney;
(j) any liability arising out of, and any expenses
relating to, any claim, action, dispute or litigation involving
Cheney or the Business;
(k) any liability of Cheney or the Business for fines,
penalties, damages or other amounts payable to any government or
governmental agency or instrumentality; and
(l) any obligation or liability of Cheney or the
Business for any expenses incurred in preparing or negotiating
this Agreement and consummating the transactions contemplated
hereunder.
Cheney agrees to discharge and indemnify, defend and hold
harmless Buyer and Headway and their respective officers,
directors, employees, agents and stockholders from all Unassumed
Liabilities, whether or not now known, liquidated or contingent,
including, without limitation, any that might otherwise be deemed
to have been assumed by Buyer by virtue of its purchase of the
Acquired Assets or otherwise by operation of law.
1.6 Allocation of Purchase Price. Buyer and Cheney
agree to report this transaction for United States federal income
tax purposes in accordance with a written allocation of Purchase
Price to be prepared, initialed and mutually agreed to by Cheney
and Buyer on or before the Closing Date.
1.7 Closing Date Adjustments. On or before the
Closing Date, Buyer and Cheney shall determine and agree on, as
of the Closing Date, (i) any amounts that Cheney or the Business
may have prepaid for equipment or office leases included in the
Acquired Assets in respect of periods beginning on or continuing
after the Closing Date, (ii) any amounts that Cheney or the
Business may have prepaid for sales, use or similar taxes,
license fees (exclusive of corporate franchise fees), insurance,
services or other expenses relating to the Acquired Assets in
respect of periods beginning on or continuing after the Closing
Date, (iii) the amount of any accrued bonuses and accrued
vacation, sick or holiday time or pay as of the Closing Date with
respect to temporary, payrolled, leased or full-time employees of
the Business retained by Buyer pursuant to Section 10.2, as set
forth in Schedule 1.7, and (iv) any amounts of the type described
in clauses (i) and (ii) in respect of periods prior to the
Closing Date which are expected to be billed after the Closing
Date. All amounts relating to periods ending prior to the
Closing Date shall be for the account of Cheney and all amounts
relating to periods beginning or continuing on or after the
Closing Date shall be for the account of Buyer. The respective
amounts shall be netted against each other on the Closing Date.
If the result of such netting is an amount owing to Cheney, Buyer
shall pay such amount to Cheney on the Closing Date. If the
result of such netting is an amount owing to Buyer, Cheney shall
pay such amount to Buyer on the Closing Date in the form of a
reduction of the Purchase Price and the Down Payment.
1.8 Collection of Accounts Receivable and Accrued
Payments.
(a) Within 15 days after the Closing Date, Buyer and
Cheney shall determine and agree on, as of the close of business
on the business day immediately preceding the Closing Date, the
amount of the Accruals. Promptly after the Closing Date, Buyer,
in coordination with Cheney, shall render invoices to the
Business's clients for the Accruals. Buyer shall remit to Cheney
all payments received by it on account of the Accruals and the
Accounts Receivable (collectively, the "Closing Date
Receivables") within 15 days after the end of each month in which
such payments are received. While Buyer shall use reasonable
efforts to collect the Closing Date Receivables commensurate with
the efforts it would use to collect its own accounts receivable,
Buyer shall not be required to institute litigation or other
collection proceedings in order to do so and, in any event, Buyer
shall have no liability to Cheney for any of the Closing Date
Receivables that are not collected. Cheney shall have the right
to institute collection proceedings with respect to any of the
Closing Date Receivables that are aged more than 120 days after
the date of the related invoice, but shall notify Buyer of any
such action not less than five business days before it is
instituted.
(b) Cheney shall promptly pay to Buyer, if and when
received, any amounts which are received by it after the Closing
Date in respect of any of the Acquired Assets or with respect to
any accounts receivable generated by Buyer with respect to
periods on or after the Closing Date. Similarly, if Buyer
receives after the Closing Date any payments with respect to any
of the Excluded Assets other than the Closing Date Receivables
(which shall be governed by Section 1.8(a)), Buyer shall promptly
pay such amounts to Cheney. Any amounts received pursuant to
this Section 1.8(b) shall be applied to the receivables
specifically identified by the client/payor. If no such
identification is provided, Buyer or Cheney, as the case may be,
shall inquire of client for written identification and apply the
amount received accordingly.
(c) Any sums received by Buyer or Cheney that are
required to be remitted to the other party pursuant to this
Section 1.8 shall, until so paid over, be deemed to be held in
trust on behalf of such other party.
1.9 Nonassignable Contracts. Nothing in this
Agreement shall be construed as an attempt to assign any contract
which is by law and/or its terms nonassignable without the
consent of any other party thereto unless and until such consent
is given.
2. Closing. The consummation of the purchase and
sale of the Acquired Assets shall take place at 9:00 a.m. on
March 23, 1998, at the offices of Christy & Viener, 620 Fifth
Avenue, New York, New York 10020 (the "Closing Date").
3. Conditions to the Obligations of Buyer. The
obligations of Buyer under Section 1 are subject to the
satisfaction, on or before the Closing Date, of the following
conditions:
3.1 Due Performance. Cheney shall have in all
material respects fully performed and complied with all
agreements and conditions required under this Agreement to be
performed or complied with by him on or prior to the Closing
Date.
3.2 Accuracy of Representations and Warranties. All
representations and warranties of Cheney set forth in Section 6
of this Agreement shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of
such date.
3.3 Certificate. Buyer shall have received a
certificate from Cheney to the effect set forth in Sections 3.1
and 3.2.
3.4 Employment Agreement. Buyer, Headway and Cheney
shall have entered into an Employment Agreement in a form
satisfactory to all such parties (the "Employment Agreement").
3.5 Related Instruments. Cheney shall have executed
and delivered to Buyer a General Bill of Sale in customary form
with respect to the Acquired Assets, as well as such other
instruments of assignment with respect to specific Acquired
Assets as Buyer shall reasonably request, all of which shall be
consistent with the terms and conditions of this Agreement.
3.6 Financial Statements. On or before February 15,
1998, Cheney shall have prepared and delivered to Buyer and
Headway reviewed financial statements with respect to the
Business as of and for the fiscal years ended December 31, 1997
and December 31, 1996 (the "Reviewed Financial Statements") and
unaudited financial statements with respect to the Business for
the fiscal year ended December 31, 1995 (collectively, the
"Unaudited Financial Statements"; the Reviewed Financial
Statements and the Unaudited Financial Statements being
collectively referred to as the "Financial Statements"). The
Financial Statements shall be prepared, at the expense of Cheney,
in accordance with generally accepted accounting principles
applied on a basis consistent throughout all periods presented
and on an accrual basis.
3.7 Legal Opinion. Buyer shall have received an
opinion of Martin J. Gersten, Esq., counsel for Cheney, dated
the Closing Date, reasonably satisfactory in form and substance
to counsel for Buyer and covering the matters set forth in
Sections 6.1, 6.2, 6.3, 6.4(a) and 6.6.
3.8 No Adverse Change. There shall have been no
material adverse change in the business, results of operations or
financial condition of the Business since December 31, 1996.
3.9 Consents and Governmental Approvals. Headway and
Buyer shall have received any material consents of third parties,
and any authorizations, orders, grants, consents, permits and
approvals of all relevant governmental authorities, required in
connection with the consummation of the transactions contemplated
under this Agreement, without the imposition of any materially
burdensome conditions or restrictions, which shall continue to be
in full force and effect on the Closing Date.
3.10 No Claims. No claim, action, suit, investigation
or proceeding shall be pending or threatened against any of the
parties which, if adversely determined, might (i) prevent or
hinder consummation of the transactions contemplated by this
Agreement, (ii) result in the payment of substantial damages by
Buyer or Headway as a result of the transactions contemplated
hereby or (iii) materially and adversely affect Cheney, the
Business or the business or assets of Buyer or Headway.
3.11 Budget. On or prior to the Closing Date, Cheney,
Buyer and Headway Corporate Staffing Services, Inc. ("HCSSI")
shall have agreed upon a written annual operating and capital
expenditure budget for Buyer for the first Earnout Period
pursuant to Section 10.1.
4. Conditions to the Obligations of Cheney. The
obligations of Cheney under Section 1 are subject to the
satisfaction, on or before the Closing Date, of the following
conditions:
4.1 Due Performance. Headway and Buyer shall have in
all material respects fully performed and complied with all
agreements and conditions required under this Agreement to be
performed or complied with by them on or prior to the Closing
Date.
4.2 Accuracy of Representations and Warranties. All
representations and warranties of Headway and Buyer set forth in
Section 7 of this Agreement shall be true and correct in all
material respects on and as of the Closing Date as if made on and
as of such date.
4.3 Certificate. Cheney shall have received a
certificate from each of Buyer and Headway to the effect set
forth in Sections 4.1 and 4.2.
4.4 Related Instruments. Buyer shall have executed
and delivered to Cheney a General Instrument of Assumption in
customary form with respect to the Assumed Liabilities, as well
as such other instruments of assumption with respect to specific
Assumed Liabilities as Cheney shall reasonably request, all of
which shall be consistent with the terms and conditions of this
Agreement.
4.5 Employment Agreement. Buyer, Headway and Cheney
shall have entered into the Employment Agreement.
4.6 Headway Guarantee. Headway shall have executed
and delivered to Cheney an unconditional Guarantee (of payment
and performance) of Buyer's obligations under this Agreement, in
such form as shall reasonably be acceptable to Cheney (the
"Guarantee").
4.7 Legal Opinion. Cheney shall have received an
opinion of Messrs. Christy & Viener, counsel for Buyer and
Headway, dated the Closing Date, reasonably satisfactory in form
and substance to counsel for Cheney and covering the matters set
forth in Sections 7.1 (exclusive of the last sentence thereof),
7.2, 7.3, 7.4 (a) and 7.6.
4.8 Corporate/Member Action. Cheney shall have
received copies, certified by (a) the Secretary of Buyer, of
resolutions of Buyer's members approving the execution of this
Agreement and the Employment Agreement and the consummation of
the transactions contemplated hereby and thereby, and (b) the
Secretary of Headway, of resolutions of Headway's Board of
Directors approving the execution of this Agreement, the
Employment Agreement and the Guarantee and the consummation of
the transactions contemplated hereby and thereby.
4.9 Consents and Governmental Approvals. Cheney shall
have received any material consents of third parties, and any
authorizations, orders, grants, consents, permits and approvals
of all relevant governmental authorities, required in connection
with the consummation of the transactions contemplated under this
Agreement, without the imposition of any materially burdensome
conditions or restrictions, which shall continue to be in full
force and effect on the Closing Date.
4.10 No Claims. No claim, action, suit, investigation
or proceeding shall be pending or threatened against any of the
parties which, if adversely determined, might (i) prevent or
hinder consummation of the transactions contemplated by this
Agreement, (ii) result in the payment of substantial damages by
Cheney as a result of the transactions contemplated hereby or
(iii) materially and adversely affect Cheney, the Business or the
business or assets of Buyer or Headway.
4.11 Budget. On or prior to the Closing Date, Cheney,
Buyer and HCSSI shall have agreed upon a written annual operating
and capital expenditure budget for Buyer for the first Earnout
Period pursuant to Section 10.1.
5. Waiver of Conditions. Each of the parties shall
have the right to waive, in writing and whole or in part, any of
the conditions to his or its performance set forth in this
Agreement and, on such waiver, the waiving party may proceed with
the consummation of the transactions contemplated herein, it
being understood that such waiver shall not constitute a waiver
of any right which such party may have by reason of the breach by
any other party of any representation, warranty or agreement
contained herein, or by reason of any misrepresentation made by
any such other party herein.
6. Representations and Warranties of Cheney. Cheney
represents and warrants to Buyer and Headway as follows:
6.1 Sole Proprietor. Cheney is a sole proprietor with
full power and authority to own, lease and operate the properties
used in connection with the Business and to carry on the Business
in the places and in the manner currently conducted or proposed
to be conducted.
6.2 Authority; Due Authorization. Cheney has all
requisite power and authority to execute and deliver this
Agreement and the Employment Agreement and to consummate the
transactions contemplated hereby and thereby. Cheney has taken
all action necessary for the execution and delivery by him of
this Agreement and the Employment Agreement and for the
consummation of the transactions contemplated hereby and thereby.
6.3 Valid Obligation. This Agreement and the
Employment Agreement, when executed and delivered by Cheney,
shall constitute his valid and binding obligation, in each case
enforceable in accordance with its terms, except as may be
limited by principles of equity or by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally.
6.4 No Conflicts or Defaults. Except as set forth on
Schedule 6.4, the execution and delivery of this Agreement and
the Employment Agreement by Cheney, and the consummation of the
transactions contemplated hereby and thereby, do not and shall
not, with or without the giving of notice or the passage of time,
(a) materially violate or conflict with, or result in a material
breach of, or a material default or loss of rights under, any
agreement, lease, mortgage, instrument, permit or license to
which Cheney or the Business is a party, or to which Cheney or
the Business or any of the Acquired Assets are subject, or any
judgment, order, decree, law, rule or regulation to which Cheney
or the Business or any of the Acquired Assets are subject, (b)
result in the creation of, or give any party the right to create,
any lien, charge, encumbrance or any other right or adverse
interest on or with respect to any of the Acquired Assets or (c)
terminate or give any party the right to terminate, abandon or
refuse to perform any material agreement, arrangement or
commitment to which Cheney or the Business is a party or to which
any of the Acquired Assets or Cheney are subject.
6.5 Subsidiaries and Related Parties. The Business is
conducted entirely by and through Cheney. Except as set forth in
Schedule 6.5, neither Cheney nor any key employee of Cheney (with
respect to the Business) or the Business or any of their
respective affiliates or relatives has any direct or indirect
interest (other than an ownership interest of up to 5% of the
voting securities of any corporation, the securities of which are
publicly-traded) in any assets used in the Business or in any
corporation, partnership or other entity that (a) competes with
the Business, (b) sells or purchases products or services to or
from Cheney (in connection with the Business) or the Business,
(c) leases real or personal property to or from Cheney (in
connection with the Business) or the Business or (d) otherwise
does business with Cheney (in connection with the Business) or
the Business.
6.6 Authorizations. Except as set forth in Schedule
6.6, no authorization, approval, order, license, permit or
consent of, or filing or registration with, any court or
governmental authority, regulatory entity or official body, and
no consent of any other party, is required in connection with the
execution, delivery and performance of this Agreement and the
Employment Agreement by Cheney.
6.7 The Acquired Assets.
(a) Cheney has, and on the Closing Date shall have and
shall transfer to Buyer, good and marketable title to all of the
Acquired Assets, free and clear of all claims, liens, security
interests, charges, restrictions and other encumbrances except
(i) any created pursuant to this Agreement, (ii) any arising
under leases of real or personal property to which Cheney or the
Business is a party and which have been specifically disclosed to
Buyer, or (iii) mechanics' or other liens arising or incurred in
the ordinary course of business and which do not interfere
materially with the possession, ownership or use of any real or
personal property forming part of the Acquired Assets used by the
Business.
(b) Set forth in Schedule 6.7 is a list of all real
property leased by Cheney (in connection with the Business) or
the Business, with a brief description of the premises. Cheney
owns no real property used in connection with the Business.
(c) The office equipment, furniture, vehicles,
computers, computer software, office supplies and leasehold
improvements included in the Acquired Assets are, in all material
respects, in good operating condition and repair, reasonable wear
and tear excepted, and are satisfactory for the requirements of
the Business as presently conducted.
6.8 Client Agreements.
(a) Schedule 1.1.B sets forth a true and complete list
of all written and oral client agreements and arrangements to
which Cheney (in connection with the Business) or the Business is
party (the "Client Agreements"). Cheney has furnished Buyer with
a true copy of each Client Agreement or a written description of
any Client Agreement that has not been reduced to writing. The
Client Agreements constitute all of the contracts, agreements,
understandings and arrangements pursuant to which Cheney (in
connection with the Business) or the Business provide any
temporary, permanent, leased or payrolled employee services for
or with respect to the clients who are parties to such
agreements. Except as set forth in Schedule 6.8, (i) each Client
Agreement was entered into in the ordinary course of business of
the Business, (ii) is in full force and effect on the date of
this Agreement and is valid, binding and enforceable in
accordance with its terms, (iii) neither Cheney nor the Business
is in material breach or default under any of the Client
Agreements and neither has received any notice or claim of any
such breach or default from any party, (iv) to the best knowledge
and belief of Cheney, the relationship of Cheney or the Business
with the clients that are parties to the Client Agreements is
good and there has been no expression by any such clients to
Cheney of any intention to terminate or materially modify any of
such relationships, (v) Cheney does not have any knowledge of any
material breach or default under any of the Client Agreements by
any other party thereto, (vi) no event or action has occurred, is
pending or, to Cheney's best knowledge, is threatened, which,
after the giving of notice, passage of time or otherwise, could
constitute or result in any such material breach or default by
Cheney, the Business or any other party under any of the Client
Agreements and (vii) no material amount claimed to be payable to
Cheney or the Business under any of the Client Agreements is
being disputed by any client.
(b) Except as set forth in Schedule 6.8.A, (i) for his
or its services under each Client Agreement, Cheney or the
Business is entitled to receive the compensation provided under
such Client Agreement, without discount, offset or concessions of
any kind, and neither Cheney nor the Business has proposed or
agreed to offer or accept any discount, offset or concession and
(ii) to the best knowledge and belief of Cheney, the payment
history of the clients under the Client Agreements is good as
judged by industry standards. Set forth in Schedule 6.8.B is an
aging schedule for all of the Accounts Receivable and accounts
payable of the Business as of the Closing Date, which list is
accurate in all material respects.
(c) All of the accounts receivable reflected on the
books and records of Cheney (pertaining to the Business) or the
Business on Schedule 6.8.B are the result of bona fide
transactions in the ordinary course of business of the Business
and, to the best knowledge and belief of Cheney, are fully
collectible by Cheney or the Business, subject to no defenses,
counterclaims, set-offs or recoupments, except to the extent
appropriately reserved for on the books and records of Cheney
(pertaining to the Business) or the Business and except as
disclosed in Schedule 6.8.A.
6.9 Financial Statements.
(a) The Financial Statements have been and will be
prepared in accordance with generally accepted accounting
principles applied on a basis consistent throughout all periods
presented. Such statements are and will be correct and complete
in all material respects, are reconcilable to the books and
records of Cheney (pertaining to the Business) or the Business,
and present fairly the financial position of the Business as of
the dates, and the results of operations, cash flows and changes
in financial position of the Business for the periods, indicated,
except in the case of interim or unaudited financial statements,
for the omission of footnotes and for year-end review adjustments
which are not expected to be material.
(b) Except as set forth in Schedule 6.9, neither
Cheney nor the Business had any material liabilities or
obligations, whether secured or unsecured, accrued, determined,
absolute or contingent, asserted or unasserted or otherwise,
which are required to be reflected or reserved in a balance sheet
or the notes thereto under generally accepted accounting
principles, but which are not reflected in the Financial
Statements.
6.10 Other Agreements.
(a) Schedule 1.1.C sets forth a true and complete list
of the office leases, equipment leases and other agreements,
contracts and instruments included in the Acquired Assets other
than the Client Agreements (the "Other Agreements"). Together
with the Client Agreements, the Other Agreements constitute all
of the material contracts, agreements, understandings and
arrangements required for the operation of the Business, as
currently conducted by Cheney, or which have a material effect
thereon.
(b) Except as set forth in Schedule 6.10, (i) each
Other Agreement was entered into in the ordinary course of
business of the Business, is in full force and effect on the date
of this Agreement and is valid, binding and enforceable in
accordance with its terms, (ii) neither Cheney nor the Business
is in material breach or default under any of the Other
Agreements and Cheney has not received any written notice or
claim of any such breach or default from any party, (iii) Cheney
has no knowledge of any material breach or default under any of
the Other Agreements by any party thereto and (iv) no event or
action has occurred, is pending or, to Cheney's best knowledge,
is threatened, which, after the giving of notice, passage of time
or otherwise, could constitute or result in any such material
breach or default by Cheney, the Business or any other party
under any of the Other Agreements.
6.11 Intellectual Property. Schedule 1.1.E sets forth
a true and complete list of all trademarks, service marks, domain
name, trade names and copyrights, and United States or foreign
registrations and applications for registration of any of them,
and any other intellectual property rights, of the Business or
Cheney (in connection with the Business), all of which
intellectual property is included in the Acquired Assets. Cheney
or the Business owns or has legal right to use, pursuant to one
or more of the Other Agreements, all such intellectual property
without infringing on the rights or intellectual property of any
third party. No royalties or fees are payable by Cheney or the
Business to any party by reason of the use by Cheney or the
Business of any of such intellectual property. Cheney has not
received any claims that the products or services of the Business
have infringed the rights of others, and Cheney is not aware of
any infringement by others of the intellectual property used in
the Business.
6.12 Taxes. Except as set forth in Schedule 6.12,
Cheney (in connection with the Business) and/or the Business have
filed all federal, state, local and foreign returns and reports
which were required to be filed prior to the date hereof in
respect of all income, withholding, franchise, payroll, excise,
property, value-added, sales, use or other taxes, imposts, duties
or assessments (together with any related penalties, fines or
interest, the "Taxes"). Each such return and report is complete
and accurate in all material respects, and Cheney and/or the
Business has paid, or the Business established adequate reserves
for payment of, all Taxes (and any related penalties, fines and
interest) shown to be due on such returns or reports and any
assessments received with respect thereto. Except as set forth
in Schedule 6.12, Cheney has received no notice of any claims
pending or threatened for taxes for periods prior to the date
hereof, in excess of such reserves.
6.13 Permits; Compliance with Law. Except as set forth
in Schedule 6.13, the Business and/or Cheney hold all permits,
certificates, licenses, approvals and other authorizations of
governmental authorities as are materially necessary to the
conduct of the Business. The Business and/or Cheney are in
material compliance with the terms of each thereof and Cheney has
not received any notice or claim pertaining to the failure to
obtain, or the breach or violation of the terms of, any such
authorization. Cheney has not received any notice of any
proceeding or investigation likely to result in the suspension or
revocation of any such authorization. Cheney is conducting the
Business and the affairs of the Business in material compliance
with all applicable federal, state and local laws, ordinances,
rules, regulations and court or administrative orders and
decrees, including, without limitation, any respecting wage and
hour, withholding and unemployment compensation requirements.
6.14 Litigation. Except as set forth in Schedule 6.14,
there are no claims, actions, suits, proceedings, investigations
or criminal proceedings, at law or in equity, before any court,
tribunal, governmental authority or other forum (collectively,
"Proceedings") pending or, to Cheney's best knowledge,
threatened, against Cheney or the Business, which, if adversely
determined, would, singly or in the aggregate, have a material
adverse effect on Cheney, the Business or the Acquired Assets or
the ability of Cheney to perform his obligations under this
Agreement or which would challenge the validity or propriety of
the transactions contemplated in this Agreement. Schedule 6.14
contains a list of all Proceedings to which Cheney or the
Business is a party or to which Cheney, the Business or any of
the Acquired Assets are subject. There is no material
outstanding and unsatisfied judgment, order, writ, ruling,
injunction, stipulation or decree of any court, arbitrator or
governmental authority against or materially affecting Cheney,
the Business or any material portion of the Acquired Assets.
6.15 Ordinary Course; No Material Adverse Effect.
Except as set forth in Schedule 6.15 and for the transactions
contemplated in this Agreement, since December 31, 1996, Cheney
has conducted the Business and maintained the assets relating to
the Business substantially in the same manner as previously
conducted or maintained and solely in the ordinary course and,
since such date, there has not been any event that has or would,
with or without the giving of notice or the passage of time,
result in a material adverse effect on Cheney or the Business.
6.16 Employee Benefits and Relations.
(a) Except as set forth in Schedule 6.16, neither
Cheney (in connection with the Business) nor the Business
maintain or sponsor, or contributes or has any obligation or
liability to contribute to, any "employee pension benefit plan",
"employee welfare benefit plan" or "multi-employer plan" (as such
terms are defined in Sections 3(2), 3(1) and 4001(a)(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA")). Set forth in Schedule 6.16 is a list of all bonus,
pension, profit-sharing, deferred compensation, retirement,
vacation, disability, death benefit, unemployment,
hospitalization, medical, dental, severance, or other plan,
agreement, arrangement or understanding providing benefits to any
current or former employee of Cheney (in connection with the
Business) or the Business or to which Cheney or the Business has
any liability or obligation (all such plans, agreements,
arrangements and understandings are referred to as "Benefit
Plans"). Cheney has delivered to Buyer and Headway true,
complete and correct copies of (i) each Benefit Plan and all
amendments thereto (or, in the case of any unwritten Benefit
Plans, descriptions thereof), (ii) annual reports on Form 5500
for the past three years (together with accompanying financial
statements) filed with the Internal Revenue Service or Department
of Labor, as applicable, with respect to each Benefit Plan (if
any such report was required), (iii) all summary plan
descriptions for each Benefit Plan for which such summary plan
description is required or otherwise available and (iv) each
trust agreement and group annuity contract relating to any
Benefit Plan. No Benefit Plan provides for post-retirement
medical or life insurance benefits unless the event giving rise
to the benefit entitlement occurs prior to the employee's
retirement (except as required by Title I, Part 6 of ERISA).
(b) Any accrued obligations of Cheney (with respect to
the Business) or the Business under all Benefit Plans that are
required to be reflected on the balance sheet with respect to the
Business in accordance with generally accepted accounting
principles are reflected thereon as of the dates indicated
thereon and on the books and records of Cheney (pertaining to the
Business) for all periods subsequent to the date of the Financial
Statements and through the date hereof. Cheney has provided
Buyer with copies of all such balance sheets, books and records.
(c) Except as set forth in Schedule 6.16, each Benefit
Plan and any related trust complies currently, and has complied
at all times in the past, both as to form and operation, in all
material respects with the terms of such Benefit Plan and with
the applicable provisions of ERISA, the Internal Revenue Code
(the "Code") and other applicable laws. All necessary government
approvals for each Benefit Plan have been obtained on a timely
basis.
(d) Except as set forth in Schedule 6.16, neither
Cheney nor the Business has any liability (contingent or
otherwise) with respect to any terminated Benefit Plan. Neither
Cheney nor the Business is a member of, or has any liability with
respect to, a controlled group of corporations or a trade or
business (whether or not incorporated) under common control
which, together with Cheney and/or the Business, is or was at any
time treated as a single employer under Section 414(b), (c), (m)
or (o) of the Code or Section 4001(b)(1) of ERISA.
(e) Neither Cheney nor the Business is a party to any
union or collective bargaining contract with respect to any of
the employees of Cheney (in connection with the Business) or the
Business and there has not been, nor has Cheney received written
notice threatening, any representational or organizational
activity, strike, slowdown, picketing or work stoppage by any
union or other group of employees of Cheney (in connection with
the Business) or the Business.
(f) Schedule 6.16.A sets forth (i) the name of each
employee and sales representative of Cheney (with respect to the
Business) or the Business (other than temporary or payrolled
personnel), together with the annual compensation rate for each
such person and (ii) each oral or written contract, commitment or
understanding between Cheney (with respect to the Business) or
the Business and any current or former sales person, employee or
agent employed or retained by Cheney (in connection with the
Business) or the Business or any associate or relative of such
persons (other than temporary or payrolled personnel).
6.17 Insurance. All of the insurable Acquired Assets
are, in the judgment of Cheney, adequately insured for the
benefit of Cheney and/or the Business against loss or damage by
theft, fire and all other hazards and risks of a character
usually insured against by persons operating similar properties
in the localities where such properties are located, under valid
and enforceable policies issued by insurance carriers of
substantial assets. A list of all of insurance policies of
Cheney (with respect to the Business) or the Business, indicating
carriers, coverage and applicable limits of liability, is set
forth in Schedule 6.17. All such policies of insurance are in
full force and effect on the date hereof, and shall remain in
full force and effect through the Closing Date in accordance with
their terms. Cheney has not received notice of termination of
any such policies.
6.18 Miscellaneous. All representations and warranties
of Cheney set forth in this Agreement and all information set
forth in the Schedules are true and complete in all material
respects and no such representation, warranty or information
contains any untrue statement of a material fact or, to the
knowledge of Cheney, omits to state any material fact necessary
in order to make such representation, warranty or information, in
light of the circumstances under which it is made, not false or
misleading. Any disclosure made pursuant to any of the
representations and warranties in this Section 6 shall be deemed
to have been made for purposes of any other such representations
and warranties.
7. Representations and Warranties of Buyer and
Headway. Buyer and Headway, jointly and severally, represent
and warrant to Cheney as follows:
7.1 Due Organization and Qualification. Buyer is a
limited liability company duly organized and validly existing
under the laws of the State of Delaware, with full power and
authority to own, lease and operate its properties and to carry
on its business in the places and in the manner currently
conducted or proposed to be conducted. Headway is a corporation
duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, with full corporate power and
authority to own, lease and operate its properties and to carry
on its business in the places and in the manner currently
conducted or proposed to be conducted. Each of Buyer and Headway
is qualified to do business and is in good standing as a foreign
limited liability company or foreign corporation in each
jurisdiction in which the nature of the activities conducted by
it or the character of the properties owned or leased by it makes
such qualification necessary and the failure to so qualify would
have a material adverse effect on its business.
7.2 Authority; Due Authorization. Headway has all
requisite corporate power and authority to execute and deliver
this Agreement, the Employment Agreement and the Guarantee and to
consummate the transactions contemplated hereby and thereby.
Headway has taken all corporate action necessary for the
execution and delivery by it of this Agreement, the Employment
Agreement and the Guarantee and for the consummation of the
transactions contemplated hereby and thereby. Buyer has all
requisite power and authority to execute and deliver this
Agreement and the Employment Agreement and to consummate the
transactions contemplated hereby and thereby. Buyer has taken
all member action necessary for the execution and delivery by it
of this Agreement and the Employment Agreement and for the
consummation of the transactions contemplated hereby and thereby.
7.3 Valid Obligation. This Agreement and the
Employment Agreement, when executed and delivered by each of
Buyer and Headway, and the Guarantee, when executed and delivered
by Headway, shall constitute their respective valid and binding
obligations, in each case enforceable in accordance with its
terms, except as may be limited by principles of equity or by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights
generally.
7.4 No Conflicts or Defaults. The execution and
delivery of this Agreement and the Employment Agreement by each
of Buyer and Headway, and the Guarantee by Headway, and the
consummation of the transactions contemplated hereby and thereby,
do not and shall not (a) contravene the Certificate of Formation
or Limited Liability Company Agreement of Buyer or the
Certificate of Incorporation or the By-Laws of Headway or (b)
with or without the giving of notice or the passage of time,
materially violate or conflict with, or result in a material
breach of, or a material default or loss of rights under, any
agreement, lease, mortgage, instrument, permit or license to
which Buyer or Headway is a party or by which Buyer or Headway
are bound, or any judgment, order, decree, law, rule or
regulation to which Buyer or Headway are subject.
7.5 Copies of Charter Documents. Copies of the
Certificate of Formation and Limited Liability Company Agreement
of Buyer and the Certificate of Incorporation and By-Laws of
Headway, in each case as amended to the date hereof, have been
delivered to Cheney and are true and complete copies of such
documents as in effect on the date of this Agreement.
7.6 Authorizations. No authorization, approval,
order, license, permit or consent of, or filing or registration
with, any court or governmental authority, regulatory entity or
official body, and no consent of any other party, that has not
already been received or will be received as of the Closing Date,
is required in connection with the execution, delivery and
performance of this Agreement or the Employment Agreement by
Buyer and Headway, or the Guarantee by Headway.
7.7 Litigation. There are no Proceedings, pending or
threatened, against Buyer or Headway which, if adversely
determined, would, singly or in the aggregate, have a material
adverse effect on the ability of Buyer or Headway to perform
their respective obligations under this Agreement or which would
challenge the validity or propriety of the transactions
contemplated in this Agreement. There is no material outstanding
and unsatisfied judgment, order, writ, ruling, injunction,
stipulation or decree of any court, arbitrator or governmental
authority against or materially affecting Buyer or Headway or any
material portion of their respective assets.
7.8 Miscellaneous. All representations and warranties
of Buyer and Headway set forth in this Agreement were, as of the
date on which they were made or given, true and complete in all
material respects and no such representation, warranty or
information contains or contained any untrue statement of a
material fact or, to the knowledge of Buyer and Headway, omits or
omitted to state any material fact necessary in order to make
such representation or warranty, in light of the circumstances
under which it is or was made, not false or misleading. Any
disclosure made pursuant to any of the representations in this
Section 7 shall be deemed to have been made for purposes of any
other such representations.
8. Survival of Representations and Warranties. All
representations and warranties made by any party in this
Agreement or in any document or certificate delivered pursuant to
this Agreement shall survive the Closing and continue in effect
until December 31, 2001 (except that the representations and
warranties set forth in Sections 6.12 and 6.16 relating to Taxes
and Benefit Plans shall survive for a period equal to the statute
of limitations applicable to any claims and liabilities which may
result from a breach thereof) and shall not be affected or
diminished by any investigation made by or on behalf of any party
or by any notice of breach of, or failure to perform under, this
Agreement which is not effectively waived pursuant to Section 5,
subject, however, to the limitations on indemnification set forth
in Section 13.5.
9. Conduct of the Business Prior to Closing Date.
9.1 Preservation of Representations and Warranties.
Between the date of this Agreement and the Closing Date, Cheney
shall refrain from taking, without the prior written consent of
Buyer or Headway, any action which would render any of the
representations or warranties set forth in Section 6 materially
inaccurate as of the Closing Date. Cheney shall notify Buyer and
Headway promptly of the occurrence of any matter, event or change
in circumstances after the date hereof that would render any of
such representations and warranties inaccurate or which would
have been required pursuant to such representations or warranties
to be disclosed hereunder if it had occurred on or prior to the
date hereof.
9.2 Preserve Business. Between the date of this
Agreement and the Closing Date, Cheney shall preserve
substantially intact the Business, keep available the services of
the present key employees of the Business and preserve Cheney's
or the Business's present relationships with persons having
significant business relations in respect of the Business and
conduct the Business solely in the ordinary course. In this
regard and without limitation of the foregoing, Cheney shall not,
with respect to the Business, (A) make or grant any wage or
salary increases or bonuses other than pursuant to pre-existing
commitments or, with the prior written consent of Buyer, to
retain key employees, (B) terminate, amend or waive any
substantial rights under any Client Agreement or Other Agreement,
(C) sell, encumber or otherwise dispose of any of the Acquired
Assets or (D) enter into any material agreement, commitment or
understanding other than in the ordinary course of business.
9.3 Further Investigation.
(a) Between the date of this Agreement and the Closing
Date, Cheney shall provide Buyer, Headway and their respective
representatives with full access during normal business hours, on
reasonable prior notice, to the premises, personnel and files and
books and records of Cheney (pertaining to the Business) or the
Business and the Acquired Assets, and Cheney shall cause the
employees and representatives of the Business to furnish such
financial and operating data and other information with respect
to the Business and the Acquired Assets as Buyer or Headway shall
reasonably request; provided, however, that any such
investigation shall be conducted in such manner as not to
interfere unreasonably with the operation of the Business.
During such investigation, Buyer, Headway and their respective
representatives shall have the right to make copies of, or
excerpts from, such files, books and records as they may deem
advisable; provided, that all such information and material
secured by such parties in the course of such investigation shall
be deemed to be confidential and shall be used solely with
respect to the transactions herein described.
(b) If the purchase and sale contemplated in this
Agreement are not consummated, each of the parties shall (i)
return all written information and copies and summaries thereof
to the party from which such information originated and (ii)
maintain in confidence and not disclose to third parties any
information obtained from the other party which the other party
designated as confidential (or deemed to be confidential pursuant
to the provisions of Section 9.3(a)) or with respect to which the
circumstances of his or its disclosure reasonably indicated that
the other party treated it as confidential. The foregoing shall
not apply to any information that is or becomes part of public or
industry knowledge for reasons other than the acts or omissions
of the party to whom such information is disclosed in connection
with the transactions contemplated herein. The provisions of
this Section 9.3 shall survive the termination of this Agreement
for any reason.
9.4 Releases, Consents, Waivers and Filings. The
parties shall use their respective best efforts and cooperate
with each other to do all things reasonably necessary or
desirable to consummate in an expeditious manner the transactions
contemplated by this Agreement. In this regard, the parties
shall cooperate to obtain from all relevant third parties and
governmental authorities all consents, waivers, permits,
authorizations and licenses to or for, such transactions that may
be required under any agreement, lease, financing arrangement,
license, permit or other instrument or under any applicable law,
rule or regulation, and to obtain and file appropriate
registrations and transfers of Cheney's intellectual property.
9.5 No Solicitation. Cheney shall not, directly or
through any other party, negotiate or conclude an agreement with
any other party for the sale or other disposition of the
Business, or enter into any discussions with any other party for
such purposes or knowingly take any other action that might
materially prejudice the consummation of the transactions
contemplated herein, unless and until this Agreement is
terminated in accordance with Section 15.1.
10. Post-Closing Matters.
10.1 Operation of the Business During Earnout Periods.
On or prior to the Closing Date, and as a condition thereto,
Cheney, Buyer and HCSSI shall agree upon a written annual
operating and capital expenditure budget for the first Earnout
Period. For each of the second and third Earnout Periods, Buyer
and Cheney (as long as Cheney shall remain employed by Buyer
pursuant to the Employment Agreement) shall prepare and submit to
the HCSSI Board of Directors (the "HCSSI Board") annual operating
and capital expenditure budgets with respect to the Business, as
well as interim budget reports, at such times as the HCSSI Board
reasonably establishes, which budgets shall be approved in the
reasonable discretion of the HCSSI Board. Until such time as
Cheney and Buyer shall agree upon and submit any budget and the
HCSSI Board shall approve any such budget, Buyer shall operate
the Business consistent with the budget previously approved by
the HCSSI Board, or if none, the annual operating and capital
expenditure budgets utilized by Cheney for the operation of the
business for the calendar year ended 1997. After a budget is
approved by the HCSSI Board, Buyer's management shall be
authorized to act and to operate the Business in accordance with
such budget. Headway and HCSSI shall at all times have access to
the books and records of Buyer and to such other information
pertaining to its business as they request from time to time and
shall have the right at any time to audit the books of Buyer.
Cheney acknowledges that Buyer shall, in connection with the
operation of the Business, be required to implement the
accounting and operating systems and procedures of the Headway
group of companies.
10.2 The Employees. Buyer and Cheney shall, prior to
the Closing Date, agree upon which employees of Cheney (with
respect to the Business) or the Business Buyer wishes to employ.
Cheney shall permit Buyer to offer employment to such employees
prior to the Closing Date. Immediately prior to the Closing
Date, Cheney shall inform any employees to whom Buyer does not
offer employment, or who do not accept Buyer's offer of
employment if made, that they shall be relieved of their duties
with respect to the Business, effective on the Closing Date. All
liabilities and obligations associated with the termination of
employment by Cheney of any employees to whom Buyer does not
offer employment or who do not accept Buyer's offer of employment
under contract or applicable law or otherwise shall be the sole
responsibility of Cheney, and Cheney shall discharge and
indemnify, defend and hold harmless Buyer and Headway and their
respective officers, directors, employees, agents and
shareholders from all such obligations and liabilities.
10.3 Financial Statements. On or prior to 45 days
following the Closing Date, Cheney shall, at his expense, prepare
and deliver to Buyer and Headway unaudited financial statements
with respect to the Business as of and for the three-month
periods ended March 31, 1997, June 30, 1997 and September 30,
1997 and for period from January 1, 1998 through the Closing
Date, such financial statements to be prepared in accordance with
generally accepted accounting principles on a basis consistent
with the Financial Statements and on an accrual basis.
10.4 Insurance Matters. The parties shall cooperate to
preserve the existing insurance coverage of Cheney (with respect
to the Business) or the Business with respect to the Acquired
Assets through the Closing Date and to effect an appropriate
transition to Buyer's insurance, if requested, on the Closing
Date.
10.5 Further Assurances. Whenever reasonably requested
to do so by a party to this Agreement, on or after the Closing
Date, any other party shall do, execute, acknowledge and deliver
all such acts, bills of sale, assignments, confirmations,
consents and any and all such further instruments and documents,
in form reasonably satisfactory to the requesting party (and
consistent with the terms and conditions of this Agreement), as
shall be reasonably necessary or advisable to carry out the
intent of this Agreement, including, without limitation, to vest
in Buyer all of the right, title and interest of Cheney in and to
the Acquired Assets.
10.6 Authorization to Buyer. Without limiting in any
respect the right, title and interest in and to the Acquired
Assets to be acquired by Buyer hereunder, Cheney irrevocably
authorizes, effective upon the Closing Date, Buyer and its
successors and assigns, to demand and receive, from time to time,
any and all of the Acquired Assets, to give receipts and releases
for or in respect of the same, to collect, assert or enforce any
claim, right or title of any kind therein or thereto and, for
such purpose, from time to time, to institute and prosecute in
the name of Cheney or the Business (but only if Cheney consents
to the use of such name), or otherwise, any and all proceedings
at law, in equity or otherwise, which Buyer shall deem expedient
or desirable with respect to the Acquired Assets.
10.7 Correspondence. Cheney authorizes Buyer, on and
after the Closing Date, to receive and open mail addressed to
Cheney and to deal with the contents thereof in a responsible
manner; provided, that such mail relates to the Acquired Assets
or to the Business. Buyer shall promptly deliver to Cheney all
other mail addressed to Cheney which is received by Buyer.
Cheney shall have the right, at his request and expense, to
inspect any such mail addressed to it and retained by Buyer and
to make copies thereof.
10.8 Conditions of Operation. Subject to the
provisions of Section 10.1, during the period commencing on the
Closing Date and terminating on December 31, 2001:
(a) Buyer shall operate the Business in substantially
the same manner as it was conducted prior to the Closing Date;
(b) the prior written consent of Cheney shall be
required if Buyer enters into any transactions other than in the
ordinary course or inconsistent with the budgeting process set
forth in Section 10.1; and
(c) Headway shall provide Buyer with sufficient
working capital to operate the Business following the Closing
Date.
11. NonCompetition.
11.1 General. Cheney agrees, for a period from the
Closing Date until December 31, 2002 (or December 31, 2001, with
respect to Sections 11.1(b) and (d)) (the "Term") and provided
that Buyer and Headway are not in material default with respect
to any of their material obligations under this Agreement, the
Employment Agreement (the termination of Cheney without cause
thereunder being deemed a material default) or the Guarantee,
that he shall not, directly or indirectly:
(a) within a 75-mile radius from One Laurel Square,
Hamden, Connecticut, engage, for or on behalf of himself or any
person or entity other than Buyer or Headway, in the business of
the placement or provision of temporary, permanent, leased or
payrolled personnel (including self-incorporated personnel);
(b) solicit or attempt to solicit business for
services offered by Buyer or Headway from any parties who (i) are
clients of Cheney (in connection with the Business) or the
Business on the Closing Date or at any time during the 12 months
prior to the Closing Date or to whom Cheney (in connection with
the Business) or the Business has made or makes proposals for
services during the 12 months preceding the Closing Date or (ii)
are clients of Buyer or Headway during the Term; or to whom Buyer
makes proposals for services during the Term;
(c) within a 75-mile radius of One Laurel Square,
Hamden, Connecticut, otherwise divert or attempt to divert from
Buyer or Headway any business involving the placement or
provision of temporary, permanent, leased or payrolled personnel
(including self-incorporated personnel) of the type now or during
the Term conducted by Cheney (in connection with the Business) or
the Business, Buyer or Headway;
(d) solicit or attempt to solicit for any business
endeavor any employee (including any temporary, payrolled or
leased employee) of Buyer or Headway, including any employee of
the Cheney or the Business who is employed by Buyer after the
Closing Date; or
(e) render any services as a joint venturer, partner,
consultant or otherwise to, or have any interest as a
stockholder, partner, member, lender or otherwise in, any person
or entity which is engaged in activities which, if performed by
Cheney, would violate this Section 11.1.
The foregoing shall not prevent Cheney from purchasing or owning
(i) up to 5% of the voting securities of any corporation, the
securities of which are publicly-traded, or (ii) any interest in
any entity which is not also engaged in the business of the
placement or provision of temporary, permanent, leased or
payrolled personnel (including self-incorporated personnel).
Provided that Buyer and Headway are not in material default with
respect to any of their material obligations under this
Agreement, the Employment Agreement (the termination of Cheney
without cause thereunder being deemed a material default) or the
Guarantee, Cheney shall, during the Term, direct any business
opportunities in the temporary, permanent, leased or payrolled
personnel placement business that may come to his attention to
Buyer and Headway. References to Headway and Buyer in this
Section 11 shall also be deemed to refer to their respective
divisions and subsidiaries.
11.2 Injunctive Relief. Because Buyer and Headway
would not have an adequate remedy at law to protect their
businesses from any breach of the provisions of Section 11.1,
Buyer and Headway shall be entitled, in the event of such a
breach or threatened breach thereof by Cheney, to injunctive
relief, in addition to such other remedies and relief that would
be available to Buyer. In the event of such a breach, in
addition to any other remedies, Buyer and Headway shall be
entitled to receive from Cheney payment of, or reimbursement for,
their reasonable attorneys' fees and disbursements incurred in
successfully enforcing any such provision; provided, that Cheney
shall be entitled to receive from Buyer and Headway payment of,
or reimbursement for, his reasonable attorney's fees and
disbursements incurred in any proceeding commenced by Buyer and
Headway pursuant to the Section 11.2 in which Buyer and Headway
are not successful. The provisions of this Section 11 shall
survive the Closing Date.
12. Bulk Sales. Buyer waives compliance by Cheney
with the provisions of any applicable bulk sales law. Cheney
shall promptly pay or otherwise discharge all valid claims of his
creditors (as defined by the applicable bulk sales law) in
connection with the Business, as and when they become due and
payable.
13. Indemnification.
13.1 Obligations of Cheney. Cheney shall indemnify,
defend and hold harmless Buyer and Headway and their respective
officers, directors, employees, agents, shareholders, successors
and assigns from and against any Damages (as defined in Section
13.3) in connection with:
(a) any breach of any representation, warranty,
covenant or agreement of Cheney contained in this Agreement or
in any certificate, instrument or other agreement delivered by
him in connection with this Agreement;
(b) all Unassumed Liabilities and the operation of the
Business at any time prior to the Closing Date;
(c) the termination of the employment of any of
Cheney's (with respect to the Business) or the Business's
employees, as contemplated in Section 10.2; and
(d) any claim, action, suit or proceeding asserted or
instituted on the basis of any matter described in clauses (a),
(b) or (c) of this Section 13.1;
provided, however, that, except in connection with liabilities
under clauses (b), (c) or (d) above, the breach of the
representations and warranties set forth in Sections 6.12 and
6.16 relating to Taxes and Benefit Plans or the breach of the
provisions set forth in Section 11 relating to non-competition
(as to which the limitations of these provisos shall not apply),
no payment hereunder shall be required to be made by Cheney
unless and until the aggregate amount of any such losses,
damages, liabilities, costs and expenses exceeds $50,000 (and
then only in excess of such amount); provided, that in no event
shall Cheney be required to make payments hereunder in excess of
that portion of the Purchase Price as shall have been paid by
Buyer to Cheney.
13.2 Obligations of Buyer and Headway. Buyer and
Headway, jointly and severally, shall indemnify, defend and hold
harmless Cheney and his heirs, executors and assigns from and
against any Damages in connection with:
(a) any breach of any representation, warranty,
covenant or agreement of either Buyer or Headway (and their
respective successors and assigns) contained in this Agreement or
in any certificate, instrument or other agreement delivered by
either of them in connection with this Agreement;
(b) all Assumed Liabilities and the operation by Buyer
of the Business at any time on or after the Closing Date; and
(c) any claim, action, suit or proceeding asserted or
instituted on the basis of any matter described in clauses (a) or
(b) of this Section 13.2;
provided, however, that, except in connection with clause (b)
above, no payment hereunder shall be required to be made by Buyer
or Headway unless and until the aggregate amount of any such
losses, damages, liabilities, costs and expenses exceeds $50,000
(and then only in excess of such amount); provided, that in no
event shall Buyer and Headway be required to make payments
hereunder in excess of the Purchase Price.
13.3 Damages. For purposes of this Section 13,
"Damages" means any loss, liability, damage, cost or expense
suffered or incurred by a party in connection with the matters
described in Sections 13.1 or 13.2, as the case may be,
including, without limitation, assessments, fines, penalties,
judgments, settlements, costs, reasonable attorneys' fees and
reasonable disbursements and other reasonable out of pocket
expenses of the party incident to any matter as to which the
party is entitled to indemnification under such Sections, or
incident to any allegations or claims which, if true, would give
rise to Damages subject to indemnification hereunder, or incident
to the enforcement by the party of his or its rights and remedies
under this Section 13.
13.4 Proceedings. Any party seeking indemnification
pursuant to this Section 13 (the "Indemnified Party") shall give
the party from which indemnification is sought (the "Indemnifying
Party") prompt notice of any claim, allegation, action, suit or
proceeding which he or it believes might give rise to
indemnification under this Section 13, stating the nature and
extent of any such claim, allegation, suit or proceeding with
reasonable specificity, and the amount thereof, if known. Any
failure to give such notice shall not affect the indemnification
provided hereunder except to the extent that the Indemnifying
Party is actually prejudiced as a result of such failure. The
Indemnifying Party shall have the right to participate in, and,
with the consent of the Indemnified Party, which consent shall
not be unreasonably withheld or delayed, to control, the defense
of any such claim, allegation, action, suit or proceeding, at the
Indemnifying Party's expense, and with counsel of his or its own
choosing reasonably acceptable to the Indemnified Party;
provided, however, that if Buyer and Headway are the Indemnified
Parties, they shall have the right to withhold such consent and
to retain control of such defense in the case of any claim,
action, suit or proceeding with respect to which an adverse
outcome could have a material adverse effect on Buyer or Headway,
with the expense of any counsel retained by Buyer and Headway in
any such instance to be at Buyer's and Headway's expense. No
settlement or compromise of any such claim, action, suit or
proceeding shall be made without the prior consent of the
Indemnified Party and the Indemnifying Party, which consent shall
not be unreasonably withheld or delayed by either of them.
13.5 Limitations on Indemnification. Anything in
Article 13 to the contrary notwithstanding, no right to
indemnification may be asserted under this Section 13 after
December 31, 2001, except any such rights to indemnification
arising in connection with (a) any matter referred to in Sections
6.12 or 6.16, none of which shall be subject to any time
limitation other than any statutes of limitation applicable to
such matters, (b) any matter covered by Section 11 or (c) any
claim as to which the notice required by Section 13.4 has been
given on or prior to December 31, 2001.
13.6 Offset. It is agreed that, without limiting any
other rights of Buyer and Headway, they shall have the right to
set off against and deduct from any amounts payable to Cheney
pursuant to the provisions of Section 1.3 the amount of any
Damages for which they are entitled to indemnification under this
Section 13. In order to set off any such indemnity claim against
any amount payable to Cheney pursuant to Section 1.3, Buyer must,
in each instance, provide a certificate to Cheney setting forth
the claim in reasonable detail. If Cheney does not agree to
such claim in writing within 10 days after delivery of such
notice, Buyer agrees (a) to deposit into escrow, in an interest
bearing account, the amount of such claim, with Christy & Viener
as escrow agent, under a form of escrow agreement to be mutually
agreed by the parties, with the costs of such escrow arrangement
to be borne equally by the parties, and (b) to utilize the
arbitration procedures set forth in Section 14 to resolve such
claim.
14. Arbitration.
14.1 General. Any controversy or claim arising out of
or relating to this Agreement shall be finally resolved by
arbitration pursuant to the Commercial Arbitration Rules of the
American Arbitration Association; provided, however, that this
Section 14.1 shall not in any way affect the right of Buyer and
Headway to seek injunctive relief or any other remedies pursuant
to Section 11.2. Any such arbitration shall take place in New
York, New York, before three arbitrators, one of which shall be
appointed by Buyer or Headway, one by Cheney, and the third by
the arbitrators so appointed; provided, however, that the parties
may by mutual agreement designate a single arbitrator. The
parties further agree that (i) the arbitrators shall be empowered
to include arbitration costs and attorney fees in the award to
the prevailing party in such proceedings and (ii) the award in
such proceedings shall be final and binding on the parties. The
arbitrators shall apply the law of the State of New York,
exclusive of conflict of laws principles, to any dispute.
Judgment on the arbitrators' award may be entered in any court
having the requisite jurisdiction. Nothing in this Agreement
shall require the arbitration of disputes between the parties
that arise from actions, suits or proceedings instituted by third
parties.
14.2 Consent to Jurisdiction; Service of Process. Each
party irrevocably submits to the jurisdiction and venue of the
arbitration described in Section 14.1 and to the jurisdiction and
venue of the federal and state courts sitting in New York County,
New York, for the enforcement of any judgment on the arbitrators'
award, and waives any objection it may have with respect to the
jurisdiction of such arbitrations or courts or the inconvenience
of such forums or venues. Buyer and Headway appoint Messrs.
Christy & Viener, 620 Fifth Avenue, New York, New York 10020,
Attention: Laurence S. Markowitz, Esq., and Cheney appoints
Martin J. Gersten, Esq., as their respective attorneys-in-fact
and authorized agents solely to receive on their behalf, service
of any demands for, or any notice with respect to, arbitration
hereunder or any service of process. Service on either of such
attorneys-in-fact may be made by registered or certified mail or
by personal delivery, in any case return receipt requested, and
shall be effective as service on Buyer and Headway or Cheney, as
the case may be. Nothing herein shall be deemed to affect any
right to serve any such demand, notice or process in any other
manner permitted under applicable law.
15. Miscellaneous.
15.1 Termination. This Agreement may be terminated
at any time prior to the Closing Date by the mutual written
consent of all the parties.
15.2 Entire Agreement; Amendments; No Waivers. This
Agreement, together with the Schedules, sets forth the entire
understanding of the parties with respect to its subject matter
and merges and supersedes all prior and contemporaneous
understandings of the parties with respect to its subject matter.
No provision of this Agreement may be waived or modified, in
whole or in part, except by a writing signed by each of the
parties. Failure of any party to enforce any provision of this
Agreement shall not be construed as a waiver of his or its rights
under such or any other provision. No waiver of any provision of
this Agreement in any instance shall be deemed to be a waiver of
the same or any other provision in any other instance.
15.3 Communications. All notices, consents and other
communications given under this Agreement shall be in writing and
shall be deemed to have been duly given (a) when delivered by
hand or by Federal Express or a similar overnight courier to, (b)
five days after being deposited in any United States post office
enclosed in a postage prepaid registered or certified mail
envelope (Return Receipt Requested) addressed to, or (c) when
successfully transmitted by facsimile (with a confirming copy of
such communication to be sent as provided in (a) or (b) above)
to, the party for whom intended, at the address or facsimile
number for such party set forth below, or to such other address
or facsimile number as may be furnished by such party by notice
in the manner provided herein; provided, however, that any notice
of change of address or facsimile number shall be effective only
on receipt.
If to Buyer or Headway: with a copy to:
Headway Corporate Resources, Inc. Christy & Viener
850 Third Avenue 620 Fifth Avenue
New York, New York 10022 New York, New York 10020
Attention: Barry S. Roseman, President Atten: Laurence S.
Markowitz, Esq.
Fax No.: (212) 508-3540 Fax No.: (212) 632-5555
If to Cheney: with a copy to:
Mr. Timothy Cheney Martin J. Gersten, Esq.
25 Lansdowne Avenue 14 Powder Horn Hill
Hamden, Connecticut 06517 Brookfield, Connecticut
06804
Fax No.: (203) 281-0109 Fax No.: (203) 740-8642
15.4 Successors and Assigns. This Agreement shall be
binding on, enforceable against and inure to the benefit of, the
parties and their respective heirs, executors, successors and
permitted assigns (whether by merger, consolidation, acquisition
or otherwise), and nothing herein is intended to confer any
right, remedy or benefit upon any other person. No party may
assign his or its rights or delegate his or its obligations under
this Agreement without the express written consent of all of the
other parties; provided, however, that Buyer may assign its
rights or delegate its obligations hereunder, either before or
after the Closing Date, to Headway or any other wholly-owned
subsidiary of Headway.
15.5 Expenses. Each of the parties shall bear and pay,
without any right of reimbursement from any other party, all
costs, expenses and fees incurred by him or it or on his or its
behalf incident to the preparation, execution and delivery of
this Agreement and the performance of such party's obligations
hereunder, whether or not the transactions contemplated in this
Agreement are consummated, including, without limitation, the
fees and disbursements of attorneys, accountants and consultants
employed by such party, and shall indemnify and hold harmless the
other parties from and against all such fees, costs and expenses.
15.6 Brokers and Finders. Except as set forth in
Schedule 15.6, each party represents to the others that no agent,
broker, investment banker, financial advisor or other person or
entity is or shall be entitled to any broker's or finder's fee or
other commission or similar fee in connection with the
transactions contemplated by this Agreement. Each party shall
indemnify and hold harmless the others from and against any
claim, liability or obligation with respect to any fees,
commissions or expenses asserted by any person or entity on the
basis of any act or statement alleged to have been committed or
made by such indemnifying party or any of his or its affiliates.
15.7 Public Announcements. No oral or written public
announcement or disclosure with respect to this Agreement and the
transactions contemplated herein prior to the Closing Date shall
be made by or on behalf of any party without the prior approval
of the other parties, except to the extent required by applicable
securities laws or the rules and regulations of any stock
exchange, by court order or as otherwise required by law.
15.8 Governing Law. This Agreement shall in all
respects be governed by and construed in accordance with the laws
of the State of New York applicable to agreements made and fully
to be performed in such state, without giving effect to conflicts
of law principles.
15.9 Severability and Savings Clause. If any provision
of this Agreement is held to be invalid or unenforceable by any
court or tribunal of competent jurisdiction, the remainder of
this Agreement shall not be affected thereby, and such provision
shall be carried out as nearly as possible according to its
original terms and intent to eliminate such invalidity or
unenforceability. In this regard, the parties agree that the
provisions of Section 11, including, without limitation, the
scope of the territorial and time restrictions, are reasonable
and necessary to protect and preserve Buyer's legitimate
interests. If the provisions of Section 11 are held by a court
of competent jurisdiction to be in any respect unreasonable, then
such court may reduce the territory or time to which it pertains
or otherwise modify such provisions to the extent necessary to
render such provisions reasonable and enforceable.
15.10 Counterparts. This Agreement may be executed
in multiple counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
15.11 Construction. Headings used in this
Agreement are for convenience only and shall not be used in the
interpretation of this Agreement. References to Sections and
Schedules are to the sections and schedules of this Agreement.
As used herein, the singular includes the plural and the
masculine, feminine and neuter gender each includes the others
where the context so indicates.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first set forth above.
HEADWAY CORPORATE RESOURCES, INC. CHENEY ASSOCIATES, L.L.C.
By /s/Barry S. Roseman By /s/Barry S. Roseman
President Treasurer
/s/ TIMOTHY CHENEY
E-31
Exhibit No. 2
Form 8-K
Headway Corporate Resources, Inc.
SEC File No. 0-23170
[Each of the schedules to this Agreement described in Sections 1
and 6 are omitted, and will be provided supplementally to the
Commission on request.]
ASSET PURCHASE AGREEMENT
AGREEMENT, dated as of March 23, 1998, among HEADWAY
CORPORATE RESOURCES, INC., a Delaware corporation ("Headway"),
HEADWAY CORPORATE STAFFING SERVICES OF NORTH CAROLINA, INC., a
Delaware corporation ("Buyer"), SELECT STAFFING SERVICES, INC., a
Virginia corporation ("Seller"), and JACK L. POWELL, JR.
("Powell").
W I T N E S S E T H:
WHEREAS, Buyer wishes to purchase, and Seller wishes to
sell, the assets and business of Seller specified in this
Agreement;
NOW, THEREFORE, the parties agree as follows:
1. Purchase and Sale of the Acquired Assets.
1.1 Acquired Assets. Subject to the terms and
conditions of this Agreement, and in reliance on the
representations, warranties and agreements set forth herein, on
the Closing Date (as defined in Section 2), Seller shall sell,
convey, transfer, assign and put Buyer into possession of, and
Buyer shall purchase from Seller, effective as of the Closing
Date, all of Seller's right, title and interest in and to those
certain assets of Seller utilized in connection with Seller's
business of the placement or provision of temporary, permanent,
leased or payrolled (as that term is defined in Section 1.3(f))
personnel (including, without limitation, self-incorporated
personnel) conducted at its Richmond, Hampton, Norfolk and
Virginia Beach, Virginia locations (the "Business") and
identified or described below:
(a) the office furniture, equipment, computers,
fixtures and vehicles of Seller pertaining to the Business and
listed in Schedule 1.1.A;
(b) all computer software (except "Branchpack"
computer software), programs and databases owned by Seller
pertaining to the Business and identified on Schedule 1.1.B;
(c) all office supplies owned by Seller pertaining to
the Business;
(d) the client agreements and arrangements of Seller
pertaining to the Business set forth in Schedule 1.1.C;
(e) the office leases, equipment leases and other
agreements, contracts and instruments of Seller pertaining to the
Business listed in Schedule 1.1.D;
(f) all prepayments and deposits of Seller pertaining
to the Business, including without limitation, security deposits
under assigned leases;
(g) originals or true copies of all books and records
of Seller pertaining to the assets referred to in subparagraphs
(a) through (f) above, as appropriate, including customer lists
and credit files, and all those pertaining to Seller's employees
who are hired by Buyer pursuant to Section 9.2;
(h) all permits, licenses, approvals and other
governmental authorizations pertaining to the Business that are
transferable to Buyer and listed in Schedule 1.1.E;
(i) any other assets not referred to in Section 1.2,
including, without limitation, telephone and facsimile numbers
and data transmission lines, which are used by Seller exclusively
in connection with the Business; and
(j) the goodwill pertaining to the Business;
all as the same exist on the date hereof and shall exist on the
Closing Date, subject only to changes occurring in the ordinary
course of business of Seller. All such assets to be acquired are
referred to together as the "Acquired Assets".
1.2 Excluded Assets. The following assets of Seller
are excluded from the Acquired Assets: (a) the consideration
payable to Seller by Buyer, (b) any cash, bank deposits,
certificates of deposit, marketable securities, notes, drafts,
checks or other cash equivalents or similar instruments owned by
Seller, (c) accounts receivable of Seller pertaining to the
Business as of the Closing Date (the "Accounts Receivable"), (d)
all claims and rights of Seller to any federal, state or local
refunds, credits, rebates, claims, repayments or benefits of
Taxes (as defined in Section 6.14), (e) any loans receivable of
Seller, (f) any refundable portions of paid insurance premiums
and prepaid federal, state or local income taxes, (g) Seller's
interest in any life insurance policies maintained by Seller on
the life of any employee, (h) any treasury stock held by Seller,
(i) the corporate stock certificate books, ledger books, minute
books and similar corporate records of Seller, (j) Seller's tax
records and any books and records which Seller shall be required
to retain pursuant to any applicable law, rule or regulation
(provided, that at Buyer's request and expense, Seller shall
provide Buyer with copies of any record or document retained by
Seller and, similarly, Buyer, at Seller's request and expense,
shall provide Seller with copies of any record or document
transferred to Buyer hereunder) and (k) all records and
correspondence relating to the foregoing excluded assets.
1.3 Purchase Price.
(a) As consideration for the sale, conveyance,
transfer, assignment and delivery to Buyer of the Acquired
Assets, Buyer shall pay to Seller a purchase price (the "Purchase
Price"), subject to adjustment as provided in Section 1.3(b), as
follows:
(i) $2,965,000 payable on the Closing Date; and
(ii) the Earnout on the Earnout Payment Dates (as
such terms are defined in Sections 1.3(b) and
1.3(d)), respectively).
All amounts payable by Buyer pursuant to Sections 1.3(a) and
1.3(b) shall be paid by wire transfer in immediately available
funds to accounts designated by Seller to Buyer not later than
two business days prior to the scheduled date of such payment.
(b) Each of the three consecutive twelve-month periods
commencing April 1, 1998 is referred to as an "Earnout Period".
If, for any Earnout Period, Buyer's EBITA equals or exceeds
$1,000,000 (the "Base Amount"), Buyer shall pay to Seller
$500,000 in cash for such Earnout Period (each, an "Earnout"),
plus (i) $1.50 for each $1.00 that Buyer's EBITA for such Earnout
Period exceeds the Base Amount or minus (ii) $1.50 for each $1.00
that Buyer's EBITA for such Earnout Period is less than the Base
Amount. During each Earnout Period, the Business shall be
operated as a separate division of Buyer. On each Earnout
Payment Date, Buyer will furnish Seller with a detailed
computation of the Earnout.
The calculation of the Earnout for each Earnout Period
shall be independent of the calculations for the other Earnout
Periods, and there shall be no cumulation of EBITA from one
Earnout Period to another, except that if the Earnout for the
first or second Earnout Period is negative (that is, less than
zero), the amount of any negative Earnout shall be subtracted
from any positive Earnout, or added to any negative Earnout, for
the following Earnout Period. The fact that EBITA or the
Earnout for any Earnout Period is negative shall not result in
any liability by Seller or Powell to Buyer.
(c) For the purposes of this Agreement, "EBITA"
means, for an Earnout Period, Net Income (as defined below)
without deductions for (i) interest expense, (ii) provisions for
income taxes and (iii) amortization of goodwill and other
intangible assets resulting from Buyer's purchase of the Acquired
Assets. Net Income shall exclude revenues and expenses
attributable to acquisitions by Buyer of at least a majority of
the stock, or substantially all of the assets of, other entities
after the Closing Date.
"Net Income" means the net income (or loss) of Buyer
for an Earnout Period attributable to Buyer's continued operation
of the Business, as determined by Headway in accordance with
generally accepted accounting principles ("GAAP"). The
calculation of Net Income shall take into account the following
expenses to the extent incurred in the ordinary course of the
Business and consistent with GAAP: (i) wage, salary and
commission expense of all temporary, payrolled and full-time
employees of Buyer attributable to the Business; (ii) reasonable
travel and entertainment expenses incurred by Buyer's employees
attributable to the Business; (iii) bonuses paid to Buyer's
employees attributable to the Business; (iv) all amounts
attributable to FICA and any other federal, state and local taxes
paid by Buyer on behalf of such employees; (v) all unemployment
insurance premiums, workers' compensation premiums, medical and
disability coverage and any other benefits provided by Buyer to
such employees; (vi) expenses attributable to the in-house
processing by Buyer of the payroll for such employees; (vii)
Buyer's general and administrative expenses directly attributable
to the operation of the Business in the ordinary course; (viii)
sales commissions of outside sales representatives attributable
to the Business; (ix) any fall-offs, rebates, discounts, offsets
or concessions granted by Buyer to its clients with respect to
the Business; (x) depreciation in connection with the acquisition
by Headway, Buyer or any other subsidiary of Headway of computer
and telecommunications equipment consistent with that used by the
Headway group of companies and utilized by Buyer in connection
with the Business; (xi) for the first Earnout Period only, any
expenses reasonably and necessarily incurred by Headway, Buyer or
any other subsidiary of Headway in connection with the transition
of the operation of the Business to Buyer as part of the Headway
group of companies, including, without limitation, expenses for
the installation and implementation by Buyer in connection with
the Business of the third party accounting and operating software
used by Headway; and (xii) an annual charge for technical and
financial support provided by the Headway group of companies,
including, without limitation, the reasonable allocation by
Headway to the Business of fees charged by Headway's certified
public accountants in connection with the annual audit of the
Headway group of companies. Notwithstanding the foregoing, in no
event may the charges contemplated in clauses (x), (xi) and (xii)
above exceed $200,000 for any Earnout Period. For the purpose of
determining Net Income pursuant to this Section 1.3(c), any
reserves established by Buyer attributable to the Business for
bad debts with respect to its receivables during any Earnout
Period shall be added to Net Income to the extent deducted
therefrom.
In the event of a material change in the ownership,
management or operations of the Buyer during the Earnout Periods
that, in the reasonable discretion of Powell or Seller, would
materially and adversely affect the revenues of Buyer with
respect to the Business, including without limitation, changes
resulting from one or more sales or other dispositions of
substantially all of the assets of Buyer, an organizational or
ownership restructuring (such as a merger, consolidation or other
reorganization involving its business, or a spin-off, split-up or
other divisional restructuring or a substantial sale of its stock
to an unaffiliated organization) or any other organic change that
reduces operations, then the parties shall agree to discuss and
evaluate the then current definition of Net Income to assure that
the Earnout calculation set forth in this Section 1.3 continues
to be a fair and relevant method to measure the EBITA of the
Business and the Net Income defined herein, and whether
adjustments should be made to the method of calculation to take
into account the effect of such changes. Buyer also agrees not
to take actions calculated to minimize EBITA or to reduce Net
Income for the purpose of avoiding any Earnout obligations
hereunder, or to reduce any Earnout to which Seller would
otherwise be entitled to hereunder (including using affiliated
organizations to compete with the Business or using marketing or
business plans intended to cause the diversion of revenue from
the Business to the Buyer's affiliated organizations).
(d) Each Earnout shall be paid 90 days following the
close of the related Earnout Period (each, an "Earnout Payment
Date"). If any such day is not a business day, the Earnout
Payment Date shall be the next succeeding business day. If, as
of the close of business on the day prior to any Earnout Payment
Date, any account receivable included as income in the
calculation of Net Income has not been fully collected, the
uncollected amount of such account receivable shall be charged
against EBITA, and the Earnout shall be reduced accordingly. If
such account receivable is thereafter collected after such
Earnout Payment Date, Buyer shall pay Seller the amount by which
such Earnout had been reduced in respect of such account
receivable, net of any direct collection costs and net of an
interest charge for any account receivable paid more than 90 days
after the date of invoice (a "Restoration Amount"), with the
interest rate determined by reference to the interest rate then
in effect for Eurodollar Rate Loans under the Credit Agreement,
dated as of March 12, 1998, by and among Headway, as Borrower,
NationsBank, National Association, as Agent and as Lender, and
the lenders from time to time parties thereto, which amount shall
be calculated and paid at the end of each fiscal quarter,
commencing on June 30, 1998; provided, that with respect to the
Earnout Payment Date for the third Earnout Period, Buyer shall be
obligated to pay Seller a Restoration Amount with respect to any
such account receivable only if such account receivable is
collected within 90 days of such third Earnout Payment Date.
(e) Within 5 business days after receipt by Seller and
Powell of written notice from Headway, Seller and Powell, jointly
and severally, agree to pay Buyer $3.00 for each $1.00 that the
EBITA of the Business as determined by Headway based upon the
audited financial statements of the Business for the fiscal year
ended December 31, 1997 delivered to Buyer and Headway pursuant
to Section 9.3, is less than $1,000,000 (after excluding any
corporate overhead of Seller) ("Deficiency Amount").
(f) For the purposes of this Agreement, "payrolled"
personnel means (i) those employees of Headway, Buyer or Seller
(with respect to the Business), as the case may be, who are hired
by Headway, Buyer or Seller on behalf of a client and are
considered as full-time "permanent" employees of such client, but
whose compensation is paid by Headway, Buyer or Seller (with
respect to the Business) or (ii) those employees of Headway,
Buyer or Seller (with respect to the Business) who are considered
to be payrolled employees under industry practice or
understanding prevailing at the time.
(g) Headway guarantees to Seller and Powell the full
and timely performance and payment of all of Buyer's obligations
under this Agreement.
1.4 Assumption of Liabilities. As additional
consideration for the purchase of the Acquired Assets, Buyer
shall assume and agree to pay, perform and discharge in full the
following debts, contracts, obligations and liabilities of Seller
(the "Assumed Liabilities"), and no others, as and when due, and
to indemnify and hold Seller and Powell harmless therefrom:
(a) all obligations and liabilities of Seller arising
on or after the Closing Date under its office leases for the
premises located at 5516 Falmouth Street, Suite 108, Richmond,
Virginia; 22 Enterprise Parkway, Suite 100, Hampton, Virginia
23666; and 4525 South Boulevard, Suite 203, Virginia Beach,
Virginia 23452; and
(b) all obligations or liabilities arising on or after
the Closing Date under Seller's client agreements and
arrangements set forth in Schedule 1.1.C and Seller's equipment
leases and other agreements, contracts and instruments set forth
in Schedule 1.1.D.
1.5 Liabilities Not Assumed. Other than the
liabilities referred to in Section 1.4, Buyer shall not assume or
be deemed to have assumed any of the liabilities or obligations
of Seller of any kind (together, the "Unassumed Liabilities"),
including, without limitation:
(a) any liability claims with respect to the business
and affairs of Seller and the acts and omissions of its current
or former officers, directors, employees and agents, either
before or after the Closing Date;
(b) any obligation or liability of Seller to Powell or
any other current or former officer or director of Seller;
(c) any obligation or liability for federal, state,
local or foreign income or other taxes (including any related
penalties, fines and interest) of Seller, including, without
limitation, any and all taxes arising out of the transactions
contemplated hereby;
(d) any obligation or liability arising out of the
operation of Seller's business (including the Business) prior to
the Closing Date, including any rebates, discounts, offsets or
concessions attributable to amounts invoiced to clients of Seller
prior to the Closing Date;
(e) any obligation or liability to Seller's temporary,
payrolled, leased or full-time employees for salary, wages,
bonuses or other compensation or benefits, including any with
respect to retirement plans, and accrued vacation, sick and
holiday time and pay incurred prior to the Closing Date,
including, without limitation, any liabilities of Seller
contemplated by Section 9.2 but excluding any liabilities set
forth in Schedule 1.7;
(f) any liabilities of Seller with respect to any
pension, retirement, savings, profit-sharing or other benefit
plans;
(g) any liability arising out of, and any expenses
relating to, any claim, action, dispute or litigation involving
Seller;
(h) any liability of Seller for fines, penalties,
damages or other amounts payable to any government or
governmental agency or instrumentality; and
(i) any obligation or liability of Seller or Powell
for any expenses incurred in preparing or negotiating this
Agreement and consummating the transactions contemplated
hereunder.
Seller and Powell, jointly and severally, agree to discharge and
indemnify, defend and hold harmless Buyer and Headway and their
respective officers, directors, employees, agents and
stockholders from all Unassumed Liabilities, whether or not now
known, liquidated or contingent, including, without limitation,
any that might otherwise be deemed to have been assumed by Buyer
by virtue of its purchase of the Acquired Assets or otherwise by
operation of law.
1.6 Allocation of Purchase Price. Buyer and Seller
agree to report this transaction for United States federal income
tax purposes in accordance with a written allocation of Purchase
Price to be prepared, initialed and mutually agreed to by Buyer
and Seller at or before the Closing Date.
1.7 Closing Date Adjustments. On or before the
Closing Date, Buyer and Seller shall determine and agree on, as
of the Closing Date, (i) any amounts that Seller may have prepaid
for equipment or office leases included in the Acquired Assets
in respect of periods beginning on or after the Closing Date,
(ii) any amounts that Seller may have prepaid for sales, use or
similar taxes, license fees (exclusive of corporate franchise
fees), insurance, services or other expenses relating to the
Acquired Assets in respect of periods beginning on or after the
Closing Date, (iii) the amount of any bonuses, vacation, sick or
holiday time or pay accrued as of the Closing Date with respect
to temporary, payrolled, leased or full-time employees of Seller
retained by Buyer pursuant to Section 9.2, as set forth in
Schedule 1.7 and (iv) any amounts of the type described in
clauses (i) and (ii) in respect of periods prior to the Closing
Date which are expected to be billed after the Closing Date. All
amounts relating to periods ending prior to the Closing Date
shall be for the account of Seller and all amounts relating to
periods beginning on or after the Closing Date shall be for the
account of Buyer. The respective amounts shall be netted against
each other on the Closing Date. If the result is an amount owing
to Seller, Buyer shall pay such amount to Seller on the Closing
Date. If the result is an amount owing to Buyer, Seller shall
pay such amount to Buyer at the Closing Date.
1.8 Collection of Accounts Receivable and Time Sheet
Receivables.
(a) From time to time after the Closing Date, Buyer
and Seller shall determine and agree upon any time sheets of
temporary, payrolled or leased personnel employed by Seller in
connection with the Business not submitted to Seller prior to the
Closing Date attributable to services rendered by such personnel
to clients of the Business on or prior to the Closing Date.
Seller shall pay such employees and render invoices (the
"Invoices") to the client for the services so provided and shall
be entitled to any proceeds received therefrom. However, if
requested by Seller, and to the extent practicable, Buyer shall
pay such employees and render and collect such Invoices. After
any Invoice is collected by Buyer, Seller shall be entitled to
receive from Buyer the amount so collected, less (i) 115% of the
amount actually paid by Buyer to the personnel who provided the
service to which such invoice relates and (ii) any billed
expenses paid by Buyer to such personnel in connection with their
providing such service (the "Net Invoice Amount"). Buyer shall
remit to Seller all Net Invoice Amounts and payments received by
it on account of any Receivables within 15 days after the end of
each month in which such payments or Net Invoice Amounts are
received. While Buyer shall use reasonable efforts to collect
the Receivables and the Invoices commensurate with the efforts it
would use to collect its own accounts receivable, Buyer shall not
be required to institute litigation or other collection
proceedings in order to do so and, in any event, Buyer shall have
no liability to Seller for any Receivables or Invoices that are
not collected. Seller shall have the right to institute
collection proceedings with respect to any Receivables that are
aged more than 120 days after the date of the related invoice,
but shall notify Buyer of any such action not less than five
business days before it is instituted.
(b) Seller shall promptly pay to Buyer, if and when
received, any amounts which are received by it after the Closing
Date in respect of any of the Acquired Assets or with respect to
any accounts receivable generated by Buyer with respect to
periods on or after the Closing Date; provided, that if any such
amount is remitted to Buyer more than 5 business days after
receipt by Seller, Seller shall pay interest to Buyer on such
amount for that number of days during which such amount remains
unremitted to Buyer at the Default Rate for Base Rate Loans (as
those terms are defined in the Credit Agreement). If Buyer
receives after the Closing Date any payments with respect to any
assets of Seller not included in the Acquired Assets other than
with respect to the Invoices and the Receivables (which shall be
governed by Section 1.8(a)), Buyer shall promptly pay such
amounts to Seller; provided, that if any such amount is remitted
to Seller more than 5 business days after receipt by Buyer, Buyer
shall pay interest to Seller on such amount for that number of
days during which such amount remains unremitted to Seller at the
Default Rate for Base Rate Loans. Any amounts received pursuant
to this Section 1.8(b) shall be applied to the receivables
specifically identified by the client. If no such identification
is provided, Buyer or Seller, as the case may be, shall inquire
of client for written identification and apply the amount
received accordingly. Seller agrees to permit Buyer to use its
name for the purpose of depositing checks received by Buyer in
respect of accounts receivable generated by Buyer attributable to
periods on or after the Closing Date.
1.9 Nonassignable Contracts. Nothing in this
Agreement shall be construed as an attempt to assign any contract
which is by law nonassignable without the consent of any other
party thereto unless and until such consent is given.
2. Closing. The consummation of the purchase and
sale of the Acquired Assets shall take place at 10:00 a.m. on
March 23, 1998 (the "Closing Date") at the offices of Christy &
Viener, 620 Fifth Avenue, New York, New York 10020.
3. Conditions to the Obligations of Buyer. The
obligations of Buyer under Section 1 are subject to the
satisfaction, on or before the Closing Date, of the following
conditions:
3.1 Due Performance. Seller and Powell shall have in
all material respects fully performed and complied with all
agreements and conditions required under this Agreement to be
performed or complied with by it or him on or prior to the
Closing Date.
3.2 Accuracy of Representations and Warranties. All
representations and warranties of Seller and Powell set forth in
Section 6 of this Agreement shall be true and correct in all
material respects on and as of the Closing Date as if made on and
as of such date.
3.3 Certificate. Buyer shall have received a
certificate from each of Seller and Powell to the effect set
forth in Sections 3.1 and 3.2.
3.4 Related Instruments. Seller shall have executed
and delivered to Buyer a General Bill of Sale in customary form
with respect to the Acquired Assets, as well as such other
instruments of assignment with respect to specific Acquired
Assets as Buyer shall reasonably request.
3.5 Solvency Certificate. Powell, individually and in
his capacity as President of Seller, and the most senior
financial officer or employee of Seller shall have executed and
delivered to Buyer and Headway a certificate attesting to the
solvency of Seller.
3.6 Financial Statements. On or before the Closing
Date, Seller and Powell shall have prepared and delivered to
Buyer and Headway (a) unaudited financial statements with respect
to the Business as of and for the nine-month period ended
September 30, 1997 and for the fiscal years ended December 31,
1995, December 31, 1996 and December 31, 1997 (collectively, the
"Unaudited Financial Statements") and (b) audited issued
financial statements of Seller for the fiscal year ended December
31, 1996 (the "Audited Financial Statements"; the Audited
Financial Statements and the Unaudited Financial Statements being
collectively referred to as the "Financial Statements"). The
Financial Statements delivered pursuant to this Section 3.6 shall
have been prepared at the expense of Seller and Powell in
accordance with generally accepted accounting principles applied
on a basis consistent throughout all periods presented and on an
accrual basis.
3.7 Procedures Report. On or before the Closing
Date, Seller and Powell shall have delivered to Buyer and Headway
a report prepared by Arthur Andersen, LLP with respect to income
and expense verification procedures of Seller in form and
substance reasonably satisfactory to Buyer and Headway.
3.8 Lease Assignments. On the Closing Date, Buyer
and Select shall have entered into lease assignment agreements
with the landlords of each of the Richmond, Hampton and Virginia
Beach, Virginia offices in form and substance satisfactory to
Buyer and Headway.
3.9 Non-Competition Agreement Assignments. On or
prior to the Closing Date, Seller shall provide Headway and Buyer
with evidence of the assignment to Buyer of all non-competition
agreements of Seller with all of its permanent employees with
respect to the Business.
3.10 Form UCC-3's. On or prior to the Closing Date,
Buyer shall have received from each of Crestar Bank ("Crestar")
and NationsBank, National Association ("NationsBank"), original
signed Form UCC-3's releasing all liens held by each of Crestar
and NationsBank with respect to the Acquired Assets, all such
releases to be in form and substance satisfactory to Buyer and
Headway.
3.11 Legal Opinion. Buyer shall have received an
opinion of Messrs. Hunton & Williams, counsel for Seller and
Powell, dated the Closing Date, reasonably satisfactory in form
and substance to counsel for Buyer and covering the matters set
forth in Sections 6.1 (exclusive of the last sentence thereof),
6.2, 6.3, 6.4(a) and 6.8.
3.12 Corporate Action. Buyer shall have received
copies, certified by the Secretary of Seller, of resolutions of
its Board of Directors and sole Stockholder approving the
execution of this Agreement and the consummation of the
transactions contemplated hereby.
3.13 Consents and Governmental Approvals. Headway and
Buyer shall have received any material consents of third parties,
and any authorizations, orders, grants, consents, permits and
approvals of all relevant governmental authorities, required in
connection with the consummation of the transactions contemplated
under this Agreement, without the imposition of any materially
burdensome conditions or restrictions, which shall continue to be
in full force and effect on the Closing Date.
3.14 No Claims. No claim, action, suit, investigation
or proceeding shall be pending or threatened against any of the
parties which, if adversely determined, might (i) prevent or
hinder consummation of the transactions contemplated by this
Agreement, (ii) result in the payment of substantial damages by
Buyer or Headway as a result of the transactions contemplated
hereby or (iii) materially and adversely affect the business or
assets of Seller, Buyer or Headway.
4. Conditions to the Obligations of Seller and
Powell. The obligations of Seller and Powell under Section 1 are
subject to the satisfaction, on or before the Closing Date, of
the following conditions:
4.1 Due Performance. Headway and Buyer shall have in
all material respects fully performed and complied with all
agreements and conditions required under this Agreement to be
performed or complied with by them on or prior to the Closing
Date.
4.2 Accuracy of Representations and Warranties. All
representations and warranties of Headway and Buyer set forth in
Section 7 of this Agreement shall be true and correct in all
material respects on and as of the Closing Date as if made on and
as of such date.
4.3 Certificate. Seller and Powell shall have
received a certificate from each of Buyer and Headway to the
effect set forth in Sections 4.1 and 4.2.
4.4 Related Instruments. Buyer shall have executed
and delivered to Seller a General Instrument of Assumption in
customary form with respect to the Assumed Liabilities, as well
as such other instruments of assumption with respect to specific
Assumed Liabilities as Seller shall reasonably request.
4.5 Legal Opinion. Seller and Powell shall have
received an opinion of Messrs. Christy & Viener, counsel for
Buyer and Headway, dated the Closing Date, reasonably
satisfactory in form and substance to counsel for Seller and
Powell and covering the matters set forth in Sections 7.1
(exclusive of the last sentence thereof), 7.2, 7.3, 7.4 (a) and
7.6.
4.6 Corporate Action. Seller and Powell shall have
received copies from each of Headway and Buyer of resolutions of
their respective Board of Directors certified by their respective
Secretaries, in each instance approving the execution of this
Agreement and the consummation of the transactions contemplated
hereby.
4.7 Consents and Governmental Approvals. Seller and
Powell shall have received any material consents of third
parties, and any authorizations, orders, grants, consents,
permits and approvals of all relevant governmental authorities,
required in connection with the consummation of the transactions
contemplated under this Agreement, without the imposition of any
materially burdensome conditions or restrictions, which shall
continue to be in full force and effect on the Closing Date.
4.8 No Claims. No claim, action, suit, investigation
or proceeding shall be pending or threatened against any of the
parties which, if adversely determined, might (i) prevent or
hinder consummation of the transactions contemplated by this
Agreement, (ii) result in the payment of substantial damages by
Seller or Powell as a result of the transactions contemplated
hereby or (iii) materially and adversely affect the business or
assets of Seller, Buyer or Headway.
5. Waiver of Conditions. Each of the parties shall
have the right to waive, in whole or in part, any of the
conditions to its performance set forth in this Agreement and, on
such waiver, the waiving party may proceed with the consummation
of the transactions contemplated herein, it being understood
that such waiver shall not constitute a waiver of any right which
such party may have by reason of the breach by the other party of
any representation, warranty or agreement contained herein.
6. Representations and Warranties of Seller and
Powell. Each of Seller and Powell, jointly and severally,
represents and warrants to Buyer and Headway as follows (as used
herein, "Seller's knowledge" shall mean the actual knowledge of
Seller's officers and key employees, including Stephanie Burch,
excluding knowledge implied by law):
6.1 Due Organization and Qualification. Seller is a
corporation duly incorporated, validly existing and in good
standing under the laws of the Commonwealth of Virginia, with
full corporate power and authority to own, lease and operate its
properties and to carry on its business in the places and in the
manner currently conducted or proposed to be conducted. Seller
is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature of the
activities conducted by it or the character of the properties
owned or leased by it makes such qualification necessary and
where such failure to so qualify would have a material adverse
effect on the Business.
6.2 Authority; Due Authorization. Seller has all
requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated
hereby. Seller has taken all corporate action necessary for the
execution and delivery by it of this Agreement and for the
consummation of the transactions contemplated hereby. Powell has
the requisite power and authority to execute and deliver, and has
taken all action necessary for the execution and delivery of,
this Agreement and for the consummation of the transactions
contemplated hereby.
6.3 Valid Obligation. This Agreement, when executed
and delivered by each of Seller and Powell, shall constitute the
valid and binding obligation of each of Seller and Powell,
enforceable in accordance with its terms, except as may be
limited by principles of equity or by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally.
6.4 No Conflicts or Defaults. The execution and
delivery of this Agreement by each of Seller and Powell and the
consummation of the transactions contemplated hereby, do not and
shall not (a) contravene the Articles of Incorporation or By-Laws
of Seller or (b) with or without the giving of notice or the
passage of time, (i) materially violate or conflict with, or
result in a material breach of, or a material default or loss of
rights under, any agreement, lease, mortgage, instrument, permit
or license to which Seller is a party and which is included in
the Acquired Assets, or to which any of the Acquired Assets are
subject, or any judgment, order, decree, law, rule or regulation
to which any of the Acquired Assets are subject, (ii) result in
the creation of, or give any party the right to create, any lien,
charge, encumbrance or any other right or adverse interest on or
with respect to any of the Acquired Assets or (iii) terminate or
give any party the right to terminate, abandon or refuse to
perform any material agreement, arrangement or commitment to
which Seller is a party and which is included in the Acquired
Assets or to which any of the Acquired Assets are subject.
6.5 Copies of Charter Documents. Copies of the
Articles of Incorporation and By-Laws of Seller, in each case as
amended to the date hereof, have been delivered to Buyer or its
representatives and are true and complete copies of such
documents as in effect on the date of this Agreement.
6.6 Capitalization of Seller Powell holds all of the
issued and outstanding capital stock of Seller. There are no
outstanding options, warrants, rights, conversion rights,
preemptive rights, calls, commitments or demands of any character
obligating Seller or Powell to issue, sell, redeem or repurchase
any capital stock of Seller or any other security giving a right
to shares of Seller's capital stock, or obligating Powell to sell
or otherwise dispose of any of his shares of capital stock of
Seller.
6.7 Subsidiaries and Related Parties. The Business is
conducted entirely by and through Seller. Seller has no direct
or indirect subsidiaries, nor are there any other entities that
Seller otherwise directly or indirectly controls or in which it
has any ownership or other interest. Except as set forth in
Schedule 6.7, neither Powell nor any director, officer or key
employee of Seller or any of their respective affiliates or
relatives has any direct or indirect interest (other than an
ownership interest of up to 5% of the voting securities of any
corporation, the securities of which are publicly-traded) in any
assets used in the Business or in any corporation, partnership or
other entity that (a) competes with Seller, (b) sells or
purchases products or services to or from Seller, (c) leases real
or personal property to or from Seller or (d) otherwise does
business with Seller.
6.8 Authorizations. Except as set forth in Schedule
6.8, no authorization, approval, order, license, permit or
consent of, or filing or registration with, any court or
governmental authority, regulatory entity or official body, and
no consent of any other party, is required in connection with the
execution, delivery and performance of this Agreement by each of
Seller and Powell.
6.9 The Acquired Assets.
(a) Seller has and shall transfer to Buyer, good and
marketable title to all of the Acquired Assets, free and clear of
all claims, liens, security interests, charges, restrictions and
other encumbrances except: (i) any created pursuant to this
Agreement; (ii) any arising under leases of real or personal
property to which Seller is a party and which have been
specifically disclosed to Buyer; or (iii) mechanics' or other
liens arising or incurred in the ordinary course of business and
which do not interfere materially with the possession, ownership
or use of any real or personal property used by Seller in
connection with the Business.
(b) Set forth in Schedule 6.9 is a list of all real
property leased by Seller in connection with the Business, with a
brief description of the premises. Seller owns no real property
used in connection with the Business.
(c) The office equipment, furniture, vehicles,
computers, computer software, office supplies and leasehold
improvements included in the Acquired Assets are, in all material
respects, in good operating condition and repair, reasonable wear
and tear excepted, and are satisfactory for the requirements of
the Business.
6.10 Client Agreements.
(a) Schedule 1.1.B sets forth a true and complete list
of all written and oral client agreements and arrangements to
which Seller is party relating to the Business (the "Client
Agreements"). Seller has furnished Buyer with a true copy of
each Client Agreement or a written description of any Client
Agreement that has not been reduced to writing. The Client
Agreements constitute all of the contracts, agreements,
understandings and arrangements pursuant to which Seller provides
any temporary, permanent, leased or payrolled employee services
for or with respect to the clients who are parties to such
agreements. Except as set forth in Schedule 6.10.A, (i) each
Client Agreement was entered into in the ordinary course of
Seller's business, (ii) is in full force and effect on the date
of this Agreement and is valid, binding and enforceable in
accordance with its terms, (iii) Seller is not in material breach
or default under any of the Client Agreements and has not
received any notice or claim of any such breach or default from
any party, (iv) to the knowledge of Seller and the best knowledge
of Powell, the relationship of Seller with the clients that are
parties to the Client Agreements is generally good and there has
been no expression of any intention to terminate or materially
modify any of such relationships, (v) neither Seller nor Powell
has any knowledge of any material breach or default under any of
the Client Agreements by any other party thereto, (vi) no event
or action has occurred, is pending or, to Seller's knowledge, is
threatened, which, after the giving of notice, passage of time or
otherwise, could constitute or result in any such material breach
or default by Seller or any other party under any of the Client
Agreements and (vii) no material amount claimed to be payable to
Seller under any of the Client Agreements is being disputed by
any client.
(b) Except as set forth in Schedule 6.10.B, (i) for
its services under each Client Agreement, Seller receives the
compensation provided under such Client Agreement, without
discount, offset or concessions of any kind, and Seller has not
proposed or agreed to offer or accept any discount, offset or
concession and (ii) to the knowledge of Seller and the best
knowledge of Powell, the payment history of the clients under the
Client Agreements is good as judged by industry standards. Set
forth in Schedule 6.10.C is an aging schedule for all of Seller's
accounts receivable and accounts payable as of the Closing Date,
which list is accurate in all material respects.
6.11 Financial Statements.
(a) The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied
on a basis consistent throughout all periods presented. Such
statements are correct and complete in all material respects, are
reconcilable to the books and records of Seller, and present
fairly the financial position of Seller (with respect to the
Business) as of the dates, and the results of operations, cash
flows and changes in financial position of Seller for the
periods, indicated, except for the omission of footnotes and for
year-end review adjustments (which are not expected by Seller or
Powell to be material).
(b) Except as set forth in Schedule 6.11, Seller had
no material liabilities or obligations, whether secured or
unsecured, accrued, determined, absolute or contingent, asserted
or unasserted or otherwise, which are required to be reflected or
reserved in a balance sheet with respect to the Business or the
notes thereto under generally accepted accounting principles, but
which are not reflected in the Financial Statements.
6.12 Other Agreements.
(a) Schedule 1.1.C sets forth a true and complete list
of the office leases, equipment leases and other agreements,
contracts and instruments included in the Acquired Assets other
than the Client Agreements (the "Other Agreements"). Together
with the Client Agreements, the Other Agreements constitute all
of the material contracts, agreements, understandings and
arrangements required for the operation of the Business, as
currently conducted by Seller, or which have a material effect
thereon.
(b) Except as set forth in Schedule 6.12, (i) each
Other Agreement was entered into in the ordinary course of
business of the Business, is in full force and effect on the date
of this Agreement and is valid, binding and enforceable in
accordance with its terms, (ii) Seller is not in material breach
or default under any of the Other Agreements and has not received
any written notice or claim of any such breach or default from
any party, (iii) neither Seller nor Powell have any knowledge of
any material breach or default under any of the Other Agreements
by any party thereto and (iv) no event or action has occurred, is
pending or, to Seller's knowledge, is threatened, which, after
the giving of notice, passage of time or otherwise, could
constitute or result in any such material breach or default by
Seller or any other party under any of the Other Agreements.
6.13 Intellectual Property. Seller owns or has legal
right to use the trade name "Select Staffing" without infringing
on the rights or intellectual property of any third party. No
royalties or fees are payable by Seller to any party by reason of
the use by Seller of any of such intellectual property. To
Seller's knowledge, Seller has not received any claims that it or
its products or services have infringed the rights of others, and
neither Seller nor Powell are aware of any infringement by others
of Seller's intellectual property.
6.14 Taxes. Except as set forth in Schedule 6.14,
Seller has filed all federal, state, local and foreign returns
and reports which were required to be filed prior to the date
hereof in respect of all income, withholding, franchise, payroll,
excise, property, value-added, sales, use or other taxes,
imposts, duties or assessments (together with any related
penalties, fines or interest, "Taxes"). Each such return and
report is complete and accurate in all material respects, and
Seller has paid, or established adequate reserves for payment of,
all Taxes (and any related penalties, fines and interest) shown
to be due on such returns or reports and any assessments received
with respect thereto. Except as set forth in Schedule 6.14,
Seller has received no notice of any claims pending or threatened
for taxes against it for periods prior to the date hereof, in
excess of such reserves.
6.15 Permits; Compliance with Law. Seller holds all
permits, certificates, licenses, approvals and other
authorizations of governmental authorities as are materially
necessary to the conduct of the Business. Seller is in material
compliance with the terms of each thereof and have not received
any notice or claim pertaining to the failure to obtain, or the
breach or violation of the terms of, any such authorization.
Neither Seller nor Powell has received any notice of any
proceeding or investigation likely to result in the suspension or
revocation of any such authorization. Seller is conducting the
Business in material compliance with all applicable federal,
state and local laws, ordinances, rules, regulations and court or
administrative orders and decrees, including, without limitation,
any respecting wage and hour, withholding and unemployment
compensation requirements.
6.16 Litigation. Except as set forth in Schedule 6.16,
there are no claims, actions, suits, proceedings, investigations
or criminal proceedings, at law or in equity, before any court,
tribunal, governmental authority or other forum (collectively,
"Proceedings") pending or, to Seller's knowledge, threatened,
against Seller which, if adversely determined, would, singly or
in the aggregate, have a material adverse effect on the Business
or the Acquired Assets or the ability of Seller or Powell to
perform their respective obligations under this Agreement or
which would challenge the validity or propriety of the
transactions contemplated in this Agreement. Schedule 6.16
contains a list of all Proceedings to which Seller is a party or
to which it or any of the Acquired Assets are subject. There is
no material outstanding and unsatisfied judgment, order, writ,
ruling, injunction, stipulation or decree of any court,
arbitrator or governmental authority against or materially
affecting Seller, the Business or any material portion of the
Acquired Assets.
6.17 Ordinary Course; No Material Adverse Effect.
Except as set forth in Schedule 6.17 and for the transactions
contemplated in this Agreement, since December 31, 1996, Seller
has conducted its business and maintained its assets
substantially in the same manner as previously conducted or
maintained and solely in the ordinary course and, since such
date, there has not been any event that has or would, with or
without the giving of notice or the passage of time, result in a
material adverse effect on Seller or the Business. Since January
1, 1998, Seller has not entered into any new real property leases
(other than with respect to Virginia Beach, Virginia office) or
moved any temporary, payrolled, leased or full-time employees
employed by Seller in connection with the Business as of such
date to locations other than the Richmond, Hampton, Norfolk or
Virginia Beach, Virginia locations.
6.18 Employee Benefits and Relations.
(a) Except as set forth in Schedule 6.18, Seller does
not maintain or sponsor, or contribute or has any obligation or
liability to, any employee pension benefit plan, employee welfare
benefit plan or multi-employer plan (as such terms are defined in
Sections 3(2), 3(1) and 4001(a)(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")). Set forth in
Schedule 6.18 is a list of all bonus, pension, profit-sharing,
deferred compensation, stock ownership, stock bonus, stock
option, phantom stock, retirement, vacation, disability, death
benefit, unemployment, hospitalization, medical, dental,
severance, or other plan, agreement, arrangement or understanding
providing benefits to any current or former employee, officer or
director of Seller or to which Seller has any liability or
obligation (all such plans, agreements, arrangements and
understandings are referred to as "Benefit Plans"). Seller and
Powell have delivered to Buyer and Headway true, complete and
correct copies of (i) each Benefit Plan and all amendments
thereto (or, in the case of any unwritten Benefit Plans,
descriptions thereof), (ii) annual reports on Form 5500 for the
past three years (together with accompanying financial
statements) filed with the Internal Revenue Service or Department
of Labor, as applicable, with respect to each Benefit Plan (if
any such report was required), (iii) all summary plan
descriptions for each Benefit Plan for which such summary plan
description is required or otherwise available and (iv) each
trust agreement and group annuity contract relating to any
Benefit Plan. No Benefit Plan provides for post-retirement
medical or life insurance benefits unless the event giving rise
to the benefit entitlement occurs prior to the employee's
retirement (except as required by Title I, Part 6 of ERISA).
(b) Any accrued obligations of Seller under all
Benefit Plans that are required to be reflected on the balance
sheet of Seller in accordance with generally accepted accounting
principles are reflected thereon as of the dates indicated
thereon and on the books and records of Seller for all periods
thereafter. Seller and Powell have provided Buyer with copies of
all such balance sheets, books and records.
(c) Except as set forth in Schedule 6.18, each Benefit
Plan and any related trust complies currently, and has complied
at all times in the past, both as to form and operation, in all
material respects with the terms of such Benefit Plan and with
the applicable provisions of ERISA, the Code and other applicable
laws. All necessary government approvals for each Benefit Plan
have been obtained on a timely basis.
(d) Except as set forth in Schedule 6.18, Seller has
no liability (contingent or otherwise) with respect to any
terminated Benefit Plan. Seller is not a member of, and has no
liability with respect to, a controlled group of corporations or
a trade or business (whether or not incorporated) under common
control which, together with Seller, is or was at any time
treated as a single employer under Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b)(1) of ERISA.
(e) Seller is not a party to any union or collective
bargaining contract with respect to any of its employees and
there has not been, nor has Seller or Powell received written
notice threatening, any representational or organizational
activity, strike, slowdown, picketing or work stoppage by any
union or other group of employees against Seller.
(f) Schedule 6.18 sets forth (i) the name of each
director and officer of Seller and each employee and sales
representative employed by Seller in connection with the Business
(other than temporary or payrolled personnel), together with the
annual compensation rate for each such person, and (ii) each oral
or written contract, commitment or understanding between Seller
and any current or former director, officer, stockholder or agent
of Seller and any current or former sales person or employee
employed by Seller in connection with the Business, or any
associate or relative of such persons (other than temporary or
payrolled personnel).
6.19 Miscellaneous. All representations and warranties
of Seller and Powell set forth in this Agreement and all
information set forth in the Schedules are true and complete in
all material respects and no such representation, warranty or
information contains any untrue statement of a material fact or,
to the knowledge of Seller and Powell, omits to state any
material fact necessary in order to make such representation,
warranty or information, in light of the circumstances under
which it is made, not false or misleading. Any disclosure made
pursuant to any of the representations and warranties in this
Section 6 shall be deemed to have been made for purposes of any
other such representations and warranties.
7. Representations and Warranties of Buyer and
Headway. Buyer and Headway, jointly and severally, represent
and warrant to Seller and Powell as follows:
7.1 Due Organization and Qualification. Each of Buyer
and Headway is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware,
with full corporate power and authority to own, lease and operate
its properties and to carry on its business in the places and in
the manner currently conducted or proposed to be conducted. Each
of Buyer and Headway is qualified to do business and is in good
standing as a foreign corporation in which the nature of the
activities conducted by it or the character of the properties
owned or leased by it makes such qualification necessary and the
failure to so qualify would have a material adverse effect on its
business.
7.2 Authority; Due Authorization. Each of Buyer and
Headway has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby, including with respect to
Headway, the guarantee of Headway set forth in Section 1.3(g).
Each of Buyer and Headway has taken all corporate action
necessary for the execution and delivery by it of this Agreement
and for the consummation of the transactions contemplated hereby,
including, with respect to Headway, the guarantee of Headway set
forth in Section 1.3(g).
7.3 Valid Obligation. This Agreement, when executed
and delivered by each of Buyer and Headway, shall constitute
their respective valid and binding obligations, enforceable in
accordance with its terms, except as may be limited by principles
of equity or by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally.
7.4 No Conflicts or Defaults. The execution and
delivery of this Agreement by each of Buyer and Headway, and the
consummation of the transactions contemplated hereby, do not and
shall not (a) contravene the Certificates of Incorporation or the
By-Laws of Buyer or Headway or (b) with or without the giving of
notice or the passage of time, materially violate or conflict
with, or result in a material breach of, or a material default or
loss of rights under, any agreement, lease, mortgage, instrument,
permit or license to which Buyer or Headway is a party or by
which Buyer or Headway are bound or any judgment, order, decree,
law, rule or regulation to which Buyer or Headway are subject.
7.5 Copies of Charter Documents. Copies of the
Certificates of Incorporation and By-Laws of each of Buyer and
Headway, in each case as amended to the date hereof, have been
delivered to Seller and Powell and are true and complete copies
of such documents as in effect on the date of this Agreement.
7.6 Authorizations. No authorization, approval,
order, license, permit or consent of, or filing or registration
with, any court or governmental authority, regulatory entity or
official body, and no consent of any other party, is required in
connection with the execution, delivery and performance of this
Agreement by Buyer and Headway.
7.7 Litigation. There are no Proceedings, pending or
threatened, against Buyer or Headway which, if adversely
determined, would, singly or in the aggregate, have a material
adverse effect on the ability of Buyer or Headway to perform
their respective obligations under this Agreement or which would
challenge the validity or propriety of the transactions
contemplated in this Agreement. There is no material outstanding
and unsatisfied judgment, order, writ, ruling, injunction,
stipulation or decree of any court, arbitrator or governmental
authority against or materially affecting Buyer or Headway or any
material portion of their respective assets.
7.8 Miscellaneous. All representations and warranties
of Buyer and Headway set forth in this Agreement were, as of the
date on which they were made or given, true and complete in all
material respects and no such representation, warranty or
information contains or contained any untrue statement of a
material fact or, to the knowledge of Buyer and Headway, omits or
omitted to state any material fact necessary in order to make
such representation or warranty, in light of the circumstances
under which it is or was made, not false or misleading. Any
disclosure made pursuant to any of the representations in this
Section 7 shall be deemed to have been made for purposes of any
other such representations.
8. Survival of Representations and Warranties. All
representations and warranties made by any party in this
Agreement or in any document or certificate delivered pursuant to
this Agreement shall survive for a period of two years from the
Closing Date (except that the representations and warranties set
forth in Sections 6.14 and 6.18 relating to Taxes and Benefit
Plans shall survive for a period equal to the statute of
limitations applicable to any claims and liabilities which may
result from a breach thereof) and shall be unaffected by any
investigation made by or on behalf of any party or by any notice
of breach of, or failure to perform under, this Agreement which
is not effectively waived pursuant to Section 5, subject,
however, to the limitations on indemnification set forth in
Section 12.5.
9. Post-Closing Matters.
9.1 Use of Select Staffing Mark. Seller grants Buyer
(or its nominee) the right to use the trade name "Select
Staffing" for a period of 90 days following the Closing Date,
alone or in conjunction with the name "Headway", including,
without limitation, the right to (a) publish ads stating that the
Select Staffing offices located in Richmond, Hampton and Virginia
Beach, Virginia are now part of the Headway group of companies
and (b) identify on invoices and other correspondence and/or have
its staff answer the telephone and identify such offices as
"Select/Headway" or "Headway/Select". Buyer (or its nominee)
shall obtain Seller's prior approval for any other written use of
"Select Staffing", which approval shall not be unreasonably
withheld. Seller agrees to respond to such request within 24
hours of receipt thereof, and, if such response is not received
within such 24-hour period, the request shall be deemed granted.
9.2 Seller's Employees. Buyer shall, after conferring
with Powell in such regard, inform Seller reasonably prior to the
Closing Date as to whether it wishes to employ any employees
employed by Seller in connection with the Business, and if it
wishes to do so, the names of such employees and the positions
and compensation Buyer proposes to offer them. Seller shall
permit Buyer to offer employment to such employees on the terms
proposed by Buyer prior to the Closing Date. Immediately prior
to the Closing Date, Seller shall inform any of Seller's
employees to whom Buyer does not offer employment, or who do not
accept Buyer's offer of employment if made, that they shall be
relieved of their duties with respect to the business of Seller
being acquired by Buyer hereunder, effective on the Closing Date.
All liabilities and obligations associated with the termination
of employment by Seller of any of its employees to whom Buyer
does not offer employment or who do not accept Buyer's offer of
employment under contract or applicable law or otherwise shall be
the sole responsibility of Seller, and Seller and Powell, jointly
and severally, shall discharge and indemnify, defend and hold
harmless Buyer and Headway and their respective officers,
directors, employees, agents and shareholders from all such
obligations and liabilities.
9.3 Seller Financial Statements. On or prior to April
30, 1998, Seller and Powell shall have prepared and delivered to
Buyer and Headway (a) audited financial statements with respect
to the Business for the fiscal year ending December 31, 1997, (b)
audited issued financial statements of Seller for the fiscal
years ended December 31, 1996 and December 31, 1997 and (c)
unaudited financial statements with respect to the Business as of
and for the three-month periods ending March 31, 1997, June 30,
1997 and September 31, 1997. The financial statements shall be
prepared at the expense of Seller and Powell in accordance with
generally accepted accounting principles applied on a basis
consistent throughout all periods presented and on an accrual
basis. The audited financial statements may be prepared by
Seller's accounting firm as long as the firm is a member of the
SEC Practice section of the AICPA and agrees to provide the
consents required for the inclusion of their audit reports in any
filings made by Headway with the Securities and Exchange
Commission that require inclusion of any of such financial
statements.
9.4 Buyer Financial Statements and Billing Reports.
Buyer agrees, for the period from the Closing Date until the end
of the third Earnout Period, to provide Seller with unaudited
monthly financial statements with respect to the Business within
45 days after the end of each such month, commencing with the
month ending April 30, 1998. Such financial statements shall not
contain footnotes and may be subject to later adjustments and/or
revisions by Buyer. Buyer agrees to provide Seller, as promptly
as available, billing reports with respect to the Business for
the period from the Closing Date through March 31, 1998.
9.5 Further Assurances. Whenever reasonably requested
to do so by a party to this Agreement, on or after the Closing
Date, any other party shall do, execute, acknowledge and deliver
all such acts, bills of sale, assignments, confirmations,
consents and any and all such further instruments and documents,
in form reasonably satisfactory to the requesting party, as shall
be reasonably necessary or advisable to carry out the intent of
this Agreement, including, without limitation, to vest in Buyer
all of the right, title and interest of Seller in and to the
Acquired Assets.
9.6 Authorization to Buyer. Without limiting in any
respect the right, title and interest in and to the Acquired
Assets to be acquired by Buyer hereunder, Seller irrevocably
authorizes, effective upon the Closing Date, Buyer and its
successors and assigns, to demand and receive, from time to time,
any and all of the Acquired Assets, to give receipts and releases
for or in respect of the same, to collect, assert or enforce any
claim, right or title of any kind therein or thereto and, for
such purpose, from time to time, to institute and prosecute in
the name of Seller (but only if Seller consents to such use of
its name), or otherwise, any and all proceedings at law, in
equity or otherwise, which Buyer shall deem expedient or
desirable. Each of Powell and Seller hereby waives any right to
challenge the transactions contemplated by this Agreement
pursuant to sections 270 through 281 of the New York Debtor and
Creditor Law, 11 U.S.C. 547, 548 or 550 or any other similar
state or federal statutes and shall use his or its best efforts
to prevent any third party from exercising or enforcing any such
rights or remedies, and Powell, Seller and Seller's officers and
directors shall cooperate in the defense of Headway and Buyer
with respect to any such claims.
9.7 Correspondence. Seller authorizes Buyer, on and
after the Closing Date, to receive and open mail addressed to
Seller and to deal with the contents thereof in a responsible
manner; provided, that such mail relates to the Acquired Assets
or to the business of Seller to be carried on by Buyer. Buyer
shall promptly deliver to Seller all other mail addressed to
Seller which is received by Buyer. Seller shall have the right,
on its request and its expense, to inspect any such mail
addressed to it and retained by Buyer and to make copies thereof.
10. NonCompetition.
10.1 General. Each of Seller and Powell agrees, for a
period of five years after the Closing Date (the "Term"), that it
or he shall not, directly or indirectly:
(a) within a 75-mile radius of the Richmond, Hampton,
Norfolk and Virginia Beach, Virginia locations (the "Market
Area"), engage, for or on behalf of itself or any person or
entity other than Buyer or Headway, in the business of the
placement or provision of temporary, permanent, leased or
payrolled personnel (including self-incorporated personnel);
(b) solicit or attempt to solicit business for
services offered by Seller, Buyer or Headway from any parties who
(i) are clients of Seller (with respect to the Business) on the
Closing Date or at any time during the 12 months prior to the
Closing Date or to whom Seller (in connection with the Business)
has made or makes proposals for services during the 12 months
preceding the Closing Date or (ii) are clients of Buyer or
Headway during the Term or to whom Buyer or Headway makes
proposals for services during the Term;
(c) within the Market Area, otherwise divert or
attempt to divert from Buyer or Headway any business involving
the placement or provision of temporary, permanent, leased or
payrolled personnel (including self-incorporated personnel) of
the type now or during the Term conducted by Seller (with respect
to the Business), Buyer or Headway;
(d) solicit or attempt to solicit for any business
endeavor any employee of Buyer or Headway, including any employee
of Seller who is employed by Buyer after the Closing Date; or
(e) render any services as a joint venturer, partner,
consultant or otherwise to, or have any interest as a
stockholder, partner, member, lender or otherwise in, any person
or entity which is engaged in activities which, if performed by
Seller or Powell, would violate this Section 10.1.
The foregoing shall not prevent (a) Seller or Powell from
purchasing or owning (i) up to 5% of the voting securities of any
corporation, the securities of which are publicly-traded, or (ii)
any interest in any entity which is not also engaged in the
business of the placement or provision of temporary, permanent,
leased or payrolled personnel (including self-incorporated
personnel) and (b) Seller from conducting its business, as
presently conducted outside of the Market Area. Notwithstanding
the foregoing, to the extent that, in any particular instance,
Seller wishes to provide a temporary employee specializing in
information technology to any of its clients in the Market Area,
Seller may fill such assignment itself but only after Seller has
subcontracted such assignment to Headway and Headway is unable to
fill such assignment within 30 days after the request thereof of
Seller. References to Headway and Buyer in this Section 10 shall
also be deemed to refer to their respective divisions and
subsidiaries.
10.2 Injunctive Relief. Because Buyer and Headway
would not have an adequate remedy at law to protect their
businesses from any breach of the provisions of Section 10.1,
Buyer and Headway shall be entitled, in the event of such a
breach or threatened breach thereof by Seller or Powell, to
injunctive relief, in addition to such other remedies and relief
that would be available to Buyer. In the event of such a breach,
in addition to any other remedies, Buyer and Headway shall be
entitled to receive from Seller and Powell, jointly and
severally, payment of, or reimbursement for, their reasonable
attorneys' fees and disbursements incurred in successfully
enforcing any such provision. The provisions of this Section 10
shall survive the Closing Date.
11. Bulk Sales. Buyer waives compliance by Seller
with the provisions of any applicable bulk sales law. Seller
shall promptly pay or otherwise discharge all valid claims of its
creditors (as defined by the applicable bulk sales law), as and
when they become due and payable (in accordance with Seller's
customary and commercially reasonable practices), and Seller and
Powell, jointly and severally, shall indemnify and hold harmless
Buyer and Headway from any and all liabilities, costs and
expenses (including, without limitation, reasonable attorneys'
fees and disbursements) incurred by Buyer and arising from the
failure of Seller to satisfy the claims of such creditors.
12. Indemnification.
12.1 Obligations of Seller and Powell. Seller and
Powell, jointly and severally, shall indemnify, defend and hold
harmless Buyer and Headway and their respective officers,
directors, employees, agents, shareholders, successors and
assigns from and against any Damages (as defined in Section 12.3)
in connection with:
(a) any breach of any representation, warranty or
agreement of either Seller or Powell contained in this Agreement
or in any certificate, instrument or other agreement delivered by
either of them in connection with this Agreement;
(b) all Unassumed Liabilities and the operation of
Seller's business (including the Business) at any time prior to
the Closing Date;
(c) the termination of the employment of any of
Seller's employees, as contemplated in Section 9.2; and
(d) any claim, action, suit or proceeding asserted or
instituted on the basis of any matter described in clauses (a),
(b) or (c) of this Section 12.1;
provided, however, that, except in connection with liabilities
under clauses (b) or (c) above, the breach of the representations
and warranties set forth in Sections 6.14 and 6.18 relating to
Taxes and Benefit Plans or the breach of the provisions set forth
in Section 10 relating to non-competition (as to which the
limitations of these provisos shall not apply), no payment
hereunder shall be required to be made by Seller or Powell unless
and until the aggregate amount of any such losses, damages,
liabilities, costs and expenses exceeds $25,000 and Seller and
Powell shall not be required to make payments hereunder in excess
of $2,000,000.
12.2 Obligations of Buyer and Headway. Buyer and
Headway, jointly and severally, shall indemnify, defend and hold
harmless Seller and Powell and their respective heirs, executors,
officers, directors, employees, agents, shareholders, successors
and assigns, as applicable, from and against any Damages in
connection with:
(a) any breach of any representation, warranty or
covenant of either Buyer or Headway contained in this Agreement
or in any certificate, instrument or other agreement delivered by
either of them in connection with this Agreement;
(b) all Assumed Liabilities and the operation by Buyer
of the Business at any time on or after the Closing Date; and
(c) any claim, action, suit or proceeding asserted or
instituted on the basis of any matter described in clauses (a) or
(b) of this Section 12.2;
provided, however, that, except in connection with clause (b)
above, no payment hereunder shall be required to be made by Buyer
or Headway unless and until the aggregate amount of any such
losses, damages, liabilities, costs and expenses exceeds $25,000
and Buyer and Headway shall not be required to make payments
hereunder in excess of $2,000,000.
12.3 Damages. For purposes of this Section 12,
"Damages" means any loss, liability, damage or expense suffered
or incurred by a party in connection with the matters described
in Sections 12.1 or 12.2, as the case may be, including, without
limitation, assessments, fines, penalties, judgments,
settlements, costs, reasonable attorneys' fees and reasonable
disbursements and other reasonable out of pocket expenses of the
party incident to any matter as to which the party is entitled to
indemnification under such Sections, or incident to any
allegations or claims which, if true, would give rise to Damages
subject to indemnification hereunder, or incident to the
enforcement by the party of its rights and remedies under this
Section 12.
12.4 Proceedings. Any party seeking indemnification
pursuant to this Section 12 (the "Indemnified Party") shall give
the party from which indemnification is sought (the "Indemnifying
Party") prompt notice of any claim, allegation, action, suit or
proceeding which it believes might give rise to indemnification
under this Section 12, stating the nature and extent of any such
claim, allegation, suit or proceeding with reasonable
specificity, and the amount thereof, if known. Any failure to
give such notice shall not affect the indemnification provided
hereunder except to the extent that the Indemnifying Party is
actually prejudiced as a result of such failure. The
Indemnifying Party shall have the right to participate in, and,
with the consent of the Indemnified Party, which consent shall
not be unreasonably withheld or delayed, to control, the defense
of any such claim, allegation, action, suit or proceeding, at the
Indemnifying Party's expense, and with counsel of its own
choosing reasonably acceptable to the Indemnified Party;
provided, however, that if Buyer and Headway are the Indemnified
Parties, they shall have the right to withhold such consent and
to retain control of such defense in the case of any claim,
action, suit or proceeding with respect to which an adverse
outcome could have a material adverse effect on Buyer or Headway,
with the expense of any counsel retained by Buyer and Headway in
any such instance to be at Buyer's and Headway's expense. No
settlement or compromise of any such claim, action, suit or
proceeding shall be made without the prior consent of the
Indemnified Party and the Indemnifying Party, which consent shall
not be unreasonably withheld or delayed by either of them.
12.5 Limitations on Indemnification. No right to
indemnification may be asserted under this Section 12 after the
second anniversary of the Closing Date, except any such rights to
indemnification arising in connection with (a) any matter
referred to in Sections 6.14 or 6.18, none of which shall be
subject to any time limitation other than any statutes of
limitation applicable to such matters, (b) any matter covered by
Section 10 or (c) any claim as to which the notice required by
Section 12.4 has been given on or prior to the third anniversary
of the Closing Date.
12.6 Offset. It is agreed that, without limiting any
other rights of Buyer and Headway, they shall have the right to
set off against and deduct from any amounts payable pursuant to
the provisions of Section 1.3 the amount of any Damages for which
they are entitled to indemnification under this Section 12 and
the amount of any unpaid Deficiency Amount, if any, under Section
1.3(e). In order to set off any such indemnity claim against any
amount payable to Seller pursuant to Section 1.3, Buyer must, in
each instance, provide a certificate to Seller setting forth the
claim in reasonable detail. If Seller does not agree to such
claim in writing within 10 days after delivery of such notice,
Buyer agrees (a) to deposit into escrow, in an interest bearing
account, the amount of such claim, with Christy & Viener as
escrow agent, under a form of escrow agreement to be mutually
agreed by the parties, with the costs of such escrow arrangement
to be borne equally by the parties, and (b) to utilize the
arbitration procedures set forth in Section 13 to resolve such
claim.
13. Arbitration.
13.1 General. Any controversy or claim arising out of
or relating to this Agreement shall be finally resolved by
arbitration pursuant to the Commercial Arbitration Rules of the
American Arbitration Association; provided, however, that this
Section 13.1 shall not in any way affect the right of Buyer and
Headway to seek injunctive relief or any other remedies pursuant
to Section 10.2. Any such arbitration shall take place in New
York, New York, before three arbitrators, one of which shall be
appointed by Buyer or Headway, one by Seller and Powell, and the
third by the arbitrators so appointed; provided, however, that
the parties may by mutual agreement designate a single
arbitrator. The parties further agree that (i) the arbitrators
shall be empowered to include arbitration costs and attorney fees
in the award to the prevailing party in such proceedings and (ii)
the award in such proceedings shall be final and binding on the
parties. The arbitrators shall apply the law of the State of New
York, exclusive of conflict of laws principles, to any dispute.
Judgment on the arbitrators' award may be entered in any court
having the requisite jurisdiction. Nothing in this Agreement
shall require the arbitration of disputes between the parties
that arise from actions, suits or proceedings instituted by third
parties.
13.2 Consent to Jurisdiction; Service of Process. Each
party irrevocably submits to the jurisdiction and venue of the
arbitration described in Section 13.1 and to the jurisdiction and
venue of the federal and state courts sitting in New York County,
New York, for the enforcement of any judgment on the arbitrators'
award, and waives any objection it may have with respect to the
jurisdiction of such arbitrations or courts or the inconvenience
of such forums or venues. Buyer and Headway appoint Messrs.
Christy & Viener, 620 Fifth Avenue, New York, New York 10020,
Attention: Laurence S. Markowitz, Esq., and Seller and Powell
appoint Messrs. Hunton & Williams, 1751 Pinnacle Drive, Suite
1700, McLean, Virginia 22102, Attention: Joseph W. Conroy, Esq.,
as their respective attorneys-in-fact and authorized agents
solely to receive on their behalf, service of any demands for, or
any notice with respect to, arbitration hereunder or any service
of process. Service on either of such attorneys-in-fact may be
made by registered or certified mail or by personal delivery, in
any case return receipt requested, and shall be effective as
service on Buyer and Headway or Seller and Powell, as the case
may be. Nothing herein shall be deemed to affect any right to
serve any such demand, notice or process in any other manner
permitted under applicable law.
14. Miscellaneous.
14.1 Entire Agreement; Amendments; No Waivers. This
Agreement, together with the Schedules, sets forth the entire
understanding of the parties with respect to its subject matter
and merges and supersedes all prior and contemporaneous
understandings of the parties with respect to its subject matter.
No provision of this Agreement may be waived or modified, in
whole or in part, except by a writing signed by each of the
parties. Failure of any party to enforce any provision of this
Agreement shall not be construed as a waiver of its rights under
such or any other provision. No waiver of any provision of this
Agreement in any instance shall be deemed to be a waiver of the
same or any other provision in any other instance.
14.2 Communications. All notices, consents and other
communications given under this Agreement shall be in writing and
shall be deemed to have been duly given (a) when delivered by
hand or by Federal Express or a similar overnight courier to, (b)
five days after being deposited in any United States post office
enclosed in a postage prepaid registered or certified mail
envelope addressed to, or (c) when successfully transmitted by
facsimile (with a confirming copy of such communication to be
sent as provided in (a) or (b) above) to, the party for whom
intended, at the address or facsimile number for such party set
forth below, or to such other address or facsimile number as may
be furnished by such party by notice in the manner provided
herein; provided, however, that any notice of change of address
or facsimile number shall be effective only on receipt.
If to Buyer or Headway: with a copy to:
Headway Corporate Resources, Inc. Christy & Viener
850 Third Avenue 620 Fifth Avenue
New York, New York 10022 New York, New York 10020
Attention: Barry S. Roseman, President Atten: Laurence S.
Markowitz, Esq.
Fax No.: (212) 508-3540 Fax No.: (212) 632-5555
If to Seller or Powell: with a copy to:
Mr. Jack L. Powell, Jr. Hunton & Williams
Select Staffing Services, Inc. 1751 Pinnacle Drive
8200 Greensboro Drive Suite 1700
Suite 1010 McLean, Virginia 22102
McLean, Virginia 22102 Attention: Joseph W.
Conroy, Esq.
Fax No.: (703) 761-9748 Fax No.: (703) 714-7410
14.3 Successors and Assigns. This Agreement shall be
binding on, enforceable against and inure to the benefit of, the
parties and their respective heirs, successors and permitted
assigns (whether by merger, consolidation, acquisition or
otherwise), and nothing herein is intended to confer any right,
remedy or benefit upon any other person. No party may assign its
rights or delegate its obligations under this Agreement without
the express written consent of all of the other parties;
provided, however, that Buyer may assign its rights or delegate
its obligations hereunder, either before or after the Closing
Date, to Headway or any other wholly-owned subsidiary of Headway.
14.4 Expenses. Each of the parties shall bear and pay,
without any right of reimbursement from any other party, all
costs, expenses and fees incurred by it or on its or his behalf
incident to the preparation, execution and delivery of this
Agreement and the performance of such party's obligations
hereunder, whether or not the transactions contemplated in this
Agreement are consummated, including, without limitation, the
fees and disbursements of attorneys, accountants and consultants
employed by such party, and shall indemnify and hold harmless the
other parties from and against all such fees, costs and expenses.
14.5 Brokers and Finders. Each party represents to the
others that no agent, broker, investment banker, financial
advisor or other person or entity is or shall be entitled to any
broker's or finder's fee or other commission or similar fee in
connection with the transactions contemplated by this Agreement.
Each party shall indemnify and hold harmless the others from and
against any claim, liability or obligation with respect to any
fees, commissions or expenses asserted by any person or entity on
the basis of any act or statement alleged to have been committed
or made by such indemnifying party or any of its affiliates.
14.6 Public Announcements. No oral or written public
announcement or disclosure with respect to this Agreement and the
transactions contemplated herein prior to the Closing Date shall
be made by or on behalf of any party without the prior approval
of the other parties, except to the extent required by applicable
securities laws or the rules and regulations of any stock
exchange, by court order or as otherwise required by law.
14.7 Governing Law. This Agreement shall in all
respects be governed by and construed in accordance with the laws
of the State of New York applicable to agreements made and fully
to be performed in such state, without giving effect to conflicts
of law principles.
14.8 Severability and Savings Clause. If any provision
of this Agreement is held to be invalid or unenforceable by any
court or tribunal of competent jurisdiction, the remainder of
this Agreement shall not be affected thereby, and such provision
shall be carried out as nearly as possible according to its
original terms and intent to eliminate such invalidity or
unenforceability. In this regard, the parties agree that the
provisions of Section 10, including, without limitation, the
scope of the territorial and time restrictions, are reasonable
and necessary to protect and preserve Buyer's legitimate
interests. If the provisions of Section 10 are held by a court
of competent jurisdiction to be in any respect unreasonable, then
such court may reduce the territory or time to which it pertains
or otherwise modify such provisions to the extent necessary to
render such provisions reasonable and enforceable.
14.9 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
14.10 Construction. Headings used in this
Agreement are for convenience only and shall not be used in the
interpretation of this Agreement. References to Sections and
Schedules are to the sections and schedules of this Agreement.
As used herein, the singular includes the plural and the
masculine, feminine and neuter gender each includes the others
where the context so indicates.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first set forth above.
HEADWAY CORPORATE RESOURCES, INC. HEADWAY CORPORATE STAFFING
SERVICES OF NORTH CAROLINA,
INC.
By /s/ Barry S. Roseman By /s/ Barry S. Roseman
President Treasurer
SELECT STAFFING SERVICES, INC.
By /s/ Jack L. Powell, Jr. /s/ JACK L. POWELL, JR.
President
E-84
Exhibit No. 3
Form 8-K
Headway Corporate Resources, Inc.
SEC File No. 0-23170
[Each of the schedules to this Agreement described in Sections 3
and 6 are omitted, and will be provided supplementally to the
Commission on request.]
STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of March 23, 1998, among HEADWAY
CORPORATE RESOURCES, INC., a Delaware corporation ("Buyer" or
"Headway"), L&M SHORE FAMILY HOLDINGS LIMITED PARTNERSHIP, a
Nevada limited partnership ("L&M"), ELDER INVESTMENTS LIMITED
PARTNERSHIP, a Nevada limited partnership ("ELP"), MARK SHORE
("Shore") and LINDA ELDER ("Elder"; L&M, ELP and Elder being
collectively referred to as the "Stockholders" and each
sometimes, individually, as a "Stockholder").
W I T N E S S E T H:
WHEREAS, the Stockholders own all the issued and
outstanding shares of capital stock of Shore Resources,
Incorporated, a California corporation ("SRI"); and
WHEREAS, Buyer wishes to purchase from the
Stockholders, and the Stockholders wish to sell to Buyer, all of
the issued and outstanding shares of capital stock of SRI;
NOW, THEREFORE, the parties agree as follows:
1. Purchase and Sale of the Stock.
1.1 Acquired Shares. Subject to the terms and
conditions of this Agreement, and in reliance on the
representations, warranties and agreements set forth herein, on
the "Closing Date" (as defined in Section 2), Buyer shall
purchase, and each Stockholder shall sell, convey, transfer,
assign and deliver to Buyer, all of its right, title and interest
in and to all shares of SRI Common Stock, no par value per share
(the "Stock"), held by such Stockholder. The number of shares of
Stock owned by each Stockholder on the date hereof and which
shall be transferred to Buyer on the Closing Date is as follows:
L&M, 940 shares, ELP, 35.4 shares and Elder, 24.6 shares. The
Stockholders shall transfer all of the Stock free and clear of
all claims, liens, security interests, charges, encumbrances,
equities, adverse interests and restrictions of any kind
(collectively, "Liens"), except any imposed under the federal or
applicable state securities laws. On the Closing Date, each
Stockholder shall deliver to Buyer one or more certificates
evidencing the shares of Stock to be transferred to Buyer by such
Stockholder, duly endorsed in blank or accompanied by duly
executed stock powers in blank, together with all necessary
documentary or stock transfer stamps affixed to such
certificates.
1.2 Purchase Price.
(a) As consideration for the sale, conveyance,
transfer, assignment and delivery to Buyer of the Stock, Buyer
shall pay to the Stockholders a purchase price of $5,000,000 (the
"Purchase Price"), subject to adjustment as provided in Sections
1.2(b) and 1.2(c), as follows:
(i) $4,750,000 payable on the Closing Date (the
"Closing Payment");
(ii) $250,000 deposited by Buyer in escrow on the
Closing Date, with Messrs. Christy & Viener
as escrow agent (the "Escrow Agent"), in
accordance with the terms of the Escrow
Agreement (as defined in Section 3.7); and
(iii) the Earnout on the Earnout Payment Dates
(as defined in Sections 1.2(c) and 1.2(e)).
All amounts payable by Buyer pursuant to this Section 1.2(a) and
Section 1.2(c) shall be paid by wire transfer on the Closing Date
in immediately available funds to accounts designated by the
Stockholders to Buyer not later than two business days prior to
the scheduled date of such payment.
(b) If, on the Closing Date, and based upon the
estimated Closing Balance Sheet (as defined in Section 3.8), (i)
the aggregate value of the cash, cash equivalents and accounts
receivable balances of SRI (together, the "Cash Value") does not
exceed the aggregate amount of its liabilities (including the
present value of any tax liabilities for the period ending on the
Closing Date associated with the conversion of the books of SRI
from cash basis to accrual basis accounting calculated based on a
combined federal and state effective tax rate of 40.1%
(multiplied by 88.65%, which represents a discount based on a
present value factor of 5% per annum) by at least $700,000 and
(ii) the book value of SRI's fixed assets (the "Book Value") does
not at least equal $80,000, the amount, if any, by which the Cash
Value does not exceed such aggregate liabilities by $700,000 and
the amount, if any, by which the Book Value is less than $80,000,
shall reduce the Purchase Price by $1.00 for each $1.00 of such
deficiency, as follows: (y) the aggregate amount of the
Retention Bonuses (as defined in Section 3.6), and the next
$250,000 of such deficiency shall reduce the Closing Payment; and
(z) any deficiency in excess thereof shall be payable in cash by
the Stockholders to the Buyer in three equal installments (each,
an "Installment"), with each Installment to be payable 30 days
following the close of each of the Earnout Periods (as defined in
Section 1.2(c)) (each, an "Installment Payment Date"); provided,
that, for the purposes of the foregoing, the amount, if any, by
which the Cash Value exceeds such aggregate liabilities over
$700,000 may be added to the Book Value to the extent that the
Book Value is less than $80,000. Any Installment due shall be
offset against the Earnout due on the same date. Shore and the
Stockholders, jointly and severally, shall be liable for the
repayment of each Installment, if any, on each Installment
Payment Date to the extent that such Installment has not been
repaid pursuant to the applicable Earnout. The aggregate
liabilities contained in the Closing Balance Sheet shall include
all accruals required by generally accepted accounting
principles, including, without limitation, accruals for wages,
salaries, bonuses, sales commissions, vacation time, sick pay,
unemployment insurance premiums, workers' compensation premiums,
medical and disability insurance premiums, Taxes (as that term is
defined in Section 6.15) and trade payables. Within 15 days
after the Closing Date, the Stockholders shall provide to Buyer
the finalized Closing Balance Sheet, along with a reconciliation
thereof to the estimated Closing Balance Sheet and the Closing
Payment actually made on the Closing Date. The reconciliation
shall include a calculation illustrating the amount of the
adjustment (either an increase for the Stockholders or a
reimbursement to Buyer) to the Closing Payment. Within 5
business days thereafter, the party required to make such
adjustment shall pay the party so entitled.
(c) Each of the three consecutive twelve-month periods
commencing on April 1, 1998 is referred to as an "Earnout
Period". If, for any Earnout Period, SRI's EBITA (as defined in
Section 1.2(d)) equals $1,200,000 (the "Base Amount"), Buyer
shall pay to the Stockholders $450,000 in cash for each such
Earnout Period (each, an "Earnout"), subject to adjustment as
provided below:
(i) The Earnout for each of the Earnout Periods shall
be (A) increased by $1.50 for each $1.00 that SRI's EBITA
for such Earnout Period exceeds the Base Amount and (B)
reduced, but not below zero, by $1.50 for each $1.00 that
SRI's EBITA for such Earnout Period is less than the Base
Amount; and
(ii) The Earnout for the third Earnout Period shall be
increased by $150,000 if the cumulative EBITA of SRI for the
three Earnout Periods equals or exceeds $3,600,000.
The calculation of the Earnout for each Earnout Period
shall be independent of the calculations for the other Earnout
Periods, and there shall be no cumulation of EBITA from one
Earnout Period to another (except for the purposes of Section
1(c)(ii)).
(d) For the purposes of this Agreement, "EBITA" means,
for an Earnout Period, Net Income (as defined below) without
deductions for (i) interest expense, (ii) provisions for income
taxes and (iii) amortization of goodwill and other intangible
assets resulting from Buyer's purchase of SRI.
"Net Income" means the net income (or loss) of SRI for
an Earnout Period attributable to Buyer's continued operation of
SRI's business, as reasonably determined by Buyer in accordance
with generally accepted accounting principles consistently
applied in accordance with the Financial Statements (as defined
in Section 3.8(a)). For this purpose, "SRI" and "SRI's business"
shall include (x) any organization or business that is the
successor to SRI as a result of any merger, sale or disposition
of its stock or assets, or any liquidation, consolidation or
other reorganization involving SRI or its business or assets and
(y) any organization or business of Buyer or any of its
affiliates that is utilizing assets or resources of SRI,
including client lists, trade secrets, marketing and sales
information and other intangibles owned or used by SRI in its
business, irrespective of whether such assets or resources are
owned by SRI during the Earnout Period in question. The
calculation of Net Income shall take into account the following
expenses to the extent incurred in the ordinary course of SRI's
business: (i) wage, salary and commission expense (but excluding
the automobile allowance of Elder pursuant to Section 2.5 of the
Employment Agreement (as defined in Section 3.4)) of all
temporary, payrolled (as defined in Section 1.2(f)) and full-time
employees of SRI, including, without limitation, salary and other
compensation paid to Elder and that portion of the expense of a
controller engaged by SRI attributable to SRI's operations and
reasonably acceptable to Buyer; (ii) reasonable travel and
entertainment expenses incurred by SRI's employees; (iii) bonuses
paid to SRI's employees and approved by Elder; (iv) all amounts
attributable to FICA and any other federal, state and local taxes
paid by SRI on behalf of such employees; (v) all unemployment
insurance premiums, workers' compensation premiums, medical and
disability coverage and any other benefits provided by SRI to
such employees (excluding any increase in workers' compensation
premiums due by SRI attributable to periods prior to the Closing
Date); (vi) reasonable general and administrative expenses; (vii)
sales commissions; (viii) depreciation in connection with the
acquisition by Buyer, SRI or any other subsidiary of Buyer of
computer and telecommunications equipment for use at SRI
consistent with that used by the Headway group of companies; and
(ix) an annual charge of $50,000 for technical and financial
support provided by the Headway group of companies, which amount
shall include the allocation by Headway to SRI of fees charged by
Headway's certified public accountants in connection with the
annual audit of the Headway group of companies; provided, that in
the event that in any Earnout Period SRI's EBITA (calculated in
accordance with items (i) through (viii) of this paragraph only)
is less than the Base Amount, such charge shall be reduced to
$30,000 for the determination of SRI's EBITA attributable to such
Earnout Period. For the purpose of determining Net Income
pursuant to this Section 1.2(d), any reserves established by SRI
for bad debts with respect to its receivables during any Earnout
Period shall be added to Net Income to the extent deducted
therefrom. If Shore or the Stockholders shall disagree with the
calculation of Net Income by Buyer, Shore and the Stockholders,
together with their accountants, shall be entitled to meet with
Buyer and its accountants for the purpose of resolving any such
disagreement.
In the event of a material change in the ownership,
management or operations of SRI during the Earnout Periods that,
in the reasonable discretion of either Elder or Shore, would
materially and adversely affect the revenues of SRI, including
without limitation, changes resulting from one or more sales or
other dispositions of substantially all of the assets of SRI, an
organizational or ownership restructuring (such as a merger,
consolidation or other reorganization involving its business, or
a spin-off, split-up or other divisional restructuring, or a
substantial sale of its stock to an unaffiliated organization) or
any other organic change that reduces operations, then the
parties shall agree to discuss and evaluate the then current
definition of Net Income to assure that the Earnout calculation
set forth in this Section 1.2 continues to be a fair and relevant
method to measure SRI's EBITA and the Net Income defined herein,
and whether adjustments should be made to the method of
calculation to take into account the effect of such changes.
Such adjustments might include augmenting the EBITA of SRI with
portions of the EBITA of affiliated organizations that are
attributable to SRI assets or resources transferred to or shared
with such other organizations. Buyer also agrees not to take
actions calculated to minimize EBITA or to reduce Net Income for
the purpose of avoiding any Earnout obligations hereunder, or to
reduce any Earnout to which the Stockholders and Shore would
otherwise be entitled to hereunder (including using affiliated
organizations to compete with SRI's business or using marketing
or business plans intended to cause the diversion of revenue from
SRI to the Buyer's affiliated organizations). Buyer agrees
otherwise to conduct itself in good faith and to use commercially
reasonable efforts to maximize EBITA and Net Income during the
Earnout Periods.
(e) Each Earnout shall be paid in two equal
installments, the first installment to be paid 30 days following
the close of the related Earnout Period and the second
installment to be paid 90 days following the close of the related
Earnout Period (each, an "Earnout Payment Date"); provided, that,
the Earnout paid on the first Earnout Payment Date may be based
on an estimate, as reasonably determined by Buyer, of the total
Earnout for the related Earnout Period. If any such day is not a
business day, the Earnout Payment Date shall be the next
succeeding business day. If, as of the close of business on the
third day prior to an Earnout Payment Date with respect to any
Earnout, any account receivable included as income in the
calculation of Net Income has not been collected (using a cash
basis method of determination), the uncollected amount of such
account receivable shall be deducted from Net Income and EBITA
and the Earnout shall be reduced accordingly; provided, that any
such uncollected account receivable may not be deducted more
than once during any Earnout Period. If such account receivable
is thereafter collected after any such Earnout Payment Date,
Buyer shall pay the Stockholders (but no sooner than on the
second Earnout Payment Date of an Earnout Period to the extent
that the uncollected receivable relates to the first Earnout
Payment Date in the same Earnout Period) the amount by which such
Earnout had been reduced in respect of such account receivable,
net of any direct collection costs paid to outside collection
agents or attorneys and net of an interest charge for any account
receivable paid more than 120 days after the date of invoice (a
"Restoration Amount"), with the interest rate determined by
reference to the interest rate then in effect for Eurodollar
Loans under the Credit Agreement, dated as of March 12, 1998, by
and among Headway, as Borrower, NationsBank, National
Association, as Agent and as Lender, and the lenders from time to
time parties thereto (or any successor senior credit facility of
Headway); provided, that with respect to the Earnout for the
third Earnout Period, Buyer shall be obligated to pay the
Stockholders a Restoration Amount with respect to any such
account receivable only if such account receivable is collected
within 90 days of the second Earnout Payment Date (the "Final
Restoration Amount") with respect to such Earnout. Any such
accounts receivable remaining uncollected on the day following
the Final Restoration Date shall be deemed to be conveyed,
transferred and assigned to the Stockholders on such day and the
Stockholders shall have the right to institute collection
proceeding with respect thereto and to keep any proceeds received
therefrom. The Stockholders shall notify Buyer of any such
action not less than five days before it is instituted.
(f) For the purposes of this Agreement, "payrolled"
personnel means (i) those employees of Buyer or SRI, as the case
may be, who are hired by Buyer or SRI on behalf of a client of
Buyer or SRI, as the case may be, and are considered as full-time
"permanent" employees of such client, but whose compensation is
paid by Buyer or SRI or (ii) those employees of Buyer or SRI who
are considered to be payrolled employees under industry practice
or understanding prevailing at the time. For the purposes of
Section 1.2(d)(i), payrolled personnel of SRI shall mean only
those personnel with regard to which the revenue for their
placement services is credited to the account of SRI.
2. Closing. The consummation of the purchase and
sale of the Stock shall take place at 10:00 a.m. on March 16,
1998 (the "Closing Date"), at the offices of Christy & Viener,
620 Fifth Avenue, New York, New York 10020.
3. Conditions to the Obligations of Buyer. The
obligations of Buyer under Section 1 are subject to the
satisfaction, on or before the Closing Date, of the following
conditions:
3.1 Due Performance. The Stockholders and Shore shall
have in all material respects fully performed and complied with
all agreements and conditions required under this Agreement to be
performed or complied with by it or them on or prior to the
Closing Date.
3.2 Accuracy of Representations and Warranties. All
representations and warranties of the Stockholders and Shore set
forth in Section 6 of this Agreement shall be true and correct in
all material respects on and as of the Closing Date as if made on
and as of such date.
3.3 Certificate. Buyer shall have received a
certificate from the Stockholders and Shore to the effect set
forth in Sections 3.1 and 3.2.
3.4 Employment Agreement. Buyer and Elder shall have
entered into an Employment Agreement in a form satisfactory to
both parties (the "Employment Agreement").
3.5 Sharing Agreement. The Stockholders and Shore
shall have provided a certificate to Buyer, in form and substance
reasonably satisfactory to Buyer, with respect to the terms of an
agreement between Shore and Elder regarding the allocation of the
Purchase Price (the "Sharing Agreement").
3.6 Retention Bonuses. On or prior to the Closing
Date, Shore, Elder and SRI shall have reached agreement with key
employees of SRI whereby such employees shall receive the bonuses
(the "Retention Bonuses") set forth on Schedule 3.6 and included
in the Closing Balance Sheet as an incentive for remaining with
SRI after the Closing Date, the amount and payee of each such
Retention Bonus to be reasonably satisfactory to Buyer.
3.7 Escrow Agreement. Buyer, the Stockholders, Shore
and Christy & Viener, as escrow agent (the "Escrow Agent") shall
have entered into an Escrow Agreement in a form satisfactory to
all such parties (the "Escrow Agreement").
3.8 Financial Statements.
(a) On or before the Closing Date, the Stockholders
shall have prepared and delivered to Buyer unaudited financial
statements of SRI as of and for the nine-month period ended
September 30, 1997 and for the twelve-month periods ended
December 31, 1995 and December 31, 1996 (collectively, the
"Unaudited Financial Statements") and on or before March 31,
1998, the Stockholders shall have prepared and delivered to Buyer
audited financial statements of SRI for the twelve-month period
ended December 31, 1997 (the "Audited Financial Statements"). On
the Closing Date, the Stockholders shall have prepared and
delivered to Buyer an unaudited balance sheet of SRI as of the
Closing Date (the "Closing Balance Sheet"; the Unaudited
Financial Statements, the Audited Financial Statements and the
Closing Balance Sheet being collectively referred to as the
"Financial Statements"). The Financial Statements shall be
prepared at the expense of the Stockholders in accordance with
generally accepted accounting principles (except, with respect to
the Unaudited Financial Statements, (i) to the extent that
deferred income taxes are not recognized as to differences
between the financial and tax bases of assets and (ii)
substantially all of the footnote disclosures and statements of
cash flows required by generally accepted accounting principles
are omitted) applied on a basis consistent throughout all periods
presented and, as requested by Buyer, on a calendar-year and
accrual basis and shall reflect a deferred tax liability for the
conversion of the books of SRI from cash basis to accrual basis
accounting calculated based on a combined federal and state
effective tax rate of 40.1% (multiplied by 88.65%, which
represents a discount based on a present value factor of 5% per
annum).
(b) The Audited Financial Statements may be prepared
by SRI's accounting firm, as long as such firm is registered to
practice in front of the Securities and Exchange Commission
("SEC") and agrees to provide consents, as needed, for the
inclusion of their audit reports in SEC filings made by Buyer
that include such financial statements, but in any event will be
prepared at SRI's sole expense. In the event that the
transactions contemplated by this Agreement are not consummated
other than (i) by reason of any material misrepresentation by the
Stockholders of any representation or warranty made by them
hereunder or (ii) at the election of the Stockholders, Buyer
shall bear the cost of the preparation of the Audited Financial
Statements
3.9 Payoff Letter. Buyer shall have received an
original, signed payoff letter from Harbor Bank and original,
signed Form UCC-3's releasing all liens held by Harbor Bank with
respect to the assets of SRI, all such documents to be in form
and substance satisfactory to Buyer and Headway.
3.10 Shareholders' Agreement. On or prior to the
Closing Date, Shore, Elder and SRI shall have terminated the SRI
Shareholders' Agreement, dated as of April 1, 1995, among such
parties, such termination to be in form and substance
satisfactory to Buyer and Headway.
3.11 Legal Opinion. Buyer shall have received an
opinion of Messrs. Greenberg, Traurig, Hoffman, Lipoff, Rosen &
Quentel, P.A., special counsel for the Stockholders and Shore,
dated the Closing Date, reasonably satisfactory in form and
substance to counsel for Buyer and covering the matters set forth
in Sections 6.1 (exclusive of the last sentence thereof), 6.2,
6.3, 6.4(a), 6.6 and, to their actual knowledge, 6.8.
3.12 Partnership Action. Buyer shall have received
copies, certified by the general partner of each of L&M and ELP,
of actions of the limited partners and general partner of each
of L&M and ELP approving the execution of this Agreement, the
Escrow Agreement and the Sharing Agreement and the consummation
of the transactions contemplated hereby and thereby.
3.13 Resignations. Buyer shall have received the
written resignations of all persons serving as officers and
directors of SRI.
3.14 No Adverse Change. There shall have been no
material adverse change in the business, results of operations or
financial condition of SRI since September 30, 1997.
3.15 Consents and Governmental Approvals. Buyer shall
have received any material consents of third parties, and any
authorizations, orders, grants, consents, permits and approvals
of all relevant governmental authorities, required in connection
with the consummation of the transactions contemplated under this
Agreement, without the imposition of any materially burdensome
conditions or restrictions, which shall continue to be in full
force and effect on the Closing Date.
3.16 No Claims. No claim, action, suit, investigation
or proceeding shall be pending or threatened against any of the
parties which, if adversely determined, might (i) prevent or
hinder consummation of the transactions contemplated by this
Agreement, (ii) result in the payment of substantial damages by
Buyer as a result of the transactions contemplated hereby or
(iii) materially and adversely affect the business or assets of
SRI or Buyer.
3.17 Due Diligence. Buyer shall have completed to its
reasonable satisfaction a diligence review of SRI's business.
4. Conditions to the Obligations of the Stockholders
and Shore. The obligations of the Stockholders and Shore under
Section 1 are subject to the satisfaction, on or before the
Closing Date, of the following conditions:
4.1 Due Performance. Buyer shall have in all material
respects fully performed and complied with all agreements and
conditions required under this Agreement to be performed or
complied with by it on or prior to the Closing Date.
4.2 Accuracy of Representations and Warranties. All
representations and warranties of Buyer set forth in Section 7 of
this Agreement shall be true and correct in all material respects
on and as of the Closing Date as if made on and as of such date.
4.3 Certificate. The Stockholders and Shore shall
have received a certificate from Buyer to the effect set forth in
Sections 4.1 and 4.2.
4.4 Employment Agreement. Buyer and Elder shall have
entered into the Employment Agreement.
4.5 Escrow Agreement. Buyer, the Stockholders, Shore
and the Escrow Agent shall have entered into the Escrow
Agreement.
4.6 Legal Opinion. The Stockholders and Shore shall
have received an opinion of Messrs. Christy & Viener, counsel for
Buyer, dated the Closing Date, reasonably satisfactory in form
and substance to counsel for the Stockholders and Shore and
covering the matters set forth in Sections 7.1 (exclusive of the
last sentence thereof), 7.2, 7.3, 7.4 (a) and, to their actual
knowledge, 7.6.
4.7 Corporate Action. The Stockholders and Shore
shall have received copies of resolutions of Buyer's Board of
Directors, certified by the Secretary of Buyer, approving the
execution of this Agreement, the Employment Agreement and the
Escrow Agreement and the consummation of the transactions
contemplated hereby and thereby.
4.8 Consents and Governmental Approvals. The
Stockholders and Shore shall have received any material consents
of third parties, and any authorizations, orders, grants,
consents, permits and approvals of all relevant governmental
authorities, required in connection with the consummation of the
transactions contemplated under this Agreement, without the
imposition of any materially burdensome conditions or
restrictions, which shall continue to be in full force and effect
on the Closing Date.
4.9 No Claims. No claim, action, suit, investigation
or proceeding shall be pending or threatened against any of the
parties which, if adversely determined, might (i) prevent or
hinder consummation of the transactions contemplated by this
Agreement, (ii) result in the payment of substantial damages by
the Stockholders or Shore as a result of the transactions
contemplated hereby or (iii) materially and adversely affect the
business or assets of SRI or Buyer.
5. Waiver of Conditions. Each of the parties shall
have the right to waive, in whole or in part, any of the
conditions to its performance set forth in this Agreement and, on
such waiver, the waiving party may proceed with the consummation
of the transactions contemplated herein, it being understood
that such waiver shall not constitute a waiver of any right which
such party may have by reason of the breach by the other party of
any representation, warranty or agreement contained herein, or by
reason of any misrepresentation made by such other party herein.
6. Representations and Warranties of the Stockholders
and Shore. Each of the Stockholders and Shore, jointly and
severally, represents and warrants to Buyer as follows:
6.1 Due Organization and Qualification. SRI is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of California, with full
corporate power and authority to own, lease and operate its
properties and to carry on its business in the places and in the
manner currently conducted or proposed to be conducted. SRI is
qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature of the
activities conducted by it or the character of the properties
owned or leased by it makes such qualification necessary and the
failure to so qualify would have a material adverse effect on its
business. Each of L&M and ELP is a limited partnership duly
organized and validly existing under the laws of the State of
Nevada, with full power and authority to own, lease and operate
its properties and to carry on its business in the places and
manner currently conducted or proposed to be conducted. Each of
the Stockholders is qualified to do business as a foreign limited
partnership in each jurisdiction in which the nature of the
activities conducted by it or the character of the properties
owned or leased by it makes such qualification necessary and the
failure to so qualify would have a material adverse effect on its
business.
6.2 Authority; Due Authorization. Each of L&M and ELP
has the requisite power and authority to execute and deliver, and
has taken all action necessary for the execution and delivery of,
this Agreement and the Escrow Agreement, and for the consummation
of the transactions contemplated hereby and thereby. Shore has
the requisite power and authority to execute and deliver, and has
taken all action necessary for the execution and delivery of,
this Agreement, the Escrow Agreement and the Sharing Agreement
and for the consummation of the transactions contemplated hereby
and thereby. Elder has the requisite power and authority to
execute and deliver, and has taken all action necessary for the
execution and delivery of, this Agreement, the Escrow Agreement,
the Employment Agreement and the Sharing Agreement and for the
consummation of the transactions contemplated hereby and thereby.
6.3 Valid Obligation. This Agreement and the Escrow
Agreement, when executed and delivered by each of the
Stockholders and Shore, the Sharing Agreement, when executed and
delivered by Shore and Elder, and the Employment Agreement, when
executed and delivered by Elder, shall constitute the valid and
binding obligation of such Stockholder or Shore, as the case may
be, in each case enforceable in accordance with its terms, except
as may be limited by principles of equity or by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally.
6.4 No Conflicts or Defaults. The execution and
delivery of this Agreement and the Escrow Agreement by each of
the Stockholders and Shore, the Sharing Agreement by Shore and
Elder, the Employment Agreement by Elder and the consummation of
the transactions contemplated hereby and thereby, do not and
shall not (a) contravene the Certificate of Incorporation or By-
Laws of SRI or the certificates of limited partnership or limited
partnership agreement of each of L&M or ELP or (b) with or
without the giving of notice or the passage of time, (i)
materially violate or conflict with, or result in a material
breach of, or a material default or loss of rights under, any
agreement, lease, mortgage, instrument, permit or license to
which SRI, any Stockholder or Shore is a party, or to which SRI,
any Stockholder, Shore or the Stock are subject, or any judgment,
order, decree, law, rule or regulation to which SRI, any
Stockholder, Shore or the Stock are subject, (ii) result in the
creation of, or give any party the right to create, any lien,
charge, encumbrance or any other right or adverse interest on or
with respect to SRI or the Stock, or (iii) terminate or give any
party the right to terminate, abandon or refuse to perform any
material agreement, arrangement or commitment to which SRI, any
Stockholder or Shore is a party or to which SRI, any Stockholder,
Shore or the Stock are subject.
6.5 Copies of Charter and Other Documents. Copies of
the Articles of Incorporation and By-Laws of SRI and abstracts of
the Certificates of Limited Partnership and Limited Partnership
Agreements of each of L&M and ELP, in each case as amended to the
date hereof, have been delivered to Buyer or its representatives
and are true and complete copies of such documents as in effect
on the date of this Agreement. Copies of all minutes and
consents of the board of directors and the stockholders of SRI
and all actions taken by the limited partners and general partner
of each of L&M and ELP, up to and including the date hereof, have
been delivered to Buyer or its representatives and are true and
complete copies of such documents.
6.6 Capitalization of SRI, L&M and ELP.
(a) The authorized capital stock of SRI consists of
25,000 shares of Stock, of which 1,000 shares are issued and
outstanding and no shares are held in treasury. All of such
issued and outstanding shares of Stock were duly authorized and
validly issued, are fully paid and nonassessable, were not issued
in violation of any preemptive rights and are owned by the
Stockholders. There are no outstanding options, warrants,
rights, conversion rights, preemptive rights, calls, commitments
or demands of any character obligating SRI or any of the
Stockholders, to issue, sell, redeem or repurchase any shares of
Stock or any other security giving a right to acquire shares of
Stock. Each Stockholder is the sole beneficial and record owner
of the shares of Stock indicated for such Stockholder in Section
1.1, and owns such shares free and clear of all Liens, except any
imposed under the federal or applicable state securities laws.
As of the Closing Date, all right, title and interest in and to
all of such shares of Stock shall be owned by such Stockholder,
and on the assignment and delivery of the certificates for such
shares to Buyer on the Closing Date, Buyer shall acquire good and
marketable title to such shares, free and clear of all Liens,
except any imposed under the federal or applicable state
securities laws.
(b) The holders of the limited and general partnership
interests of each of L&M and ELP are set forth in Schedule 6.6.
Each limited and general partner so listed is the sole and
beneficial holder of the interest indicated for such partner.
There are no outstanding options, warrants, rights, preemptive
rights, calls, commitments or demands of any character obligating
either of L&M or ELP or any limited or general partner of L&M or
ELP to issue, sell, redeem or repurchase any limited or general
partnership interest of L&M or ELP.
6.7 Subsidiaries and Related Parties. SRI's business
is conducted entirely by and through SRI. SRI has no direct or
indirect subsidiaries, nor are there any other entities that SRI
otherwise directly or indirectly controls or in which it has any
ownership or other interest. Except as set forth in Schedule
6.7, none of the Stockholders, Shore or any director, member,
officer or key employee of SRI or any of their respective
affiliates or relatives has any direct or indirect interest
(other than an ownership interest of up to 5% of the voting
securities of any corporation, the securities of which are
publicly-traded) in any assets used in SRI's business or in any
corporation, partnership or other entity that (a) competes with
SRI, (b) sells or purchases products or services to or from SRI,
(c) leases real or personal property to or from SRI or (d)
otherwise does business with SRI.
6.8 Authorizations. Except as set forth in Schedule
6.8, no authorization, approval, order, license, permit or
consent of, or filing or registration with, any court or
governmental authority, regulatory entity or official body, and
no consent of any other party, is required in connection with the
execution, delivery and performance of this Agreement and the
Escrow Agreement by each of the Stockholders and Shore, the
Sharing Agreement by Shore and Elder or the Employment Agreement
by Elder.
6.9 The Assets.
(a) SRI has good and marketable title to all of its
tangible personal property and assets free and clear of all Liens
or mortgages, except (i) any arising under leases of real or
personal property to which SRI is a party and which have been
specifically disclosed to Buyer or (ii) mechanics' or other liens
arising or incurred in the ordinary course of business and which
do not interfere materially with the possession, ownership or use
of any real or personal property used by SRI.
(b) Set forth in Schedule 6.9.A is a list (by
categories) of all real property leased by SRI, with a brief
description of the premises. SRI owns no real property.
(c) Schedule 6.9.B sets forth a true and complete list
of all office furniture and equipment, computers, fixtures,
leasehold improvements, vehicles, computer software, programs and
databases of SRI. All such property is, in all material
respects, in good operating condition and repair, reasonable wear
and tear excepted, and is satisfactory for the requirements of
SRI's business.
6.10 Client Agreements.
(a) Schedule 6.10.A sets forth a true and complete
list of all written agreements and, to the best knowledge of each
of the Stockholders and Shore, all oral client agreements and
arrangements, to which SRI is party (the "Client Agreements").
SRI has furnished Buyer with a true copy of each Client Agreement
or a written description of any Client Agreement that has not
been reduced to writing. The written Client Agreements, and to
the best knowledge of each of the Stockholders and Shore, the
oral Client Agreements, constitute all of the contracts,
agreements, understandings and arrangements pursuant to which SRI
provides any temporary, permanent, leased or payrolled employee
services for or with respect to the clients who are parties to
such agreements. Except as set forth in Schedule 6.10.A, (i)
each Client Agreement was entered into in the ordinary course of
SRI's business, (ii) is in full force and effect on the date of
this Agreement and is valid, binding and enforceable in
accordance with its terms, (iii) SRI is not in material breach or
default under any of the Client Agreements and has not received
any notice or claim of any such breach or default from any party,
(iv) to the best knowledge of each of the Stockholders and Shore,
the relationship of SRI with the clients that are parties to the
Client Agreements is generally good, and there has been no
expression of any intention to terminate or materially modify any
of such relationships, (v) the Stockholders have no knowledge of
any material breach or default under any of the Client
Agreements by any other party thereto, (vi) to the best knowledge
of each of the Stockholders and Shore, no event or action has
occurred, is pending or, is threatened, which, after the giving
of notice, passage of time or otherwise, could constitute or
result in any such material breach or default by SRI or any other
party under any of the Client Agreements and (vii) no material
amount claimed to be payable to SRI under any of the Client
Agreements is being disputed by any client.
(b) Except as set forth in Schedule 6.10.B, (i) for
its services under each Client Agreement, SRI receives the
compensation provided under such Client Agreement, without
discount, offset or concessions of any kind (other than billing
adjustments in the ordinary course of business), and SRI has not
proposed or agreed to offer or accept any discount, offset or
concession and (ii) the Stockholders and Shore believe that the
payment history of the clients under the Client Agreements has
been within acceptable industry standards.
6.11 Receivables and Payables.
(a) SRI's receivables (including, without limitation,
accounts receivable, loans receivable, notes, advances and
receivables due from affiliates) which are reflected in the
Closing Balance Sheet (subject to any reserves for bad debts with
respect to such receivables set forth in the Closing Balance
Sheet) were the result of bona fide transactions in the ordinary
course of SRI's business. All receivables that are reflected in
the Closing Balance Sheet (subject to any reserves for bad debt
set forth in the Closing Balance Sheet) are fully collectible and
are subject to no defenses, counterclaims, set-offs or
recoupments. Except as set forth in Schedule 6.11.A, no fall-
offs, rebates, discounts, offsets or concessions have been
granted by SRI to any of its clients with respect to any
receivable which is reflected on the Closing Balance Sheet and
SRI has no obligation to grant any fall-offs, rebates, discounts,
offsets or concessions to any customer with respect to any
transaction reflected on the Closing Balance Sheet.
(b) Set forth in Schedule 6.11.B is an aging schedule
of SRI's accounts receivable and accounts payable as of the
Closing Date, which list is accurate in all material respects.
6.12 Financial Statements.
(a) Subject to Section 3.8(a), the Financial
Statements have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent
throughout all periods presented. Such statements are correct
and complete in all material respects, are reconcilable to the
books and records of SRI, and present fairly the financial
position of SRI as of the dates, and the results of operations,
cash flows and changes in financial position of SRI for the
periods, indicated, except in the case of interim or unaudited
financial statements, for the omission of footnotes and for year-
end review adjustments which are not expected to be material.
(b) Except as set forth in Schedule 6.12, SRI had no
material liabilities or obligations, whether secured or
unsecured, accrued, determined, absolute or contingent, asserted
or unasserted or otherwise, which are required to be reflected or
reserved in a balance sheet or the notes thereto under generally
accepted accounting principles, but which are not reflected in
the Financial Statements.
6.13 Other Agreements.
(a) Schedule 6.13.A sets forth a true and complete
list of the office leases, equipment leases and other agreements,
contracts and instruments to which SRI is a party other than the
Client Agreements (the "Other Agreements"). Together with the
Client Agreements, the Other Agreements constitute all of the
material contracts, agreements, understandings and arrangements
required for the operation of SRI's business, as currently
conducted by SRI, or which have a material effect thereon.
(b) Except as set forth in Schedule 6.13.B, (i) each
Other Agreement was entered into in the ordinary course of SRI's
business, is in full force and effect on the date of this
Agreement and is valid, binding and enforceable in accordance
with its terms, (ii) SRI is not in material breach or default
under any of the Other Agreements and has not received any
written notice or claim of any such breach or default from any
party, (iii) none of SRI, the Stockholders and Shore have any
knowledge of any material breach or default under any of the
Other Agreements by any party thereto and (iv) to the best
knowledge of each of the Stockholders and Shore, no event or
action has occurred, is pending or is threatened, which, after
the giving of notice, passage of time or otherwise, could
constitute or result in any such material breach or default by
SRI or any other party under any of the Other Agreements.
6.14 Intellectual Property. Schedule 6.14 sets forth a
true and complete list of all trademarks, service marks, domain
name, trade names and copyrights, and United States or foreign
registrations and applications for registration of any of them,
and any other intellectual property rights, used by SRI in its
business, all of which intellectual property is included in the
assets of SRI. SRI owns or has legal right to use, pursuant to
one or more of the Other Agreements, all such intellectual
property without, to the best knowledge of each of the
Stockholders and Shore, infringing on the rights or intellectual
property of any third party. No royalties or fees are payable by
SRI to any party by reason of the use by SRI of any of such
intellectual property. SRI has not received any claims that it
or its products or services have infringed the rights of others,
and the Stockholders and Shore are not aware of any infringement
by others of SRI's intellectual property.
6.15 Taxes. Except as set forth in Schedule 6.15, SRI
has filed all federal, state, local and foreign returns and
reports which were required to be filed prior to the date hereof
in respect of all income, withholding, franchise, payroll,
excise, property, value-added, sales, use or other taxes,
imposts, duties or assessments (together with any related
penalties, fines or interest, "Taxes"). Each such return and
report is complete and accurate in all material respects, and SRI
has paid, or established adequate reserves for payment of, all
Taxes (and any related penalties, fines and interest) shown to be
due on such returns or reports and any assessments received with
respect thereto. Except as set forth in Schedule 6.15, SRI has
received no notice of any claims pending or threatened for taxes
against it for periods prior to the date hereof in excess of such
reserves. No tax return or tax return liability of SRI is
presently under audit, or, to the best knowledge of the
Stockholders or Shore, proposed to be audited. SRI has not given
or been requested to give waivers of any statute of limitations
related to the payment of any Taxes.
6.16 Permits; Compliance with Law. SRI holds all
permits, certificates, licenses, approvals and other
authorizations of governmental authorities as are materially
necessary to the conduct of its businesses. SRI is in material
compliance with the terms of each thereof and have not received
any notice or claim pertaining to the failure to obtain, or the
breach or violation of the terms of, any such authorization.
None of SRI, the Stockholders or Shore has received any notice of
any proceeding or investigation likely to result in the
suspension or revocation of any such authorization. SRI is
conducting its business and affairs in material compliance with
all applicable federal, state and local laws, ordinances, rules,
regulations and court or administrative orders and decrees,
including, without limitation, any respecting wage and hour,
withholding and unemployment compensation requirements.
6.17 Litigation. Except for workers compensation
claims arising in the ordinary course of business or as set forth
in Schedule 6.17, there are no claims, actions, suits,
proceedings, investigations or criminal proceedings, at law or in
equity, before any court, tribunal, governmental authority or
other forum (collectively, "Proceedings") pending or, to the best
knowledge of each of the Stockholders or Shore, threatened,
against SRI, any of the Stockholders or Shore, which, if
adversely determined, would, singly or in the aggregate, have a
material adverse effect on SRI's business or the ability of any
of the Stockholders or Shore to perform their respective
obligations under this Agreement or which would challenge the
validity or propriety of the transactions contemplated in this
Agreement. Schedule 6.17 contains a list of all Proceedings to
which SRI or any of the Stockholders or Shore is a party. There
is no material outstanding and unsatisfied judgment, order, writ,
ruling, injunction, stipulation or decree of any court,
arbitrator or governmental authority against or materially
affecting SRI, SRI's business or any of the Stockholders or
Shore.
6.18 Ordinary Course; No Material Adverse Effect.
Except as set forth in Schedule 6.18 and for the transactions
contemplated in this Agreement, since September 30, 1997, SRI has
conducted its business and maintained its assets substantially in
the same manner as previously conducted or maintained and solely
in the ordinary course and, since such date, there has not been
any event that has or would, with or without the giving of notice
or the passage of time, result in a material adverse effect on
SRI or its business.
6.19 Employee Benefits and Relations.
(a) Except as set forth in Schedule 6.19, SRI does not
maintain or sponsor, or contribute or has any obligation or
liability to, any "employee pension benefit plan", "employee
welfare benefit plan" or "multi-employer plan" (as such terms are
defined in Sections 3(2), 3(1) and 4001(a)(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")).
Set forth in Schedule 6.19 is a list of all bonus, pension,
profit-sharing, deferred compensation, stock ownership, stock
bonus, stock option, phantom stock, retirement, vacation,
disability, death benefit, unemployment, hospitalization,
medical, dental, severance, or other plan, agreement, arrangement
or understanding providing benefits to any current or former
employee, officer, member or director of SRI or to which SRI has
any liability or obligation (all such plans, agreements,
arrangements and understandings are referred to as "Benefit
Plans"). Shore and Elder have delivered to Buyer true, complete
and correct copies of (i) each Benefit Plan and all amendments
thereto (or, in the case of any unwritten Benefit Plans,
descriptions thereof), (ii) annual reports on Form 5500 for the
past three years (together with accompanying financial
statements) filed with the Internal Revenue Service or Department
of Labor, as applicable, with respect to each Benefit Plan (if
any such report was required), (iii) all summary plan
descriptions for each Benefit Plan for which such summary plan
description is required or otherwise available and (iv) each
trust agreement and group annuity contract relating to any
Benefit Plan. No Benefit Plan provides for post-retirement
medical or life insurance benefits unless the event giving rise
to the benefit entitlement occurs prior to the employee's
retirement (except as required by Title I, Part 6 of ERISA).
(b) Any accrued obligations of SRI under all Benefit
Plans that are required to be reflected on the balance sheet of
SRI in accordance with generally accepted accounting principles
are reflected thereon as of the dates indicated thereon and on
the books and records of SRI for all periods thereafter. Shore
and Elder have provided Buyer with copies of all such balance
sheets, books and records.
(c) Except as set forth in Schedule 6.19, each Benefit
Plan and any related trust complies currently, and has complied
at all times in the past, both as to form and operation, in all
material respects with the terms of such Benefit Plan and with
the applicable provisions of ERISA, the Code and other applicable
laws. All necessary government approvals for each Benefit Plan
have been obtained on a timely basis.
(d) Except as set forth in Schedule 6.19, SRI has no
liability (contingent or otherwise) with respect to any
terminated Benefit Plan. SRI is not a member of, and has no
liability with respect to, a controlled group of corporations or
a trade or business (whether or not incorporated) under common
control which, together with SRI, is or was at any time treated
as a single employer under Section 414(b), (c), (m) or (o) of the
Code or Section 4001(b)(1) of ERISA.
(e) SRI is not a party to any union or collective
bargaining contract with respect to any of its employees and
there has not been, nor has SRI, any of the Stockholders or Shore
received written notice threatening, any representational or
organizational activity, strike, slowdown, picketing or work
stoppage by any union or other group of employees against SRI.
(f) Schedule 6.19 sets forth (i) the name of each
director, officer, employee and sales representative of SRI
(other than temporary or payrolled personnel), together with the
annual compensation rate for each such person and (ii) each oral
or written contract, commitment or understanding between SRI and
any current or former director, officer, sales person, employee,
agent or stockholder of SRI or any associate or relative of such
persons (other than temporary or payrolled personnel).
6.20 Insurance. All of the insurable assets of SRI
are, in the judgment of the Stockholders and Shore, adequately
insured for the benefit of SRI against loss or damage by theft,
fire and all other hazards and risks of a character usually
insured against by persons operating similar properties in the
localities where such properties are located, under valid and
enforceable policies issued by insurance carriers of substantial
assets. A list of all of insurance policies of SRI, indicating
carriers, coverage and applicable limits of liability, is set
forth in Schedule 6.20. All such policies of insurance are in
full force and effect on the date hereof, and shall remain in
full force and effect through the Closing Date in accordance with
their terms. None of the Stockholders or Shore has received
notice of termination of any such policies.
6.21 Bank Accounts, Etc. Schedule 6.21 sets forth a
true and complete list of (a) all accounts and credit
arrangements maintained by SRI and all persons authorized to sign
or act on behalf of the SRI with respect thereto, and all safe
deposit boxes and other similar custodial arrangements, and (b)
the names of all persons holding powers of attorney from SRI or
otherwise authorized to act on behalf of SRI with respect to any
matters and a summary of the terms thereof.
6.22 Payment of Taxes on Transaction. On or before the
Closing Date, each of the Stockholders shall have paid, and
complied with all laws imposing, any federal, state or local
documentary, transfer or other taxes (other than income taxes)
which are required to be paid in connection with the sale,
transfer, exchange, conveyance, assignment and delivery of its
shares of Stock to Buyer.
6.23 Miscellaneous. All representations and warranties
of each of the Stockholders and Shore set forth in this Agreement
and all information set forth in the Schedules are true and
complete in all material respects and no such representation,
warranty or information contains any untrue statement of a
material fact or, to the best knowledge of each of the
Stockholders or Shore, omits to state any material fact necessary
in order to make such representation, warranty or information, in
light of the circumstances under which it is made, not false or
misleading. Any disclosure made pursuant to any of the
representations and warranties in this Section 6 shall be deemed
to have been made for purposes of any other such representations
and warranties. Buyer acknowledges that it has performed an
independent investigation in connection with the acquisition of
the Stock and that, aside from the representations and warranties
in this Section 6, the Stockholders and Shore have not made any
representations and warranties in connection with the sale of the
Stock.
7. Representations and Warranties of Buyer. Buyer
represents and warrants to each of the Stockholders and Shore as
follows:
7.1 Due Organization and Qualification. Buyer is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, with full
corporate power and authority to own, lease and operate its
properties and to carry on its business in the places and in the
manner currently conducted or proposed to be conducted. Buyer is
qualified to do business and is in good standing as a foreign
corporation in which the nature of the activities conducted by it
or the character of the properties owned or leased by it makes
such qualification necessary and the failure to so qualify would
have a material adverse effect on its business.
7.2 Authority; Due Authorization. Buyer has all
requisite corporate power and authority to execute and deliver
this Agreement, the Escrow Agreement and the Employment Agreement
and to consummate the transactions contemplated hereby and
thereby. Buyer has taken all corporate action necessary for the
execution and delivery by it of this Agreement, the Escrow
Agreement and the Employment Agreement and for the consummation
of the transactions contemplated hereby and thereby.
7.3 Valid Obligation. This Agreement, the Escrow
Agreement and the Employment Agreement, when executed and
delivered by Buyer, shall constitute its valid and binding
obligations, in each case enforceable in accordance with its
terms, except as may be limited by principles of equity or by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights
generally.
7.4 No Conflicts or Defaults. The execution and
delivery of this Agreement, the Escrow Agreement and the
Employment Agreement by Buyer, and the consummation of the
transactions contemplated hereby and thereby, do not and shall
not (a) contravene the Certificate of Incorporation or the By-
Laws of Buyer or (b) with or without the giving of notice or the
passage of time, materially violate or conflict with, or result
in a material breach of, or a material default or loss of rights
under, any agreement, lease, mortgage, instrument, permit or
license to which Buyer is a party or by which Buyer is bound,
other than the Credit Agreement, or any judgment, order, decree,
law, rule or regulation to which Buyer is subject.
7.5 Copies of Charter Documents. Copies of the
Certificate of Incorporation and By-Laws of Buyer, as amended to
the date hereof, have been delivered to the Stockholders and
Shore and are true and complete copies of such documents as in
effect on the date of this Agreement.
7.6 Authorizations. No authorization, approval,
order, license, permit or consent of, or filing or registration
with, any court or governmental authority, regulatory entity or
official body, and no consent of any other party, is required in
connection with the execution, delivery and performance of this
Agreement, the Escrow Agreement or the Employment Agreement by
Buyer.
7.7 Litigation. There are no Proceedings, pending or
threatened, against Buyer which, if adversely determined, would,
singly or in the aggregate, have a material adverse effect on the
ability of Buyer to perform its obligations under this Agreement
or that would challenge the validity or propriety of the
transactions contemplated in this Agreement. There is no material
outstanding and unsatisfied judgment, order, writ, ruling,
injunction, stipulation or decree of any court, arbitrator or
governmental authority against or materially affecting Buyer or
any material portion of its assets.
7.8 Miscellaneous. All representations and warranties
of Buyer set forth in this Agreement were, as of the date on
which they were made or given, true and complete in all material
respects and no such representation, warranty or information
contains or contained any untrue statement of a material fact or,
to the best knowledge of Buyer, omits or omitted to state any
material fact necessary in order to make such representation or
warranty, in light of the circumstances under which it is or was
made, not false or misleading. Any disclosure made pursuant to
any of the representations in this Section 7 shall be deemed to
have been made for purposes of any other such representations.
8. Survival of Representations and Warranties. All
representations and warranties made by any party in this
Agreement or in any document or certificate delivered pursuant to
this Agreement shall survive the Closing Date for a period of two
years (except that the representations and warranties set forth
in Sections 6.15 and 6.19 relating to Taxes and Benefit Plans
shall survive for a period equal to the statute of limitations
applicable to any claims and liabilities which may result from a
breach thereof) and shall be unaffected by any investigation made
by or on behalf of any party or by any notice of breach of, or
failure to perform under, this Agreement which is not effectively
waived pursuant to Section 5, subject, however, to the
limitations on indemnification set forth in Section 11.5.
9. Post-Closing Matters.
9.1 Operation of SRI During Earnout Periods. For each
Earnout Period, SRI shall prepare and submit to the Board of
Directors of Headway Corporate Staffing Services, Inc. ("HCSSI")
annual operating and capital expenditure budgets with respect to
SRI, as well as interim budget reports, at such times as the
HCSSI Board of Directors (the "HCSSI Board") reasonably
establishes, which budgets shall be approved in the reasonable
discretion of the HCSSI Board. Shore and Elder shall have the
right to participate in and assist in the preparation of any such
budgets during the Earnout Periods and shall receive copies of
SRI's quarterly financial statements and shall have reasonable
access to SRI's strategic and business plans and other management
reports upon providing reasonable notice to review the same
during normal business hours or other mutually agreed times. In
the event of a dispute with respect to the calculation of Net
Income for any Earnout Period, to the extent that the parties
cannot resolve their differences after the meeting of the parties
with their accountants contemplated by Section 1.2(d), Shore and
Elder shall have the right, under the supervision of Headway or
SRI personnel, upon reasonable prior written notice to SRI and
during normal business hours, to review the books and records of
SRI pertaining to such Net Income calculation; provided, that
neither Shore nor Elder may make copies of any such books and
records. After a budget is approved by the HCSSI Board, SRI's
management shall be authorized to act and to operate SRI's
business in accordance with such budget. HCSSI and Buyer shall at
all times have access to the books and records of SRI and to such
other information pertaining to its business as they request from
time to time and shall have the right at any time to audit the
books of SRI. Each of the Stockholders and Shore acknowledge
that SRI shall be required to implement the accounting and
operating systems and procedures of the Headway group of
companies. To the extent that SRI is not meeting the annual
operating or capital expenditure budgets then in effect, or its
accounts receivable collection experience is less favorable than
that of other HCSSI subsidiaries, the HCSSI Board shall have the
right to require Buyer to make such changes in its operations and
personnel as the HCSSI Board deems reasonably necessary.
9.2 Uncollected Receivables.
(a) To the extent that any of the accounts receivable
of SRI acquired by Buyer pursuant to this Agreement (the
"Acquired Receivables") remain uncollected (the "Uncollected
Receivables") for a period greater than 90 days from the Closing
Date, the Stockholders and Shore, jointly and severally, shall,
within 5 days of receipt of written notice from Buyer setting
forth in detail such Uncollected Receivables, pay to Buyer the
uncollected amount net of any reserves for bad debts reflected in
the Closing Balance Sheet, net of tax cost (using the combined
federal and state effective tax rate of 40.1%) relating to such
Uncollected Receivables but grossed-up to account for the
discount rate applied pursuant to Section 1.2(b), which
uncollected amount shall be deemed a reduction of the Purchase
Price (provided, however, that such uncollected amount shall not
require any additional repayment or reimbursement of the Purchase
Price because such adjustment is already taken into account by
the payment obligations of the Stockholders and Shore set forth
in this Section 9.2(a)).
(b) SRI shall use reasonable efforts to collect the
Acquired Receivables commensurate with the efforts it would use
to collect its own accounts receivable. SRI shall not be
required to institute litigation or other collection proceedings
in order to do so. The Stockholders shall have the right to
institute collection proceedings with respect to the Uncollected
Receivables but only after payment in full is made with respect
to such receivables pursuant to Section 9.2(a), and SRI shall be
deemed to have conveyed, transferred and assigned any such
Uncollected Receivables to the Stockholders. The Stockholders
shall notify Buyer of any such action not less than five days
before it is instituted. Any amounts received by SRI with
respect to collection of the Acquired Receivables or accounts
receivable generated by SRI on and after the Closing Date shall
be applied to the receivables specifically identified by the
client. If no such identification is provided, SRI shall inquire
of client for written identification and apply the amount
received accordingly.
9.3 Insurance Matters. The parties shall cooperate to
preserve the existing insurance coverage of SRI through the
Closing Date and to effect an appropriate transition to Buyer's
insurance, if requested, on the Closing Date.
9.4 Financial Statements. On or prior to 30 days
following the Closing Date, the Stockholders shall, at their
expense, prepare and deliver to Buyer and Headway unaudited
financial statements with respect to SRI as of and for the three-
month periods ended March 31, 1997, June 30, 1997 and September
30, 1997, such financial statements to be prepared in accordance
with generally accepted accounting principles on a basis
consistent with the Financial Statements and on an accrual basis
(except (i) to the extent that deferred income taxes are not
recognized as to differences between the financial and tax bases
of assets and (ii) substantially all of the footnote disclosures
and statements of cash flows required by generally accepted
accounting principles are omitted).
9.5 Transition Period. Shore agrees, for six months
following the Closing Date, to assist with the transition of
SRI's business to Buyer at such reasonable times and with respect
to such matters as from time to time may be reasonably requested
by Buyer or HCSSI.
9.6 Further Assurances. Whenever reasonably requested
to do so by a party to this Agreement, on or after the Closing
Date, any other party shall do, execute, acknowledge and deliver
all such acts, bills of sale, assignments, confirmations,
consents and any and all such further instruments and documents,
in form reasonably satisfactory to the requesting party, as shall
be reasonably necessary or advisable to carry out the intent of
this Agreement, including, without limitation, to vest in Buyer
all of the right, title and interest of the Stockholders in the
Stock.
9.7 Final Tax Return. The Stockholders shall promptly
prepare at its expense a federal income tax return for SRI for
the period beginning July 1, 1997 and ending on the Closing Date.
Such return shall not be filed with the Internal Revenue Service
prior to Buyer being given a reasonable opportunity to review,
comment on and approve the return; provided, that if such
approval process results in additional fees charged by the
accounting firm preparing such return other than those
reasonably necessary to completely and accurately prepare such
return, such additional fees shall be at the expense of Buyer.
Buyer shall bear responsibility to fund the amount due pursuant
to such return solely to the extent of the tax liability for 1998
reflected on the Closing Balance Sheet. Buyer agrees to make no
election that would adversely affect the Stockholders without
their prior consent. If any election taken by Buyer (without the
prior consent of the Stockholders) causes SRI to have a tax
liability for the period beginning on July 1, 1997 and ending on
the Closing Date in excess of that reflected on the Closing
Balance Sheet, then such amount shall not be the subject of
indemnification under Section 11.1.
10. NonCompetition.
10.1 General. Each of the Stockholders and Shore
agrees, provided Buyer is not in material default with respect to
any of its material obligations under this Agreement, for a
period of five years after the Closing Date (the "Term"), that
he, she or it shall not, in the Ventura, Los Angeles, Orange, San
Bernadino, San Diego and Riverside counties of the State of
California (the "Market Area") (or for such lesser area or such
lesser period as may be determined by a court of competent
jurisdiction to be a reasonable limitation on the competitive
activity of any of the Stockholders or Shore), directly or
indirectly:
(a) engage, for or on behalf of himself, herself or
itself or any person or entity other than SRI or Buyer, in the
business of the placement or provision of temporary, permanent,
leased or payrolled personnel (including self-incorporated
personnel);
(b) solicit or attempt to solicit business for
services offered by SRI or Buyer from any parties who (i) are
clients of SRI on the Closing Date or at any time during the 12
months prior to the Closing Date or to whom SRI has made or makes
proposals for services during the 12 months preceding the Closing
Date or (ii) are clients of SRI or Buyer during the Term or to
whom SRI or Buyer makes proposals for services during the Term;
(c) otherwise divert or attempt to divert from SRI or
Buyer any business involving the placement or provision of
temporary, permanent, leased or payrolled personnel (including
self-incorporated personnel) of the type now or during the Term
conducted by SRI or Buyer;
(d) solicit or attempt to solicit for any business
endeavor any employee (including, without limitation, any
temporary, payrolled or leased employee) of SRI or Buyer; or
(e) render any services as a joint venturer, partner,
consultant or otherwise to, or have any interest as a
stockholder, partner, member, lender or otherwise in, any person
or entity which is engaged in activities which, if performed by
any of the Stockholders or Shore, would violate this Section
10.1.
The foregoing shall not prevent any of the Stockholders or Shore
from purchasing or owning (i) up to 5% of the voting securities
of any corporation, the securities of which are publicly-traded,
or (ii) any interest in any entity which is not also engaged in
the business of the placement or provision of temporary,
permanent, leased or payrolled personnel (including self-
incorporated personnel). Each of the Stockholders and Shore
shall, during the Term, provided that Buyer is not in material
default with respect to any of its material obligations under
this Agreement, use his, her or its best efforts to direct to SRI
any business opportunities in the temporary, permanent, leased or
payrolled personnel placement business that may come to his, her
or its attention in the Market Area. Notwithstanding the
foregoing, each of the Stockholders and Shore, and personnel
under their control, may engage in customary referral practices
that are general industry practices. References to Buyer in this
Section 10 shall also be deemed to refer to its divisions and
subsidiaries.
10.2 Injunctive Relief. Because Buyer would not have
an adequate remedy at law to protect its business from any breach
of the provisions of Section 10.1, Buyer shall be entitled, in
the event of such a breach or threatened breach thereof by any of
the Stockholders or Shore, to injunctive relief, in addition to
such other remedies and relief that would be available to Buyer.
In the event of such a breach, in addition to any other remedies,
Buyer shall be entitled to receive from the Stockholders or Shore
payment of, or reimbursement for, its reasonable attorneys' fees
and disbursements incurred in successfully enforcing any such
provision. The provisions of this Section 10 shall survive the
Closing Date.
11. Indemnification.
11.1 Obligations of the Stockholders and Shore. Each
of the Stockholders and Shore, jointly and severally, shall
indemnify, defend and hold harmless Buyer and its officers,
directors, employees, agents, shareholders, successors and
assigns from and against any Damages (as defined in Section 11.3)
in connection with:
(a) any breach of any representation, warranty or
agreement of the Stockholders, or Shore contained in this
Agreement or in any certificate delivered by any of them on the
Closing Date;
(b) claims of third parties for liabilities not
disclosed to Buyer in this Agreement and arising from the
operation of SRI's business at any time prior to the Closing
Date;
(c) any increase in workers' compensation premiums due
by SRI attributable to periods prior to the Closing Date;
(d) any and all Taxes attributable to the operations
of SRI on or prior to the Closing Date, including, without
limitation, any Taxes arising out of the transactions
contemplated hereby, but excluding any Taxes set forth in the
Closing Balance Sheet;
(e) any claim, action, suit or proceeding against SRI
for employment discrimination, sexual harassment or employee
mischief (such as the planting of viruses in computer software)
by any present or former member, director, officer, employee
(temporary or permanent) or agent of SRI arising out of
circumstances existing on or prior to the Closing Date;
(f) any liabilities set forth in the Audited Financial
Statements that should have been set forth in the Closing Balance
Sheet and which are liabilities of SRI subsequent to the Closing
Date; and
(g) any claim, action, suit or proceeding asserted or
instituted on the basis of any matter described in clauses (a),
(b), (c), (d), (e) or (f) of this Section 11.1;
provided, however, that, except in connection with liabilities
under clauses (d) or (e) above, the breach of the representations
and warranties set forth in Sections 6.15 and 6.19 relating to
Taxes and Benefit Plans or the breach of the provisions set forth
in Section 10 relating to non-competition (as to which the
limitations of these provisos shall not apply), no payment
hereunder shall be required to be made by the Stockholders and
Shore unless and until the aggregate amount of any such losses,
damages, liabilities, costs and expenses exceeds $50,000 and the
Stockholders and Shore shall not be required to make payments
hereunder in excess of the Purchase Price; provided, that the
amount of such losses, damages, liabilities, costs and expenses
shall be offset by any insurance proceeds received by Buyer with
respect to the foregoing. To the extent that the Stockholders
and Shore are required to indemnify Buyer pursuant to the
provisions of this Section 11.1, Shore and Elder shall have the
right, under the supervision of Headway or SRI personnel, upon
reasonable prior written notice to SRI and during normal business
hours, to review the books and records of SRI pertaining to such
indemnification event; provided, that neither Shore nor Elder may
make copies of any such books and records.
11.2 Obligations of Buyer. Buyer shall indemnify,
defend and hold harmless each of the Stockholders and Shore and
their respective heirs, executors and assigns, as applicable,
from and against any Damages in connection with:
(a) any breach of any representation, warranty or
covenant of Buyer (and its successors and assigns) contained in
this Agreement or in any certificate, instrument or other
agreement delivered by it in connection with this Agreement;
(b) the operation by Buyer of SRI at any time on or
after the Closing Date; and
(c) any claim, action, suit or proceeding asserted or
instituted on the basis of any matter described in clauses (a) or
(b) of this Section 11.2;
provided, however, that, except in connection with clause (b)
above, no payment hereunder shall be required to be made by Buyer
unless and until the aggregate amount of any such losses,
damages, liabilities, costs and expenses exceeds $50,000 and
Buyer shall not be required to make payments hereunder in excess
of the Purchase Price provided, that the amount of such losses,
damages, liabilities, costs and expenses shall be offset by any
insurance proceeds received by Buyer with respect to the
foregoing.
11.3 Damages. For purposes of this Section 11,
"Damages" means any loss, liability, damage or expense suffered
or incurred by a party in connection with the matters described
in Sections 11.1 or 11.2, as the case may be, including, without
limitation, assessments, fines, penalties, judgments,
settlements, costs, reasonable attorneys' fees and reasonable
disbursements and other reasonable out of pocket expenses of the
party incident to any matter as to which the party is entitled to
indemnification under such Sections, or incident to any
allegations or claims which, if true, would give rise to Damages
subject to indemnification hereunder, or incident to the
enforcement by the party of its rights and remedies under this
Section 11.
11.4 Proceedings. Any party seeking indemnification
pursuant to this Section 11 (the "Indemnified Party") shall give
the party from which indemnification is sought (the "Indemnifying
Party") prompt notice of any claim, allegation, action, suit or
proceeding which it believes might give rise to indemnification
under this Section 11, stating the nature and extent of any such
claim, allegation, suit or proceeding with reasonable
specificity, and the amount thereof, if known. Any failure to
give such notice shall not affect the indemnification provided
hereunder except to the extent that the Indemnifying Party is
actually prejudiced as a result of such failure. The
Indemnifying Party shall have the right to participate in, and,
with the consent of the Indemnified Party, which consent shall
not be unreasonably withheld or delayed, to control, the defense
of any such claim, allegation, action, suit or proceeding, at the
Indemnifying Party's expense, and with counsel of its own
choosing reasonably acceptable to the Indemnified Party;
provided, however, that if Buyer is the Indemnified Party, it
shall have the right to withhold such consent and to retain
control of such defense in the case of any claim, action, suit or
proceeding with respect to which, in Buyer's reasonable
discretion, an adverse outcome could have a material adverse
effect on Buyer, with the expense of any counsel retained by
Buyer in any such instance to be at Buyer's expense. No
settlement or compromise of any such claim, action, suit or
proceeding shall be made without the prior consent of the
Indemnified Party and the Indemnifying Party, which consent shall
not be unreasonably withheld or delayed by either of them.
11.5 Limitations on Indemnification. No right to
indemnification may be asserted under this Section 11 after the
second anniversary of the Closing Date, except any such rights to
indemnification arising in connection with (a) any matter
referred to in Sections 6.15 or 6.19, none of which shall be
subject to any time limitation other than any statutes of
limitation applicable to such matters, (b) any matter covered by
Section 10, (c) any claim arising under Section 11.1(e)
(provided, that Buyer shall have no right to indemnification
under Section 11(e) after the third anniversary of the Closing
Date) or (d) any claim as to which the notice required by Section
11.4 has been given on or prior to the second (or in the case of
clause (c) above, third) anniversary of the Closing Date.
12. Arbitration.
12.1 General. Any controversy or claim arising out of
or relating to this Agreement shall be finally resolved by
arbitration pursuant to the Commercial Arbitration Rules of the
American Arbitration Association; provided, however, that this
Section 12.1 shall not in any way affect the right of Buyer to
seek injunctive relief or any other remedies pursuant to Section
10.2. Any such arbitration shall take place in New York, New
York, before three arbitrators, one of which shall be appointed
by Buyer, one by the Stockholders and Shore, and the third by the
arbitrators so appointed; provided, however, that the parties may
by mutual agreement designate a single arbitrator. The parties
further agree that (i) the arbitrators shall include arbitration
costs and attorney fees in the award to the prevailing party in
such proceedings and (ii) the award in such proceedings shall be
final and binding on the parties. The arbitrators shall apply
the law of the State of New York, exclusive of conflict of laws
principles, to any dispute. Judgment on the arbitrators' award
may be entered in any court having the requisite jurisdiction.
Nothing in this Agreement shall require the arbitration of
disputes between the parties that arise from actions, suits or
proceedings instituted by third parties.
12.2 Consent to Jurisdiction; Service of Process. Each
party irrevocably submits to the jurisdiction and venue of the
arbitration described in Section 12.1 and to the jurisdiction and
venue of the federal and state courts sitting in New York County,
New York, for the enforcement of any judgment on the arbitrators'
award, and waives any objection it may have with respect to the
jurisdiction of such arbitrations or courts or the inconvenience
of such forums or venues. Buyer appoints Messrs. Christy &
Viener, 620 Fifth Avenue, New York, New York 10020, Attention:
Laurence S. Markowitz, Esq., and the Stockholders and Shore
appoint Messrs. Greenberg, Traurig, Hoffman, Lipoff, Rosen &
Quentel, P.A., 1221 Brickell Avenue, Miami, Florida 33131,
Attention: Allan Shore, Esq., as their respective attorneys-in-
fact and authorized agents solely to receive on their behalf,
service of any demands for, or any notice with respect to,
arbitration hereunder or any service of process. Service on
either of such attorneys-in-fact may be made by registered or
certified mail or by personal delivery, in any case return
receipt requested, and shall be effective as service on Buyer or
the Stockholders or Shore, as the case may be. Nothing herein
shall be deemed to affect any right to serve any such demand,
notice or process in any other manner permitted under applicable
law.
13. Miscellaneous.
13.1 Entire Agreement; Amendments; No Waivers. This
Agreement, together with the Schedules, sets forth the entire
understanding of the parties with respect to its subject matter
and merges and supersedes all prior and contemporaneous
understandings of the parties with respect to its subject matter.
No provision of this Agreement may be waived or modified, in
whole or in part, except by a writing signed by each of the
parties. Failure of any party to enforce any provision of this
Agreement shall not be construed as a waiver of its rights under
such or any other provision. No waiver of any provision of this
Agreement in any instance shall be deemed to be a waiver of the
same or any other provision in any other instance.
13.2 Communications. All notices, consents and other
communications given under this Agreement shall be in writing and
shall be deemed to have been duly given (a) when delivered by
hand or by Federal Express or a similar overnight courier to, (b)
five days after being deposited in any United States post office
enclosed in a postage prepaid registered or certified mail
envelope addressed to, or (c) when successfully transmitted by
facsimile (with a confirming copy of such communication to be
sent as provided in (a) or (b) above) to, the party for whom
intended, at the address or facsimile number for such party set
forth below, or to such other address or facsimile number as may
be furnished by such party by notice in the manner provided
herein; provided, that any notice of change of address or
facsimile number shall be effective only on receipt.
If to Buyer: with a copy to:
Headway Corporate Resources, Christy & Viener
Inc. 620 Fifth Avenue
850 Third Avenue New York, New York 10020
New York, New York 10022 Attention: Laurence S.
Attention: Barry S. Roseman, Markowitz, Esq.
President Fax No.: (212) 632-5555
Fax No.: (212) 508-3540
If to the Stockholders or
Shore:
Greenberg Traurig
1221 Brickell Avenue
Miami, Florida 33131
Attention: Allan Shore, Esq.
Fax No.: (305) 579-0717
13.3 Successors and Assigns. This Agreement shall be
binding on, enforceable against and inure to the benefit of, the
parties and their respective heirs, successors and permitted
assigns (whether by merger, consolidation, acquisition or
otherwise), and nothing herein is intended to confer any right,
remedy or benefit upon any other person. No party may assign its
rights or delegate its obligations under this Agreement without
the express written consent of all of the other parties;
provided, however, that Buyer may assign its rights or delegate
its obligations hereunder, either before or after the Closing
Date, to any of its wholly-owned subsidiaries; provided, that as
a condition to any such assignment by Buyer, Buyer shall provide
to the Stockholders and Shore a guarantee in form and substance
reasonably acceptable to them guaranteeing such assignee's
obligations under this Agreement.
13.4 Expenses. Each of the parties shall bear and pay,
without any right of reimbursement from any other party, all
costs, expenses and fees incurred by it or on its or his behalf
incident to the preparation, execution and delivery of this
Agreement and the performance of such party's obligations
hereunder, whether or not the transactions contemplated in this
Agreement are consummated, including, without limitation, the
fees and disbursements of attorneys, accountants and consultants
employed by such party, and shall indemnify and hold harmless the
other parties from and against all such fees, costs and expenses.
13.5 Brokers and Finders. Except Oxford Mergers &
Acquisitions, Inc., with respect to the Stockholders and Shore,
and Staffing Solution, Inc., with respect to Buyer, each party
represents to the others that no agent, broker, investment
banker, financial advisor or other person or entity is or shall
be entitled to any broker's or finder's fee or other commission
or similar fee in connection with the transactions contemplated
by this Agreement. Each party shall indemnify and hold harmless
the others from and against any claim, liability or obligation
with respect to any fees, commissions or expenses asserted by any
person or entity on the basis of any act or statement alleged to
have been committed or made by such indemnifying party or any of
its affiliates.
13.6 Public Announcements. No oral or written public
announcement or disclosure with respect to this Agreement and the
transactions contemplated herein prior to the Closing Date shall
be made by or on behalf of any party without the prior approval
of the other parties, except to the extent required by applicable
securities laws or the rules and regulations of any stock
exchange, by court order or as otherwise required by law (in
which case Shore shall be notified prior to such required
disclosure and provided with a copy thereof).
13.7 Governing Law. This Agreement shall in all
respects be governed by and construed in accordance with the laws
of the State of New York applicable to agreements made and fully
to be performed in such state, without giving effect to conflicts
of law principles.
13.8 Severability and Savings Clause. If any provision
of this Agreement is held to be invalid or unenforceable by any
court or tribunal of competent jurisdiction, the remainder of
this Agreement shall not be affected thereby, and such provision
shall be carried out as nearly as possible according to its
original terms and intent to eliminate such invalidity or
unenforceability. In this regard, the parties agree that the
provisions of Section 10, including, without limitation, the
scope of the territorial and time restrictions, are reasonable
and necessary to protect and preserve Buyer's legitimate
interests. If the provisions of Section 10 are held by a court
of competent jurisdiction to be in any respect unreasonable, then
such court may reduce the territory or time to which it pertains
or otherwise modify such provisions to the extent necessary to
render such provisions reasonable and enforceable.
13.9 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
13.10 Construction. Headings used in this
Agreement are for convenience only and shall not be used in the
interpretation of this Agreement. References to Sections and
Schedules are to the sections and schedules of this Agreement.
As used herein, the singular includes the plural and the
masculine, feminine and neuter gender each includes the others
where the context so indicates.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first set forth above.
HEADWAY CORPORATE RESOURCES, INC.
By (Signature)
ELDER INVESTMENTS L&M SHORE FAMILY HOLDINGS
LIMITED PARTNERSHIP LIMITED PARTNERSHIP
By (Signature) By (Signature)
/s/ MARK SHORE /s/ LINDA ELDER
E-85
Exhibit No. 4
Form 8-K
Headway Corporate Resources, Inc.
SEC File No. 0-23170
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES F CONVERTIBLE
PREFERRED STOCK OF HEADWAY CORPORATE RESOURCES, INC.
HEADWAY CORPORATE RESOURCES, INC., a corporation organized
and existing under the General Corporation Law of the State of
Delaware (the "Corporation"), DOES HEREBY CERTIFY THAT:
A. Pursuant to authority conferred upon the Board of
Directors (the "Board") by the Certificate of Incorporation of
the Corporation (the "Certificate of Incorporation") and pursuant
to the provisions of 151 of the Delaware General Corporation
Law, the Board, pursuant to a unanimous written consent dated
March 19, 1998, adopted the following resolution providing for
the designations, preferences and relative, participating,
optional and other rights, and the qualifications, limitations
and restrictions of the Series F Convertible Preferred Stock.
WHEREAS, the Certificate of Incorporation provides for
two classes of shares known as common stock, $0.0001 par value
per share (the "Common Stock"), and preferred stock, $0.0001 par
value per share (the "Preferred Stock"); and
WHEREAS, the Board is authorized by the Certificate of
Incorporation to provide for the issuance of the shares of
Preferred Stock in series, and by filing a certificate pursuant
to the applicable law of the State of Delaware, to establish from
time to time the number of shares to be included in such series
and to fix the designations, preferences and rights of the shares
of each such series and the qualifications, limitations and
restrictions thereof.
NOW, THEREFORE, BE IT RESOLVED, that the Board deems it
advisable to, and hereby does, designate a Series F Convertible
Preferred Stock and fixes and determines the preferences, rights,
qualifications, limitations and restrictions relating to the
Series F Convertible Preferred Stock as follows:
1. Designation. The shares of such series of Preferred
Stock shall be designated "Series F Convertible Preferred Stock"
(referred to herein as the "Series F Stock").
2. Authorized Number. The number of shares constituting
the Series F Stock shall be 1,000.
3. Ranking. The Series F Stock shall rank, as to
dividends and upon Liquidation Payments (as defined in Section
5(a) hereof), senior and prior to the Common Stock and to all
other classes or series of stock issued by the Corporation. (All
equity securities of the Corporation to which the Series F Stock
ranks prior, whether with respect to dividends or upon
liquidation, dissolution, winding up or otherwise, including the
Common Stock are collectively referred to herein as "Junior
Securities.") The Corporation shall not have or create any class
of stock ranking on parity with, or senior to, the Series F
Stock.
4. Dividends.
(a) Dividend Accrual and Payment. From and after the
date of issuance of the Series F Stock (the "Original Issue Date"
), dividends shall accrue on a daily basis on the shares of
Series F Stock at the initial annual rate (subject to reset in
accordance with Section 4(e)) of 5.5% per share (expressed as a
percentage of the $20,000,000.00 per share liquidation preference
(the "Dividend Rate")). The holders of shares of Series F Stock
shall be entitled to receive such dividends when and as declared
by the Board, in cash, out of assets legally available for such
purpose, quarterly in arrears on the 30th day of March, June,
September and December of each year (each of such dates being a
"Dividend Payment Date"), commencing June 30, 1998. Such
dividends shall be paid to the holders of record at the close of
business on the date specified by the Board at the time such
dividend is declared, provided, however, that such date shall not
be more than 60 nor less than 10 days prior to the applicable
Dividend Payment Date. Dividends on the Series F Stock shall be
cumulative so that if, for any dividend accrual period, cash
dividends at the rate hereinabove specified are not declared and
paid or set aside for payment, the amount of accrued but unpaid
dividends shall accumulate with interest at the then applicable
Dividend Rate and shall be added to the dividends payable for
subsequent dividend accrual periods and upon any redemption or
conversion of shares of Series F Stock. If the Original Issue
Date is on a date which does not coincide with a Dividend Payment
Date, then the initial dividend accrual period applicable to such
shares shall be the period from the Original Issue Date through
whichever of March, June, September or December next occurs after
the Original Issue Date. If the date fixed for payment of a
final liquidating distribution on any shares of Series F Stock,
or the date on which any shares of Series F Stock are redeemed or
converted into Common Stock does not coincide with a Dividend
Payment Date, then subject to the provisions hereof relating to
such payment, redemption or conversion, the final dividend
accrual period applicable to such shares shall be the period from
whichever of March, June, September or December most recently
precedes the date of such payment, conversion or redemption
through the effective date of such payment, conversion or
redemption. The rate at which dividends are paid shall be
adjusted for any combinations or divisions or similar
recapitalizations affecting the shares of Series F Stock. In
addition to the dividends provided for in this Section 4(a),
holders of Series F Stock shall be entitled to participate in
extraordinary dividends in accordance with the provisions of
Section 7 hereof. So long as any shares of Series F Stock are
outstanding, (i) the amount of all dividends paid with respect to
the shares of Series F Stock pursuant to this Section 4(a) shall
be paid pro rata to the holders entitled thereto and (ii) holders
of the shares of Series F Stock shall be entitled to receive the
dividends provided for in this Section 4(a) in preference to and
in priority over any dividends upon any Junior Securities.
(b) Dividend Limitation on Junior Securities. So long
as any shares of Series F Stock are outstanding, the Corporation
shall not declare, pay or set apart for payment, any dividend on
any Junior Securities or make any payment on account of, or set
apart for payment, money for a sinking or other similar fund for,
the purchase, redemption or other retirement of, any Junior
Securities or any warrants, rights, calls or options exercisable
or exchangeable for or convertible into any Junior Securities, or
make any distribution in respect thereof, either directly or
indirectly, and whether in cash, obligations or shares of the
Corporation or other property (other than distributions or
dividends in Junior Securities to the holder of Junior
Securities), unless prior to, or concurrently with, such
declaration, payment, setting apart for payment, purchase,
redemption or distribution, as the case may be, all accrued and
unpaid dividends on the shares of Series F Stock not paid on the
dates provided for in Section 4(a) hereof shall have been paid in
full in cash.
(c) Dividends on Fractional Shares. Each fractional
share of Series F Stock outstanding shall be entitled to a
ratably proportionate amount of all dividends accruing with
respect to each outstanding share of Series F Stock pursuant to
Section 4(a) hereof, and all such dividends with respect to such
outstanding fractional shares shall be fully cumulative and shall
accrue (whether or not declared), and shall be payable in the
same manner and at such times as provided for in Section 4(a)
hereof with respect to dividends on each outstanding share of
Series F Stock.
(d) Payments on Shares of Common Stock Subject to
Restricted Transferability. If, subsequent to the conversion of
any shares of Series F Stock into Common Stock (or other
securities) pursuant to Section 6 hereof, the shares of Common
Stock (or other securities) into which such shares of Series F
Stock were converted are subject to a contractual or other
restriction, other than (x) restrictions created by the holder of
such shares of Common Stock not at the request of the
Corporation, limiting the transferability thereof, and (y)
restrictions imposed by applicable federal and state securities
laws (such shares of Common Stock (or other securities) which are
so encumbered are herein referred to as the "Subject Shares" and
the limitation on the transferability thereof is referred to as
the "Sale Limitation"), then the Corporation shall pay to the
holder of such Subject Shares an amount in (i) cash, (ii) shares
of the Series F Stock valued at the liquidation preference
thereof, or (iii) shares of the Common Stock valued at the Market
Price thereof on the date of payment, at the option of the holder
of such Series F Stock (such amount is referred to herein as the
"Restriction Fee") equal to the amount of dividends which would
have accrued on the shares of Series F Stock which were converted
into the Subject Shares from the date upon which the Subject
Shares became subject to the Sale Limitation until the date upon
which the Sale Limitation was no longer in effect with respect to
the Subject Shares. The Restriction Fee shall be paid by the
Corporation to the holders entitled thereto on the date that
dividends are payable, or would have been payable, on the shares
of Series F Stock.
(e) Dividend Rate Adjustment. If either (x) the
Conversion Price (as defined below) is not adjusted on the second
anniversary of the Original Issue Date to $6.00 or (y) a Series F
Stock Event of Default (as defined below) has occurred prior
thereto, then the Dividend Rate shall increase, as of such second
anniversary or the date of such Series F Stock Event of Default,
as the case may be, to, and shall thereafter be, 7.5% per annum.
In addition, if all of the outstanding shares of Series F Stock
are not redeemed on or prior to the eighth anniversary of the
Original Issue Date, then the Dividend Rate shall increase to 10%
per annum commencing on such eighth anniversary, and shall
further increase by an additional 2% per year on each anniversary
thereafter, but in no event will the Dividend Rate exceed 20% per
annum.
5. Liquidation.
(a) Liquidation Procedure. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary
or involuntary, the holders of the shares of Series F Stock shall
be entitled, before any distribution or payment is made upon any
Junior Securities, to be paid an amount equal to (i) $20,000,000
per share of Series F Stock, representing the liquidation
preference per share of the Series F Stock (as adjusted for any
combinations, divisions or similar recapitalizations affecting
the shares of Series F Stock) (the "Series F Issue Price"), plus
(ii) all accrued and unpaid dividends on the Series F Stock to
such date (together with the Series F Issue Price, the
"Liquidation Payments"). If upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary,
the assets to be distributed among the holders of Series F Stock
shall be insufficient to permit payment in full to the holders of
Series F Stock of the Liquidation Payments, then the entire
assets of the Corporation shall be distributed ratably among such
holders in proportion to the full respective distributive amounts
to which they are entitled.
(b) Remaining Assets. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary
or involuntary, after the holders of Series F Stock shall have
been paid in full the Liquidation Payments, the remaining assets
of the Corporation may be distributed ratably per share in order
of preference to the holders of Junior Securities in accordance
with their terms.
(c) Notice of Liquidation. Written notice of a
liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, stating a payment date, the
amount of the Liquidation Payments and the place where said
Liquidation Payments shall be payable, shall be given by mail,
postage prepaid, not less than 30 days prior to the payment date
stated therein, to each holder of record of Series F Stock at his
post office addresses as shown by the records of the Corporation.
(d) Fractional Shares. The Liquidation Payments with
respect to each outstanding fractional share of Series F Stock
shall be equal to a ratably proportionate amount of the
Liquidation Payments with respect to each outstanding share of
Series F Stock.
6. Conversion.
The holders of the Series F Stock shall have the
following conversion rights:
(a) Conversion. Subject to the limitations set forth
below, the Series F Stock shall be convertible at any time after
the third month subsequent to the Original Issue Date, unless
previously redeemed, at the option of the holder of record
thereof, into the number of fully paid and nonassessable shares
of Common Stock equal to the quotient of (x) the aggregate
liquidation preference of the shares of Series F Stock being
converted divided by (y) the Conversion Price (as defined below)
then in effect upon surrender to the Corporation or its transfer
agent of the certificate or certificates representing the Series
F Stock to be converted, as provided below, or if the holder
notifies the Corporation or its transfer agent that such
certificate or certificates have been lost, stolen or destroyed,
upon the execution and delivery of an agreement satisfactory to
the Corporation to indemnify the Corporation from any losses
incurred by it in connection therewith; provided, however, that,
except to the extent provided by Regulation Y, or any successor
regulation ("Regulation Y"), promulgated under the Bank Holding
Company Act of 1956, as amended, by the Board of Governors of the
Federal Reserve System or any successor thereto (the "Federal
Reserve Board"), no shares of Series F Stock originally issued by
the Corporation to a Person subject to the provision of
Regulation Y shall be convertible by the original holder thereof
or any direct or indirect transferee thereof into shares of
Common Stock, if, after giving effect to such conversion, such
Person, its Bank Holding Company Affiliates (as hereinafter
defined) and any direct or indirect transferee thereof would
beneficially own more than 4.9% of the total issued and
outstanding shares, interests, participations or other
equivalents (however designated) of voting capital stock of the
Corporation, unless such shares of Common Stock are being
distributed, disposed of or sold in any one of the following
transactions:
(1) such shares of Common Stock are being sold in
a public offering registered under the Securities Act
of 1933, as amended, (or any successor provision
thereto) (the "Securities Act") or a public sale
pursuant to Rule 144 and 144A promulgated thereunder or
any successor rule then in effect;
(2) such shares of Common Stock are being sold
(including by virtue of a merger, consolidation or
similar transaction involving the Corporation) to any
Person or group of related persons for purposes of
Section 13(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), if, after such sale,
such Person or group of Persons in the aggregate would
own or control securities of the Corporation which
possess in the aggregate the ordinary voting power to
elect a majority of the members of the corporation's
Board of Directors;
(3) such shares of Common Stock are being sold to
a person or group of related persons for purposes of
Section 13(d) of the Exchange Act, if, after such sale,
such Person or group of Persons in the aggregate would
own, control or have the right to acquire more than two
percent (2%) of the outstanding securities of any class
of voting securities of the Corporation; or
(4) such shares of Common Stock are being sold in
any other manner permitted by the Federal Reserve
Board.
As used herein, "Bank Holding Company Affiliates" means, with
respect to a Person subject to the provisions of Regulation Y,
(i) if such Person is a bank holding company, any company
directly or indirectly controlled by such bank holding company,
and (ii) otherwise, the bank holding company that controls such
Person and any company (other than such Person) directly or
indirectly controlled by such bank holding company.
(b) Conversion Price; Converted Shares. The initial
conversion price of the Series F Stock shall be $5.58 per share
(the "Initial Conversion Price"); provided, however, that if the
average of the Market Prices (as defined below) for the Common
Stock for the 20 consecutive trading days immediately preceding
the second anniversary of the Original Issue Date (the "Second
Anniversary Price") is greater than $8.50, then the conversion
price shall thereafter be $6.00; provided further, however, that
if the Second Anniversary Price is equal to or less than $8.50,
then the conversion price shall be adjusted as of the second
anniversary of the Original Issue Date to be equal to $6.00 (the
"Maximum Conversion Price") minus the product of (i) 0.75 and
(ii) the difference between $8.50 and the Second Anniversary
Price, but in no event shall the adjusted conversion price be
lower than the Initial Conversion Price (the Initial Conversion
Price, as it may be adjusted pursuant to the terms of this
Section 6(b) and Section 7, is referred to as the "Conversion
Price"); provided, further, however, that if shares of Series F
Stock are converted prior to the earlier to occur of (x) the
second anniversary of the Original Issue Date and (y) the
occurrence of a Series F Stock Event of Default, then the
Conversion Price applicable to the shares of Series F Stock so
converted shall be $6.00 per share. Notwithstanding anything to
the contrary contained in the preceding sentence with respect to
the Conversion Price, if, at any time prior to the second
anniversary of the Original Issue Date, there is a Series F Stock
Event of Default, then the Initial Conversion Price shall not be
adjusted pursuant to such sentence. The Conversion Price also
shall be subject to adjustment as provided in Section 7 below.
If any fractional interest in a share of Common Stock would be
deliverable upon conversion of Series F Stock, the Corporation
shall pay in lieu of such fractional share an amount in cash
equal to the Conversion Price of such fractional share (computed
to the nearest one hundredth of a share) in effect at the close
of business on the date of conversion. Any shares of Series F
Stock which have been converted shall be cancelled and all
dividends on converted shares shall cease to accrue and the
certificates representing shares of Series F Stock so converted
shall represent the right to receive (i) such number of shares of
Common Stock into which such shares of Series F Stock are
convertible, plus (ii) cash payable for any fractional share,
plus (iii) all accrued but unpaid dividends relating to such
shares, together with interest thereon, through the date of
conversion, plus, if applicable (iv) the Restriction Fee.
Amounts payable with respect to the foregoing clause (iii) shall
be paid, at the option of each holder, in cash or additional
shares of Common Stock valued at the Market Price thereof on the
date of such payment. Amounts payable with respect to the
foregoing clause (iv) shall be paid in accordance with the
provisions of Section 4(d) hereof. Upon the conversion of shares
of Series F Stock as provided in this Section 6, the Corporation
shall promptly pay all then accrued but unpaid dividends to the
holder of the Series F Stock being converted. The Board shall at
all times, so long as any shares of Series F Stock remain
outstanding, reserve a sufficient number of authorized but
unissued shares of Common Stock to be issued in satisfaction of
the conversion rights and privileges aforesaid.
As used herein, "Market Price" means, with respect to
the shares of Common Stock, (a) if the shares are listed or
admitted for trading on any national securities exchange or
included in The Nasdaq National Market or Nasdaq SmallCap
Market, the last reported sales price as reported on such
exchange or Market; (b) if the shares are not listed or
admitted for trading on any national securities exchange or
included in The Nasdaq National Market or Nasdaq SmallCap
Market, the average of the last reported closing bid and
asked quotation for the shares as reported on the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") or a similar service if NASDAQ is not reporting
such information; (c) if the shares are not listed or
admitted for trading on any national securities exchange or
included in The Nasdaq National Market or Nasdaq SmallCap
Market or quoted by NASDAQ or a similar service, the average
of the last reported bid and asked quotation for the shares
as quoted by a market maker in the shares (or if there is
more than one market maker, the bid and asked quotation
shall be obtained from two market makers and the average of
the lowest bid and highest asked quotation). In the absence
of any available public quotations for the Common Stock, the
Board shall determine in good faith the fair value of the
Common Stock, which determination shall be set forth in a
certificate by the Secretary of the Corporation.
(c) Mechanics of Conversion. In the case of a
conversion, before any holder of Series F Stock shall be entitled
to convert the same into shares of Common Stock, it shall
surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or its transfer agent
for the Series F Stock, and shall give written notice to the
Corporation of the election to convert the same and shall state
therein the name or names in which the certificate of
certificates for shares of Common Stock are to be issued. The
Corporation shall, as soon as practicable thereafter and in any
case within two (2) business days of the Corporation's receipt of
the notice of conversion, issue and deliver at such office to
such holder of Series F Stock, or to the nominee or nominees of
such holder, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled as
aforesaid. A certificate or certificates will be issued for the
remaining shares of Series F Stock in any case in which fewer
than all of the shares of Series F Stock represented by a
certificate are converted.
(d) Issue Taxes. The Corporation shall pay all issue
taxes, if any, incurred in respect of the issue of shares of
Common Stock on conversion. If a holder of shares surrendered
for conversion specifies that the shares of Common Stock to be
issued on conversion are to be issued in a name or names other
than the name or names in which such surrendered shares stand,
then the Corporation shall not be required to pay any transfer or
other taxes incurred by reason of the issuance of such shares of
Common Stock to the name of another, and if the appropriate
transfer taxes shall not have been paid to the Corporation or the
transfer agent for the Series F Stock at the time of surrender of
the shares involved, the shares of Common Stock issued upon
conversion thereof may be registered in the name or names in
which the surrendered shares were registered, despite the
instructions to the contrary.
(e) Valid Issuance. All shares of Common Stock which
may be issued in connection with the conversion provisions set
forth herein will, upon issuance by the Corporation, be validly
issued, fully paid and nonassessable, free from preemptive rights
and free from all taxes, liens or charges with respect thereto
created or imposed by the Corporation.
7. Adjustment of Conversion Price. The number and kind of
securities issuable upon the conversion of the Series F Stock and
the Conversion Price shall be subject to adjustment from time to
time in accordance with the following provisions:
(a) Certain Definitions. For purposes of this
Certificate:
(i) The term "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued, or deemed
to be issued by the Corporation pursuant to paragraph
(h) of this Section 7, after the Original Issue Date
except:
(A) shares of Common Stock issuable upon
conversion of, or distributions with respect to,
the Series F Stock now or hereafter issued by the
Corporation; and
(B) up to 1,000,000 shares of Common Stock
(the "Maximum Amount") issuable upon the exercise
of stock options or other awards made or
denominated in shares of Common Stock granted
after the Original Issue Date under the
Corporation's 1993 Stock Incentive Plan, or any
successor plan, which stock options or other
awards will be issuable in aggregate amounts not
to exceed one third of the Maximum Amount (the
"Maximum Annual Amount") in any of the three (3)
fiscal years commencing with the Company's 1998
fiscal year (provided that with respect to the
1998 fiscal year, any options or awards granted
before the Initial Issue Date that are disclosed
in the Securities Purchase Agreement will not be
included for the purpose of the limitations set
forth herein); provided that (x) no more than (i)
50% of the Maximum Annual Amount may be granted to
directors, officers, employees or consultants of
the Corporation who are, at the time of such
grant, and were for a period of ninety (90) days
prior thereto, employed or otherwise engaged or
retained by the Corporation or any of its
Subsidiaries (collectively, "Eligible Personnel"),
(ii) no stock option grants or other awards shall
be made in any fiscal year to any Eligible
Personnel unless the Corporation's Stock Incentive
Plan Committee (or any successor thereto) approved
each grant and award, based upon such criteria as
such Committee determines to be appropriate, which
criteria shall include the achievement by the
Corporation, with respect to the four (4) fiscal
quarters preceding the fiscal quarter in which
such grant or award is made, of performance goals
adopted by the foregoing Committee (or the Board
of Directors, as applicable), and (iii) 50% of the
Maximum Annual Amount may be granted to
prospective officers and employees of the
Corporation or its Subsidiaries in connection with
Permitted Acquisitions; and (y) the exercise price
of each such stock option and the exercise price
for each other award made or denominated in shares
of Common Stock is no less than the Market Value
of the Common Stock on the date of the grant of
such stock option (the foregoing permitted options
or other awards are referred to herein as the
"Management Options").
(ii) The term "Common Stock" shall mean (A) the
Common Stock and (B) the stock of the Corporation of
any class, or series within a class, whether now or
hereafter authorized, which has the right to
participate in the distribution of either earnings or
assets of the Corporation without limit as to the
amount or percentage.
(iii) The term "Convertible Securities" shall
mean any evidence of indebtedness, shares or other
securities (other than the Series F Stock) convertible
into or exercisable or exchangeable for Common Stock.
(iv) The term "Options" shall mean any and all
rights, options or warrants (other than the Management
Options) to subscribe for, purchase or otherwise in any
manner acquire Common Stock or Convertible Securities.
(b) Reorganization, Reclassification. Subject to the
provisions of Sections 8(b) and 8(c) hereof, in the event of a
reorganization, share exchange, or reclassification, other than a
change in par value, or from par value to no par value, or from
no par value to par value or a transaction described in
subsection (c) or (d) below, each share of Series F Stock shall,
after such reorganization, share exchange or reclassification, be
convertible at the option of the holder into the kind and number
of shares of stock and/or other securities, cash or other
property which the holder of such share of Series F Stock would
have been entitled to receive if the holder had held the Common
Stock issuable upon conversion of such share of Series F Stock
immediately prior to such reorganization, share exchange or
reclassification.
(c) Consolidation, Merger. Subject to the provisions
of Sections 8(b) and (c) hereof, in the event of a merger or
consolidation to which the Corporation is a party, each share of
Series F Stock shall, after such merger or consolidation, be
convertible at the option of the holder into the kind and number
of shares of stock and/or other securities, cash or other
property which the holder of such share of Series F Stock would
have been entitled to receive if the holder had held the Common
Stock issuable upon conversion of such share of Series F Stock
immediately prior to such consolidation or merger.
(d) Subdivision or Combination of Shares. In case
outstanding shares of Common Stock shall be subdivided, the
Conversion Price shall be proportionately reduced as of the
effective date of such subdivision, or as of the date a record is
taken of the holders of Common Stock for the purpose of so
subdividing, whichever is earlier. In case outstanding shares of
Common Stock shall be combined, the Conversion Price shall be
proportionately increased as of the effective date of such
combination, or as of the date a record is taken of the holders
of Common Stock for the purpose of so combining, whichever is
earlier.
(e) Stock Dividends. In case shares of Common Stock
are issued as a dividend or other distribution on the Common
Stock (or such dividend is declared), the Conversion Price shall
be adjusted, as of the date a record is taken of the holders of
Common Stock for the purpose of receiving such dividend or other
distribution (or if no such record is taken, as at the earliest
of the date of such declaration, payment or other distribution),
to that price determined by multiplying the Conversion Price in
effect immediately prior to such declaration, payment or other
distribution by a fraction (i) the numerator of which shall be
the number of shares of Common Stock outstanding immediately
prior to the declaration or payment of such dividend or other
distribution, and (ii) the denominator of which shall be the
total number of shares of Common Stock outstanding immediately
after the declaration or payment of such dividend or other
distribution. In the event that the Corporation shall declare or
pay any dividend on the Common Stock payable in any right to
acquire Common Stock for no consideration, then the Corporation
shall be deemed to have made a dividend payable in Common Stock
in an amount of shares equal to the maximum number of shares
issuable upon exercise of such rights to acquire Common Stock.
(f) Extraordinary Dividends. In case the Corporation
shall fix a record date for the making of a dividend or
distribution to all holders of its Common Stock of capital stock
(other than Common Stock), evidence of indebtedness, assets or
cash, or rights, options or warrants to subscribe for or other
securities convertible into or exercisable or exchangeable for
capital stock (excluding those referred to in Section 7(h) and
any cash dividends, during any period of 365 consecutive days,
not exceeding, in the aggregate, the lesser of (i) five percent
(5%) of the Corporation's aggregate Consolidated Net Income (as
defined in the Indenture under which the Corporation issued its
Increasing Rate Senior Subordinated Notes due 2006 (the "Note
Indenture")) per share of Common Stock, calculated on a fully
diluted basis, for the four (4) consecutive fiscal quarters most
recently preceding the declaration of the dividend or
distribution and (ii) two percent (2%) of the Market Price of the
Common Stock as of the date of the declaration of the dividend),
then in each such case the Conversion Price shall be adjusted so
that after such record date, the Conversion Price shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on such record date by
a fraction of which the numerator shall be the Market Price per
share of Common Stock on such record date less the fair market
value (as determined in good faith by the Board) of the portion
of the capital stock, rights, options, warrants, evidences of
indebtedness, assets or cash so distributed with respect to each
share of Common Stock and the denominator of which shall be the
Market Price per share of Common Stock on such record date. Such
adjustment shall be made whenever any Extraordinary Dividend is
made, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive
such Extraordinary Dividend.
(g) Issuance of Additional Shares of Common Stock. If
the Corporation shall issue any Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued
pursuant to paragraph (h) below) after the Original Issue Date
(other than as provided in the foregoing subsections (b) through
(f)), for no consideration or for a consideration per share less
than the greater of (x) the Conversion Price in effect on the
date of and immediately prior to such issue, and (y) the Market
Price in effect on the date of and immediately prior to such
issue, then in such event, the Conversion Price shall be reduced,
concurrently with such issue, to a price equal to the quotient
obtained by dividing:
(A) an amount equal to (x) the total number of
shares of Common Stock outstanding immediately prior to
such issuance or sale multiplied by the greater of (i)
the Conversion Price, and (ii) the Market Price, in
each case in effect immediately prior to such issuance
or sale, plus (y) the aggregate consideration received
or deemed to be received by the Corporation upon such
issuance or sale, by
(B) the total number of shares of Common Stock
outstanding immediately after such issuance or sale.
(h) Deemed Issue of Additional Shares of Common Stock.
If the Corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible
Securities or shall fix a record date for the determination of
holders of any class of securities then entitled to receive any
such Options or Convertible Securities, then the maximum number
of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein designed to
protect against dilution) of Common Stock issuable upon the
exercise of such Options, or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of
such Convertible Securities, shall be deemed to be Additional
Shares of Common Stock issued as of the time of such issue of
Options or Convertible Securities or, in case such a record date
shall have been fixed, as of the close of business on such record
date, provided that in any such case in which Additional Shares
of Common Stock are deemed to be issued:
(i) no further adjustments in the Conversion
Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon
the exercise of such Options or the issue of Common
Stock upon the conversion or exchange of such
Convertible Securities;
(ii) if such Options or Convertible Securities by
their terms provide, with the passage of time or
otherwise, for any increase or decrease in the
consideration payable to the Corporation, or increase
or decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange
thereof, the Conversion Price computed upon the
original issuance of such Options or Convertible
Securities (or upon the occurrence of a record date
with respect thereto), and any subsequent adjustments
based thereon, upon any such increase or decrease
becoming effective, shall be recomputed to reflect such
increase or decrease insofar as it affects such Options
or the rights of conversion or exchange under such
Convertible Securities (provided, however, that no such
adjustment of the Conversion Price shall affect Common
Stock previously issued upon conversion of the Series F
Stock);
(iii) upon the expiration of any such Options
or any rights of conversion or exchange under such
Convertible Securities which shall not have been
exercised, the Conversion Price computed upon the
original issue of such Options or Convertible
Securities (or upon the occurrence of a record date
with respect thereto), and any subsequent adjustments
based thereon, shall, upon such expiration, be
recomputed as if:
(A) in the case of Options or Convertible
Securities, the only Additional Shares of Common
Stock issued were the shares of Common Stock, if
any, actually issued upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities and the consideration
received therefor was the consideration actually
received by the Corporation (x) for the issue of
all such Options, whether or not exercised, plus
the consideration actually received by the
Corporation upon exercise of the Options or (y)
for the issue of all such Convertible Securities
which were actually converted or exchanged plus
the additional consideration, if any, actually
received by the Corporation upon the conversion or
exchange of the Convertible Securities; and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if
any, actually issued upon the exercise thereof
were issued at the time of issue of such Options,
and the consideration received by the Corporation
for the Additional Shares of Common Stock deemed
to have been then issued was the consideration
actually received by the Corporation for the issue
of all such Options, whether or not exercised,
plus the consideration deemed to have been
received by the Corporation upon the issue of the
Convertible Securities with respect to which such
Options were actually exercised.
(iv) No readjustment pursuant to clause (ii) or
(iii) above shall have the effect of increasing the
Conversion Price to an amount which exceeds the lower
of (x) the Conversion Price on the original adjustment
date or (y) the Conversion Price that would have
resulted from any issuance of Additional Shares of
Common Stock between the original adjustment date and
such readjustment date.
(v) In the case of any Options which expire by
their terms not more than 30 days after the date of
issue thereof, no adjustment of the Conversion Price
shall be made until the expiration or exercise of all
such Options, whereupon such adjustment shall be made
in the same manner provided in clause (iii) above.
(i) Determination of Consideration. For purposes of
this Section 7, the consideration received by the Corporation for
the issue of any Additional Shares of Common Stock shall be
computed as follows:
(i) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be the
aggregate amount of cash received by the
Corporation; and
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof
at the time of the issue, as determined in good
faith by the vote of a majority of the Board or if
the Board cannot reach such agreement, by a
qualified independent public accounting firm,
other than the accounting firm then engaged as the
Corporation's independent auditors.
(ii) Options and Convertible Securities. The
consideration per share received by the Corporation for
Additional Shares of Common Stock deemed to have been
issued pursuant to paragraph (h) above, relating to
Options and Convertible Securities shall be determined
by dividing:
(A) the total amount, if any, received or
receivable by the Corporation as consideration for
the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the
instruments relating thereto, without regard to
any provision contained therein designed to
protect against dilution) payable to the
Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible
Securities, or in the case of Options for
Convertible Securities, the exercise of such
Options for Convertible Securities and the
conversion or exchange of such Convertible
Securities, by
(B) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein designed to protect against dilution)
issuable upon the exercise of such Options or
conversion or exchange of such Convertible
Securities.
(j) Other Provisions Applicable to Adjustment Under
this Section. The following provisions will be applicable to the
adjustments in Conversion Price as provided in this Section 7:
(i) Treasury Shares. The number of shares of
Common Stock at any time outstanding shall not include
any shares thereof then directly or indirectly owned or
held by or for the account of the Corporation.
(ii) Other Action Affecting Common Stock. If
the Corporation shall take any action affecting the
outstanding number of shares of Common Stock other than
an action described in any of the foregoing subsections
7(b) to 7(h) hereof, inclusive, which would have an
inequitable effect on the holders of Series F Stock,
then the Conversion Price shall be adjusted in such
manner and at such time as the Board on the advice of
the Corporation's independent public accountants may in
good faith determine to be equitable in the
circumstances.
(iii) Minimum Adjustment. No adjustment of
the Conversion Price shall be made if the amount of any
such adjustment would be an amount less than one
percent (1%) of the Conversion Price then in effect,
but any such amount shall be carried forward and an
adjustment in respect thereof shall be made at the time
of and together with any subsequent adjustment which,
together with such amount and any other amount or
amounts so carried forward, shall aggregate an increase
or decrease of one percent (1%) or more.
(iv) Certain Adjustments. The Conversion Price
shall not be adjusted upward except in the event of a
combination of the outstanding shares of Common Stock
into a smaller number of shares of Common Stock or in
the event of a readjustment of the Conversion Price
pursuant to Section 7(h)(ii) or (iii).
(k) Dilution Event. Each of Section 7(b), (c), (d),
(e), (f) and (g) are herein referred to as a "Dilution Event."
Notwithstanding the foregoing sentence, any exercise of any
Options or Convertible Securities that are (x) outstanding as of
the Original Issue Date and (y) disclosed in Schedule 5.6 to the
Securities Purchase Agreement (as defined in the Note Indenture)
shall not be deemed a Dilution Event.
(l) Notices of Adjustments. Whenever the Conversion
Price is adjusted as herein provided, an officer of the
Corporation shall compute the adjusted Conversion Price in
accordance with the foregoing provisions and shall prepare a
written certificate setting forth such adjusted Conversion Price
and showing in detail the facts upon which such adjustment is
based, and such written instrument shall promptly be delivered to
the recordholders of the Series F Stock.
8. Redemption.
(a) Redemption by the Corporation. The Corporation
shall have no rights to redeem the Series F Stock or to cause the
sale by the holders of such Series F Stock prior to the third
anniversary of the Original Issue Date and other than as
specifically provided herein. If (x) after the third and prior
to the fifth anniversary of the Original Issue Date, the average
of the Market Prices for the Common Stock for 20 consecutive
trading days (the first day of which was after the third
anniversary of the Original Issue Date) is at least $10.00, or
(y) after the fifth anniversary of the Original Issue Date, the
average of the Market Prices for the Common Stock for 20
consecutive trading days (the first day of which was after the
fifth anniversary of the Original Issue Date) is at least
$10.9375, the Series F Stock may be redeemed in whole, but not in
part, at a price per share equal to 100% of the Series F Stock
Issue Price plus all accrued and unpaid dividends to the date of
redemption (such date being referred to herein as the "Redemption
Date"); provided, however, that the Corporation may only effect a
redemption of the Series F Stock pursuant to this Section 8 if
at, and immediately subsequent to, the Redemption Date, the
Common Stock into which the Series F Stock is convertible could
be offered and sold by the holders thereof without compliance
with the registration requirements of Section 5 of the Securities
Act or if the offer and sale of the Common Stock into which the
Series F Stock is convertible is covered by a registration
statement which has been filed with and declared effective by the
Securities and Exchange Commission, and which remains effective
through the Redemption Date, and in each case without being
subject to any other legal or contractual restriction on
transferability, including without limitation, limitations under
paragraph (e)(i) of Rule 144 promulgated under the Securities
Act. At any time after the eighth anniversary of the Original
Issue Date, the Corporation may redeem the Series F Stock in
whole, but not in part, at a price per share equal to 100% of the
Series F Stock Issue Price, plus all accrued and unpaid dividends
to the Redemption Date, provided that the conditions set forth in
the proviso to the previous sentence are satisfied.
(b) Redemption Upon the Occurrence of an Event of
Default. Upon the occurrence of any Series F Stock Event of
Default, other than a Bankruptcy Event of Default (as defined
below), (x) the Initial Purchaser or Initial Purchasers (as
defined in the Securities Purchase Agreement) holding at least
30% of the outstanding shares of Series F Stock, or (y) in the
event that each of the Initial Purchasers, other than GarMark
Partners, L.P. (collectively "GarMark"), shall own less than 100%
of the Series F Stock owned by such Initial Purchaser on the
Original Issue Date, then the holder or holders of at least 35%
of the outstanding shares of Series F Stock, shall have the right
to require (by written notice delivered to the Corporation (the
"Holders' Redemption Demand") within 60 days after such holder or
holders' receipt of the Event of Default Notice (as defined
below)) the Corporation to redeem no later than 30 days after the
Corporation's receipt of the Holders' Redemption Demand all or
any portion of the Series F Stock owned by such holder or holders
at a price per share equal to 102% of the Series F Stock Issue
Price, plus all accrued and unpaid dividends on the shares of
Series F Stock to be so redeemed to the Redemption Date. The
Corporation will give written notice of such election to the
other holders of Series F Stock, which notice shall (i) state the
Redemption Date, which date should be not later than 30 days
after the date of the Holders' Redemption Demand, and (ii) be
given at least 10 days prior to such Redemption Date. Upon the
giving of such notice, each holder of the Series F Stock may
demand redemption of all or any portion of such holder's Series F
Stock by mailing written notice thereof to the Corporation prior
to the Redemption Date. The Corporation will redeem all shares
of Series F Stock as to which rights under this paragraph have
been exercised within 30 days after the date of the Holders'
Redemption Demand. Each holder of Series F Stock shall also have
any other rights that such holder may have been afforded under
any contract or agreement at any time and any other rights that
such holder may have under any law.
(c) Redemption on Bankruptcy Event of Default or
Change in Control. Upon the occurrence of any Bankruptcy Event
of Default or in the event of a Change of Control (as defined
below), any holder of Series F Stock shall have the right to
require (by delivery of a Holders' Redemption Demand) the
Corporation to redeem within 60 days after such holder or
holders' receipt of the Event of Default Notice or Change of
Control Notice (as defined below), as the case may be, all or any
portion of the Series F Stock owned by such holder at a price per
share equal to 102% of the Series F Stock Issue Price plus an
amount equal to all accrued and unpaid dividends on the shares of
Series F Stock to be so redeemed to the Redemption Date. The
Corporation will redeem all shares of Series F Stock as to which
rights under this paragraph have been exercised within 30 days
after the date of the Holders' Redemption Demand. Each holder of
Series F Stock shall also have any other rights that such holder
may have been afforded under any contract or agreement at any
time and any other rights that such holder may have under any
law.
As used herein, a "Change of Control" means a change of
control of the Corporation of a nature that would be
required to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the Exchange Act,
whether or not the Corporation is then subject to such
reporting requirement; provided, that, without limitation,
such a Change of Control shall be deemed to have occurred
if:
(i) any "person" (as defined in Sections 13(d)
and 14(d) of the Exchange Act) or "group" (as defined
in Section 13(d) of the Exchange Act) other than
Permitted Holders (as defined in the Note Indenture) is
or becomes the "beneficial owner" (as defined in Rule
13(d)(3) of the Exchange Act), directly or indirectly,
of securities of the Corporation representing thirty
percent (30%) or more of the combined voting power of
the Corporation's then outstanding securities;
provided, however, that no Change of Control shall be
deemed to have occurred if prior to the acquisition of
such thirty percent (30%) of the combined voting power
of the Corporation's then outstanding securities, a
majority of the Continuing Directors (as defined below)
approves such acquisition; or
(ii) if there shall cease to be a majority of the
Board comprised of Continuing Directors; or
(iii) the stockholders of the Corporation
approve a merger or consolidation of the Corporation
with any other corporation, other than a merger or
consolidation which would result in the voting
securities of the Corporation outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) at least eighty
percent (80%) of the combined voting power of the
voting securities of the Corporation or such surviving
entity outstanding immediately after such merger or
consolidation; or
(iv) if any recapitalization event occurs as a
result of which the holders of voting securities of the
Corporation outstanding immediately prior thereto do
not continue to hold at least eighty percent (80%) of
the combined voting power of the voting securities of
the Corporation immediately after such recapitalization
event; or
(v) the stockholders of the Corporation approve a
plan of complete liquidation of the Corporation or an
agreement for the sale or disposition by the
Corporation of all or substantially all of the
Corporation's assets; or
(vi) a majority of the "named executive officers"
set forth in the Corporation's most recent Proxy
Statement or Annual Report on Form 10-K or Form 10-KSB,
as the case may be (excluding Edward E. Furash), cease
to occupy such positions within a period of 365
consecutive days.
As used herein, "Continuing Directors" means
individuals who constitute the Board as of the Original
Issue Date and any new director(s) whose election by
the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of
the period or whose election or nomination for election
was previously so approved.
(d) Option to Convert in Lieu of Redemption.
Notwithstanding anything to the contrary contained herein, any
holder of shares of Series F Stock that does not want the
Corporation to redeem the shares of Series F Stock called by the
Corporation for redemption shall have the prior right to convert
all or any portion of its shares of Series F Stock into Common
Stock at the then-applicable Conversion Price.
(e) Redemption Procedure. On or prior to the
Redemption Date, the Corporation shall deposit the Series F Stock
Issue Price plus an amount equal to all accrued and unpaid
dividends on all outstanding shares of Series F Stock to be so
redeemed to the Redemption Date (the "Redemption Price") with a
bank or trust corporation having aggregate capital and surplus in
excess of $500,000,000 as a trust fund for the benefit of the
holders of the shares of Series F Stock, with irrevocable
instructions and authority to the bank or trust corporation to
pay the Redemption Price for such shares to their respective
holders on or after the Redemption Date upon receipt of the
certificate or certificates of the shares of Series F Stock to be
redeemed. From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all
rights of the holders of shares of Series F Stock as holders of
Series F Stock (except the right to receive the Redemption Price
upon surrender of their certificate or certificates) shall cease
as to those shares of Series F Stock redeemed, and such shares
shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose
whatsoever. If on the Redemption Date the funds of the
Corporation legally available for redemption of shares of Series
F Stock are insufficient to redeem the total number of shares of
Series F Stock to be redeemed on such date, then the Corporation
will use those funds which are legally available therefor to
redeem the maximum possible number of shares of Series F Stock
ratably among the holders of such shares to be redeemed based
upon their holdings of Series F Stock. Payments shall first be
applied against accrued and unpaid dividends and thereafter
against the remainder of the Redemption Price. The shares of
Series F Stock not redeemed shall remain outstanding and entitled
to all the rights and preferences provided herein. At any time
thereafter when additional funds of the Corporation are legally
available for the redemption of shares of Series F Stock such
funds will immediately be used to redeem the balance of the
shares of Series F Stock to be redeemed. No dividends or other
distributions shall be declared or paid on, nor shall the
Corporation redeem, purchase or acquire any shares of, the Common
Stock or any other class or series of stock of the Corporation
unless the Redemption Price of all shares elected to be redeemed
shall have been paid in full. Until the Redemption Price for a
share of Series F Stock elected to be redeemed shall have been
paid in full, such share of Series F Stock shall remain
outstanding for all purposes and entitle the holder thereof to
all the rights and privileges provided herein, including, without
limitation, that dividends and interest thereon shall continue to
accrue and, if unpaid prior to the date such shares are redeemed,
shall be included as part of the Redemption Price as provided in
this Section 8(e).
(f) Events of Default. A "Series F Stock Event of
Default" occurs if:
(i) the Corporation has breached any material
covenant, obligation or agreement set forth in this
Certificate, the Securities Purchase Agreement (as
defined in the Note Indenture), the Registration Rights
Agreement (as defined in the Note Indenture) or any
other agreement executed in connection with the
Financing (as defined in the Note Indenture) and such
breach continues for a period of thirty (30) days; or
(ii) the Corporation defaults in the payment of
any dividend on the Series F Stock as and when due and
payable, and such default continues for a period of
fifteen (15) days; or
(iii) the Corporation defaults in making any
redemption payment that it is obligated to make
hereunder; whether or not such payment is legally
permissible or conflicts with any other agreement to
which the Corporation or any of its Subsidiaries (as
defined in the Note Indenture) is a party or by which
any of its or their respective assets are bound; or
(iv) any representation or warranty contained in
the Securities Purchase Agreement, the Registration
Rights Agreement or any other agreement executed in
connection with the Financing, or any writing furnished
by the Corporation or any of its Subsidiaries to any
holder of the Series F Stock, contains any untrue
statement of a material fact or omits to state a
material fact necessary in order to make the statements
made, in the light of the circumstances under which
they were made, not misleading; or
(v) an Event of Default (as defined in the Credit
Agreement) under the Credit Agreement (as defined in
the Note Indenture) has occurred and is continuing; or
(vi) an Event of Default (as defined in the Note
Indenture) under the Note Indenture has occurred and is
continuing; or
(vii) the Corporation or any of its
Subsidiaries has breached any material contract to
which it or any of its Subsidiaries is a party, or by
which any of its or their respective assets are bound,
except a breach that would not have a material adverse
effect on the business, operations, prospects, assets
or condition (financial or otherwise) on the
Corporation or any of its Material Subsidiaries (as
defined below); or
(viii) any judgments, orders or decrees for the
payment of money in excess of $2,500,000, either
individually or in an aggregate amount, shall be
entered against the Corporation or any of its
Subsidiaries or any of their respective properties and
shall not be discharged and there shall have been a
period of thirty (30) days during which a stay of
enforcement of such judgment or order, by reason of
pending appeal or otherwise, shall not be in effect; or
(ix) the Corporation or any of its Subsidiaries
which would be a "significant subsidiary" pursuant to
Article 1-02 of Regulation S-X ("Material Subsidiary")
pursuant to or within the meaning of any law under
Title 11 of the U.S. Code or any similar Federal, state
or foreign law for the relief of debtors ("Bankruptcy
Law"):
(A) commences a voluntary case or proceeding
with respect to itself,
(B) consents to the entry of an order for
relief against it in an involuntary case or
proceeding,
(C) consents to the appointment of a
receiver, trustee, assignee, liquidator,
sequestrator or similar official under any
Bankruptcy Law ("Custodian") of it or for all or
any material part of its property,
(D) makes a general assignment for the
benefit of its creditors,
(E) consents to or acquiesces in the
institution of bankruptcy or insolvency
proceedings against it,
(F) shall generally not pay its debts when
such debts become due or shall admit in writing
its inability to pay its debts generally, or
(G) takes any corporate action in
furtherance of or to facilitate, conditionally or
otherwise, any of the foregoing; or
(x) a court of competent jurisdiction enters a
decree, judgment or order under any Bankruptcy Law
that:
(A) is for relief against the Corporation or
any Material Subsidiary of the Corporation in an
involuntary case or proceeding,
(B) appoints a Custodian of the Corporation
or any Material Subsidiary of the Corporation for
all or substantially all of its properties, or
(C) orders the winding-up or liquidation of
the Corporation or any Material Subsidiary of the
Corporation, and in each case the order or decree
remains unstayed and in effect for sixty (60)
days.
Each of the foregoing events in clause (ix) and (x) are
referred to herein as a "Bankruptcy Event of Default."
If an Event of Default occurs and is continuing, in
addition to any other notices required pursuant to this
Certificate or the Financing Documents (as defined in the
Note Indenture), the Corporation must, within ten (10) days
after the occurrence of such Event of Default, give to the
holders of the Series F Stock notice of such Event of
Default, including a reasonably detailed description of the
events causing such Event of Default, and the actions
proposed to be taken by the Corporation in response thereto
(an "Event of Default Notice").
9. Notices of Record Dates and Effective Dates. In case:
(a) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock payable otherwise than in
shares of Common Stock; or (b) the Corporation shall authorize
the granting to the holders of Common Stock of rights to
subscribe for or purchase any shares of capital stock of any
class or any other rights; or (c) of any reorganization, share
exchange or reclassification of the capital stock of the
Corporation (other than a subdivision or combination of
outstanding shares of Common Stock), or of any consolidation or
merger to which the Corporation is party or of the sale, lease or
exchange of all or substantially all of the property of the
Corporation; or (d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation; then the
Corporation shall cause to be mailed to the recordholders of the
Series F Stock at least 20 days prior to the applicable record
date or effective date hereinafter specified, a notice stating
(i) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights, or, if a record is not to
be taken, the date as of which the holders of record of Common
Stock to be entitled to such dividend, distribution or rights are
to be determined or (ii) the date on which such reclassification,
reorganization, share exchange, consolidation, merger, sale,
lease, exchange, dissolution, liquidation or winding up is
expected to become effective or be consummated, and the date as
of which it is expected that holders of record of Common Stock
shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such
reclassification, reorganization share exchange, consolidation,
liquidation, merger, sale, lease, exchange, dissolution,
liquidation or winding up.
10. Preemptive Rights.
(a) For so long as any shares of Series F Stock are
outstanding, prior to seeking financing in one or a series of
related transactions that would aggregate more than $1,000,000 in
any consecutive twelve month period from any Person (as defined
below) consisting of any issuance by the Corporation or any
Affiliate (as defined below) thereof of any shares of Common
Stock or Preferred Stock, including securities convertible into,
or exercisable or exchangeable for, any shares of Common Stock or
Preferred Stock (other than (i) to fund the lesser of $2,000,000
or 20% of the consideration payable in connection with a
Permitted Acquisition (as defined in the Note Indenture)
provided, however, that the per share price paid in connection
with such Permitted Acquisition is at least equal to the greater
of (x) the Market Price of the Common Stock on the Business Day
immediately preceding the day on which the Permitted Acquisition
is consummated, and (y) the Maximum Conversion Price (a
"Permitted Acquisition Equity Financing"), (ii) which is made
pursuant to an underwritten public offering pursuant to a
registration statement declared effective by the Securities and
Exchange Commission, (iii) upon the exercise of the Management
Options or (iv) upon the exercise, in accordance with the
currently existing terms thereof, of the Corporation's Options as
set forth on Schedule 5.6 to the Securities Purchase Agreement)
(the "Equity Financing," and the securities to be issued in
connection therewith, the "Equity Securities"), the Corporation
shall first give to each holder of Series F Stock the opportunity
(such opportunity being herein referred to as the "Preemptive
Right") to purchase (on the same terms as such Equity Securities
are proposed to be sold) the same proportion of such Equity
Securities proposed to be sold by the Corporation as equals such
holder's percentage of the outstanding Series F Stock held by
such holder on the day preceding the date of the Preemptive
Notice (as defined herein). Notwithstanding any provision
hereof, on the date, if any, that the Initial Purchasers
beneficially own, in the aggregate, less than 30% of the Series
F Stock, the Corporation's obligations set forth in this Section
10 shall cease and be of no further effect.
(b) At least thirty (30) days prior to the issuance by
the Corporation of any Equity Securities, the Corporation shall
give written notice thereof (the "Preemptive Notice") to each
holder of Series F Stock. The Preemptive Notice shall specify
(i) the name and address of the bona fide investor to whom the
Corporation proposes to issue or sell Equity Securities, (ii) the
total amount of capital to be raised by the Corporation pursuant
to the issuance or sale of Equity Securities, (iii) the number of
such Equity Securities proposed to be issued or sold, (iv) the
price and other terms of their proposed issuance or sale, (v) the
number of such Equity Securities which such holder is entitled to
purchase (determined as provided in subsection (a) above), and
(vi) the period during which such holder may elect to purchase
such Equity Securities, which period shall extend for at least
thirty (30) days following the receipt by such holder of the
Preemptive Notice (the "Preemptive Acceptance Period"). Each
holder of Series F Stock who desires to purchase Equity
Securities shall notify the Corporation within the Preemptive
Acceptance Period of the number of Equity Securities he wishes to
purchase, as well as the number, if any, of additional Equity
Securities he would be willing to purchase in the event that all
of the Equity Securities subject to the Preemptive Right are not
subscribed for by the other holders of Series F Stock.
(c) During the Preemptive Acceptance Period, except as
required by law, the Corporation and each holder of Series F
Stock shall not discuss the proposed Equity Financing with any
other person, other than officers, directors and employees of the
Corporation.
(d) In the event a holder of Series F Stock declines
to subscribe for all or any part of its pro rata portion of any
Equity Securities which are subject to the Preemptive Right (the
"Declining Preemptive Purchaser") during the Preemptive
Acceptance Period, then the other holders of Series F Stock shall
have the right to subscribe for all (or any declined part) of the
Declining Preemptive Purchaser's pro rata portion of such Equity
Securities (to be divided among the other holders of Series F
Stock desiring to exercise such right on a ratable basis).
(e) After the conclusion of the Preemptive Acceptance
Period, any Equity Securities which none of the holders elect to
purchase in accordance with the provisions of this Section 10,
may be sold by the Corporation, within a period of four (4)
months after the expiration of the Preemptive Acceptance Period,
to any other person or persons at not less than the price and
upon other terms and conditions not less favorable to the
Corporation than those set forth in the Preemptive Notice.
"Affiliate" means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or any other entity or
organization including a government or political subdivision or
any agency or instrumentality thereof ("Person") (i) which
directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control, with
such Person; or (ii) which beneficially owns or holds ten percent
(10%) or more of the voting power (or in the case of a Person
which is not a corporation, 10% or more of the equity or other
ownership interest) of such Person; or (iii) ten percent (10%) or
more of the voting power (or in the case of a Person which is not
a corporation, ten percent (10%) or more of the equity or other
ownership interest) of which is beneficially owned or held by
such Person. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through
ownership of voting power by contract or otherwise.
11. Voting Rights.
(a) General. Except as otherwise expressly provided
herein or as provided by any applicable law, the Series F Stock
shall be non-voting. In addition to the rights otherwise
provided for herein or by law, so long as any shares of Series F
Stock are outstanding, the Corporation will not, and it will
cause its Subsidiaries not to, without the affirmative vote, or
the written consent pursuant to Section 228 of the Delaware
General Corporation Law, of (x) (1) the Initial Purchasers
holding at least (A) 70% of the outstanding Series F Stock (or
such greater number as may be required by law) or (B) two thirds
of the outstanding Series F Stock (or such greater number as may
be required by law) on and after the date upon which Moore Global
Investments, Ltd. and Remington Investment Strategies, L.P. and
any of their Affiliates (collectively "Moore"), own less than
100% of the shares of Series F Stock acquired by them on the
Original Issue Date, or (2) in the event that each of the Initial
Purchasers, other than GarMark, shall own less than 50% of the
Series F Stock owned by such Initial Purchaser on the Original
Issue Date, then the holders of at least a majority (or such
greater number as may be required by law) of the Series F Stock,
voting separately as a class; and (y) so long as Moore, shall own
100% of the shares of Series F Stock acquired by them on the
Original Issue Date, the approval of Moore with respect to the
items enumerated in clauses (i), (iv), (v), (vi), (viii), (ix),
(x), (xiv), (xv), (xvi) and (xviii) below, such approval not to
be unreasonably withheld:
(i) grant or issue any Options, other than the
Management Options or Convertible Securities, to any
officers, directors, employees or consultants of the
Corporation or any of its Affiliates;
(ii) incur Indebtedness (as defined in the Note
Indenture) in excess of the amounts permitted to be
incurred pursuant to the Note Indenture;
(iii) retire, redeem, purchase or acquire any
Junior Securities or any interest therein;
(iv) effect or permit to occur any Change of
Control enumerated in clauses (i), (iii), (iv), (v) or
(vi), or facilitate any Change of Control enumerated in
clause (ii), of the definition of Change of Control
contained herein;
(v) effect any material change in the nature of
the business conducted as of the Original Issue Date by
the Corporation or any of its Subsidiaries;
(vi) enter into any Affiliate Transaction (as
defined in the Note Indenture);
(vii) effect, or agree to effect, any
acquisitions the purchase price for which (or any
portion thereof) consists of equity securities of the
Corporation or Convertible Securities in an amount in
excess of the amount of Permitted Acquisition Equity
Financing;
(viii) amend, waive or repeal any provisions
of, or add any provision to, (x) this Certificate or
(y) any provision of the Corporation's Certificate of
Incorporation or any other certificate of designation
filed with the Secretary of State of Delaware by the
Corporation with respect to its preferred stock;
(ix) increase the authorized number of shares of
Series F Stock or reclassify the shares of Series F
Stock;
(x) amend, waive or repeal any provisions of, or
add any provision to, the Corporation's By-laws (the
"By-laws") in any manner that would have an adverse
effect on the holders of the Series F Stock,
notwithstanding, without limitation, the provisions of
Article IV, Section 3 of the By-Laws as such provision
pertains to Moore;
(xi) sell, convey, transfer, assign or otherwise
dispose of any Subsidiary of the Corporation or any
division, operating unit or other business unit that,
on a pro forma basis, constitutes more than 20% of the
pro forma Consolidated EBITDA (as defined in the Note
Indenture) of the Corporation;
(xii) sell any Common Stock (other than as
permitted pursuant to the terms of Section 10(a)) at a
cash purchase price below the greater of (x) $8.50, and
(y) the Market Price on the date of such sale;
(xiii) enter, or permit any of its Subsidiaries
to enter, into any agreement, contract, binding
commitment or other arrangement providing for any
Permitted Acquisition in which the aggregate
consideration, including the estimated amounts, as
determined in good faith by the Board of Directors of
the Company, of any contingent consideration payable by
the Company in connection with such Permitted
Acquisition is, or may be, greater than $7,500,000;
(xiv) sell any Common Stock or other
Convertible Securities in connection with a Permitted
Acquisition in an amount in excess of, or on terms
other than, a Permitted Acquisition Equity Financing;
(xv) enter into any agreement, indenture or other
instrument which contains any provisions restricting
the Corporation's obligation to pay dividends on, make
liquidation payments in respect of, or make redemptions
of the Series F Stock in accordance herewith;
(xvi) dissolve the Corporation;
(xvii) terminate or change the Corporation's
independent auditors;
(xviii) (x) commence any material action, suit
or proceeding, or (y) settle, compromise or waive any
material right with respect to or release any part of,
any material action, suit, proceeding, investigation or
claim;
(xix) replace, renew, refinance, extend,
prepay, redeem, defease or otherwise retire any
material Indebtedness (as defined in the Note
Indenture) other than as permitted pursuant to the Note
Indenture;
(xx) incur, or suffer to exist, any Lien, other
than Permitted Liens (as defined in the Note
Indenture), with respect to any material Property (as
defined in the Note Indenture); or
(xxi) increase, decrease or otherwise amend
the size, or requirements for election or appointment
to or service on, the Board of Directors (other than as
provided herein).
(b) Appointment of Board of Director Observers. On
the Original Issue Date, (i) GarMark shall have the right to
designate one (1) voting Board member, and each of GarMark and
Moore shall have the right to designate one (1) non-voting Board
observer, each of whom will be given notice of, and permitted to
attend, all meetings of the Board, and (ii) GarMark shall have
the right to designate one (1) voting committee member, and each
of GarMark and Moore shall have the right to designate one (1)
non-voting committee observer, to each of the Corporation's
Compensation Committee, Stock Incentive Plan Committee, Finance
Committee, Audit Committee, and any other committee that is
created or established after the date hereof, each of whom will
be given notice of, and permitted to attend, all meetings of each
such committee. On the Original Issue Date, the Corporation
acting through its Board and in accordance with its Charter
Documents (as defined in the Securities Purchase Agreement) and
applicable Law (as defined in the Securities Purchase Agreement),
shall (i) (A) increase the size of its Board by one (1), (B)
elect the person referred to hereinabove (or such other person as
may be selected by GarMark) to the newly created directorship to
hold office until his successor is elected at a special or annual
meeting of the stockholders, and (C) in connection with any such
subsequent election of directors, nominate, recommend and do all
other acts and things to cause (including, without limitation,
voting all shares for which the Corporation's management or Board
holds proxies (including undesignated proxies) unless otherwise
provided by the stockholders submitting such proxies) the person
referenced in the preceding clause (B) to be elected to the
Board, and (ii) increase the size of each of the Compensation
Committee, Stock Incentive Plan Committee, Finance Committee,
Audit Committee, and if any other committee is created or
established after the date hereof, of such committee, by one (1),
and cause the person referred to hereinabove (or such other
person as may be selected by GarMark) to become a member thereof.
In the event any director, or member of a committee, elected
pursuant to this Section 11(b) shall cease to serve as a director
or member, as applicable, for any reason, the Corporation shall
cause (subject to the provisions of its Charter Documents and
applicable Law) the vacancy resulting thereby to be filled as
promptly as practicable by a person selected by GarMark.
Notwithstanding any provision hereof, on the date, if any, that
any Initial Purchaser entitled to exercise the rights provided in
this Section 11(b) beneficially owns less than 25% of the Common
Stock that would be issuable to such Initial Purchaser upon its
conversion of the Series F Stock acquired on the Original Issue
Date (assuming that the shares of Series F Stock would be
converted at a conversion price of $6.00 per share, subject to
the adjustments provided herein with respect to conversion price
and the number of shares issuable upon conversion), the
Corporation's obligations set forth in this Section 11(b) with
respect to such Initial Purchaser shall cease and be of no
further effect.
(c) Election of Board of Directors.
(i) If at any time or times any dividend payable
on the Series F Stock shall be in arrears and unpaid
for four (4) consecutive quarterly periods (each a
"Dividend Payment Default") or if the Corporation shall
have failed to discharge any obligation pursuant to a
request for redemption pursuant to Section 8(b) (the
"Redemption Obligation") (each of the foregoing a
"Triggering Event"), then the number of directors
constituting the Board, without further action, shall
be increased by such number (rounded up to the nearest
whole number) as is necessary such that subsequent to
such occurrence the number of directors nominated and
elected by the holders of the Series F Stock, as set
forth herein, is at least one third of the entire Board
and the holders of the Series F Stock shall have the
exclusive right, voting separately as a class, to
nominate and elect the directors (the "New Directors")
of the Corporation to fill such newly created
directorships (which New Directors shall be apportioned
among Class 1, Class 2 and Class 3 in accordance with
Article V of the Certificate of Incorporation and
Section 3 of the By-laws and in a manner that provides
the New Directors with the longest tenure of the
Board), the remaining directors to be elected by the
other class or classes of stock entitled to vote
therefor, at each meeting of stockholders held for the
purpose of electing directors;
(ii) Whenever such voting right shall have vested,
such right may be exercised at a special meeting of the
holders of the Series F Stock called as hereinafter
provided, at any annual meeting of stockholders held
for the purpose of electing directors or by the written
consent of the holders of Series F Stock pursuant to
Section 228 of the Delaware General Corporation Law.
Such voting right shall continue until such time as all
cumulative dividends accumulated on the Series F Stock
shall have been paid in full or the Corporation shall
have fulfilled its Redemption Obligation, as the case
may be, at which time such voting right of the holders
of Series F Stock shall terminate, but such voting
right shall again vest in the event of each and every
subsequent failure of the Corporation to pay dividends
for the requisite number of periods or to discharge any
Redemption Obligation as described above.
(iii) At any time when such voting right shall
have vested in the holders of Series F Stock and if
such right shall not already have been initially
exercised, a proper officer of the Corporation shall,
upon the written request of any holder of record of
Series F Stock then outstanding, call a special meeting
of holders of Series F Stock. Such meeting shall be
held at the earliest practicable date upon the notice
required for annual meetings of stockholders. If such
meeting shall not be called within 30 days after such
written request, then the holders of record of 10% of
the shares of Series F Stock then outstanding may
designate in writing a holder of Series F Stock to call
such meeting at the expense of the Corporation, and
such meeting may be called by such person so designated
upon the notice required for annual meetings of
stockholders. Any holder of Series F Stock which would
be entitled to vote at such meeting shall have access
to the stock books of the Corporation for the purpose
of causing a meeting of stockholders to be called
pursuant to the provisions of this paragraph.
Notwithstanding the provisions of this paragraph,
however, no such special meeting shall be called during
a period within 90 days immediately preceding the date
fixed for the next annual meeting of stockholders.
(iv) At any meeting at which the holders of Series
F Stock shall have the right to elect New Directors as
provided herein, the presence in person or by proxy of
the holders of at least a majority of the then
outstanding shares of Series F Stock shall be required
and be sufficient to constitute a quorum. At any such
meeting or adjournment thereof, the absence of a quorum
of the holders of Series F Stock shall not prevent the
election of directors other than the New Directors and
the absence of a quorum or quorums of the holders of
capital stock entitled to elect such other directors
shall not prevent the election of any New Directors.
(v) For so long as the aforesaid voting rights
are vested in the holders of Series F Stock, the term
of office of the New Directors shall terminate upon the
election of their successors by the holders of Series F
Stock. Upon any termination of the aforesaid voting
rights in accordance with Section 11(c)(ii), the term
of office of all New Directors shall thereupon
terminate and upon such termination the number of
directors constituting the Board shall, without further
action, be reduced by the number of such New Directors.
(vi) In the case of any vacancy occurring among
the New Directors, the New Directors who shall have
been so elected (even if there is a sole remaining New
Director) may appoint a successor to hold office until
his successor is elected at an annual or a special
meeting of the stockholders. If all New Directors
shall cease to serve as directors before their terms
shall expire, the holders of Series F Stock then
outstanding may elect successors to hold office until
each of their successors are elected at an annual or a
special meeting of the stockholders.
(vii) For the duration of any Triggering
Event, (x) Moore or any of its Affiliates, shall have
the right to designate one (1) Series F Nominee (as
defined below) and (y) GarMark shall have the right to
designate the remaining Series F Nominee(s) to be
elected by the holders of the Series F Stock; provided
that in the event that Moore shall own less than 100%
of the Series F Stock owned by it on the Original Issue
Date, then the holders of at least a majority of the
Series F Stock shall have the right to designate all of
the Corporation's New Director nominees for election to
the Board. The nominees so designated are herein
referred to as the "Series F Nominees." In furtherance
of the foregoing, the Corporation, acting through its
Board and in accordance with its Certificate of
Incorporation, By-laws and applicable law, shall
recommend in the proxy statement for each annual or
special meeting of stockholders at which any New
Director shall be elected, and shall recommend at each
such stockholders' meeting, as part of the management
or Board slate for election to the Board, the Series F
Nominees.
(viii) So long as any shares of Series F Stock
are outstanding, the Corporation shall take such action
as may be necessary so that its By-laws shall contain
provisions ensuring that the number of directors of the
Corporation shall at all times be such that the
exercise, by the holders of the Series F Stock, of the
right to elect any New Directors will not contravene
any provisions of the Certificate of Incorporation or
By-laws.
(d) Provisions with respect to Regulation Y.
Notwithstanding any other provisions to the contrary set forth in
this Section 11, no Person subject to the provisions of
Regulation Y promulgated under the Bank Holding Company Act of
1956, as amended, by the Federal Reserve Board, holding shares of
Series F Preferred Stock shall be entitled to exercise any of the
rights granted to the Series F Stock pursuant to this Section 11
if the exercise of such right(s) would cause such Person not to
be in compliance with Regulation Y.
12. Shares to be Retired. All shares of the Series F Stock
redeemed, converted, exchanged or purchased by the Corporation
shall be retired and canceled and shall not be restored to the
status of authorized but unissued shares of Preferred Stock and
may not thereafter be reissued.
13. Public Documents. For so long as the Corporation has
any securities registered under the Exchange Act, upon the filing
with the Securities and Exchange Commission of any financial
statements, proxy or information statements, notices, reports or
registration statements (other than any registration statements
relating to employee benefit or dividend reinvestment plans), or
the issuance of any press release or other public announcement
(each a "Public Document"), the Corporation shall, within five
(5) business days, provide to each holder of Series F Stock a
copy of such Public Document.
14. Notice Regarding Certain Corporate Actions. If, at any
time, the Corporation decides to take certain corporate action,
including, but not limited to, any Dilution Event or Change of
Control (a "Change of Control Notice"), then the Corporation
shall provide each holder of Series F Stock with written notice
of such action at least 20 days prior to the record date for such
action, and if there is no record date for such action, then such
written notice shall be provided at least 20 days prior to the
effective date of such action; provided that any holder of Series
F Stock may elect not to receive any such notices by providing
the Corporation with written notice of such election.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this 19th day of March, 1998.
HEADWAY CORPORATE RESOURCES, INC.
By: /s/
E-115
Exhibit No. 5
Form 8-K
Headway Corporate Resources, Inc.
SEC File No. 0-23170
SCHEDULE A
AMENDMENT TO BYLAWS
The amendments to the Bylaws of the Corporation are as
follows:
1. Article III, Section 2 of the Bylaws is amended by
adding the following new sentence immediately after the third
sentence thereof:
"However, if any Dividend Payment Default,
(as defined in the Certificate of
Designations, Preferences and Rights of
Series F Convertible Preferred Stock ("Series
F Stock") of the Corporation) shall occur and
be continuing, the then number of Directors
shall be increased as set forth therein and
such new directorships (the "Additional
Directors"), shall be apportioned among Class
1, Class 2 and Class 3 in accordance with
Article V of the Certificate of Incorporation
and Section 3 below."
2. Article III, Section 3 of the Bylaws is amended by
adding the following new text immediately after the last sentence
thereof:
"Notwithstanding anything to the contrary
that may be contained in this Section 3 or in
Section 4 below, the Additional Directors and
their successors shall be elected exclusively
by the holders of Series F Stock, voting
separately as a class, at each annual or
special meeting of stockholders held for the
purpose of electing any directors or by the
written consent of the holders of Series F
Stock pursuant to Section 228 of the Delaware
General Corporation Law. Such voting right
shall continue until such time as all
cumulative dividends accumulated on the
Series F Stock shall have been paid in full,
at which time such voting right of the
holders of Series F Stock shall terminate,
but such voting right shall again vest in the
event of each and every subsequent Dividend
Payment Default. Upon any termination of
such voting right, the term of office of all
Additional Directors shall terminate and,
upon such termination, the number of
directors constituting the Board of Directors
shall without further action, be reduced by
the number of such Additional Directors.
For the duration of any Dividend Payment
Default, (x) Moore Global Investments, Ltd.
and Remington Investment Strategies, L.P. and
any of their affiliates (collectively,
"Moore") shall have the right to designate
one (1) Series F Nominee (as defined below)
and (y) GarMark Partners, L.P. ("GarMark")
shall have the right to designate the
remaining series F Nominee(s) to be elected
by the holders of the Series F Stock;
provided that in the event that Moore shall
own less than 100% of the Series F Stock
owned by it on the original issue date, then
the holders of a majority of the outstanding
Series F Stock, shall have the right to
designate all of the Additional Directors as
nominees for election to the Board of
Directors. The nominees so designated are
herein referred to as the "Series F
Nominees." In furtherance of the foregoing,
the Corporation, acting through its Board of
Directors and in accordance with its
Certificate of Incorporation, Bylaws and
applicable law, shall recommend in the proxy
statement for each annual or special meeting
of stockholders at which any New Director
shall be elected, and shall recommend at each
such stockholders' meeting, as part of the
management or Board of Directors' slate for
election to the Board of Directors, the
Series F Nominees."
3. Article III, Section 4 of the Bylaws is amended by
deleting said Section in its entirety and inserting the following
in lieu thereof.
"Other than with respect to Additional
Directors, vacancies in the Board of
Directors may be filled by a majority of the
remaining directors, though less than a
quorum, or by a sole remaining director, and
each director so elected shall hold office
until his successor is elected at an annual
or a special meeting of the stockholders. In
the case of any vacancy occurring among the
Additional Directors, the Additional
Directors who shall have been so elected
(even if there is a sole remaining Additional
Director) may appoint a successor to hold
office until his successor is elected at an
annual or a special meeting of the
stockholders. If all Additional Directors
shall cease to serve as Directors before
their terms shall expire, the holders of
Series F Stock then outstanding may elect
successors to hold office until each of their
successors are elected at an annual or a
special meeting of the stockholders."
4. Article VI of the Bylaws is hereby amended by
adding the following new Section 3 immediately after Section 2
thereof:
"Section 3. Notwithstanding the foregoing,
no provision of the Bylaws, including,
without limitation, Sections 2, 3 or 4 of
Article III, that relates to Additional
Directors, or which otherwise adversely
affects the benefits intended to be conferred
upon the holders of Series F Stock, shall be
amended, modified, eliminated or otherwise
changed without (x) the consent of the
initial holders of the Series F Stock holding
at least (A) 70% of the outstanding Series F
Stock, or (B) two thirds of the outstanding
Series F Stock on and after the date upon
which Moore owns less than 100% of the shares
of the Series F Stock acquired by it on the
original issue date or (y) in the event that
each of the initial holders of the Series F
Stock, other than GarMark, shall own less
than 50% of the Series F Stock owned by such
initial holder on the original issue date of
the Series F Stock, the consent of the
holders of a majority of the outstanding
shares of Series F Stock, at an annual or
special meeting of stockholders called for
such purpose, or by the written consent of
the holders of Series F Stock pursuant to
Section 228 of the Delaware General
Corporation Law. "
E-116
Exhibit No. 6
Form 8-K
Headway Corporate Resources, Inc.
SEC File No. 0-23170
_____________________________________
SECURITIES PURCHASE AGREEMENT
_____________________________________
INCREASING RATE SENIOR SUBORDINATED NOTES
DUE MARCH 12, 2006
AND
SERIES F CONVERTIBLE PREFERRED STOCK
OF
HEADWAY CORPORATE RESOURCES, INC.
Dated as of March 19, 1998
TABLE OF CONTENTS
Section Page
1. Definitions 1
2. Issuance, Purchase and Sale of the Securities. 8
2.1 Issuance of the Securities. 8
2.2 Sale and Purchase of the Securities 9
3. Closing of Sale of Securities 9
4. Deliveries at the Closing 9
4.1 Deliveries by the Company to the Purchasers on the
Closing Date 9
(a) Securities. 9
(b) Compliance Certificate. 9
(c) Opinion of Counsel 10
(d) Note Indenture 10
(e) Credit Facility. 10
(f) Registration Rights Agreement. 10
(h) Certificate of Designations. 10
(i) Bylaws Amendment. 11
(j) Board of Directors. 11
(k) Other Transaction Documents. 11
(l) Governmental and Third Party Permits, Consents,
Etc 11
(m) Information Memorandum 11
(n) Corporate Documents 11
(o) Waivers 12
(p) Payment of Closing Fees 12
(q) Payment of the Signing Fee and the Commitment Fee.
12
4.2 Deliveries by the Purchasers to the Company on the
Closing Date. 12
(a) Purchase Price. 12
(b) Compliance Certificate. 12
(c) Registration Rights Agreement. 13
5. Representations and Warranties. Etc. 13
5.1 Organization and Qualification; Authority 13
5.2 Subsidiaries; Other Holdings 13
5.3 Licenses 14
5.4 Corporate and Governmental Authorization; Contravention
14
5.5 Validity and Binding Effect 15
5.6 Capitalization 16
5.7 Litigation; Defaults 18
5.8 Outstanding Debt 18
5.9 No Material Adverse Change 18
5.10 Employee Programs 19
5.11 Private Offerings 20
5.12 Broker's or Finder's Commissions 21
5.13 Company SEC Documents; Information Memorandum 21
5.14 Financial Statements; No Undisclosed Liabilities;
Accounts Receivable 22
5.15 Foreign Assets Control Regulation. Etc 23
5.16 Federal Reserve Regulations and Other Matters 23
5.17 Investment Company Act 24
5.18 Public Utility Holding Company Act 24
5.19 Interstate Commerce Act 24
5.20 Environmental Regulation, Etc 24
5.21 Properties and Assets 25
5.22 Insurance 25
5.23 Employment Practices 26
5.24 Intellectual Property 26
5.25 Material Contracts and Obligations 27
5.26 Taxes 29
5.27 Transactions with Affiliates; Arm's-Length
Transactions; Conflicts of Interest 30
5.28 Limitation on Subsidiary Payment Restrictions 30
5.29 Notes 30
5.30 Solvency 30
5.31 RICO 31
5.32 Absence of Certain Practices 31
5.33 No Other Business 31
5.34 Minute Books 31
5.35 Regulatory Requirements; Cessation of Direct Investment
Program 31
6. Purchase for Investment; Source of Funds 32
7. Covenants of the Company 33
7.1 Use of Proceeds 33
7.2 The Company's Board of Directors 33
7.3 Publicly Available Information 34
7.4 Public Documents 34
7.5 Information Relating to the Purchasers 34
7.6 Notice Regarding Certain Corporate Actions 34
7.7 Access to Information 34
7.8 True Books and Records of the Company 35
7.9 Officer's Knowledge of Default 35
7.10 Suits or Other Proceedings. 35
7.11 Hedging Obligations. 35
7.12 Projections. Prepare all 35
8. Restrictions on Transfer 35
8.1 Restrictive Legends 35
8.2 Notice of the Proposed Transfer; Opinions of Counsel 36
9. Miscellaneous 37
9.1 Indemnification: Expenses Etc. 37
9.2 Survival of Representations and Warranties;
Severability 39
9.3 Amendment and Waiver 39
9.4 Notices, Etc 39
9.5 Successors and Assigns 39
9.6 Agreement and Action of the Purchasers 40
9.7 Descriptive Headings 40
9.8 Satisfaction Requirement 40
9.9 GOVERNING LAW 40
9.10 Service of Process 40
9.11 Counterparts 41
9.12 Disclosure to Other Persons 41
9.13 Acknowledgment by Purchasers 42
9.14 No Adverse Interpretation of Other Agreements 42
9.15 WAIVER OF JURY TRIAL 42
SCHEDULES
SCHEDULE 5.1 -- Jurisdictions in which the Company is
qualified
SCHEDULE 5.2 -- Subsidiaries; Jurisdictions in which the
Subsidiaries are qualified
SCHEDULE 5.4 -- Authorization and Approvals
SCHEDULE 5.6 -- Capitalization
SCHEDULE 5.7 -- Litigation; Defaults
SCHEDULE 5.8 -- Debt and Other Liabilities
SCHEDULE 5.9 -- Material Developments
SCHEDULE 5.10 -- Employee Programs
SCHEDULE 5.14 -- Undisclosed Liabilities
SCHEDULE 5.19 -- Environmental
SCHEDULE 5.21 -- Condemnation Proceedings and Liens
SCHEDULE 5.22 -- Insurance
SCHEDULE 5.23 -- Employment Practices
SCHEDULE 5.24 -- Patents and Trademarks
SCHEDULE 5.25 -- Material Contracts and Obligations
SCHEDULE 5.26 -- Taxes
SCHEDULE 5.27 -- Transactions with Affiliates
SCHEDULE 5.28 -- Subsidiary Payment Restrictions
SCHEDULE 5.35 -- Earnout Provisions
SCHEDULE 5.36 -- Existing Investments
EXHIBITS
EXHIBIT A -- Form of Certificate of
Designations, Preferences and Rights of the
Preferred Stock
EXHIBIT B -- Form of Opinion of Christy & Viener
EXHIBIT C -- Form of Note Indenture
EXHIBIT D -- Form of Amendment to the Company's Bylaws
EXHIBIT E -- Form of Registration Rights Agreement
EXHIBIT F -- Form of Guaranty Agreement
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT ("Agreement") dated as of
March 19, 1998, among Headway Corporate Resources, Inc., a
Delaware corporation (the "Company"), and each purchaser
executing a signature page hereto or any subsequent holder of the
Securities (each a "Purchaser," and collectively the
"Purchasers").
W I T N E S S E T H:
WHEREAS, the Company desires to issue and sell to the
Purchasers, and the Purchasers desire to purchase from the
Company, (i) the Notes in the aggregate amount of up to
$10,000,000, and (ii) the Preferred Stock in the aggregate
liquidation preference of up to $20,000,000 (the Notes and the
Preferred Stock are herein collectively referred to as the
"Securities"), on the terms, and subject to the conditions, set
forth herein.
NOW THEREFORE, in consideration of these premises, the
mutual covenants and agreements set forth herein and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. For purposes hereof unless the context
otherwise requires, the following terms shall have the meanings
indicated. All accounting terms not otherwise defined herein,
shall have the respective meanings accorded to them under GAAP.
Unless the context otherwise requires, (i) references to a
"Schedule" or an "Exhibit" are to a Schedule or an Exhibit
attached to this Agreement, (ii) references to a "section" or a
"subdivision" are to a section or a subdivision of this
Agreement, or (iii) any of the following terms may be used in the
singular or the plural, depending on the reference:
"Acquisition Documents" means, collectively, (a) that
certain Asset Purchase Agreement dated as of March 31, 1997
between the Company, Headway Corporate Staffing Services of North
Carolina, Inc., Advanced Staffing Solutions, Inc., H. Wade
Gresham and Mark F. Herron, (b) that certain Asset Purchase
Agreement dated as of July 28, 1997 between the Company, ASA
Personnel Services, Inc., Administrative Sales Associates, Inc.,
Administrative Sales Associates Temporaries, Inc., Richard Brody
and Arnold Katz, (c) that certain Asset Purchase Agreement dated
as of September 29, 1997 between the Company, Irene Cohen Temps,
Inc., Quality Outsourcing, Inc., George J. Burt, Richard E. Gaudy
and Peter F. Notaro, (d) that certain Purchase Agreement dated as
of September 30, 1997 between the Company, Headway Corporate
Staffing Services of Connecticut, Inc., Electronic Data
Resources, L.L.C., EDR Associates, Inc., Maurice Dusel, James
Roberts and Michael Russell, (e) that certain Asset Purchase
Agreement, to be dated on or about March 23, 1998, among the
Company, Headway Corporate Staffing Services of North Carolina,
Inc., Select Staffing Services, Inc. and Jack Powell, (f) that
certain Asset Purchase Agreement, to be dated on or about March
23, 1998, among the Company, Cheney Associates, L.L.C. and
Timothy Cheney, an individual doing business under the names
Cheney Associates, Inc. and Cheney Consulting Group, (g) that
certain Stock Purchase Agreement, to be dated on or about March
23, 1998, among the Company, L&M Shore Family Holdings Limited
Partnership, Elder Investments Limited Partnership, Mark Shore
and Linda Elder, and (h) any other purchase agreement entered
into hereafter by the Company and/or any Subsidiaries relating to
the acquisition of any entity or any assets thereof.
"Affiliate" means, with respect to any specified
Person, any other Person who directly or indirectly through one
or more intermediaries controls, or is controlled by, or is under
common control with, such specified Person. The term "control"
means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing.
"Agreement" means this Agreement, as amended, modified
or supplemented from time to time, in accordance with the terms
hereof, together with any exhibits, schedules or other
attachments thereto.
"Business Day" has the meaning ascribed thereto in the
Note Indenture.
"Bylaws Amendment" means the Amendment to the Company's
by-laws, attached hereto as Exhibit D.
"Capital Stock" means, with respect to any Person, any
and all shares, interests, participations, rights in or other
equivalents (however designated and whether voting or non-voting)
of such Person's capital stock or any form of membership
interests, as applicable, whether outstanding on the Closing Date
or issued after the Closing Date and any and all rights, warrants
or options exercisable or exchangeable for or convertible into
such capital stock.
"Certificate of Designations" means the Certificate of
Designations, Preferences and Rights of the Series F Convertible
Preferred Stock of the Company, attached hereto as Exhibit A.
"Change of Control" has the meaning ascribed thereto in
the Note Indenture.
"Charter Documents" has the meaning ascribed thereto in
Section 5.1 hereof.
"Closing" has the meaning ascribed thereto in Section 3
hereof.
"Closing Date" has the meaning ascribed thereto in
Section 3 hereof.
"Code" means the Internal Revenue Code of 1986, and the
rules and regulations thereunder, as amended from time to time.
"Commission" means the United States Securities and
Exchange Commission or any other federal agency at the time
administering the Securities Act.
"Commitment Fee" means (i) one (1) percent of the
principal amount of the Notes, plus (ii) one (1) percent of the
aggregate liquidation preference of the Preferred Stock, as
determined pursuant to the Certificate of Designation.
"Commitment Letter" means those certain commitment
letters between each Purchaser and the Company, each dated
January 27, 1998, with respect to the transactions contemplated
hereby.
"Common Stock" means the common stock, par value $.0001
per share, of the Company.
"Company" has the meaning ascribed thereto in the
introduction hereof.
"Contract" has the meaning ascribed thereto in Section
5.25 hereof.
"Credit Agreement" means the Credit Agreement, dated as
of March 19, 1998, entered into between the Company and
NationsBank, National Association, as agent, and the lenders
party thereto from time to time, providing for the Credit
Facility, as the same may at any time be amended, amended and
restated, supplemented or otherwise modified, including any
refinancing, refunding, replacement or extension thereof
permitted under the Note Indenture which provides for working
capital and other financing, whether by the same or any other
lender or group of lenders.
"Credit Facility" means the $75,000,000 revolving
credit facility, pursuant to the Credit Agreement.
"Current Affiliate" has the meaning ascribed thereto in
Section 5.10 hereof.
"Default" has the meaning ascribed thereto in the Note
Indenture.
"DGCL" shall mean the Delaware General Corporation Law
in effect as of the date hereof, as amended from time to time.
"Dilution Event" has the meaning ascribed thereto in
the Note Indenture.
"Domestic Subsidiary" has the meaning ascribed thereto
in the Note Indenture.
"Employee Program" has the meaning ascribed thereto in
Section 5.10 hereof.
"Employees" means officers, directors, consultants,
employees and all other persons who render services to the
Company.
"Environment" means soil, surface waters, groundwaters,
land, stream sediments, surface or subsurface strata and ambient
air.
"Environmental Law(s)" means and includes any Laws
relating to the regulation or protection of human health, safety
or the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes into the
environment (including ambient air, soil, surface water, ground
water, wetlands, land or subsurface strata), or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security
Act of 1974, and the rules and regulations thereunder, as amended
from time to time.
"ERISA Plan" has the meaning ascribed thereto in
Section 5.10 hereof.
"Event of Default" has the meaning ascribed thereto in
the Note Indenture.
"Executive Officer" means the Chief Executive Officer,
the President, the Chief Operating Officer, the Chief Financial
Officer, the Treasurer and any Senior Vice President of the
Company or any other person who, by whatever title, has control
over or responsibility for the management and operations of the
Company.
"Financial Statements" has the meaning ascribed thereto
in Section 5.14 hereof.
"GAAP" means generally accepted accounting principles
and practices set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of
the Financial Accounting
Standards Board or in such other statements by such other entity
as may be approved by a significant segment of the accounting
profession that are applicable to the circumstances as of the
date of determination.
"GarMark" means GarMark Partners, L.P.
"Governmental Authority" means any governmental or
quasi-governmental authority including, without limitation, any
federal, state, territorial, county, municipal or other
governmental or quasi-governmental agency, board, branch, bureau,
commission, court, arbitration panel, department, authority, body
or other instrumentality or political unit or subdivision or
official thereof, whether domestic or foreign.
"Guaranty Agreement" means the Guaranty Agreement of
even date herewith, by and among the Company's Domestic
Subsidiaries and the Trustee, for the benefit of the Purchasers,
substantially in the form of Exhibit F hereto, as amended,
modified or supplemented from time to time in accordance with the
terms thereof, together with any exhibits, schedules or other
attachments thereto.
"Hazardous Materials" means and includes any
pollutants, hazardous or toxic materials, substances or wastes,
including: petroleum and petroleum products and derivatives;
asbestos; radon; polychlorinated bi-phenyls; urea-formaldehyde
foam insulation; explosives; radioactive materials; laboratory
wastes and medical wastes (including contaminated clothing, body
fluids, contaminated medical instruments and equipment,
catheters, used bandages, gauzes, needles or other sharp
instruments); and any chemicals, materials or substances
designated or regulated as hazardous or as toxic substances,
materials, or wastes, or otherwise regulated, under any
Environmental Law; hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant,
contaminant, or other human health or safety, as defined or
regulated under any Environmental Law.
"Hazardous Waste" means and includes any hazardous
waste as defined or regulated under any Environmental Law.
"Hedging Obligations" has the meaning ascribed thereto
in the Note Indenture.
"Information Memorandum" means that certain Information
Memorandum of the Company dated December 1, 1997, together with
all attachments, schedules and exhibits thereto, distributed in
connection with the purchase and sale of the Securities, and any
supplement or amendment thereto reviewed by each Purchaser prior
to the date of this Agreement.
"Initial Purchasers" means the Purchasers listed on the
signature pages hereto and each of their respective Affiliates.
"Illegal Transfer Notice" has the meaning ascribed
thereto in Section 8.2 hereof.
"Indemnified Party" or "Indemnified Parties" has the
meaning ascribed thereto in Section 9.1(a) hereof.
"Intellectual Property" has the meaning ascribed
thereto in Section 5.24(a) hereof.
"IRS" means the Internal Revenue Service or any
successor agency.
"Law" Any statute, ordinance, code, rule, regulation or
order enacted, adopted, promulgated, applied or followed by any
Governmental Authority.
"License" or "Licenses" has the meaning ascribed
thereto in Section 5.3 hereof.
"Lien" means any security agreement, financing
statement (whether or not filed) mortgage, lien (statutory or
otherwise), charge, pledge, hypothecation, conditional sales
agreement, adverse claim, title retention agreement or other
security interest, encumbrance, lien, charge, restrictive
agreement, mortgage, deed of trust, indenture, pledge, option,
limitation, exception to or other title defect in or on any
interest or title of any vendor, lessor, lender or other secured
party to or of such Person under any conditional sale, lease,
consignment, or bailment given for security purposes, trust
receipt or other title retention agreement with respect to any
Property or asset of such Person, whether direct, indirect,
accrued or contingent.
"Losses" has the meaning ascribed thereto in Sect on
9.1(a) hereof.
"Material Adverse Effect" has the meaning ascribed
thereto in Section 5.1 hereof.
"Moore" means Remington Investment Strategies L.P. and
Moore Global Investments, Ltd. or any of their Affiliates.
"Multiemployer Plan" has the meaning ascribed thereto
in Section 5.10 hereof.
``Notes" means the Increasing Rate Senior Subordinated
Notes of the Company, due March 19, 2006, issued pursuant to the
Note Indenture as amended, modified or supplemented from time to
time in accordance with the terms thereof and the Note Indenture.
"Note Indenture" means the Indenture of even date
herewith by and between the Company and the Trustee,
substantially in the form of Exhibit C hereto, as amended,
modified or supplemented from time to time in accordance with the
terms thereof, together with any exhibits, schedules or other
attachments thereto.
"Officers' Certificate" means a certificate executed on
behalf of the Company by (a) the Chairman of the Board of
Directors (if an officer) or the President or one of the Vice
Presidents of the Company and (b) the Treasurer or one of the
Assistant Treasurers or the Secretary or one of the Assistant
Secretaries of the Company.
"Option Plan" means any stock award or option plan,
grant of warrants, grant of rights (including grant of exercise,
exchange or conversion rights), agreement or arrangement,
undertaking or commitment of any kind, for Employees relating to
Capital Stock or other securities of the Company.
"Permitted Acquisitions" has the meaning ascribed
thereto in the Note Indenture.
"Permitted Investments" has the meaning ascribed
thereto in the Note Indenture.
"Permitted Liens" has the meaning ascribed thereto in
the Note Indenture.
"Person" means any individual, entity or group,
including, without limitation, individual, corporation, limited
liability company, limited or general partnership, joint venture,
association, joint stock company, trust, unincorporated
organization, or government or any agency or political
subdivision thereof.
"Preferred Stock" means the Series F Convertible
Preferred Stock $0.0001 par value per share of the Company having
the terms outlined in the Certificate of Designations and an
aggregate liquidation preference of $20,000,000.
"Property" means any interest in any kind of property
or asset, whether real, personal or mixed, or tangible or
intangible.
"Public Document" has the meaning ascribed thereto in
Section 7.4 hereof.
"Purchasers" except as defined elsewhere in this
Agreement, shall be as defined in the introduction hereto.
"Registration Rights Agreement" means the Registration
Rights Agreement of even date herewith, by and among the Company
and the Purchasers, substantially in the form of Exhibit E
hereto, as amended, modified or supplemented from time to time in
accordance with the terms thereof, together with any exhibits,
schedules or other attachments thereto.
"Regulation D" means Regulation D under the Securities
Act.
"Regulation S" means Regulation S under the Securities
Act.
"Release" means any releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing, or dumping into the Environment.
"Restricted Security" has the meaning ascribed thereto
in Section 8.2 hereof.
"Rule 144" means Rule 144 as promulgated by the
Commission under the Securities Act, and any successor rule or
regulation thereto.
"Rule 144A" means Rule 144A as promulgated by the
Commission under the Securities Act, and any successor rule or
regulation thereto.
"Securities" means, collectively, the Notes and the
Preferred Stock.
"Securities Act" means the Securities Act of 1933, and
the rules and regulations of the Commission promulgated
thereunder, as amended.
"Security Documents" has the meaning ascribed thereto
the Note Indenture.
"Signing Fee" means the aggregate amount of $50,000.
"Subsidiary" means with respect to any Person, any
corporation, association or other business entity of which
securities representing more than 50% of the combined voting
power of the total Voting Stock (or in the case of an association
or other business entity which is not a corporation, more than
50% of the equity interest) is at the time owned or controlled,
directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. When used
therein without reference to any Person, Subsidiary means a
Subsidiary of the Company.
"Swap Agreements" has the meaning ascribed thereto in
the Note Indenture.
"Taxes" has the meaning ascribed thereto in Section
5.26 thereof.
"Threat of Release" means a substantial likelihood of a
Release which requires action to prevent or mitigate damage to
the Environment which may result from such Release.
"Transaction Documents" means, collectively, this
Agreement, the Note Indenture, the Notes, the Registration Rights
Agreement, the Guaranty Agreement and the Credit Agreement and
any and all agreements, exhibits, schedules, certificates,
instruments and other documents contemplated thereby or executed
and delivered in connection therewith.
"Trustee" has the meaning ascribed thereto in the Notes
Indenture.
"Voting Stock" means any class or classes of Capital
Stock pursuant to which the holders thereof have the general
voting power under ordinary circumstances to vote for the
election of directors, managers or trustees of any Persons
(irrespective of whether or not at the time, stock of any class
or classes will have, or might have, voting power by the reason
of the happening of any contingency).
"Waivers" means the documents waiving the "change-in-
control" provisions contained in certain stock option agreements.
2. Issuance, Purchase and Sale of the Securities.
2.1 Issuance of the Securities.
(a) The Company has authorized the issuance and
sale of the Notes, in the aggregate principal amount of up to
$10,000,000 to be acquired by the Purchasers in accordance with
the terms of this Agreement. The Notes shall be issued pursuant
to and in accordance with the terms of the Note Indenture. Each
Note will be issued in the principal amount of $100,000 and
integral multiples of $1,000 in excess thereof, and will
otherwise be in the form of the Note attached to the Note
Indenture, with such changes thereto, if any, as may be approved
by the Purchasers and the Company.
(b) The Company has authorized the issuance and
sale of the Preferred Stock in the aggregate liquidation
preference of up to $20,000,000 to be acquired by the Purchasers
in accordance with the terms of this Agreement. The Preferred
Stock shall have the voting powers, dividend rights, liquidation
rights, designations, preference and relative, participating,
optional or other special rights, and the qualifications,
limitations and restrictions thereof, as are set forth in the
Certificate of Designations which shall be filed with the
Secretary of State of the State of Delaware on or before the
Closing Date.
2.2 Sale and Purchase of the Securities. Subject to
the terms and conditions of this Agreement and the Note
Indenture, contemporaneously with the execution hereof, the
Company will issue, sell and deliver to each Purchaser and each
Purchaser will purchase from the Company, (a) such principal
amount of Notes, and (b) such amount of the aggregate liquidation
preference of Preferred Stock, as is specified opposite such
Purchaser's name on the signature pages hereto. The purchase
price of the Securities shall be as set forth on the signature
page of each Purchaser and shall be payable by each Purchaser to
the Company in cash by wire transfer of immediately available
funds.
3. Closing of Sale of Securities. The purchase and
delivery of the Securities to be purchased by the Purchasers
hereunder shall take place at the offices of Christy & Viener,
620 Fifth Avenue, New York, New York 10020, at a closing (the
"Closing") on March 19, 1998 or at such other place or on such
other date as the Purchasers and the Company may agree upon (such
date on which the Closing shall have actually occurred, the
"Closing Date"). At the Closing, the Company will deliver or
cause to be delivered to each Purchaser the Securities to be
purchased by each such Purchaser pursuant hereto against payment
of the purchase price therefor. The Notes and the Preferred
Stock to be purchased by each Purchaser hereunder shall be, with
respect to each such Purchaser, in the form of a single Note and
a single Preferred Stock certificate, respectively (or such
greater number of Preferred Stock certificates as each Purchaser
may request no less than 48 hours prior to the Closing), in each
case dated the date of the Closing and registered in the
Purchaser's name or that of its nominee (provided to the Company
no less than 48 hours prior to the Closing). If at the Closing
the Company shall fail to tender to the Purchasers any of the
Securities to be purchased by them as provided in this Section 3,
or any of the items to be delivered pursuant to Section 4.1 shall
not have been delivered or such delivery has not been waived by
the Purchasers, the Purchasers shall, at their election, be
relieved of all further obligations, if any, under the Commitment
Letter or this Agreement, without thereby waiving any other
respective rights it may have by reason of such failure or such
non-fulfillment.
4. Deliveries at the Closing.
4.1 Deliveries by the Company to the Purchasers on the
Closing Date. At the Closing, the Company will deliver or cause
to be delivered to each Purchaser, against payment of the
purchase price as provided herein:
(a) Securities. The Securities, as provided in
Section 3 hereof;
(b) Compliance Certificate. An Officers'
Certificate, dated the date of the Closing, certifying that:
(i) the representations and warranties of
the Company and the Subsidiaries contained in this
Agreement, the other Transaction Documents, and those
otherwise made in writing by or on behalf of the
Company and the Subsidiaries, in connection with
transactions contemplated by this Agreement and the
other Transaction Documents are true and correct as of
the date hereof, after giving effect to the sale of the
Securities and the other transactions contemplated by
this Agreement and the other Transaction Documents,
except that any representations and warranties that
relate to a particular date or period shall be true and
correct as of such date or period; and
(ii) the Company and each of its
Subsidiaries have performed, satisfied and complied in
all material respects with all covenants, agreements
and conditions contained in, and required by, this
Agreement and the other Transaction Documents, to be
performed, satisfied or complied with prior to or at
the Closing, and at the time of the Closing after
giving effect to the sale of the Securities and the
other transactions contemplated by this Agreement and
the other Transaction Documents, no Default or Event of
Default has occurred and is continuing.
(c) Opinion of Counsel. A favorable opinion, from
Christy & Viener counsel for the Company, substantially in the
form set forth in Exhibit B, addressed to the Purchasers, dated
the Closing Date and otherwise satisfactory in substance and form
to the Purchasers, and their respective counsel;
(d) Note Indenture. Fully-executed original
counterparts of the Note Indenture, duly executed by the Company
and the Trustee and evidence that such Note Indenture is in full
force and effect and no term or condition thereof has been
amended, modified or waived;
(e) Credit Facility. Fully-executed counterparts
of the Credit Agreement, duly executed by the Company,
NationsBank, National Association, as agent, and the lenders
party thereto and evidence that (i) such Credit Agreement is in
full force and effect and no term or condition thereof has been
amended, modified or waived, and (ii) that all transactions with
respect to the Credit Facility have been consummated;
(f) Registration Rights Agreement. Fully-executed
original counterparts of the Registration Rights Agreement, duly
executed by the Company, and evidence that such Registration
Rights Agreement is in full force and effect and no term or
condition thereof has been amended, modified or waived;
(g) Guaranty Agreement. Fully-executed original
counterparts of the Guaranty Agreement, duly executed by each of
the Company's Domestic Subsidiaries, and evidence that such
Guaranty Agreement is in full force and effect and no term or
condition thereof has been amended, modified or waived;
(h) Certificate of Designations. Evidence of
filing with the Secretary of State of the State of Delaware of
the Certificate of Designations pursuant to Section 151 of the
DGCL with respect to the issuance and sale of the Preferred Stock
contemplated hereunder;
(i) Bylaws Amendment. Evidence of the adoption
of the Bylaws Amendment pursuant to Section 109 of the DGCL;
(j) Board of Directors. Evidence of the increase
of the size of the Company's Board of Directors and of each of
the Compensation Committee, Stock Incentive Plan Committee,
Finance Committee and Audit Committee by one (1), and of the
election of a person chosen by GarMark, to each of the vacancies
created by such increases, all as set forth in Section 7.2
hereof.
(k) Other Transaction Documents. Evidence that
other Transaction Documents and any other agreements and
documents contemplated thereby and in connection therewith have
been duly executed and delivered by all respective parties
thereto and are in full force and effect;
(l) Governmental and Third Party Permits,
Consents, Etc. Evidence that, except as set forth on Schedule
5.4, the Company and its Subsidiaries have duly applied for and
obtained all approvals, orders, licenses, consents and other
authorizations (collectively, the "Approvals") from each federal,
state and local government and governmental agency, department or
body, pursuant to any agreement to which the Company or any of
its Subsidiaries is a party, or to which any of them or any of
their assets is subject, that may be required in connection with
this Agreement, the other Transaction Documents or any other
agreements and documents contemplated thereby and in connection
therewith;
(m) Information Memorandum. Evidence that the
Information Memorandum has not been amended or supplemented
subsequent to the delivery thereof to the Purchasers;
(n) Corporate Documents.
(i) copies of the Company's and of each of
its Subsidiaries' certificate of incorporation or
formation, as the case may be, certified as of a recent
date by the Secretary of State of the jurisdiction of
incorporation or formation, as the case may be, of any
such entity;
(ii) a certificate of such Secretary of
State, dated as of a recent date, as to the good
standing of and payment of taxes by the Company and
each of its Subsidiaries which lists the Charter
Documents on file in the office of such Secretary of
State;
(iii) a certificate dated as of a recent
date as to the good standing of and payment of taxes by
the Company and each of its Subsidiaries issued by the
Secretary of State of each jurisdiction in which such
entity is qualified as a foreign corporation, except to
the extent that any failure to so qualify would not
have a Material Adverse Effect on the Company or any of
its Material Subsidiaries; and
(iv) A certificate, dated the Closing Date of
the Secretary of each of the Company and the
Subsidiaries, (i) certifying as true, complete and
correct its Charter Documents (as appropriate) and in
the case of the Company (x) resolutions of the
Company's Board of Directors relating to the adoption
of the Bylaws Amendment, (y) resolutions of the
Company's Board of Directors relating to the
transactions contemplated hereby, and (z) a certificate
of the Company's Stock Incentive Plan Committee
certifying that no "change-in-control" (as such term is
used in any option agreement or other award issued
pursuant to the Company's 1993 Stock Incentive Plan)
has occurred, or will occur upon the conversion of the
Preferred Stock, as a result of the transactions
contemplated hereby, (ii) as to the absence of
proceedings or other action for dissolution,
liquidation or reorganization of the Company, (iii) as
to the incumbency and specimen signatures of officers
who shall have executed instruments, agreements and
other documents in connection with the transactions
contemplated hereby, (iv) as to the effect that certain
agreements, instruments and other documents are in the
form approved in the resolutions referred to in clause
(i) above, and (v) covering such other matters, and
with such other attachments thereto, as Purchasers'
respective counsel may reasonably request at least one
Business Day before the Closing Date, which
certificates and attachments thereto shall be
satisfactory in form and substance to such Purchasers
and their respective counsel;
(o) Waivers. The Waivers relating to the stock
option agreements between the Company and each of Michael List
and Ronald Wendlinger in form and substance acceptable to the
Purchasers and each of their counsel, duly executed by each of
Michael List and Ronald Wendlinger;
(p) Payment of Closing Fees. The fees, expenses
and disbursements of each Purchaser's counsel reflected in
statements of such counsel rendered prior to or on the Closing
Date; and
(q) Payment of the Signing Fee and the Commitment
Fee. Each of the Signing Fee and the Commitment Fee, to the
extent not previously paid, in immediately available funds. The
Signing Fee shall be payable to GarMark. The Commitment Fee
shall be payable to each initial Purchaser in proportion to the
Securities purchased by such initial Purchaser pursuant to the
transactions contemplated hereby.
4.2 Deliveries by the Purchasers to the Company on the
Closing Date. At the Closing, each Purchaser will deliver or
cause to be delivered to the Company the following:
(a) Purchase Price. Such Purchaser's portion of
the Purchase Price, as provided herein;
(b) Compliance Certificate. An Officers'
Certificate, dated the date of the Closing, certifying that:
(i) the representations and warranties of
each Purchaser contained in this Agreement, the other
Transaction Documents, and those otherwise made in
writing by or on behalf of such Purchaser, in
connection with transactions contemplated by this
Agreement and the other Transaction Documents are true
and correct as of the date hereof, after giving effect
to the sale of the Securities and the other
transactions contemplated to be consummated at the
Closing by this Agreement and the other Transaction
Documents, except that any representations and
warranties that relate to a particular date or period
shall be true and correct as of such date or period;
(ii) such Purchaser has performed satisfied
and complied in all material respects with all
covenants, agreements and conditions contained in, and
required by, this Agreement and the other Transaction
Documents, required to be performed, satisfied or
complied with prior to or at the Closing; and
(c) Registration Rights Agreement. The
Registration Rights Agreement, duly executed by the Purchasers.
5. Representations and Warranties. Etc. In order to induce
the Purchasers to purchase the Securities, the Company represents
and warrants to the Purchasers that:
5.1 Organization and Qualification; Authority. The
Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, has
full corporate power and authority to own and lease its
Properties and carry on its business as presently conducted, is
duly qualified, registered or licensed as a foreign corporation
to do business and is in good standing in each jurisdiction in
which the ownership or leasing of its Properties or the character
of its present operations makes such qualification, registration
or licensing necessary, except where the failure to so qualify or
be in good standing would not have a material adverse effect on
the condition (financial or otherwise), assets, business or
results of operations of (a ``Material Adverse Effect") the
Company and its Subsidiaries on a consolidated basis. The Company
has heretofore delivered to each Purchaser's counsel complete and
correct copies of (i) the certificate of incorporation, articles
of organization or equivalent organizational document, and (ii)
the by-laws, operating agreement or equivalent document, of the
Company, each as amended to date and as presently in effect
(collectively, ``Charter Documents"). A list of all jurisdictions
in which the Company is qualified, registered or licensed to do
business as a foreign corporation is attached hereto as Schedule
5.1.
5.2 Subsidiaries; Other Holdings. Set forth on
Schedule 5.2 hereto are (i) the Company's Subsidiaries, and (ii)
the number and/or percentage of outstanding shares or other
equity interests (including options, warrants and other rights to
acquire any interest) of each class of Capital Stock or other
equity or ownership interests owned by the Company. Except as
set forth on Schedule 5.2, the Company does not own any Person or
Capital Stock or any other security of any Person, other than
Permitted Investments. Schedule 5.2 states as of the date hereof
(i) the organizational form of each Subsidiary, (ii) the
authorized and issued capitalizations of each Subsidiary, (iii)
the number of shares or other equity interests (including
options, warrants and other rights to acquire any interest) of
each class of Capital Stock or interest issued and outstanding of
each such Subsidiary, and (iv) the number and/or percentage of
outstanding shares or other equity interests (including options,
warrants and other rights to acquire any interest) of each class
of Capital Stock or other equity interests owned by any such
Subsidiary. Except as set forth on Schedule 5.2, no Subsidiary
owns any Person or Capital Stock or any other security of any
Person, other than Permitted Investments. Each Subsidiary is a
corporation or limited liability company, as the case may be,
duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation, as
the case may be, has full corporate power and authority to own
and lease its Properties, and carry on its business as presently
conducted, is duly qualified, registered or licensed as a foreign
corporation or limited liability company, as the case may be, to
do business and is in good standing in each jurisdiction in which
the ownership or leasing of its Properties or the character of
its present operations make such qualification, registration or
licensing necessary, except where the failure so to qualify or be
in good standing would not have a Material Adverse Effect on such
Subsidiary. A list of all jurisdictions in which each Subsidiary
is qualified, registered or licensed to do business as a foreign
corporation or limited liability company, as the case may be, is
attached hereto as Schedule 5.2. The Company owns, directly or
indirectly, all of the outstanding shares of Capital Stock of
each of its Subsidiaries free of any Liens (other than
restrictions generally applicable to securities under federal,
provincial or state securities laws and except as imposed by the
Security Documents), and said shares have been duly issued and
are fully paid and validly outstanding.
5.3 Licenses. The Company and its Subsidiaries hold
all material licenses, franchises, permits, consents,
registrations, certificates and other approvals (including,
without limitation, those relating to environmental matters,
public and worker health and safety, buildings, highways or
zoning) (individually, a "License" and collectively, "Licenses'')
required for the conduct of their business as now being
conducted, and is operating in substantial compliance therewith,
except where the failure to hold any such License or to operate
in compliance therewith would not have a Material Adverse Effect
on the Company and its Subsidiaries on a consolidated basis. The
Company and its Subsidiaries are in substantial compliance with
all Laws applicable to them, except in each case, where the
failure so to comply would not have a Material Adverse Effect on
the Company and its Subsidiaries on a consolidated basis or a
Material Adverse Effect on the ability of the Company or any of
its Subsidiaries to perform on a timely basis any obligation that
it has or will have under any Transaction Document to which it is
a party.
5.4 Corporate and Governmental Authorization;
Contravention. (a) Except as set forth on Schedule 5.4, the
execution, delivery and performance by the Company of the
Transaction Documents and all other instruments or agreements to
be executed in connection herewith or therewith, the issuance and
sale to the Purchasers of the Securities pursuant to this
Agreement, and the amendment to the Company's by-laws as
contemplated by the Bylaws Amendment (x) are within the Company's
corporate powers, having been duly authorized by all necessary
corporate action on the part of the Company, do not require any
License, authorization, approval, qualification or formal
exemption from, or other action by or in respect of, or filing of
a declaration (other than the filing of the Certificate of
Designations) or registration with, any court, Governmental
Authority, agency or official or other Person (except such as
have been obtained); (y) do not and will not (with or without the
giving or receipt of notice or the passage of time or both)
contravene or constitute a default under or violation of or give
rise to any right of termination, cancellation or acceleration
under (i) any provision of Law, (ii) the Charter Documents of the
Company or any of its Subsidiaries, (iii) any agreement or
Contract (or require the consent of any Person under any
agreement or Contract that has not been obtained) to which the
Company or any of its Subsidiaries is a party, or (iv) any
judgment, injunction, order, decree or other instrument binding
upon the Company, any of its Subsidiaries or any of their
respective Properties, except in the case of clauses (iii) and
(iv) above, where such contravention, default or violation would
not have a Material Adverse Effect on the Company and its
Subsidiaries on a consolidated basis; and (z) do not and will not
(with or without the giving or receipt of notice or the passage
of time or both) result in the creation or imposition of any Lien
on any Property of the Company or any of its Subsidiaries, other
than Permitted Liens or Liens contemplated by the Note Indenture
and the Security Documents.
(b) The execution, delivery and performance by
each of the Subsidiaries of the Transaction Documents to which it
is a party, and all other instruments or agreements to be
executed by such Subsidiary in connection therewith, (x) are
within such Subsidiary's powers, having been duly authorized by
all necessary action on the part of such Subsidiary, do not
require any License, qualification or formal exemption from, or
other action by or in respect of, or filing of a declaration or
registration with, any Governmental Authority or other Person
(except such as have been obtained); (y) do not and will not
(with or without the giving or receipt of notice or the passage
of time or both) contravene or constitute a default under or
violation of or give rise to any right of termination,
cancellation or acceleration under (i) any provision of Law, (ii)
the Charter Documents of such Subsidiary, (iii) any Contract (or
require the consent of any Person under any Contract that has not
been obtained) to which such Subsidiary is a party, or (iv) any
judgment, injunction, order, decree or other instrument binding
upon such Subsidiary or any of their respective Properties,
except, in the case of clauses (iii) and (iv) above, where such
contravention, default or violation would not have a Material
Adverse Effect on such Subsidiary; and (z) do not and will not
(with or without the giving or receipt of notice or the passage
of time or both) result in the creation or imposition of any Lien
on any Property of such Subsidiary, other than Permitted Liens or
Liens contemplated by the Note Indenture and the Security
Documents.
5.5 Validity and Binding Effect. Each of the
Transaction Documents has been duly executed and delivered by the
Company and is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.
(b) Each of the Transaction Documents to which
any of the Subsidiaries is a party has been duly executed and
delivered by such Subsidiary and is a valid and binding agreement
of such Subsidiary, enforceable against such Subsidiary in
accordance with its terms.
5.6 Capitalization.
(a) The authorized Capital Stock of the Company
consists of 20,000,000 shares of common stock, $.0001 par value
("Common Stock"). As of the date hereof: (A) (i) 9,098,594
shares of the Company's Common Stock are issued and outstanding;
(ii) no shares of the Company's Common Stock are held by the
Company in its treasury; (iii) 1,827,712 shares of the Company's
Common Stock are reserved for issuance pursuant to the Company's
Option Plans; (iv) 200,000 shares of the Company's Common Stock
are reserved for issuance under options granted pursuant to
agreements with Strategic Growth International, Inc.; (v) 50,000
shares of the Company's Common Stock are reserved for issuance
under warrants granted pursuant to a Consulting Agreement with JW
Charles Financial; (vi) 128,461 shares of the Company's Common
Stock are reserved for issuance under warrants granted to
Tallwood; (vii) 240,000 shares of the Company's Common Stock are
reserved for issuance under warrants granted to The Tailwind
Fund; (viii) 120,000 shares of the Company's Common Stock are
reserved for issuance under warrants granted to Ehud Laska; (ix)
120,000 shares of the Company's Common Stock are reserved for
issuance under warrants granted to Ziad Abdelnaur; (x) 272,352
shares of the Company's Common Stock are reserved for issuance
under warrants granted to former holders of the Company's Series
D Convertible Preferred Stock; and (xi) up to $333,333 in shares
of the Company's Common Stock in each year of the Earnout under
that certain Asset Purchase Agreement, dated as of July 28, 1997,
between the Company, ASA Personnel Services, Inc., Administrative
Sales Associates, Inc., Richard Brody and Arnold Katz; (B)
575,000 shares of the Company's Common Stock are reserved for
issuance under the Company's Series E Convertible Preferred
Stock; and (C) 575,000 shares of the Company's Series E
Convertible Preferred Stock are reserved for issuance under
warrants granted to ING (U.S.) Capital Corporation. All of the
issued and outstanding shares of Capital Stock are fully paid and
non-assessable. The Company has made available to the Purchasers
complete and correct copies of the Option Plans, and all forms of
options and warrants listed above.
(b) Schedule 5.6 sets forth a complete, true and
accurate list of (i) the holders of record, including the amount
owned by each such holder, of all issued and outstanding
preferred stock of the Company, or (ii) all options, warrants and
other equity based derivatives (including stock appreciation
rights) of the Company outstanding as of the date of this
Agreement, including (w) the date of grant, (x) the exercise
price, (y) the expiration date, and (z) the holder, including the
number of securities owned by each holder, of each such
outstanding option and warrant of the Company.
(c) The Preferred Stock to be issued to the
Purchasers hereunder will have the voting powers, dividend
rights, liquidation rights, designations, preferences and
relative, participating, optional or other special rights, and
the qualifications, limitations and restrictions, as are set
forth in (i) the Certificate of Designations, the form of which
is attached hereto as Exhibit A, which will be filed with the
Secretary of State of the State of Delaware on or prior to the
Closing Date, and (ii) the Bylaws Amendment, the form of which is
attached hereto as Exhibit D, pursuant to which the by-laws of
the Company will be amended on or prior to the Closing Date. The
Company has duly reserved for issuance the shares of Common Stock
issuable upon conversion of the Preferred Stock. The Company has
duly reserved for issuance the shares of Common Stock issuable
upon conversion of the Preferred Stock. When paid for by, and
issued to, the Purchasers, the Preferred Stock will be duly and
validly issued, fully paid and non-assessable, and will be free
and clear of any and all Liens, and except as set forth in this
Agreement, the Certificate of Designations or applicable
securities Laws, will not be subject to any restriction on use,
voting or transfer; and the shares of Common Stock issuable to
the Purchasers upon conversion of the Preferred Stock, when
issued in accordance with the Certificate of Designations, will
be duly and validly issued, fully paid and non-assessable, and
will be free and clear of any and all Liens, and except as set
forth in this Agreement and the Certificate of Designations, will
not be subject to any restriction on use, voting or transfer.
The offer, sale and issuance of the Preferred Stock by the
Company to the Purchasers (and any shares of Common Stock
issuable on conversion thereof) are exempt from the registration
requirements of the Securities Act and state securities laws. On
the basis of the representations contained in Section 6 hereof,
the offer, sale and issuance of the Securities by the Company to
the Purchasers, and any shares of Common Stock issuable to the
Purchasers (or any transferee of any Purchaser; provided that
such transferee had executed a Transferee Letter of
Representation (with respect to the Notes, substantially in the
form attached as Exhibit C to the Note Indenture, and with
respect to the Preferred Stock, such Transferee Letter of
Representation in a form amended to apply to the Preferred Stock)
contemporaneously with, or prior to, such transfer) upon
conversion of the Preferred Stock, are exempt from the
registration requirements of the Securities Act and state
securities Laws. No further approval or authorization of the
stockholders or the directors of the Company, of any Governmental
Authority or any other Person is required for the issuance and
sale of the Preferred Stock or the shares of Common Stock
issuable on conversion thereof.
(d) Except as set forth above, no shares of
Capital Stock or other voting securities of the Company are
issued, reserved for issuance or outstanding. Except as set
forth in Schedule 5.6, (i) there are no outstanding options,
warrants, rights, exercise, exchange conversion rights,
agreements, arrangements, undertakings or commitments of any kind
(A) relating to the issuance, sale, purchase, redemption, voting
or transfer of any Capital Stock or other securities of the
Company, or (B) containing any "change-in-control" provisions,
(ii) there are no rights outstanding which permit or allow the
holder thereof to cause the Company to file a registration
statement or which permit or allow the holder thereof to include
securities of the Company in a registration statement filed by
the Company, and (iii) no events have occurred that would lower
the exercise price of, accelerate vesting of, or increase the
number of shares of the Company's Common Stock into which any
such securities can be exercised, exchanged or converted. There
are no preemptive or other similar rights with respect to any
Capital Stock of the Company. None of the outstanding Capital
Stock or other securities of the Company were issued in violation
of the Securities Act, or the securities or blue sky laws of any
state or other jurisdiction.
5.7 Litigation; Defaults. Except as set forth on
Schedule 5.23 hereto, there is no action, suit, proceeding or
investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any of its
Subsidiaries, , any director, officer, agent, employee,
consultant or other Person acting on the behalf of the Company or
any of its Subsidiaries, or any properties of any of the
foregoing, before or by any Governmental Authority, which
(individually or in the aggregate) could reasonably be expected
to (i) have a Material Adverse Effect on the Company and its
Subsidiaries on a consolidated basis, or (ii) impair the ability
of the Company or any of its Subsidiaries to perform fully on a
timely basis any obligation which the Company or such Subsidiary
has or will have under any Transaction Document. Neither the
Company nor any of its Subsidiaries is in violation of, or in
default under (and there does not exist any event or condition
which, after notice or lapse of time or both, would constitute
such a default under), any term of its Charter Documents, or of
any term of any agreement, Contract, instrument, judgment,
decree, writ, determination, arbitration award, or Law
(including, without limitation, those relating to labor,
employment, occupational health and safety or similar matters)
applicable to the Company or any of its Subsidiaries or to which
the Company or any of its Subsidiaries is bound, or to any
properties of the Company or any of its Subsidiaries, except in
each case to the extent that such violations or defaults,
individually or in the aggregate, could not reasonably (a) affect
the validity or enforceability of any Transaction Document, (b)
have a Material Adverse Effect on the Company and its
Subsidiaries on a consolidated basis, or (c) impair the ability
of the Company or any of its Subsidiaries to perform fully on a
timely basis any obligation which the Company or any such
Subsidiary will have under any Transaction Document.
5.8 Outstanding Debt. Except as set forth in the
Financial Statements or on Schedule 5.8 hereto, at and as of the
Closing Date, neither the Company nor any of its Subsidiaries
has outstanding any debt for borrowed money, or obligations or
liabilities evidenced by bonds, debentures, notes or other
similar instruments or under capital leases other than the Credit
Facility and short-term debt incurred in the ordinary course of
business consistent with the Company's past practices. Schedule
5.8 contains a complete and accurate list of all material
guarantees, assumptions, purchase agreements and similar
agreements and arrangements whereby the Company or any of its
Subsidiaries is or may become directly or indirectly liable or
responsible for the indebtedness or other obligations of another
Person other than the Company or any of its Subsidiaries, except
for negotiable instruments endorsed for collection or deposit in
the ordinary course of its business, identifying, with respect to
each of the respective parties, amounts, terms and maturities.
5.9 No Material Adverse Change. Except as set forth on
Schedule 5.9, since December 31, 1997, there has been (i) no
material adverse change in the condition (financial or
otherwise), assets, business, projects or results of operations
of the Company or any of its Subsidiaries, (ii) no obligation or
liability (contingent or otherwise) incurred by the Company or
any of its Subsidiaries, other than obligations and liabilities
incurred in the ordinary course of business consistent with the
Company's past practices and no Lien placed on any of the
Properties of the Company or any of its Subsidiaries that remains
in existence on the date hereof, other than Permitted Liens and
liabilities and Liens described on Schedule 5.21 hereto, and
(iii) no acquisition or disposition of any material assets by the
Company or any of its Subsidiaries (or any contract or
arrangement therefor) or any other material transaction,
otherwise than for fair value, as determined in good faith by the
Company's Board of Directors, in the ordinary course of business.
5.10 Employee Programs. Schedule 5.10 sets forth a list
of every Employee Program maintained by the Company or any
Current Affiliate at any time during the six-year period ending
on the Closing Date or with respect to which a liability,
contingent or otherwise, of the Company or an Affiliate exists.
Each Employee Program (other than a Multiemployer Plan) which has
been maintained by the Company during the six-year period ending
on the Closing Date and which has been intended to qualify under
Section 401(a) or Section 501(c)(9) of the Code has received a
favorable determination or approval letter from the Internal
Revenue Service regarding its qualification under such section,
or the remedial amendment period under Section 401(b) of the Code
has not yet expired with respect to such Employee Program and, to
the knowledge of the Company, nothing has occurred that would
adversely affect such qualification from the date of such letter
or application (which was timely made) for a determination or
approval letter, and to the knowledge of the Company, no reason
exists why a favorable determination or approval shall not be
granted. Except as set forth on Schedule 5.10, the Company does
not know of any failure of any party to comply with any Laws
applicable with respect to the Employee Programs that have been
maintained by the Company or any Current Affiliate, and no such
failure will result from completion of the transactions
contemplated hereby. With respect to any Employee Program ever
maintained by the Company or an Affiliate, there has been no
"prohibited transaction," as defined in Section 406 of ERISA or
Code Section 4975, or breach of any duty under ERISA or other
applicable Law or any agreement which in any such case could
subject the Company to material liability either directly or
indirectly (including, without limitation, through any obligation
of indemnification or contribution) for any damages, penalties,
or taxes, or any other loss or expense. No litigation or
governmental administrative proceeding (or investigation) or
other proceeding (other than those relating to routine claims for
benefits) is pending or threatened with respect to any such
Employee Program (other than a Multiemployer Plan).
The Company and its Current Affiliates have not incurred any
liability under Title IV of ERISA which has not been paid in full
prior to the Closing. Neither the Company nor any of its Current
Affiliates is liable for any material "accumulated funding
deficiency" (whether or not waived) with respect to any Employee
Program ever maintained by the Company or any Affiliate and
subject to Code Section 412 or ERISA Section 302. With respect to
any Employee Program subject to Title IV of ERISA, there has been
no (and the transactions contemplated by this Agreement will not
result in any) (i) "reportable event," within the meaning of
ERISA Section 4043 or the regulations thereunder (for which the
notice requirement is not waived under 29 C.F.R. Part 2615) or
(ii) other event or condition which presents a material risk of
plan termination or any other event that may cause the Company or
any Current Affiliate to incur material liability, contingent or
otherwise, or have a material Lien imposed on its assets under
Title IV of ERISA. All payments and/or contributions required to
have been made by the Company and its Current Affiliates (under
the provisions of any agreements or other governing documents or
applicable Law) with respect to all Employee Programs subject to
Title IV of ERISA ever maintained by the Company or any
Affiliate, for all periods prior to the Closing, have been timely
made. Except as described on Schedule 5.10, no Employee Program
maintained by the Company or an Affiliate and subject to Title IV
of ERISA (other than a Multiemployer Plan) has any "unfunded
benefit liabilities" within the meaning of ERISA Section
4001(a)(18), as of the Closing Date. With respect to
Multiemployer Plans maintained by the Company or any Affiliate,
Schedule 5.10 states the aggregate amount of withdrawal liability
or other termination liability that would be incurred by the
Company or any Affiliate if there were a withdrawal from any such
plan as determined by the most recent withdrawal liability
calculation prepared by such plan. Except as disclosed on
Schedule 5.10, none of the Employee Programs which is a welfare
plan maintained by the Company or any Affiliate provides health
care or any other non-pension benefits to any employees after
their employment is terminated (other than as required by part 6
of subtitle B of title I of ERISA or comparable statutes or
regulations) or has ever promised to provide such post-
termination benefits.
For purposes of this section:
(i) "Employee Program" means (A) any employee
benefit plan within the meaning of Section 3(3) of ERISA and
employee benefit plans (such as foreign or excess benefit
plans) which are not subject to ERISA, and (B) any stock
option plans, bonus or incentive award plans, severance pay
policies or agreements, deferred compensation arrangements,
supplemental income arrangements, vacation plans, and all
other employee benefit plans, agreements, and arrangements
not described in (A) above, and (C) any trust used to fund
benefits under the foregoing maintained by the Company or
any Affiliate.
(ii) An entity is an "Affiliate" of the Company if
it would have ever been considered a single employer with
the Company under ERISA Section 4001(b) or part of the same
"controlled group" as the Company for purposes of ERISA
Section 302(d)(8)(C); an entity is a "Current Affiliate" if
it currently would be considered a single employer with the
Company under ERISA Section 4001(b) or part of the same
"controlled group" as the Company for purposes of ERISA
Section 302(d)(8)(C); and each reference to the Company
includes the Subsidiaries.
(iii) An entity "maintains'' an Employee
Program if such entity sponsors, contributes to, or provides
benefits under such Employee Program, or has any obligation
(by agreement or under applicable law) to contribute to or
provide benefits under such Employee Program, or if such
Employee Program provides benefits to or otherwise covers
employees of such entity (or, in respect of such employees,
their spouses, dependents, or beneficiaries).
(iv) "Multiemployer Plan" means a (pension or non-
pension) employee benefit plan to which more than one
employer contributes and which is maintained pursuant to one
or more collective bargaining agreements.
5.11 Private Offerings. No form of general solicitation
or general advertising including, but not limited to,
advertisements, articles, notices or other communications,
published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting
whose attendees have been invited by any general solicitation or
general advertising, was used by the Company or any of its
Subsidiaries or any of the Company's or such Subsidiary's
representatives, or, any other Person acting on behalf of the
Company or any of its Subsidiaries, in connection with the
offering of the Securities being purchased under this Agreement
or under any other Transaction Document. None of the Company,
any of its Subsidiaries or any Person acting on the Company's or
such Subsidiary's behalf has directly or indirectly offered the
Securities, or any part thereof or any other similar securities,
for sale to, or sold or solicited any offer to buy any of the
same from, or otherwise approached or negotiated in respect
thereof with any Person or Persons other than the Purchasers and
other investors who the Company reasonably believed had such
knowledge and experience in financial and business matters that
they were capable of evaluating the merits and risks of
purchasing the Securities. The Company further represents to the
Purchasers that, assuming the accuracy of the representations of
the Purchasers as set forth in Section 6 hereof, none of the
Company, any of its Subsidiaries or any Person acting on the
Company's or such Subsidiary's behalf has taken or will take any
action which would subject the issue and sale of the Securities
being purchased hereunder or under any other Transaction Document
to the provisions of Section 5 of the Securities Act, except as
contemplated by the Registration Rights Agreement. The Company
has not sold the Securities to anyone other than the Purchasers
designated in this Agreement. No securities of the same class or
series as the Securities have been issued and sold by the Company
prior to the date hereof. Each Note and Preferred Stock
certificate shall bear substantially the same legend set forth in
Section 8.1 hereof, as applicable, for at least so long as such
restrictions apply.
5.12 Broker's or Finder's Commissions. In addition to
and not in limitation of any other rights hereunder, the Company
and the Subsidiaries will indemnify and hold harmless each
Purchaser from and against any and all claims, demands or
liabilities for broker's, finder's, placement agent's or other
similar fees or commissions and any and all liabilities with
respect to any taxes (including interest and penalties) payable
or incurred, or alleged to have been incurred, by the Company or
any of its Subsidiaries or any Person acting, or alleged to have
been acting, on the Company's or such Subsidiary's behalf, in
connection with this Agreement, the issuance or sale of the
Securities, or any other transaction contemplated by any of the
Transaction Documents (including, without limitation, the
Company's obligation to pay the transaction fee to NationsBanc
Montgomery Securities LLC).
5.13 Company SEC Documents; Information Memorandum.
(a) The Company has timely filed with the SEC,
and has heretofore made available to the Purchasers true and
complete copies of, each report, schedule, registration statement
and definitive proxy statement required to be filed by it under
the Exchange Act or the Securities Act (as such documents have
been amended since the time of their filing, collectively, the
"Company SEC Documents"). The Company SEC Documents, including
without limitation, any financial statements or schedules
included therein, at the time filed, (x) complied in all material
respects with the applicable requirements of the Securities Act
and the Exchange Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder, and (y) did not
contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) None of this Agreement, each of the other
Transaction Documents and the Information Memorandum, contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make
the statements contained herein and therein, in light of the
circumstances under which they were made, not misleading.
(c) The historical financial and operating
information contained in the Information Memorandum has been
derived from the consolidated books and records of the Company
and its Subsidiaries based upon reasonable methods as to
allocations and calculations of such financial information.
(d) The financial projections concerning the
Company included in the Information Memorandum have been prepared
in good faith based upon reasonable assumptions.
(e) There is no material fact known to the
Company which the Company has not disclosed to the Purchasers, or
counsel to the Purchasers, in writing which has or, insofar as
the Company can reasonably foresee, may have or will have a
Material Adverse Effect on the Company to perform its obligations
under any of the Transaction Documents or in respect of the
Securities or any document contemplated hereby or thereby.
(f) The Company has provided the Purchasers with
complete and accurate information as to the Company, each of its
Subsidiaries and its affairs. No representation or warranty made
by the Company set forth herein, or in any schedule hereto, in
any supplement to any schedule, in the Note Indenture or in any
other Transaction Document, or in any certificate or other
document delivered or to be delivered in connection with the
transactions contemplated hereby or thereby, contains or will
contain any untrue statement of a material fact, or omits to
state any material fact, necessary in order to make the statement
therein, in light of the circumstances in which it was made, not
misleading.
5.14 Financial Statements; No Undisclosed Liabilities;
Accounts Receivable.
(a) The financial statements of the Company
included or incorporated by reference in the Company SEC
Documents (the "Company Financial Statements") comply, as of
their respective dates, as to form in all material respects with
applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto
with respect to audited statements or, in the case of the
unaudited statements, as permitted by Form 10-QSB of the SEC) and
fairly present in all material respects (subject, in the case of
the unaudited statements, to normal, recurring year-end audit
adjustments) the consolidated financial position of the Company
and its consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of any unaudited interim
financial statements, to normal year-end audit adjustments, none
of which would, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect on the Company and its
consolidated Subsidiaries, taken as a whole). Since December 31,
1997, neither the Company nor any of its Subsidiaries has
incurred any liabilities or obligations of any nature, whether or
not accrued, absolute, contingent or otherwise, other than
liabilities (i) disclosed in Schedule 5.14 or in the Company SEC
Documents filed prior to the date of this Agreement (complete,
true and correct copies of all of which have been furnished to
the Purchasers), (ii) adequately provided for in the Company
Financial Statements or disclosed in any related notes thereto
(complete, true and correct copies of all of which have been
furnished to the Purchasers), (iii) not required under GAAP to be
reflected in the Company's financial statements or disclosed in
any related notes thereto, (iv) incurred in connection with this
Agreement, or (v) incurred after December 31, 1997 in the
ordinary course of business consistent with the Company's past
practices and which would not have a Material Adverse Effect on
the Company and its consolidated Subsidiaries, taken as a whole.
(b) All accounts receivable as shown on the
Company Financial Statements or on the accounting records of the
Company as of the date hereof are valid, genuine and subsisting,
have arisen in the ordinary course of business from customers
believed to be commercially responsible, and the reserves shown
on the Company Financial Statements are adequate and calculated
consistent with past practice and consistent with GAAP.
5.15 Foreign Assets Control Regulation. Etc. Neither
the issue and sale of the Securities by the Company nor its use
of the proceeds thereof as contemplated by this Agreement will
violate the Foreign Assets Control Regulations, the Transaction
Control Regulations, the Cuban Assets Control Regulations, the
Foreign Funds Control Regulations, the Iranian Assets Control
Regulations, the Nicaraguan Trade Control Regulations, the South
African Transactions Control Regulations, the Libyan Sanctions
Regulations, the Soviet Gold Coin Regulations, the Panamanian
Transactions Regulations, the Haitian Transactions Regulations,
or the Iraqi Sanctions Regulations of the United States Treasury
Department (31 C.F.R., Subtitle B, Chapter V, as amended) or
Executive Orders 12722 and 12724 (transactions with Iraq).
5.16 Federal Reserve Regulations and Other Matters.
Neither the Company nor any of its Subsidiaries will, directly or
indirectly, use any of the proceeds from the sale of the
Securities for the purpose, whether immediate, incidental or
ultimate, of buying any "margin stock," or of maintaining,
reducing or retiring any indebtedness originally incurred to
purchase any stock that is currently a "margin stock," or for any
other purpose which might constitute the transactions
contemplated hereby a "purpose credit," in each case within the
meaning of Regulation G or U of the Board of Governors of the
Federal Reserve System (12 C.F.R. 207 and 221, as amended,
respectively), or otherwise take or permit to be taken any action
which would involve a violation of such Regulation G or
Regulation U or of Regulations T or X of the Board of Governors
of the Federal Reserve System (12 C.F.R. 220 and 224, as amended,
respectively), or any other regulation of such Board. No
indebtedness that may be maintained, reduced or retired with the
proceeds from the sale of the Securities was incurred for the
purpose of purchasing or carrying any "margin stock" and neither
the Company nor any of its Subsidiaries own any such "margin
stock'' or have any present intention of acquiring, directly or
indirectly, any such "margin stock."
5.17 Investment Company Act. Neither the Company nor
any of its Subsidiaries is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
5.18 Public Utility Holding Company Act. Neither the
Company nor any of its Subsidiaries is a "holding company," or a
"subsidiary company'' of a "holding company" or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding
company" as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended.
5.19 Interstate Commerce Act. To the Company's
knowledge, neither the Company nor any of its Subsidiaries is,
nor will be, a "rail carrier," or a Person controlled by or
affiliated with a "rail carrier," within the meaning of Title 49,
U.S.C. Neither the Company nor any of its Subsidiaries is a
"carrier" or other Person to which 49 U.S.C. Section 11301(b)(1)
is applicable.
5.20 Environmental Regulation, Etc.
(a) Each of the Company and its Subsidiaries (i)
has no liability under any Environmental Law or common law cause
of action relating to or arising from environmental conditions
which could have a Material Adverse Effect on the Company and its
Subsidiaries on a consolidated basis and any property owned,
operated, leased, or used by the Company and its Subsidiaries and
any facilities and operations thereon comply with and will
continue to comply with all applicable Environmental Laws to the
extent that failure to comply could have a Material Adverse
Effect on the Company and its Subsidiaries on a consolidated
basis; (ii) has never entered into or been subject to any
judgment, consent decree, compliance order, or administrative
order with respect to any environmental or health and safety
matter or received any request for information, notice, demand
letter, administrative inquiry, or formal or informal complaint
or claim with respect to any environmental or health and safety
matter or the enforcement of any Environmental Law, and (iii) has
no reason to believe that any of the items enumerated in clause
(ii) of this paragraph will be forthcoming.
(b) (i) Each of the Company and its Subsidiaries
has never, and will never, generate, transport, use, store,
treat, dispose of, or manage any Hazardous Waste, other than in
accordance with applicable Environmental Laws, except where
failure to so comply with applicable Environmental Laws would not
have a Material Adverse Effect on the Company or any of its
Subsidiaries; (ii) the Company has not caused any Release or
Threat of Release of a Hazardous Material at any site presently
or formerly owned, operated, leased, or used by the Company or
any of its Subsidiaries; (iii) the Company and its Subsidiaries
have never had Hazardous Material transported from any site
presently or formerly owned, operated, leased, or used by the
Company or any of its Subsidiaries for treatment, storage, or
disposal at any other place, other than in accordance with
applicable Environmental Laws, except where failure to so comply
with applicable Environmental Laws would not have a Material
Adverse Effect on the Company or any of its Subsidiaries; (iv)
the Company and its Subsidiaries do, not presently own, operate,
or, to the best knowledge of the Company or any of its
Subsidiaries, lease, or use any site on which underground storage
tanks are or were located; (v) the Company and its Subsidiaries
have never placed underground tanks on any site owned, operated,
leased or used by the Company or any of its Subsidiaries; (vi)
the Company and its Subsidiaries have never removed underground
tanks from any site presently or formerly owned, operated, leased
or used by the Company or any of its Subsidiaries; and (vii) the
Company and its Subsidiaries have never had a Lien imposed by any
Governmental Authority on any property, facility, machinery, or
equipment owned, operated, leased, or used by the Company or any
of its Subsidiaries in connection with the presence of any
Hazardous Material.
5.21 Properties and Assets. The Company and its
Subsidiaries have good record and marketable fee title to all
real Property and all other Property and assets, whether tangible
or intangible, owned by them and reasonably necessary in the
conduct of business of the Company or such Subsidiaries. All of
the leases necessary in any material respect for the operation of
their respective properties and assets, under which the Company
or any of its Subsidiaries holds any Property or assets, real or
personal, are valid, subsisting and enforceable and afford
peaceful and undisturbed possession of the subject matter of the
lease, and no material default by the Company or any of its
Subsidiaries exists under any of the provisions thereof. All
buildings, machinery and equipment of the Company and its
Subsidiaries are in good repair and working order, except for
ordinary wear and tear. All material current and proposed uses
of such Property of the Company and its Subsidiaries as set forth
in the Company SEC Documents and the Information Memorandum are
permitted as of right and no such Law interferes with such
current or proposed uses. To the knowledge of the Company, there
is no pending or formally proposed change in any such Laws, which
would have a Material Adverse Effect on the Company and its
Subsidiaries on a consolidated basis. Except as set forth on
Schedule 5.21, no condemnation proceeding is pending or, to the
knowledge of the Company, threatened against the Company or any
of its Subsidiaries. All Property of the Company and its
Subsidiaries are free from all Liens except for (i) Liens which
would not have a Material Adverse Effect on the Company and its
Subsidiaries on a consolidated basis; (ii) Liens disclosed on
Schedule 5.21 hereto; and (iii) Permitted Liens. Except as set
forth on Schedule 5.21 hereto and except as entered into pursuant
to the Transaction Documents neither the Company nor any of its
Subsidiaries has signed any material financing statement, as
debtor or lessee, or any security agreement authorizing any
secured party thereunder to file any such financing statement.
5.22 Insurance. A list of all insurance policies and
fidelity bonds covering the assets, business, equipment,
Properties, operations, employees, officers and directors under
which the Company or any of its Subsidiaries may derive any
material benefit is set forth on Schedule 5.22 hereof. There is
no claim by the Company or any of its Subsidiaries pending under
any of such policies or bonds as to which coverage has been
questioned, reserved, denied or disputed by the underwriters of
such policies or bonds or their agents. All premiums due and
payable under all such policies and bonds have been paid, and the
Company and its Subsidiaries are otherwise in full compliance
with the terms and conditions of all such policies and bonds.
Except as set forth on Schedule 5.22, such policies of insurance
and bonds (or other policies and bonds providing substantially
similar insurance coverage) are and have been in full force and
effect for at least the last year or since the inception of the
Company or any of its Subsidiaries, as the case may be, and
remain in full force and effect. Such policies of insurance and
bonds are, to the best knowledge of the Company, of the type and
in amounts customarily carried by Persons conducting business
similar to that presently conducted by the Company and its
Subsidiaries. The Company knows of no threatened termination of
any such policies or bonds.
5.23 Employment Practices. Neither the Company nor any
of its Subsidiaries is a party to, or in the process of
negotiating, any collective bargaining or labor agreement or
union contract. There is no (i) charge, complaint or suit
pending or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries respecting employment,
hiring for employment, terminating from employment, employment
practices, employment discrimination, terms and conditions of
employment, safety, wrongful termination, or wages and hours,
except as set forth on Schedule 5.23 hereto, (ii) unfair labor
practice charge or complaint pending or, to the knowledge of the
Company, threatened against, or decision or order in effect and
binding on, the Company or any of its Subsidiaries before or of
the National Labor Relations Board, (iii) grievance or
arbitration proceeding arising out of or under collective
bargaining agreements pending or, to the knowledge of the
Company, threatened against the Company or any of its
Subsidiaries, (iv) strike, labor dispute, slow-down, work
stoppage or other interference with work pending or, to the
knowledge of the Company, threatened against the Company or any
of its Subsidiaries, or (v) to the knowledge of the Company,
union organizing activities or union representation question
threatened or existing with respect to any groups of employees of
the Company or any of its Subsidiaries.
5.24 Intellectual Property.
(a) The Company and its Subsidiaries have
exclusive ownership of, or exclusive licenses to use, all patent,
copyright, trade secret, trademark, or other proprietary rights
used, or to be used, in the business of the Company or any of its
Subsidiaries (collectively, "Intellectual Property"). There are
no claims or demands of any other Person pertaining to any of
such Intellectual Property and no proceedings have been
instituted, or are pending or, to the knowledge of the Company,
threatened, which challenge the rights of the Company or any of
its Subsidiaries in respect thereof. The Company and its
Subsidiaries have the right to use, free and clear of claims or
rights of other Persons, all customer lists, designs,
manufacturing or other processes, computer software (subject to
applicable licenses), systems, surveys, data compilations,
research results and other information required for or incident
to their products and business as presently conducted or
contemplated.
(b) All patents, patent applications, trademarks,
trademark applications and registrations and registered
copyrights that are owned by, or licensed to, the Company or any
of its Subsidiaries or used or to be used by the Company or any
of its Subsidiaries in their business as presently conducted, are
listed on Schedule 5.24. All of such patents, patent
applications, trademark registrations, trademark applications and
registered copyrights have been duly registered in, filed in, or
issued by, the United States Patent and Trademark Office, the
United States Register of Copyrights, or the corresponding
offices of other jurisdictions as identified on said Schedule,
and have been properly maintained and renewed in accordance with
all applicable provisions of Law in the United States and each
such jurisdiction.
(c) All material licenses or other agreements
under which the Company or any of its Subsidiaries is granted
rights in Intellectual Property are listed on Schedule 5.24.
Except as set forth on Schedule 5.24, all said licenses or other
agreements are in full force and effect and there is no default
by any party thereto.
(d) All material licenses or other agreements
under which the Company or any of its Subsidiaries has granted
rights to others in Intellectual Property owned or licensed by
the Company or any of its Subsidiaries are listed on Schedule
5.24. Except as set forth on Schedule 5.24, all of said licenses
or other agreements are in full force and effect, and there is no
default by any party thereto.
(e) To the best knowledge of the Company and each
of its Subsidiaries, the present business, activities, services
and products of the Company and each of its Subsidiaries do not
infringe any intellectual property of any other Person. No
proceeding, charging the Company or any of its Subsidiaries with
infringement of any adversely held Intellectual Property has been
filed or is, to the knowledge of the Company, threatened to be
filed. Neither the Company nor any of its Subsidiaries is making
unauthorized use of any confidential information or trade secrets
of any Person, including without limitation any former employer
of any past or present employee of the Company or any of its
Subsidiaries. Neither the Company or any of its Subsidiaries
nor, to the knowledge of the Company or any of its Subsidiaries,
any of its or any Subsidiary's employees have any agreements or
arrangements with any Persons other than the Company or any of
its Subsidiaries related to confidential information or trade
secrets of such Persons or restricting any such employee's
engagement in business activities of any nature.
5.25 Material Contracts and Obligations.
(a) Schedule 5.25 is a true, complete and
accurate list prepared by the Company, categorized by subject
matter, of the following contracts, agreements, commitments,
options, liens, licenses, mortgages, other security interests,
understandings or promises, whether written or oral ("Contract"),
to which the Company or any of its Subsidiaries are a party or by
which its or any of their properties or assets are bound:
(i) purchase or sale orders, and all
agreements to or with any one customer or supplier for
the sale of products or services of an amount or value
in excess of $500,000;
(ii) all employment contracts with any
officer, consultant, director or employee;
(iii) all plans, contracts or
arrangements providing for stock options or stock
purchases, bonuses, pensions, deferred compensation,
retirement payments, profit-sharing or the like;
(iv) all contracts for construction or for
the purchase of equipment, machinery and other items
except those having a value per item or require
aggregate payments of less than $75,000;
(v) all contracts relating to the rental or
use of equipment, other personal property or fixtures
(except personal property leases and installment and
conditional sales agreements having a value per item or
aggregate payments of less than $75,000 and with terms
of less than one year);
(vi) all license agreements, either as
licensor or licensee, except licenses for computer
software licensed in the ordinary course of business;
(vii) all joint venture contracts and
agreements involving a sharing of profits;
(viii) all franchise agreements;
(ix) all distributor, sales agency and other
similar agreements;
(x) all loan or guaranty agreements, credit
agreements, notes or other evidences of indebtedness,
indentures or instruments evidencing Liens or secured
transactions;
(xi) all real estate and easements and other
rights in real property, owned or leased by or to the
Company or any of its Subsidiaries; and
(xii) all other contracts, except those
which: (i) are cancelable on 30 days' or less notice
without any penalty or other financial obligation, or
(ii) if not so cancelable, involve annual aggregate
payments by or to the Company or to any of its
Subsidiaries of $75,000 or less.
Except as set forth in Schedule 5.25, (i) each Contract was
entered into in the ordinary course of the Company's or its
Subsidiary's, as applicable, business, (ii) is in full force and
effect on the date of this Agreement and is valid, binding and
enforceable in accordance with its terms, (iii) the Company or
any of its Subsidiaries, as applicable, is not in material breach
or default under any of the Contracts and has not received any
notice or claim of any such breach or default from any party,
(iv) to the best knowledge of the Company or any of its
Subsidiaries, the relationship of the Company or any of its
Subsidiaries, as applicable, with the parties to the Contracts is
good and there has been no expression of any intention to
terminate or materially modify any such relationships, (v) the
Company or any of its Subsidiaries has no knowledge of any
material breach or default under any Contract by any other party
thereto, (vi) no event or action has occurred, is pending or is
threatened, which, after the giving or receipt of notice, and/or
passage of time or otherwise, could constitute or result in any
such material breach or default by the Company or any of its
Subsidiaries, as applicable, or any other party under any of the
Contracts, and (vii) no material amount claimed to be payable to
the Company or any of its Subsidiaries, as applicable, under any
of the Contracts is being disputed by any party. Except as set
forth in Schedule 5.25, (i) for its services under any Contract,
the Company or its Subsidiary, as applicable, receives the
compensation provided under such Contract, without discount,
offset or concessions of any kind, and the Company or its
Subsidiary, as applicable, has not proposed or agreed to offer or
accept any discount, offset or concession, and (ii) the payment
history of the parties under the Contracts is good as judged by
industry standards. The Company has delivered to the Purchasers
true and complete copies or descriptions of the Contracts
required to be listed in Schedule 5.25.
(b) None of (i) the execution and delivery of
this Agreement or the other Transaction Documents, (ii) the
consummation of any of the transactions contemplated hereby or by
the other Transaction Documents, or (iii) compliance with the
terms and provisions hereof or thereof, will result in the
creation or imposition of any Lien, other than Permitted Liens,
upon any of the Property of the Company, or conflict in any way
with the provisions of or result in a breach of or termination of
or a default or acceleration of any obligation under, or except
as set forth on Schedule 5.25, require the consent of any person
pursuant to, any such Contract.
(c) There is no term or provision of any Contract
to which the Company is a party or by which it or any of its
properties are bound, or of any provision of any Law, judgment,
writ or decree, applicable to or binding upon the Company, any of
its Subsidiaries, or their
Properties, which have or can reasonably be expected to have a
Material Adverse Effect on the Company, any of its Subsidiaries
taken as a whole or any of their Properties.
5.26 Taxes. The Company and its Subsidiaries, and any
predecessors to the Company and any of its Subsidiaries, have
filed or obtained extensions of all federal, state, local and
foreign income, excise, franchise, real estate, sales and use and
other tax returns heretofore required by Law to be filed by it.
All material taxes, including, without limitation, all federal,
state, county, local, foreign or other income, Property, sales,
use, franchise, value added, employees' income withholding,
social security, unemployment and other taxes, of any nature
whatsoever which have become due or payable by the Company or any
of its Subsidiaries, or by any predecessors thereto, including
any fines or penalties with respect thereto or interest thereon,
whether disputed or not (collectively, "Taxes"), have been paid
in full or are adequately provided for in accordance with GAAP on
the financial statements of the applicable Person. All material
deposits, Taxes and other assessments and levies required by Law
to be made, withheld, collected or provided for by the Company or
any of its Subsidiaries, or any predecessors thereto, including
deposits with respect to Taxes constituting employees' income
withholding taxes, have been duly made, withheld, collected or
provided for and have been paid over to the proper federal, state
or local authority, or are held by the applicable Person for such
payment. No Liens arising from or in connection with Taxes have
been filed and are currently in effect against the Company or any
of its Subsidiaries, except for Liens for Taxes which are not yet
due. Except as set forth on Schedule 5.26 hereto, neither the
Company nor any of its Subsidiaries, nor any predecessor thereto,
has executed or filed with the IRS, or any other taxing
authority, any agreement or document extending, or having the
effect of extending, the period for assessment or collection of
any Taxes. The federal income tax returns of the Company and each
of its Subsidiaries, and any predecessor thereto, have been
examined by the IRS, or the statute of limitations with respect
to federal income taxes has expired, for all tax years up to and
including the fiscal year ended December 31, 1993 and, except as
set forth on Schedule 5.26, any deficiencies have been paid in
full or are being contested in good faith by appropriate action
and appropriate reserves therefor have been established on the
Company's or applicable Subsidiaries' books. Except as set forth
on Schedule 5.26, neither the Company nor any of its Subsidiaries
is a party to any tax sharing agreement or arrangement. Except as
set forth on Schedule 5.26, no audits or investigations are
pending or, to the knowledge of the Company, threatened with
respect to any tax returns or taxes of the Company or any of its
Subsidiaries, or any predecessor thereto.
5.27 Transactions with Affiliates; Arm's-Length
Transactions; Conflicts of Interest. Except as set forth on
Schedule 5.27, there are no material transactions, agreements or
understandings, existing or presently contemplated, between or
among the Company or any of its Subsidiaries, and their officers
or directors or stockholders or any of their Affiliates or
associates. All transactions by the Company and its Subsidiaries
have been conducted on an arm's-length basis. Neither the
elected officers of the Company or any of its Subsidiaries nor
the key employees of the Company or any of its Subsidiaries, or
their respective spouses, have (or had during the past three
fiscal years) any material direct or indirect ownership or profit
participation in outside business enterprises with which the
Company or any of its Subsidiaries had material purchases, sales
or business dealings.
5.28 Limitation on Subsidiary Payment Restrictions.
Except as set forth on Schedule 5.28 hereto or as provided in the
other Transaction Documents, neither the Company nor any of its
Subsidiaries is subject to any consensual restriction on the
ability of any such Subsidiary (i) to pay dividends or make any
other distribution on such Subsidiary's Capital Stock to, or pay
any indebtedness owing to, repurchase or redeem any of such
Subsidiary's Capital Stock from, the Company or any other
Subsidiary of the Company, (ii) to make any loans or advances to
the Company or any other Subsidiary of the Company, or (iii) to
transfer any of its Property to the Company or any other
Subsidiary of the Company.
5.29 Notes. The Notes have been duly authorized by the
Company for issuance, and when executed and delivered by the
Company to the Purchasers against payment therefor in accordance
with the provisions of the Note Indenture, will be duly executed,
issued and delivered, and will constitute valid and legally
binding obligations of the Company entitled to the benefits
provided by the Note Indenture and enforceable against the
Company in accordance with their terms. On the basis of the
representations contained in Section 6 hereof, the Indenture is
not required to be qualified under the Trust Indenture Act of
1940, as amended.
5.30 Solvency. After giving effect to the sale of the
Securities and the other transactions contemplated by the
Transaction Documents, the Company and its Subsidiaries on a
consolidated basis will be, and the Company and each Subsidiary
will be, Solvent (as defined below). "Solvent" means, with
respect to the Company or any Subsidiary, that as of the date of
determination (i) the then fair saleable value of the Property of
such entity is greater than the then total amount of liabilities
(including guaranties and other contingent liabilities) of such
entity, (ii) such entity has sufficient funds to pay such
entity's liability on such entity's existing debts as they become
absolute and matured, and (iii) such entity's Property is not an
unreasonably small capital.
5.31 RICO. To the best knowledge of the Company or any
Subsidiary, neither the Company nor any Subsidiary is engaged in
or has engaged in any course of conduct that could subject any of
their respective Properties to any liens, seizures or other
forfeiture under any criminal law, racketeer influenced and
corrupt organizations laws, civil or criminal or other similar
Laws.
5.32 Absence of Certain Practices. The Company, any
of its Subsidiaries, or any director, officer, agent, employee,
consultant or other Person acting on any of their behalf has not
given or agreed to give any gift or similar benefit of more than
nominal value to any customer, supplier or governmental employee
or official or any other Person who is or may be in a position to
help or hinder the Company or any of its Subsidiaries in
connection with any proposed transaction involving the Company or
any of its Subsidiaries. The Company, any of its Subsidiaries,
or any director, officer, agent, employee, consultant or other
Person acting on behalf of the Company or any of its Subsidiaries
has not (i) used any corporate or other funds for unlawful
contributions, payments, gifts, or entertainment, or made any
unlawful expenditures relating to political activity to, or on
behalf of, government officials or others; (ii) accepted or
received any unlawful contributions, payments, gifts or
expenditures; or (iii) has had any transaction or payment which
was not recorded in its accounting books and records or disclosed
on its financial statements.
5.33 No Other Business. The Company has not, and is not,
engaged in any material respect in any business other than (i)
executive search, (ii) temporary staffing, (iii) pay-rolling,
(iv) contract staffing, (v) outsourcing, (vi) human resources
management services, (vii) information systems and human
resources consulting services, and (viii) strategic advisory
services.
5.34 Minute Books. The minute books of the Company and each
of its Subsidiaries contain a complete, true and correct summary
of all meetings of, and/or corporate action approved by,
directors and stockholders since the time of such entity's
organization, and accurately reflect, in accordance with the law
of such entity's jurisdiction of organization, all transactions
and other corporate action referred to in such minutes.
5.35 Regulatory Requirements; Cessation of Direct Investment
Program. Notwithstanding anything else set forth herein to the
contrary, in the event of any reasonable determination in good
faith by NationsBank Corporation or any Affiliate thereof
("NationsBank"), that by reason of any existing or future Law
(whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) (collectively, a
"Regulatory Requirement"), NationsBanc Montgomery Securities LLC
or any successor holder affiliated with NationsBank ("NationsBanc
Montgomery") is effectively restricted or prohibited from holding
any of the Securities then held by NationsBanc Montgomery, the
Company shall use reasonable good faith efforts to take such
action as it may determine is reasonably necessary and
appropriate to permit NationsBanc Montgomery to transfer the
Securities to comply with such Regulatory Requirement. All such
actions shall be taken at the expense of NationsBanc Montgomery.
NationsBanc Montgomery shall give written notice to the Company
and the other Purchasers of any reasonable determination made by
it hereunder and of the transfer it believes may be necessary or
appropriate to permit it to comply with such Regulatory
Requirement.
Notwithstanding anything else set forth herein to the
contrary, in the event NationsBanc Montgomery or any successor or
other group of NationsBank or its directly or indirectly
whollyowned Subsidiaries engaging in substantially the same
business, cease making direct mezzanine equity investments and
make a determination to liquidate all of their private equity
positions that can be liquidated, as set forth in a
representation letter to the Company, then the Company shall
permit NationsBanc Montgomery to transfer its Securities, subject
to complying with applicable Laws. All such actions shall be
taken at the expense of NationsBanc Montgomery. NationsBanc
Montgomery shall give written notice to the Company and the other
Purchasers of any determination by it hereunder.
6. Purchase for Investment; Source of Funds.
(a) Each Purchaser represents for itself to the
Company that, (i) it is an accredited investor as defined in
Regulation D under the Securities Act, or (ii) by reason of its
business and financial experience, and the business and financial
experience of those persons, if any, retained by it to advise it
with respect to its investment in the Securities, such Purchaser
together with such advisers have such knowledge, sophistication
and experience in business and financial matters as to be capable
of evaluating the merits and risk of the prospective investment,
and that it is purchasing the Securities for its own account or
for one or more separate accounts maintained by it or for the
account of one or more institutional investors on whose behalf
such Purchaser has authority to make this representation for
investment and not with a view to the distribution thereof or
with any present intention of distributing or selling any of the
Securities except in compliance with the Securities Act and
except to one or more such institutional investors, provided that
the disposition of such Purchaser's or such investor's property
shall at all times be within its control. Each Purchaser
understands and agrees that the Company's offer and sale of the
Securities have not been registered under the Securities Act and
the Securities may be resold (which resale is not now
contemplated) only if registered pursuant to the provisions
thereunder or if an exemption from registration is available.
(b) Each Purchaser represents for itself to the
Company that in purchasing the Preferred Stock hereunder, it (i)
is acting individually, and not as part of a "group" (within the
meaning of Section 13(d) of the Exchange Act), and (ii) shall not
share with any other Purchaser any investment power or voting
power with respect to the Preferred Stock (or Common Stock
issuable upon conversion of such Preferred Stock.)
(c) Each Purchaser represents for itself to the
Company that it has full power and authority and has taken all
action necessary to authorize it to enter into and perform its
obligations under this Agreement and the other Transaction
Documents. This Agreement is the legal, valid and binding
obligation of each Purchaser, and is enforceable against each
Purchaser in accordance with its terms.
(d) Each Purchaser acknowledges for itself that it has
read the Information Memorandum and has received all the
information it has requested from the Company and, relying on the
truth, completeness and accuracy of such information, such
Purchaser believes such information is sufficient to make an
informed decision with respect to its purchase of the Securities.
7. Covenants of the Company. The Company covenants and
agrees that from the date hereof, unless the Purchasers, or the
holders of the Preferred Stock, as applicable, shall otherwise
consent in writing, it will:
7.1 Use of Proceeds. Use the net proceeds from the sale of
the Securities to (a) refinance existing indebtedness of the
Company as set forth in Section 5.8 hereof; (b) make Permitted
Acquisitions; and (c) general corporate purposes.
7.2 The Company's Board of Directors. On the Closing Date
grant (i) GarMark the right to designate one (1) voting Board of
Directors member, and each of GarMark and Moore the right to
designate one (1) non-voting Board of Directors observer, each of
whom will be given notice of, and permitted to attend, all
meetings of the Company's Board of Directors, and (ii) GarMark
the right to designate one (1) voting committee member, and each
of GarMark and Moore one (1) non-voting committee observer, to
each of the Company's Compensation Committee, Stock Incentive
Plan Committee, Finance Committee, Audit Committee, and any other
committee that is created or established after the date hereof,
each of whom will be given notice of, and permitted to attend,
all meetings of each such committee. On the Closing Date, the
Company, acting through its Board of Directors and in accordance
with its Charter Documents and applicable Law, shall (i) (A)
increase the size of its Board of Directors by one (1), (B) elect
the person referred to hereinabove (or such other person as may
be selected by GarMark) to the newly created directorship to hold
office until his successor is elected at a special or annual
meeting of the stockholders and (C) in connection with any such
subsequent election of directors, nominate, recommend and do all
other acts and things to cause (including, without limitation,
voting all shares for which the Company's management or Board of
Directors holds proxies (including undesignated proxies) unless
otherwise provided by the stockholders submitting such proxies)
the person referenced in the preceding clause (B) to be elected
to the Company's Board of Directors and (ii) increase the size of
each of the Compensation Committee, Stock Incentive Plan
Committee, Finance Committee, Audit Committee, and if any other
committee is created or established after the date hereof, of
such committee, by one (1), and cause the person referred to
hereinabove (or such other person as may be selected by GarMark)
to become a member thereof. In the event any director, or member
of a committee, elected pursuant to this Section 7.2 shall cease
to serve as a director or member, as applicable, for any reason,
the Company shall cause (subject to the provisions of its Charter
Documents and applicable Law) the vacancy resulting thereby to be
filled as promptly as practicable by a person selected by
GarMark. Notwithstanding any provision hereof, on the date, if
any, that any Initial Purchaser entitled to exercise the rights
provided in this Section 7.2 beneficially owns less than 25% of
the Common Stock that would be issuable to such Initial Purchaser
upon its conversion of the Preferred Stock acquired on the
Closing Date (assuming that the shares of the Preferred Stock
would be converted at a conversion price of $6.00 per share,
subject to the adjustments provided in the Certificate of
Designations with respect to conversion price and the number of
shares issuable upon conversion), then the Company's obligations
set forth in this Section 7.2 with respect to such Initial
Purchaser shall cease and be of no further effect.
7.3 Publicly Available Information. File the reports
required to be filed by it under the Securities Act and the
Exchange Act (or, if the Company is not required to file such
reports, it will, upon the request of any Purchaser, make
publicly available other information so long as necessary to
permit sales under Rule 144 or Rule 144A, as applicable, under
the Securities Act), and it will take such further action as any
Purchaser may request, all to the extent required from time to
time to enable such Purchaser to sell the Notes, the Preferred
Stock and shares of Common Stock issuable upon conversion thereof
without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 or Rule
144A under the Securities Act, as either such Rule may be amended
from time to time, or (b) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any
Purchaser, the Company will deliver to such Purchaser a written
statement as to whether it has complied with such requirements.
7.4 Public Documents. For so long as the Company has any
securities registered under the Exchange Act, upon the filing
with the Commission of any financial statements, proxy or
information statements, notices, regular or special reports or
registration statements (other than any registration statements
relating to employee benefit or dividend reinvestment plans), or
the issuance of any press release or other public announcement
(each a "Public Document"), the Company shall within five (5)
Business Days of such filing or issuance provide to each
Purchaser a copy of such Public Document.
7.5 Information Relating to the Purchasers. From the date
hereof, not release any information relating to any Purchaser, or
any of its Affiliates, without such Person's prior written
consent, unless otherwise required by applicable Law. In
addition, the Company shall, within a reasonable time before the
issuance of any press release or the making of any public
statement relating to any Purchaser or any of their affiliates,
consult in good faith with such Person regarding the contents
thereof.
7.6 Notice Regarding Certain Corporate Actions. If, at any
time, the Company decides to take certain corporate action,
including, but not limited to, any Dilution Event or Change of
Control, then the Company shall provide each holder of Preferred
Stock with written notice of such action at least 20 days prior
to the record date for such action, and if there is no record
date for such action, then such written notice shall be provided
at least 20 days prior to the effective date of such action;
provided, however, that any holder may elect not to receive such
notices upon the delivery of written notice to the Company
informing the Company of such election.
7.7 Access to Information. At any time permit, up to twice
annually with respect to each Purchaser, at the request upon
reasonable notice, by any Purchaser for access to during normal
business hours, and information regarding, the Company, any of
its Subsidiaries or their Properties, books, records and
personnel, the Company, at its expense, will promptly provide
such access or information to such Purchaser; provided however,
that following the occurrence and during the continuation of any
Default or any Event of Default, such access shall be unlimited
and shall continue to be at the expense of the Company. In
addition, each Purchaser shall be entitled to customary
inspection rights under the DGCL.
7.8 True Books and Records of the Company. Keep and
maintain, or cause to be kept and maintained, correct, true and
complete books of record and account in which full, complete,
true and correct entries will be made of all of its corporate and
financial dealings and transactions, and set up on its books such
reserves as may be required by GAAP with respect to doubtful
accounts and all taxes, assessments, charges, levies and claims
and with respect to its business in general, and include such
reserves in interim as well as year-end financial statements, all
in such manner and such form as are generally maintained by
public companies.
7.9 Officer's Knowledge of Default. Upon any Executive
Officer of the Company obtaining knowledge of the occurrence of
any Default or Event of Default under any Transaction Document,
promptly to notify the Purchasers of the nature thereof, the
period of existence thereof, and what action the Company proposes
to take with respect thereto.
7.10 Suits or Other Proceedings. Upon any Executive Officer
of the Company obtaining knowledge of any litigation or other
proceedings being instituted against the Company or any of its
Subsidiaries, or any attachment, levy, execution or other process
being instituted against any Property of the Company or any of
its Subsidiaries, any or all of which make a claim or claims in
an aggregate amount greater than $500,000 not otherwise covered
by insurance, promptly to deliver to the Purchasers written
notice thereof stating the nature and status of such litigation,
dispute, proceeding, levy, execution or other process.
7.11 Hedging Obligations. Not incur any Hedging
Obligations or enter into any agreements, arrangements,
undertakings, commitments, devices or instruments relating to
Hedging Obligations, except pursuant to Swap Agreements in an
aggregate notional amount not to exceed at any time the lower of
(i) $45,000,000, and (ii) 60% of the aggregate commitment under
the Credit Agreement, less any permanent reductions in such
commitment.
7.12 Projections. Prepare all financial projections
concerning the Company to be provided, or made available, to the
Purchasers, in good faith based upon reasonable assumptions.
8. Restrictions on Transfer.
8.1 Restrictive Legends. Except as otherwise permitted by
this Section 8, each Note and Preferred Stock certificate (or
Common Stock certificate issued on conversion thereof) issued
pursuant to this Agreement shall be stamped or otherwise
imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS
OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED,
EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH
ACT, (ii) RULE 144 OR RULE 144A UNDER SUCH ACT, OR (iii)
ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT,
PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN OPINION OF
COUNSEL REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS
FURNISHED TO THE COMPANY THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.
The Company shall maintain a copy of this Agreement and any
amendments thereto on file in its principal office, and will make
such copy available during normal business hours for inspection
to any party thereto or will provide such copy to any Purchaser
upon its request.
Whenever the legend requirement imposed by this Section 8.1
shall terminate, as hereinabove provided, the respective holders
of Securities for which such legend requirements have terminated
shall be entitled to receive from the Company, at the Company's
expense, new Notes or new Preferred Stock (or Common Stock)
certificates, as applicable, without such legend.
8.2 Notice of the Proposed Transfer; Opinions of Counsel.
Each Purchaser of each Note and Preferred Stock certificate (or
Common Stock certificate issued on conversion thereof) bearing
the restrictive legend set forth in Section 8.1 above
("Restricted Security"), agrees that prior to any transfer or
attempted transfer of such Restricted Security, to give to the
Company (a) written notice describing the manner or circumstances
of such transfer or proposed transfer, and (b) upon reasonable
request by the Company to such transferring holder, an opinion of
counsel, which is knowledgeable in securities law matters
(including in-house counsel), in form and substance reasonably
satisfactory to the Company, to the effect that the proposed
transfer of such Restricted Security may be effected without
registration of such Restricted Security under the Securities
Act. If for any reason the Company (after having been furnished
with the opinion required to be furnished pursuant to this
Section 8.2) shall fail to notify such holder within 2 days after
such holder shall have delivered such opinion to the Company
that, in its or its counsel's opinion, the transfer may not be
legally effective (the "Illegal Transfer Notice''), such holders
shall thereupon be entitled to transfer the Restricted Security
as proposed. If the holder of the Restricted Security delivers to
the Company an opinion of counsel (including in-house counsel or
regular counsel to such Purchaser or its investment adviser) in
form and substance reasonably satisfactory to the Company that
subsequent transfers of such Restricted Security will not require
registration under the Securities Act, or if the Company does not
provide such Purchaser with an Illegal Transfer Notice as set
forth above, the Company will promptly after such contemplated
transfer deliver new certificates for such Restricted Security
which do not bear the Securities Act legend set forth in Section
8.1 above. The restrictions imposed by this Section 8 upon the
transferability of any particular Restricted Security shall cease
and terminate (i) when such Restricted Security has been sold
pursuant to an effective registration statement under the
Securities Act, (ii) when such Restricted Security has been
transferred pursuant to Rule 144 or Rule 144A promulgated under
the Securities Act, or (iii) upon the date which is two (2) years
after the later of (A) the original issue date of the Restricted
Security, and (B) the last date on which the Company or any
Affiliate of the Company was the owner of the Restricted Security
(or any predecessor Restricted Security). The holder of any
Restricted Security as to which such restrictions shall have
terminated shall be entitled to receive from the Company a new
security of the same type but not bearing the restrictive
Securities Act legend set forth in Section 8.1 and not containing
any other reference to the restrictions imposed by this Section
8. Notwithstanding any of the foregoing, no opinion of counsel
will be required to be rendered pursuant to this Section 8.2 with
respect to the transfer of any Securities on which the
restrictive legend has been removed in accordance with this
Section 8.2. As used in this Section 8.2, the term "transfer''
encompasses any sale, transfer or other disposition of any
Securities referred to herein.
9. Miscellaneous.
9.1 Indemnification: Expenses Etc..
(a) In addition to any and all obligations of the
Company to indemnify the Purchasers hereunder or under the Note
Indenture or the other Transaction Documents, the Company agrees,
without limitation as to time, to indemnify and hold harmless
each Purchaser, its Affiliates and each of its and their
respective directors, officers, partners, principals, attorneys
and advisors (individually, an "Indemnified Party" and,
collectively the "Indemnified Parties") from and against any and
all losses, claims, damages, liabilities (or actions, suits or
proceedings, including any inquiry or investigation with respect
thereto), costs (including the reasonable costs of preparation
and attorneys' fees) and expenses (including reasonable expenses
of investigation) (collectively, "Losses") to which any
Indemnified Party may become subject, insofar as such Losses
arise out of, in any way relate to, or result from (i) any breach
of any warranty, or the inaccuracy of any representation, as the
case may be, made by the Company, or the failure of the Company
to fulfill any agreement or covenant contained in this Agreement,
the Note Indenture, the Certificate of Designations, or any other
Transaction Document, or (ii) in connection with any proceeding
against the Company or any Indemnified Party brought by any third
party arising out of or in connection with the Commitment Letter,
this Agreement or the other Transaction Documents or the
transactions contemplated hereby or thereby or any action taken
in connection herewith or therewith (or any other document or
instrument executed herewith or pursuant hereto or thereto),
whether or not any Indemnified Party is a formal party to any
such proceeding; provided, however, that the Company shall not
have any obligation under this indemnity provision for
liabilities determined in a judgment by a court of competent
jurisdiction to have resulted primarily from the gross negligence
or willful misconduct of any Indemnified Party. The Company
agrees promptly to reimburse any Indemnified Party for all such
Losses as they are incurred or suffered by such Indemnified
Party. The foregoing is not intended to indemnify or hold
harmless any Indemnified Party on account of losses arising from
the limitation in value of the Preferred Stock or Notes due to
market factors, business developments or any causes other than
the willful misconduct or bad faith of the Company or any of its
officers and directors.
Except as otherwise provided herein, the Company agrees (for
the benefit of each Purchaser) to pay, and to hold each Purchaser
harmless from and against, all costs and expenses (including,
without limitation, reasonable attorneys' fees, expenses and
disbursements), if any, in connection with the enforcement
against the Company of this Agreement or any other Transaction
Document or any other agreement or instrument furnished pursuant
hereto or thereto or in connection herewith or therewith in any
action in which any Purchaser attempting to enforce any of the
foregoing shall prevail or in any action in which any Purchaser
shall in good faith assert any provision of any of the foregoing
as a defense.
(b) If any Indemnified Party is entitled to
indemnification hereunder, such Indemnified Party shall give
prompt notice to the Company of any claim or of the commencement
of any proceeding against the Company or any Indemnified Party
brought by any third party with respect to which such Indemnified
Party seeks indemnification pursuant hereto; provided, however,
that the failure to so notify the Company shall not relieve the
Company from any obligation or liability except to the extent the
Company is prejudiced by such failure. The Company shall have the
right, exercisable by giving written notice to an Indemnified
Party promptly after the receipt of written notice from such
Indemnified Party of such claim or proceeding, to assume, at the
expense of the Company, the defense of any such claim or
proceeding with counsel reasonably satisfactory to such
Indemnified Party. The Indemnified Party or Parties will not be
subject to any liability for any settlement made without its or
their consent (but such consent will not be unreasonably
withheld). The Company shall not consent to entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by claimant or plaintiff to
such Indemnified Party or Parties of a release, in form and
substance satisfactory to the Indemnified Party or Parties, from
all liability in respect of such claim, litigation or proceeding.
(c) In addition to any other obligations of the
Company to indemnify the Purchasers herein or pursuant to any of
the other Transaction Documents or any other agreements or
documents executed and delivered in connection therewith, the
Company will pay, and will hold each Purchaser harmless from
liability for the payment of all expenses arising in connection
with such transactions, including, without limitation: (a) all
document production and duplication charges and the reasonable
fees, charges and expenses of Purchaser's respective counsel in
connection with the transactions contemplated hereby (whether
arising before or after the Closing Date), and any subsequent
proposed modification of, or proposed consent under, this
Agreement, the Note Indenture or the Certificate of Designations,
whether or not such proposed modification shall be effected or
proposed consent granted; (b) the costs of obtaining a private
placement number from Standard & Poor's Corporation for the
Securities; (c) the costs and expenses, including reasonable
attorneys' fees, incurred by any Purchaser (x) in enforcing any
rights under this Agreement or in responding to any subpoena or
other legal process issued in connection with this Agreement or
the transactions contemplated hereby or thereby or by reason of
such Purchaser's having acquired any of the Securities, including
without limitation costs and expenses incurred by such Purchaser
in any bankruptcy or similar case or (y) in connection with the
redemption or conversion, as the case may be, of the Preferred
Stock or the redemption, retirement, or defeasance of the Notes;
(d) the cost of delivering to such Purchaser's principal office,
insured to its satisfaction, the Securities delivered to such
Purchaser hereunder and any Securities delivered to such
Purchaser upon any substitution of Securities pursuant to Section
2.06 and Section 2.07 of the Note Indenture and of such
Purchaser's delivering any Securities, insured to its
satisfaction, upon any such substitution; and (e) the reasonable
out-of-pocket expenses incurred by such Purchaser in connection
with such transactions and any such amendments or waivers.
9.2 Survival of Representations and Warranties;
Severability. All representations and warranties contained in
this Agreement or the Transaction Documents or made in writing by
or on behalf of the Company in connection with the transactions
contemplated by this Agreement or the Transaction Documents shall
survive, for a period of two years after the date hereof;
provided however the representations and warranties contained in
Section 5.2, 5.4, 5.5, 5.6, 5.10, 5.11, 5.20, 5.26, and 5.27
shall survive indefinitely; provided further, however that if
prior to the expiration of the survival period set forth
hereinabove, the Company shall have been notified of a claim for
indemnity hereunder and such claim shall not have been finally
resolved before the expiration of such survival period, then any
representation or warranty that is the basis for such claim shall
continue to survive and shall remain a basis for indemnity as to
such claim until such claim is finally resolved. Any provision of
this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the
validity or enforceability of such provisions in any other
jurisdiction.
9.3 Amendment and Waiver. This Agreement may be amended,
modified or supplemented, and waivers or consents to departures
from the provisions hereof may be given, provided that the same
are in writing and signed by the Purchasers and the Company.
9.4 Notices, Etc. Except as otherwise provided in this
Agreement, notices and other communications under this Agreement
shall be in writing and shall be delivered personally (with
written confirmation of receipt), sent by telecopier (with
written confirmation of receipt), mailed by registered or
certified mail, return receipt requested, or by a nationally
recognized overnight courier, postage prepaid, addressed, (a) if
to any Purchaser, at such address or telecopier number as is set
forth next to such Purchaser's name on the signature page hereto,
or as any such Purchaser shall have furnished to the Company in
writing, or (b) if to any other holder of any Security, at such
address or telecopier number as such other holder shall have
furnished to the Company in writing, or, until any such other
holder so furnishes to the Company an address or telecopier
number, then to and at the address or telecopier number of the
last holder of such Security who has furnished an address or
telecopier number, to the Company, or (c) if to the Company, at
850 Third Avenue, New York, New York 10022, telecopier no: (212)
508-3507, to the attention of Barry Roseman, President and Chief
Operating Officer, or at such other address or telecopier number,
or to the attention of such other officer, as the Company shall
have furnished to the Purchasers and each such shareholder in
writing. This Agreement and the other Transaction Documents and
all documents delivered in connection herewith or therewith
embody the entire agreement and understanding between the
Purchasers and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
9.5 Successors and Assigns. Whenever in this Agreement any
of the parties hereto are referred to, such reference shall be
deemed to include the successors and assigns of such party; and
all covenants, promises and agreements by or on behalf of the
respective parties which are contained in this Agreement shall
bind and inure to the benefit of the successors and assigns of
all other parties. The terms and provisions of this Agreement,
the Note Indenture and the other Transaction Documents shall
inure to the benefit of and shall be binding upon any assignee or
transferee of any Purchaser, and in the event of such transfer or
assignment, the rights and privileges herein conferred upon any
such Purchaser shall automatically extend to and be vested in,
and become an obligation of, such transferee or assignee, all
subject to the terms and conditions hereof. In connection
therewith, such transferee or assignee may disclose all documents
and information which such transferee or assignee now or
hereafter may have relating to the Securities, this Agreement,
the Note Indenture, the Transaction Documents, the Company, any
other Persons referred to herein or any of the business of any of
the foregoing entities, subject to Section 9.12 hereof.
9.6 Agreement and Action of the Purchasers. Upon any
occasion requiring, permitting or referencing an act or an
approval, consent, waiver, election or other action on the part
of the holders of the Notes and/or the holders of the Preferred
Stock, as applicable, any such action shall be taken, or be
deemed to have been taken, upon (i) the affirmative vote of the
Initial Purchasers holding (A) at least 70% of the Notes and/or
the Preferred Stock, as applicable, or (B) two thirds of the
Notes and/or the Preferred Stock, as applicable, on and after the
date upon which Moore owns less than 100% of the Notes and/or the
Preferred Stock, as applicable, acquired by it on the date
hereof, or (ii) in the event that each of the Initial Purchasers,
other than GarMark, shall own less than 50% of the Notes and/or
the Preferred Stock, as applicable, owned by such Initial
Purchaser on the date hereof, the affirmative vote of the holders
of at least a majority of the Notes and/or the Preferred Stock,
as applicable.
9.7 Descriptive Headings. The headings in this Agreement
are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof.
9.8 Satisfaction Requirement. If any agreement, certificate
or other writing, or any action taken or to be taken is by the
terms of this Agreement required to be satisfactory to the
Purchasers or to the holders of a specified portion of the
principal amount of any class of the Securities, the
determination of such satisfaction shall be made by the
Purchasers or such holders, as the case may be, in the sole and
exclusive judgment (exercised in good faith) of the Person or
Persons making such determination.
9.9 GOVERNING LAW. THIS AGREEMENT AND THE SECURITIES SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF
THE PARTIES SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO ANY CHOICE-OF-LAW PRINCIPLES
THEREOF.
9.10 Service of Process. The Company (a) hereby irrevocably
submits itself to the jurisdiction of the state courts of the
State of New York and to the jurisdiction of the United States
District Court for the Southern District of New York for the
purpose of any suit, action or other proceeding arising out of or
based upon this Agreement, the Note Indenture, the Securities,
the other Transaction Documents or the subject matter hereof or
thereof brought by any Purchaser or their successors or assigns
and (b) hereby waives, and agrees not to assert, by way of
motion, as a defense, or otherwise, in any such suit, action or
proceeding, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that the suit,
action or proceeding is brought in an inconvenient forum, that
the venue of the suit, action or proceeding is improper or that
this Agreement or the subject matter hereof may not be enforced
in or by such court, and (c) hereby waives any offsets or
counterclaims in any such action suit or proceeding (other than
compulsory counterclaims). The Company hereby consents to service
of process by registered mail at the address to which notices are
to be given. The Company agrees that its submission to
jurisdiction and its consent to service of process by mail is
made for the express benefit of the Purchasers. Final judgment
against the Company in any such action, suit or proceeding shall
be conclusive and may be enforced in other jurisdictions (a) by
suit, action or proceeding on the judgment, a certified or true
copy of which shall be conclusive evidence of the fact and of the
amount of any indebtedness or liability of the Company therein
described or (b) in any other manner provided by or pursuant to
the laws of such other jurisdiction; provided, however, that any
Purchaser may at its option bring suit or institute other
judicial proceedings against the Company or any of the Company's
or its assets in any state or federal court of the United States
or in any country or place where the Company or such assets may
be found.
9.11 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one
such counterpart.
9.12 Disclosure to Other Persons. Each Purchaser agrees to
keep confidential any financial information delivered by the
Company pursuant to this Agreement (other than information that
is publicly available) and such other non-public proprietary
information delivered by the Company that is clearly designated
in writing to be confidential; provided, however, that nothing
herein shall prevent any Purchaser from disclosing such
information: (i) to any of the other Purchasers, or to any
prospective purchaser who agrees in writing to be bound by this
Section 9.12, (ii) to any Affiliate, director, officer,
principal, employee, agent, advisor and professional consultant
of any Purchaser, or of any prospective purchasers, in its
capacity as such or any actual purchaser, participant, assignee,
or transferee of such Purchaser's or prospective purchaser's
rights under any Securities or any part thereof that agrees in
writing to be bound by this Section 9.12, (iii) upon order of any
court or administrative agency having jurisdiction over such
party, (iv) upon the request or demand of any regulatory agency
or authority having jurisdiction over such party, (v) which has
been publicly disclosed, (vi) which has been obtained from any
Person that is not a party hereto or an Affiliate of any such
party, (vii) in connection with the exercise of any remedy
hereunder, (viii) to the certified public accountants for such
Purchaser or as required in summary financial or descriptive
business information disclosed by such Purchaser that is an
investment fund as part of its regular reports to its investors
or partners, (ix) as required by Law, (x) in connection with any
litigation to which such Purchaser or any of its Affiliates may
be a party, or (xi) as otherwise expressly contemplated by any
order, request or demand or to obtain confidential treatment for
any disclosure pursuant to (iii) or (iv) above, the Purchasers
will use reasonable efforts to inform the Company of any such
request for disclosure prior to disclosure. Nothing in this
Section 9.12 shall be construed to create to give rise to any
fiduciary duty on the part of Purchaser to the Company.
9.13 Acknowledgment by Purchasers. Each Purchaser
acknowledges that it is aware of the restrictions imposed by, and
agrees to comply with, all Laws regarding the use of material non-
public information, including without limitation, Laws
restricting trading in the Company's securities while in
possession of such information.
9.14 No Adverse Interpretation of Other Agreements. This
Agreement shall not be used to interpret another agreement,
indenture, loan or debt agreement of the Company or any
Subsidiary. Any such agreement, indenture, loan or debt agreement
shall not be used to interpret this Agreement.
9.15 WAIVER OF JURY TRIAL. THE COMPANY HEREBY WAIVES TRIAL
BY JURY IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT WITH
RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT,
THE NOTE INDENTURE, THE SECURITIES, ANY OTHER TRANSACTION
DOCUMENTS, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO
THIS AGREEMENT, THE NOTE INDENTURE, THE SECURITIES OR ANY OTHER
TRANSACTION DOCUMENT, OR THE VALIDITY, PROTECTION,
INTERPRETATION, COLLECTION OR ENFORCEMENT, THEREOF, PROVIDED,
HOWEVER, THAT WITH RESPECT TO ANY COMPULSORY COUNTERCLAIM (I.E.,
A CLAIM BY THE COMPANY AGAINST ANY OF THE PURCHASERS WHICH IF NOT
BROUGHT IN SUCH ACTION WOULD RESULT IN THE COMPANY OR BEING
FOREVER BARRED FROM BRINGING SUCH CLAIM) THE COUNTERCLAIM IN ANY
SUCH LITIGATION.
SECURITIES PURCHASE AGREEMENT
(INCREASING RATE SENIOR SUBORDINATED NOTES AND
SERIES F CONVERTIBLE PREFERRED STOCK)
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
HEADWAY CORPORATE RESOURCES,
INC., a Delaware corporation
By: (Signature)
SECURITIES PURCHASE AGREEMENT FOR
INCREASING RATE SENIOR SUBORDINATED NOTES AND
SERIES F CONVERTIBLE PREFERRED STOCK
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the Aggregate Number and
date first written above: Purchase Price of
Securities
to be Purchased:
GARMARK PARTNERS, L.P. Aggregate principal Purchase
By: GarMark Associates, L.L.C. amount of Notes
Price: $6,666,667
its general partner to be Purchased:
$6,666,667
By: (Signature)
Address:
1325 Avenue of the Americas Aggregate Number of Purchase
26th Floor Shares of Series F Price:
$13,333,333
New York, NY 10019 Convertible Stock to
be Purchased: 666.67
Telephone: (212) 713-8500
Telecopy: (212) 713-8531
with a copy to:
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, NY 10022
Att: Scott M. Zimmerman, Esq.
Telephone: (212) 758-9500
Telecopy: (212) 758-9526 Total Purchase Price:
$20,000,000
SECURITIES PURCHASE AGREEMENT FOR
INCREASING RATE SENIOR SUBORDINATED NOTES AND
SERIES F CONVERTIBLE PREFERRED STOCK
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the Aggregate Number and
date first written above: Purchase Price of Securities
to be Purchased:
MOORE GLOBAL INVESTMENTS, LTD. Aggregate principal Purchase
amount of Notes Price:
$2,050,000
to be Purchased:
$2,050,000
By: (Signature)
Address:
c/o Cited Fund Services (Bahamas), Aggregate Number of Purchase
Ltd. Shares of Series F Price:
$4,100,000
Bahamas Financial Center Convertible Stock to
Charlotte & Shirley Street be Purchased: 205
P.O. Box CB 13136
Nassau, Bahamas
Telephone: (242) 302-5918
Telecopy: (242) 356-0221
with a copy to:
Moore Capital Management, Inc.
Address:
1251 Avenue of the Americas
New York, NY 10020
Telephone: (212) 782-7532
Telecopy: (212) 382-9895 Total Purchase Price:
$6,150,000
SECURITIES PURCHASE AGREEMENT FOR
INCREASING RATE SENIOR SUBORDINATED NOTES AND
SERIES F CONVERTIBLE PREFERRED STOCK
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the Aggregate Number and
date first written above: Purchase Price of Securities
to be Purchased:
REMINGTON INVESTMENT STRATEGIES, Aggregate principal Purchase
L.P. amount of Notes Price:
$450,000
By: Moore Capital Advisors, LLP to be Purchased:
its general partner $450,000
By: (Signature)
Address:
1251 Avenue of the Americas Aggregate Number of Purchase
53rd Floor Shares of Series F Price:
$900,000
New York, New York 10020 Convertible Stock to
be Purchased: 45
Telephone: (212) 782-7532
Telecopy: (212) 382-9895
SECURITIES PURCHASE AGREEMENT FOR
INCREASING RATE SENIOR SUBORDINATED NOTES AND
SERIES F CONVERTIBLE PREFERRED STOCK
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the Aggregate Number and
date first written above: Purchase Price of Securities
to be Purchased:
NATIONSBANC MONTGOMERY Aggregate principal Purchase
SECURITIES LLC amount of Notes
Price: $833,333
to be Purchased:
$833,333
By: (Signature)
Address:
c/o NationsBanc Montgomery Aggregate Number of Purchase
Securities LLC Shares of Series F Price:
$1,666,667
600 Montgomery Street Convertible Stock to
San Francisco, CA 94111 be Purchased: 83.33
Telephone: (415) 627-2553
Telecopy: (415) 913-5552
Attn: Jack G. Levin
E-164
Exhibit No. 7
Form 8-K
Headway Corporate Resources, Inc.
SEC File No. 0-23170
REGISTRATION RIGHTS AGREEMENT
BY AND AMONG
EACH OF THE PURCHASERS REFERRED TO HEREIN
AND
HEADWAY CORPORATE RESOURCES, INC.
Dated as of March 19, 1998
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of March 19,
1998, (the "Agreement") by and among GarMark Partners, L.P.
("GarMark"), Moore Global Investments, Ltd. ("MGI"), Remington
Investment Strategies, L.P. ("Remington", and together with MGI
"Moore") and NationsBanc Montgomery Securities LLC
("NationsBanc," and together with GarMark and Moore, the "Buyer")
and Headway Corporate Resources, Inc., a Delaware corporation
(the "Company").
WHEREAS, the Buyer and the Company have entered into a
Securities Purchase Agreement (the "Securities Purchase
Agreement") dated as of the date hereof pursuant to which each of
GarMark, Moore and NationsBanc have agreed to purchase, subject
to the terms and conditions contained therein, securities of the
Company, which securities are exchangeable or exercisable for or
convertible into shares of Common Stock of the Company; and
WHEREAS, it is a condition precedent to the purchase of
such securities that the Company provide for the registration of
the Common Stock of the Company issuable on the exchange,
exercise or conversion of the purchased securities.
NOW, THEREFORE, in consideration on the foregoing
premises and for other good and valuable consideration, the
adequacy and receipt of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION I.1. Definitions. The following terms shall
have the meanings ascribed to them below:
"Business Day" means any day other than a day on which
banks are authorized or required to be closed in the State of New
York.
"Commission" means the United States Securities and
Exchange Commission, or any other federal agency at the time
administering the Securities Act.
"Common Stock" means the common stock, par value $.0001
per share, of Headway Corporate Resources, Inc., as it may exist
from time to time.
"Convertible Preferred Stock" means the Company's
Series F Convertible Preferred Stock, par value $.0001 per share.
"Demand Registration" means a Demand Registration as
defined in Section 2.1.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar Federal statute, and the rules
and regulations of the Commission thereunder, all as the same
shall be in effect at the time.
"Holder" means any person who now holds or shall
hereafter acquire and hold Registrable Securities.
"Person" means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or other agency
or political subdivision thereof.
"Piggy-Back Registration" means a Piggy-Back
Registration as defined in Section 2.2.
"Preferred Stock Event of Default" means a Preferred
Stock Event of Default as defined in the Series F Certificate of
Designations.
"Prospectus" means the prospectus included in any
Registration Statement (including without limitation, a
prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement
in reliance upon Rule 430A promulgated under the Securities Act),
as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the
securities covered by such Registration Statement, and all other
amendments and supplements to the prospectus, including post-
effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such prospectus.
"Records" means the records of the Company as set forth
in Section 3.1.
"Registrable Securities" means the shares of Common
Stock issued or issuable upon conversion of the Convertible
Preferred Stock, until (i) a Registration Statement covering such
shares of Common Stock has been declared effective by the
Commission and such shares of Common Stock have been disposed of
pursuant to such effective Registration Statement, or (ii) such
shares of Common Stock are sold under circumstances in which all
of the applicable conditions of Rule 144 (or any similar
provisions then in force) under the Securities Act are met, or
(iii) such shares of Common Stock have been otherwise transferred
and the Company has delivered a new certificate or other evidence
of ownership for such Common Stock not bearing a restrictive
legend and not subject to any stop transfer or similar
restrictive order and all of such Common Stock may be resold by
the person receiving such certificate without complying with the
registration requirements of the Securities Act.
"Registration Statement" means any registration
statement of the Company which covers any of the Registrable
Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all
exhibits and all material incorporated by reference in such
Registration Statement.
"Required Holders" means (i) the Initial Holders (as
defined in the Securities Purchase Agreement) of at least (A) 70%
of the Registrable Securities or (B) two thirds of the
Registrable Securities on and after the date upon which Moore
owns less than 100% of the Registrable Securities acquired by it
on the date hereof, or (ii) in the event that each of the Initial
Holders, other than GarMark, shall own less than 50% of the
Registrable Securities owned by such Initial Holder on the date
hereof, then such term shall mean the Holders of a majority of
the Registrable Securities.
"Securities Act" means the Securities Act of 1933 or
any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the
time.
"Selling Holder" means a Holder who is selling
Registrable Securities pursuant to a Registration Statement under
the Securities Act.
"Selling Holders Counsel" means the counsel selected to
represent the Selling Holders as set forth in Section 3.1
"Series F Certificate of Designations" means the
Certificate of Designations under which the terms, powers,
designations, preferences, rights, qualifications, restrictions
and limitations of the Convertible Preferred Stock were
established.
"Target Effective Date" means the date a Registration
Statement is required to be declared effective by the Commission
as set forth in Section 3.1.
"Target Effective Period" means the period a
Registration Statement is required to be effective as set forth
in Section 2.1.
"Target Filing Date" means the date a Registration
Statement is required to be filed with the Commission as set
forth in Section 3.1.
"Underwriter" means a securities dealer who purchases
any Registrable Securities as principal in an underwritten
offering and not as part of such dealer's market-making
activities.
ARTICLE II.
REGISTRATION RIGHTS
SECTION II.1. Demand Registration.
(a) Request for Registration. At any time commencing
on the 8 month anniversary of the date hereof and from time to
time thereafter any Holder or Holders may make written requests
(individually, a "Request") on the Company for the registration
of the offer and sale of the Registrable Securities under the
Securities Act (such registration being hereinafter referred to
as a "Demand Registration"); provided, however, that if any
Preferred Stock Event of Default has occurred before the 8 month
anniversary of the date hereof, the Holders shall, at any time,
be entitled to exercise Requests for Demand Registrations. The
Company shall not effect a Demand Registration unless the Request
is made by Holders who, alone or together with other Holders
making the Request, hold in the aggregate not less than 35% of
the outstanding Registrable Securities; provided, however, that
for so long as Moore shall own at least 50% of the Registrable
Securities acquired by it on the date hereof, Moore shall have
the right to make a Request for one (1) such Demand Registration.
Subject to the penultimate sentence of Section 2.1(b), the
Company shall have no obligation to effect more than four Demand
Registrations. Any Request will specify the number of
Registrable Securities proposed to be sold and the intended
method(s) of disposition thereof and shall also state the firm
intent of the Holder to offer Registrable Securities for sale.
The Company shall give written notice of such Request within 10
days after the receipt thereof to all other Holders. Within 20
days after receipt of such notice by any such Holder, such Holder
may request in writing that all or any portion of its Registrable
Securities be included in such Registration Statement and the
Company shall include in the Registration Statement for such
Demand Registration the Registrable Securities of all Holders
that requested to be so included. Each such request by such
other Holders shall specify the number of Registrable Securities
proposed to be sold and the intended method(s) of disposition
thereof and shall also state the firm intent of the Holder to
offer Registrable Securities for sale.
(b) Effective Registration. A registration will not
be deemed to have been effected as a Demand Registration unless
the Registration Statement relating thereto has been declared
effective by the Commission and the Company has complied in all
material respects with its obligations under this Agreement with
respect thereto; provided that if, after the Registration
Statement has become effective, the offering and/or sale of
Registrable Securities pursuant to such Registration Statement is
or becomes the subject of any stop order, injunction or other
order or requirement of the Commission or any other governmental
or administrative agency, or if any court or other governmental
or quasi-governmental agency prevents or otherwise limits the
offer and/or sale of the Registrable Securities pursuant to the
Registration Statement, other than in each case primarily as a
result of acts or omissions of the Holder or any agent thereof,
such registration will be deemed not to have been effected. If
(i) a registration requested pursuant to this Section 2.1 is
deemed not to have been effected or (ii) the Registration
Statement relating to a Demand Registration requested pursuant to
this Section 2.1 does not remain effective for a period of at
least 270 consecutive days beyond the effective date thereof or,
with respect to an underwritten offering of Registrable
Securities, until 45 days after the commencement of the
distribution by the Holders of the Registrable Securities
included in such Registration Statement (such periods being
referred to herein as the "Target Effective Periods"), then the
Company shall continue to be obligated to effect such
Registration pursuant to this Section 2.1. The Holders shall be
permitted to withdraw all or any part of the Registrable
Securities from a Registration Statement at any time prior to the
effective date of such Demand Registration Statement; provided
that in the event of such withdrawal, such Holders shall be
responsible for the fees and expenses referred to in Section
3.3(viii) hereof incurred by such Holders with respect to such
Demand Registration prior to such withdrawal.
(c) Selection of Underwriter. If the Required Holders
participating in a Demand Registration so elect, the offering of
such Registrable Securities pursuant to such Demand Registration
shall be in the form of an underwritten offering. The Holders
making such Demand Registration shall select, subject to the
approval of the Company, which approval will not be unreasonably
withheld, one or more nationally recognized firms of investment
bankers to act as the lead managing Underwriter or Underwriters
in connection with such offering and shall select any additional
investment bankers and managers to be used in connection with the
offering.
SECTION II.2. Piggy-Back Registration. If at any time
the Company proposes to file a Registration Statement under the
Securities Act with respect to an offering by the Company for its
own account or for the account of any of its respective security
holders (other than (x) a Registration Statement on Form S-8 (or
any substitute form that may be adopted by the Commission), (y) a
Registration Statement on Form S-4 (or any substitute form that
may be adopted by the Commission); provided that such
Registration Statement on Form S-4 does not include any
securities other than the securities to be issued by the Company
in connection with a transaction that is referenced in clauses
(1) through (3) of the General Instructions A.1. of Form S-4 (as
such General Instructions are currently in effect), or (z) a
Registration Statement pursuant to a Demand Registration pursuant
to Section 2.1), then the Company shall give written notice of
such proposed filing to the Holders as soon as practicable (but
in no event less than 30 days before the anticipated filing
date), and such notice shall offer such Holders the opportunity
to register such number of Registrable Securities as each such
Holder may request (which request shall specify the Registrable
Securities intended to be disposed of by such Holder and the
intended method(s) of distribution thereof and shall also state
the firm intent of the Holder to offer Registrable Securities for
sale) (a "Piggy-Back Registration"). The Company shall use all
reasonable efforts to cause the managing Underwriter or
Underwriters of a proposed underwritten offering to permit the
Registrable Securities requested to be included in a Piggy-Back
Registration to be included on the same terms and conditions as
any similar securities of the Company or any other security
holder included therein and to permit the sale or other
disposition of such Registrable Securities in accordance with the
intended method of distribution thereof. Any Holder shall have
the right to withdraw its request for inclusion of its
Registrable Securities in any Registration Statement pursuant to
this Section 2.2 by giving written notice to the Company of its
request to withdraw, provided that in the event of such
withdrawal (other than pursuant to Section 2.3(c) hereof), such
Holder shall be responsible for the fees and expenses referred to
in Section 3.3(viii) hereof incurred by such Holder prior to such
withdrawal relating to such Registration Statement. The Company
may withdraw a Piggy-Back Registration at any time prior to the
time it becomes effective.
No registration effected under this Section 2.2, and no
failure to effect a registration under this Section 2.2, shall
relieve the Company of its obligation to effect a registration
upon the request of Holders pursuant to Section 2.1, and no
failure to effect a registration under this Section 2.2 and to
complete the sale of Registrable Securities in connection
therewith shall relieve the Company of any other obligation under
this Agreement (including, without limitation, the Company's
obligations under Sections 3.2 and 4.1).
SECTION II.3. Reduction of Offering.
(a) Demand Registration. The Company may include in a
Demand Registration pursuant to Section 2.1 securities of the
same class as the Registrable Securities for the account of the
Company and any other Persons who hold securities of the same
class as the Registrable Securities on the same terms and
conditions as the Registrable Securities to be included therein;
provided, however, that (i) if the managing Underwriter or
Underwriters of any underwritten offering described in Section
2.1 have informed the Company in writing that it is their opinion
that the total number of Registrable Securities, and securities
of the same class as the Registrable Securities which Holders,
the Company and any other Persons desiring to participate in such
registration intend to include in such offering is such as to
materially and adversely affect the success of such offering,
then the number of shares to be offered for the account of the
Company and for the account of all such other Persons (other than
the Holders) participating in such registration shall be reduced
or limited pro rata in proportion to the respective number of
shares requested to be registered to the extent necessary to
reduce the total number of shares requested to be included in
such offering to the number of shares, if any, recommended by
such managing Underwriter or Underwriters, and (ii) if the
offering is not underwritten, no other Person, including the
Company, shall be permitted to offer securities under any such
Demand Registration unless the Required Holders participating in
the offering consent to the inclusion of such shares therein.
(b) Piggy-Back Registration. (i) Notwithstanding
anything contained herein, if the managing Underwriter or
Underwriters of any underwritten offering described in Section
2.2 have informed, in writing, the Holders requesting inclusion
in such offering that it is their opinion that the total number
of shares which the Company, Holders and any other Persons
holding securities of the same class as the Registrable
Securities desiring to participate in such registration intend to
include in such offering is such as to materially and adversely
affect the success of such offering, then, the Company will
include in such registration (x) first, the shares offered by
the holders of securities who demanded such registration ("Demand
Holders"), if any, (y) then, if additional shares may be included
in such registration without materially and adversely affecting
the success of such offering, all the shares the Company offered
for its own account, if any, and (z) then, if additional shares
may be included in such registration without materially and
adversely affecting the success of such offering, the number of
shares offered by the Holders and such other holders of
securities of the same class as the Registrable Securities whose
piggy-back registration rights may not be reduced without
violating their contractual rights (provided such contractual
rights were in existence prior to the date of this Agreement), on
a pro rata basis in proportion to the relative number of
Registrable Securities of the holders (including the Holders)
participating in such registration.
(ii) If the managing Underwriter or Underwriters
of any underwritten offering described in Section 2.2 notify the
Holders requesting inclusion in such offering that the kind of
securities that the Holders, the Company and any other Persons
desiring to participate in such registration intend to include in
such offering is such as to materially and adversely affect the
success of such offering, (x) the Registrable Securities to be
included in such offering shall be reduced as described in clause
(i) above or (y) if such reduction would, in the judgment of the
managing Underwriter or Underwriters, be insufficient to
substantially eliminate the adverse effect that inclusion of the
Registrable Securities requested to be included would have on
such offering, such Registrable Securities will be excluded from
such offering.
(c) If, as a result of the proration provisions of
this Section 2.3, any Holder shall not be entitled to include all
Registrable Securities in a Demand Registration or Piggy-Back
Registration that such Holder has requested to be included, such
Holder may elect to withdraw his request to include Registrable
Securities in such registration; provided, however that if a
Holder withdraws his request pursuant to this Paragraph 2.3(c)
such Holder shall not be responsible for the fees and expenses
referred to in Section 3.3(viii) hereof.
II.4. Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without
the prior written consent of the Required Holders, enter into any
other agreement with any holder or prospective holder of any
securities of the Company which would allow such holder or
prospective holder (a) to include such securities in any
registration filed under Section 2.2 or 2.3(b) hereof, unless
under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only
to the extent that the inclusion of its securities will not
reduce the amount of the Registrable Securities of the Holders
which is included or (b) to make a demand registration which
could result in such registration statement being declared
effective prior to the earlier of the dates set forth in
subsection 3.1(a).
. ARTICLE III.
REGISTRATION PROCEDURES
SECTION III.1. Filings; Information. Whenever the
Company is required to effect or cause the registration of the
offer and sale of Registrable Securities pursuant to Section 2.1
or 2.2 hereof, the Company will use its best efforts to effect
the registration of the offer and the sale of such Registrable
Securities in accordance with the intended method(s) of
disposition thereof as quickly as practicable, and in connection
with any such request:
(a) The Company promptly will prepare and file with
the Commission a Registration Statement with respect to the offer
and sale of such securities and use its best efforts to cause
such Registration Statement to become and remain effective until
the completion of the distribution contemplated thereby;
provided, however, the Company shall not be required to keep such
Registration Statement effective for more than 270 days (or such
shorter period which will terminate when all Registrable
Securities covered by such Registration Statement have been sold,
but not prior to the expiration of the applicable period referred
to in Section 4(3) of the Securities Act and Rule 174 thereunder,
if applicable); provided, further, that with respect to a Demand
Registration, the Company shall file with the Commission a
Registration Statement as soon as is practicable after the date
of the Request and in any event no later than 60 days after the
date of the Request for the Demand Registration (the "Target
Filing Date") and shall cause such Registration Statement to be
declared effective as soon as is practicable after the date of
filing and in any event no later than 120 days after the date of
such Request (the "Target Effective Date"); provided, further
however, that with respect to a Request for Demand Registration
made prior to the first anniversary of the date hereof, other
than with respect to a Request for Demand Registration made
subsequent to a Preferred Stock Event of Default, the Company
shall not be obligated to cause such Registration Statement to be
declared effective prior to the first anniversary of the date
hereof.
(b) The Company promptly will prepare and file with
the Commission such amendments and post-effective amendments to
the Registration Statement as may be necessary to keep such
Registration Statement effective for as long as such registration
is required to remain effective pursuant to the terms hereof;
cause the Prospectus to be supplemented by any required
Prospectus supplement, and, as so supplemented, to be filed
pursuant to Rule 424 under the Securities Act; and comply with
the provisions of the Securities Act applicable to it with
respect to the disposition of all Registrable Securities covered
by such Registration Statement during the applicable period in
accordance with the intended methods of disposition by the
Selling Holders set forth in such Registration Statement or
supplement to the Prospectus.
(c) The Company, at least ten (10) Business Days prior
to filing a Registration Statement or at least five (5) Business
Days prior to filing a Prospectus or any amendment or supplement
to such Registration Statement or Prospectus, will furnish to (i)
each Selling Holder, (ii) not more than one counsel representing
all Selling Holders ("Selling Holders Counsel"), to be selected
by a majority-in-interest of such Selling Holders, and (iii) each
Underwriter, if any, of the Registrable Securities covered by
such Registration Statement copies of such Registration Statement
as proposed to be filed, together with exhibits thereto, which
documents will be subject to review and approval by each of the
foregoing within five (5) Business Days after delivery (except
that such review and approval of any Prospectus or any amendment
or supplement to such Registration Statement or Prospectus must
be within three (3) Business Days after delivery), and
thereafter, furnish to such Selling Holders, Selling Holders
Counsel and Underwriters, if any, such number of conformed copies
of such Registration Statement, each amendment and supplement
thereto (in each case including all exhibits thereto and
documents incorporated by reference therein), the Prospectus
included in such Registration Statement (including each
preliminary Prospectus) and such other documents or information
as such Selling Holders, Selling Holders Counsel or Underwriters
may reasonably request in order to facilitate the disposition of
the Registrable Securities (it being understood that the Company
consents to the use of the Prospectus and any amendment or
supplement thereto by each Selling Holder and the Underwriters,
if any, in connection with the offering and sale of the
Registrable Securities covered by such Prospectus or any
amendment or supplement thereto).
(d) The Company promptly will notify each Selling
Holder of (and in any event within 24 hours of the receipt of)
any stop order issued or threatened by the Commission and take
all reasonable actions required to prevent the entry of such stop
order or to remove it at the earliest possible moment if entered.
(e) On or prior to the date on which the Registration
Statement is declared effective, use its best efforts to register
or qualify such Registrable Securities under such other
securities or "blue sky" laws of such jurisdictions as any
Selling Holder, Selling Holders Counsel or Underwriter requests
and do any and all other acts and things which may be necessary
or advisable to enable such Selling Holder to consummate the
disposition in such jurisdictions of such Registrable Securities
owned by such Selling Holder; use its best efforts to keep each
such registration or qualification (or exemption therefrom)
effective during the period which the Registration Statement is
required to be kept effective; and use its best efforts to do any
and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities
covered by the applicable Registration Statement; provided that
the Company will not be required to (A) qualify generally to do
business in any jurisdiction where it would not otherwise be
required to qualify but for this paragraph (e), (B) subject
itself to taxation in any such jurisdiction or (C) consent to
general service of process in any such jurisdiction.
(f) The Company will notify each Selling Holder,
Selling Holders Counsel and any Underwriter promptly (and in any
event within 24 hours) and (if requested by any such Person)
confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed
and, with respect to a Registration Statement or any post-
effective amendment, when the same has become effective, (ii) of
any request by the Commission or any other federal or state
governmental authority for amendments or supplements to a
Registration Statement or Prospectus or for additional
information to be included in any Registration Statement or
Prospectus or otherwise, (iii) of the issuance by the Commission
of any stop order suspending the effectiveness of a Registration
Statement or the initiation or threatening of any proceedings for
that purpose, (iv) of the issuance by any state securities
commission or other regulatory authority of any order suspending
the qualification or exemption from qualification of any of the
Registrable Securities under state securities or "blue sky" laws
or the initiation of any proceedings for that purpose, and (v) of
the happening of any event which makes any statement made in a
Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated by reference therein
untrue or which requires the making of any changes in such
Registration Statement, Prospectus or documents so that they will
not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements in the Registration Statement
and Prospectus not misleading in light of the circumstances in
which they were made; and, as promptly as practicable thereafter,
prepare and file with the Commission and furnish a supplement or
amendment to such Prospectus so that, as thereafter deliverable
to the buyers of such Registrable Securities, such Prospectus
will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
(g) The Company will make generally available an
earnings statement satisfying the provisions of Section 11(a) of
the Securities Act no later than 90 days after the end of the 12-
month period beginning with the first day of the Company's first
fiscal quarter commencing after the effective date of a
Registration Statement, which earnings statement shall cover said
12-month period, and which requirement will be deemed to be
satisfied if the Company timely files complete and accurate
information on Forms 10-Q, 10-K and 8-K under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and
otherwise complies with Rule 158 under the Securities Act.
(h) If requested by the managing Underwriter or
Underwriters, Selling Holders Counsel, or any Selling Holder, the
Company will, unless otherwise advised by counsel, promptly
incorporate in a Prospectus supplement or post-effective
amendment such information as the managing Underwriter or
Underwriters requests, or Selling Holders Counsel requests, to be
included therein, including, without limitation, with respect to
the Registrable Securities being sold by such Selling Holder to
such Underwriter or Underwriters, the purchase price being paid
therefor by such Underwriter or Underwriters and with respect to
any other terms of the underwritten offering of the Registrable
Securities to be sold in such offering, and promptly make all
required filings of such Prospectus supplement or post-effective
amendment.
(i) The Company will enter into customary agreements
reasonably satisfactory to the Company (including, if applicable,
an underwriting agreement in customary form and which is
reasonably satisfactory to the Company) and take such other
actions as are reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities (the
Selling Holders, at their option, may require that any or all of
the representations, warranties and covenants of the Company to
or for the benefit of such Underwriters also be made to and for
the benefit of such Selling Holders).
(j) The Company will make available to each Selling
Holder (and will deliver to their counsel) and each Underwriter,
if any, subject to restrictions imposed by the United States
federal government or any agency or instrumentality thereof,
copies of all correspondence between the Commission and the
Company, its counsel or auditors and will also make available for
inspection at reasonable times at the Company's offices by any
Selling Holder of such Registrable Securities, any Underwriter
participating in any disposition pursuant to such Registration
Statement and any attorney, accountant or other professional
retained by any such Selling Holder or Underwriter (collectively,
the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Company (collectively,
the "Records") as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the
Company's officers and employees to supply all information
reasonably requested by any Inspectors in connection with such
registration statement.
(k) In connection with an underwritten offering, the
Company will participate, to the extent reasonably requested by
the managing Underwriter or Underwriters for the offering or the
Selling Holders, in reasonable and customary efforts to sell the
securities under the offering, including, without limitation,
participating in "road shows."
(l) The Company, during the period when the Prospectus
is required to be delivered under the Securities Act, promptly
will file all documents required to be filed with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act.
(m) The Company, if requested by Selling Holders,
shall cause its outside legal counsel to deliver an opinion
relating to the Registrable Securities, in customary form to such
Selling Holders and any Underwriter therefor, cause its officers
to execute and deliver all customary documents and certificates
requested by any Underwriters of the Registrable Securities, and
cause its independent public accountants to provide to such
Selling Holders and any Underwriters therefor one or more comfort
letters in customary form.
The Company may require each Selling Holder to promptly
furnish in writing to the Company such information regarding the
distribution of the Registrable Securities as the Company may
from time to time reasonably request and such other information
as may be legally required in connection with such registration
including, without limitation, all such information as may be
requested by the Commission or the National Association of
Securities Dealers, Inc.
Each Selling Holder agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind
described in Section 3.1(f) hereof, such Selling Holder will
forthwith discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable
Securities until such Selling Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section
3.1(f) hereof, and, if so directed by the Company, such Selling
Holder will deliver to the Company all copies, other than
permanent file copies then in such Selling Holder's possession,
of the most recent prospectus covering such Registrable
Securities at the time of receipt of such notice. In the event
the Company shall give such notice, the Company shall extend the
period during which such Registration Statement shall be
maintained effective (including the period referred to in Section
3.1(a) hereof) by the number of days during the period from and
including the date of the giving of notice pursuant to Section
3.1(f) hereof to the date when the Company shall make available
to the Selling Holders covered by such Registration Statement a
Prospectus supplemented or amended to conform with the
requirements of Section 3.1(f) hereof.
SECTION III.2. Liquidated Damages. If the Registration
Statement with respect to a Demand Registration is not filed on
or before the Target Filing Date, the Company shall pay
liquidated damages to each Selling Holder in an amount equal to
$.10 per 100 Registrable Securities per week beginning on the
Target Filing Date. If the Registration Statement with respect
to a Demand Registration is filed but has not become effective on
or before the Target Effective Date, the Company shall pay
liquidated damages to each Selling Holder in an amount equal to
$.10 per 100 Registrable Securities per week beginning on the
Target Effective Date. The weekly liquidated damages associated
with a late filing or a late declaration of effectiveness shall
increase by an amount equal to $.05 per 100 Registrable
Securities 90 days after the Target Filing Date or the Target
Effective Date, as the case may be, and shall thereafter increase
by an amount equal to $.05 per 100 Registrable Securities at the
end of each subsequent 90 day period for so long as the
Registration Statement with respect to a Demand Registration is
not filed or declared effective, as the case may be. If a stop
order is imposed or if for any other reason the effectiveness of
the Registration Statement with respect to a Demand Registration
is suspended for a period in excess of 10 consecutive days during
the Target Effective Period, then the Company shall pay
liquidated damages to each Holder of Registrable Securities in an
amount equal to $.10 per 100 Registrable Securities per week
beginning on the day that is 10 consecutive days after the
imposition of such stop order or other suspension of
effectiveness. The weekly liquidated damages associated with a
suspension of the effectiveness of the Registration Statement
with respect to a Demand Registration shall increase by an amount
equal to $.05 per 100 Registrable Securities 90 days after the
stop order was imposed or the Registration Statement with respect
to a Demand Registration was otherwise suspended, and shall
thereafter increase by an amount equal to $.05 per 100
Registrable Securities at the end of each subsequent 90 day
period for so long as the effectiveness remains suspended.
Liquidated damages shall be deemed to commence accruing on the
day in which the event triggering such liquidated damages occurs
(the "Trigger Date").
The Company shall pay the liquidated damages due with
respect to the Registrable Securities as additional amounts to
the Selling Holders quarterly on each dividend payment date (as
provided in the Series F Certificate of Designations), in Federal
or other immediately available funds. Liquidated damages not
previously paid, if any, shall be payable on each such dividend
payment date, and the liquidated damages shall be paid to the
record holders of Registrable Securities (as of the record date
with respect to each applicable dividend payment date) entitled
to receive such liquidated damages.
The liquidated damages to be paid to Selling Holders
pursuant to this Section 3.2 shall cease to accrue, (i) with
respect to the liquidated damages for failure to file on or prior
to the Target Filing Date, on the day the Registration Statement
is filed, (ii) with respect to the liquidated damages for failure
to have the Registration Statement declared effective on or prior
to the Target Effective Date, on the day after the Registration
Statement is declared effective, or (iii) with respect to the
liquidated damages for the suspension of effectiveness, on the
day after the reinstatement of effectiveness of the Registration
Statement.
SECTION III.3. Registration Expenses. The Company
shall pay all expenses incident to the Company's performance of
or compliance with this Agreement including, without limitation:
(i) all registration and filing fees, (ii) the fees and expenses
of compliance with securities or blue sky laws (including fees
and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), (iii) all
printing, messenger and delivery expenses, (iv) the Company's
internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing legal or
accounting duties), (v) the fees and expenses incurred in
connection with the listing or quotation, as appropriate, of the
Registrable Securities, (vi) the fees and disbursements of
counsel for the Company and the fees and expenses for independent
certified public accountants retained by the Company (including
the expenses of any special audit or cold comfort letters), (vii)
the fees and expenses of any special experts retained by the
Company in connection with such registration, and (viii) the fees
and expenses of Selling Holders Counsel. The Company shall have
no obligation to pay any underwriting fees, discounts or
commissions attributable to the sale of Registrable Securities
and any of the expenses incurred by Selling Holders which are not
payable by the Company, such costs to be borne by the Selling
Holder or Selling Holders.
ARTICLE IV.
INDEMNIFICATION AND CONTRIBUTION
SECTION IV.1. Indemnification by the Company. The
Company agrees to indemnify and hold harmless, to the fullest
extent permitted by law, each Selling Holder, its partners,
officers, directors, employees, advisors and agents, and each
Person, if any, who controls such Selling Holder within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, together with the partners, officers, directors,
employees and agents of such controlling Person (collectively,
the "Controlling Persons"), from and against any loss, claim,
damage, liability, attorneys' fees, cost or expense and costs and
expenses of investigating and defending any such claim
(collectively, the "Damages") and any action in respect thereof
to which such Selling Holder, its partners, officers, directors,
employees, advisors and agents, and any such Controlling Person
may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such Damages (or proceedings in respect
thereof) arise out of, or are based upon, any untrue statement or
alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus or any preliminary
Prospectus, or arise out of, or are based upon, any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, except insofar as the same are based upon information
furnished in writing to the Company by a Selling Holder expressly
for use therein, and shall reimburse each Selling Holder, its
partners, officers, directors, employees, advisors and agents,
and each such Controlling Person for any legal and other expenses
reasonably incurred by that Selling Holder, its partners,
officers, directors, employees, advisors and agents, or any such
Controlling Person in investigating or defending or preparing to
defend against any such Damages or proceedings; provided,
however, that the Company shall not be liable to any Selling
Holder or other indemnitee to the extent that any such Damages
arise out of or are based upon an untrue statement or omission
made in any preliminary Prospectus if (i) such Selling Holder
failed to send or deliver a copy of the final Prospectus with or
prior to the delivery of written confirmation of the sale by such
Selling Holder to the Person asserting the claim from which such
Damages arise in any case where such delivery of the Prospectus
(as amended or supplemented) is required by the Securities Act,
and (ii) the final Prospectus would have corrected such untrue
statement or such omission, where such failure to deliver the
Prospectus was not a result of non-compliance by the Company
under Section 3.1(f) of this Agreement. The Company also agrees
to indemnify any Underwriters of the Registrable Securities,
their officers and directors and each Person who controls such
Underwriters on substantially the same basis as that of the
indemnification of the Selling Holders provided in this Section
4.1.
SECTION IV.2. Indemnification by Selling Holders.
Each Selling Holder agrees, severally but not jointly, to
indemnify and hold harmless the Company, its officers, directors,
employees, advisors and agents and each Person, if any, who
controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, together with
the partners, officers, directors, employees, advisors and agents
of such controlling Person, to the same extent as the foregoing
indemnity from the Company to such Selling Holder, but only with
reference to information related to such Selling Holder, or its
plan of distribution, furnished in writing by such Selling Holder
expressly for use in any Registration Statement or Prospectus, or
any amendment or supplement thereto, or any preliminary
Prospectus; provided, however, that such Selling Holder shall not
be liable in any such case to the extent that prior to the filing
of any such Registration Statement or Prospectus or amendment or
supplement thereto, such Selling Holder has furnished in writing
to the Company information expressly for use in such Registration
Statement or Prospectus or any amendment or supplement thereto
which corrected or made not misleading information previously
furnished to the Company. In no event shall the liability of any
Selling Holder be greater in amount than the dollar amount of the
proceeds received by such Selling Holder upon the sale of the
Registrable Securities giving rise to such indemnification
obligation. In case any action or proceeding shall be brought
against the Company or its officers, directors, employees,
advisors or agents or any such controlling Person or its
officers, directors, employees or agents, in respect of which
indemnity may be sought against such Selling Holder, such Selling
Holder shall have the rights and duties given to the Company, and
the Company or its officers, directors, employees or agents, or
such controlling Person, or its officers, directors, employees,
advisors or agents, shall have the rights and duties given to
such Selling Holder, by the preceding paragraph.
SECTION IV.3. Conduct of Indemnification Proceedings.
Promptly after receipt by any person in respect of which
indemnity may be sought pursuant to Section 4.1 or 4.2 (an
"Indemnified Party") of notice of any claim or the commencement
of any action, the Indemnified Party shall, if a claim in respect
thereof is to be made against the Person against whom such
indemnity may be sought (an "Indemnifying Party"), notify the
Indemnifying Party in writing of the claim or the commencement of
such action; provided that the failure to notify the Indemnifying
Party shall not relieve it from any liability which it may have
to an Indemnified Party otherwise than under Section 4.1 or 4.2
except to the extent of any actual prejudice resulting therefrom.
If any such claim or action shall be brought against an
Indemnified Party, and it shall notify the Indemnifying Party
thereof, the Indemnifying Party shall be entitled to participate
therein, and, to the extent that it wishes, jointly with any
other similarly notified Indemnifying Party, to assume the
defense thereof with counsel reasonably satisfactory to the
Indemnified Party. After notice from the Indemnifying Party to
the Indemnified Party of its election to assume the defense of
such claim or action, the Indemnifying Party shall not be liable
to the Indemnified Party for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with
the defense thereof other than reasonable costs of investigation;
provided that the Indemnified Party shall have the right to
employ separate counsel to represent the Indemnified Party and
its controlling Persons who may be subject to liability arising
out of any claim in respect of which indemnity may be sought by
the Indemnified Party against the Indemnifying Party, but the
fees and expenses of such counsel shall be for the account of
such Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the retention of
such counsel or (ii) in the opinion of counsel to such
Indemnified Party, representation of both parties by the same
counsel would be inappropriate due to actual or potential
conflicts of interest between them, it being understood, however,
that the Indemnifying Party shall not, in connection with any one
such claim or action or separate but substantially similar or
related claims or actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for all
Indemnified Parties. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any
settlement of any claim or pending or threatened proceeding in
respect of which the Indemnified Party is or could have been a
party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party from all
liability arising out of such claim or proceeding. Whether or
not the defense of any claim or action is assumed by the
Indemnifying Party, such Indemnifying Party will not be subject
to any liability for any settlement made without its consent,
which consent will not be unreasonably withheld.
SECTION IV.4. Contribution. If the indemnification
provided for in this Article 4 is unavailable to the Indemnified
Parties in respect of any Damages referred to herein, then each
Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Damages in such proportion
as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Selling Holders on the other
from the offering of the Registrable Securities, or if such
allocation is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits but
also the relative fault of the Company on the one hand and the
Selling Holders on the other in connection with the statements or
omissions which resulted in such Damages, as well as any other
relevant equitable considerations. The relative fault of the
Company on the one hand and of each Selling Holder on the other
shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative
intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Selling Holders agree that it would
not be just and equitable if contribution pursuant to this
Section 4.4 were determined by pro rata allocation or by any
other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as
a result of the Damages referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations
set forth above, any legal or other expenses reasonably incurred
by such Indemnified Party in connection with investigating or
defending any such action or claim. Notwithstanding the
provisions of this Section 4.4, no Selling Holder shall be
required to contribute any amount in excess of the amount by
which the total price at which the Registrable Securities of such
Selling Holder were offered to the public exceeds the amount of
any damages which such Selling Holder has otherwise paid by
reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. Each
Selling Holder's obligations to contribute pursuant to this
Section 4.4 is several in the proportion that the proceeds of the
offering received by such Selling Holder bears to the total
proceeds of the offering received by all the Selling Holders and
not joint.
ARTICLE V.
MISCELLANEOUS
SECTION V.1. Participation in Underwritten
Registrations. No Person may participate in any underwritten
registration hereunder unless such Person (a) agrees to sell such
Person's securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to
approve such arrangements, and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the
terms of such underwriting arrangements and these registration
rights.
SECTION V.2. Rule 144. The Company agrees and will
use its best efforts to file any reports required to be filed by
it under the Securities Act and the Exchange Act (or, if the
Company is not required to file such reports, it will, upon the
request of any Holder, make publicly available other information
as long as necessary to permit sales under Rule 144 under the
Securities Act) and that it will take such further action as any
Holder may reasonably request, all to the extent required from
time to time to enable Holders to sell Registrable Securities
without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rules may be amended from time to time,
or (b) any similar rule or regulation hereafter adopted by the
Commission. Upon the request of any Holder, the Company will
deliver to such Holder a written statement as to whether it has
complied with such requirements.
SECTION V.3. Amendment and Modification. Any
provision of this Agreement may be waived, provided that such
waiver is set forth in a writing executed by the party against
whom the enforcement of such waiver is sought. This Agreement
may not be amended, modified or supplemented other than by a
written instrument signed by the Required Holders; provided,
however, that without the consent of all the Holders, no
amendment or modification which materially and adversely affects
the ability of such Holders to have the offer and sale of
securities registered hereunder may be effected. No course of
dealing between or among any Persons having any interest in this
Agreement will be deemed effective to modify, amend or discharge
any part of this Agreement or any rights or obligations of any
Person under or by reason of this Agreement.
SECTION V.4. Successors and Assigns; Third Party
Beneficiaries; Entire Agreement. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit
of the parties hereto, each subsequent Holder and their
respective successors and assigns and executors, administrators
and heirs. Holders are intended third party beneficiaries of
this Agreement and this Agreement may be enforced by such
Holders. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
SECTION V.5. Headings. Subject headings are included
for convenience only and shall not affect the interpretation of
any provisions of this Agreement.
SECTION V.6. Notices. Any notice, demand, request,
waiver, or other communication under this Agreement shall be in
writing and shall be deemed to have been duly given on the date
of service if personally served or sent by telecopy, on the
business day after notice is delivered to a courier or mailed by
express mail if sent by courier delivery service or express mail
for next day delivery and on the third day after mailing if
mailed to the party to whom notice is to be given, by first class
mail, registered, return receipt requested, postage prepaid and
addressed as follows:
If to the Company to:
Barry S. Roseman
President and Chief Executive Officer
Headway Corporate Resources, Inc.
850 Third Avenue
New York, New York 10022
Fax: (212) 508-3540
Phone: (212) 508-3500
If to a Holder, to the Holder
at the most current address given by such
Holder to the Company in writing, and to:
E. Garrett Bewkes, III
GarMark Partners, L.P.
c/o GarMark Advisors, L.L.C.
1325 Avenue of the Americas
26th Floor
New York, NY 10019
Fax: (212) 713-8539
Phone: (212) 713-8500
SECTION V.7. Governing Law; Forum; Process. This
Agreement shall be construed in accordance with, and governed by,
the laws of the State of New York as applied to contracts made
and to be performed entirely in the State of New York without
regard to principles of conflicts of law. Each of the parties
hereto hereby irrevocably and unconditionally submits to the
exclusive jurisdiction of any court of the State of New York or
any federal court sitting in the State of New York for purposes
of any suit, action or other proceeding arising out of this
Agreement (and agrees not to commence any action, suit or
proceedings relating hereto except in such courts). Each of the
parties hereto agrees that service of any process, summons,
notice or document by U.S. registered mail at its address set
forth herein shall be effective service of process for any
action, suit or proceeding brought against it in any such court.
Each of the parties hereto hereby irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement, which is brought by
or against it, in the courts of the State of New York or any
federal court sitting in the State of New York and hereby further
irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient
forum.
SECTION V.8. Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed an original, and
all of which together shall constitute a single agreement.
SECTION V.9. Severability. In the event that any one or
more of the immaterial provisions contained in this Agreement
shall for any reason be held to be invalid, illegal or
unenforceable, the same shall not affect any other provision of
this Agreement, but this Agreement shall be construed in a manner
which, as nearly as possible, reflects the original intent of the
parties.
SECTION V.10. No Prejudice. The terms of this Agreement
shall not be construed in favor of or against any party on
account of its participation in the preparation hereof.
SECTION V.11. Words in Singular and Plural Form. Words
used in the singular form in this Agreement shall be deemed to
import the plural, and vice versa, as the sense may require.
SECTION V.12. Remedy for Breach. The Company hereby
acknowledges that in the event of any breach or threatened breach
by the Company of any of the provisions of this Agreement, the
Holder would have no adequate remedy at law and could suffer
substantial and irreparable damage. Accordingly, the Company
hereby agrees that, in such event, the Holder shall be entitled,
without the necessity of proving damages or posting bond, and
notwithstanding any election by any Holder to claim damages, to
obtain a temporary and/or permanent injunction, without proving a
breach therefor, to restrain any such breach or threatened breach
or to obtain specific performance of any such provisions, all
without prejudice to any and all other remedies which any Holder
may have at law or in equity.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
HEADWAY CORPORATE RESOURCES, INC.
By: /s/ Signature
GARMARK PARTNERS, L.P.
By: /s/ Signature
MOORE GLOBAL INVESTMENTS, LTD.
By: /s/ Signature
REMINGTON INVESTMENT STRATEGIES,
L.P.
By: Moore Capital Advisors LLC
By: /s/ Signature
NATIONSBANC MONTGOMERY
SECURITIES LLC
By: /s/ Signature
E-183
Exhibit No. 8
Form 8-K
Headway Corporate Resources, Inc.
SEC File No. 0-23170
HEADWAY CORPORATE RESOURCES, INC., as Issuer
and
STATE STREET BANK AND TRUST COMPANY, N.A., as Trustee
INDENTURE
Dated as of March 19, 1998
$10,000,000
Increasing Rate Senior Subordinated Notes
Due 2006
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE 1
SECTION 1.01 Definitions 1
SECTION 1.02 Incorporation by Reference of TIA 20
SECTION 1.03 Rules of Construction. 21
ARTICLE II.THE SECURITIES 22
SECTION 2.01 Form and Dating 22
SECTION 2.02 Execution and Authentication 22
SECTION 2.03 Registrar and Paying Agent 23
SECTION 2.04 Paying Agent To Hold Assets in Trust 24
SECTION 2.05 Securityholder Lists 24
SECTION 2.06 Transfer and Exchange 24
SECTION 2.07 Replacement Securities 25
SECTION 2.08 Outstanding Securities 25
SECTION 2.09 Treasury Securities. 26
SECTION 2.10 Temporary Securities 26
SECTION 2.11 Cancellation 26
SECTION 2.12 Defaulted Interest 27
SECTION 2.13 Deposit of Monies 27
SECTION 2.14 CUSIP Number 27
SECTION 2.15 Restrictive Legends. 27
SECTION 2.16 Book Entry Provisions for Global Security. 28
SECTION 2.17 Special Transfer Provisions. 29
ARTICLE III. REDEMPTION 31
SECTION 3.01 Notices to Trustee 31
SECTION 3.02 Selection of Securities To Be Redeemed 31
SECTION 3.03 Notice of Redemption 32
SECTION 3.04 Effect of Notice of Redemption 33
SECTION 3.05 Deposit of Redemption Price 33
SECTION 3.06 Securities Redeemed in Part 33
ARTICLE IV.COVENANTS 33
SECTION 4.01 Payment of Securities 33
SECTION 4.02 Maintenance of Office or Agency 34
SECTION 4.03 Corporate Existence 34
SECTION 4.04 Payment of Taxes and Other Claims 34
SECTION 4.05 Maintenance of Properties and Insurance 35
SECTION 4.06 Compliance Certificates; Notice of Default 35
SECTION 4.07 Compliance with Laws 36
SECTION 4.08 SEC Reports and Other Information 36
SECTION 4.09 Waiver of Stay Extension or Usury Laws 37
SECTION 4.10 Limitation on Indebtedness 37
SECTION 4.11 Limitation on Restricted Payments 39
SECTION 4.12 Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries. 40
SECTION 4.13 Limitation on Liens. 41
SECTION 4.14 Limitation on Investments, Loans and Advances41
SECTION 4.15 Limitation on Transactions with Affiliates 42
SECTION 4.16 Change of Control 42
SECTION 4.17 Disposition of Proceeds of Asset Sales 44
SECTION 4.18 Limitation on Issuances and Sales of
Preferred Stock by Subsidiaries 46
SECTION 4.19 Limitation on Liquidations,
Dissolutions, Mergers and Consolidation 47
SECTION 4.20 Net Worth 47
SECTION 4.21 ERISA Compliance 47
SECTION 4.22 Limitation on Acquisitions 48
SECTION 4.23 Certain Consolidated Ratios 48
SECTION 4.24 Limitation on Hedging Obligations 49
SECTION 4.25 Sale of Subsidiaries. 49
SECTION 4.26 Conduct of Business 49
SECTION 4.27 Additional Guarantors. 49
ARTICLE V. SUCCESSOR CORPORATION 49
SECTION 5.01 Consolidation, Merger, Conveyance, Transfer or
Lease 49
SECTION 5.02 Successor Entity Substituted 51
ARTICLE VI.DEFAULT AND REMEDIES 51
SECTION 6.01 Events of Default 51
SECTION 6.02 Acceleration 53
SECTION 6.03 Other Remedies 54
SECTION 6.04 Waiver of Past Defaults 54
SECTION 6.05 Control by Required Holders 54
SECTION 6.06 Limitation on Suits 55
SECTION 6.07 Rights of Holders To Receive Payment 55
SECTION 6.08 Collection Suit by Trustee 55
SECTION 6.09 Trustee May File Proofs of Claim 55
SECTION 6.10 Priorities 56
SECTION 6.11 Undertaking for Costs 56
SECTION 6.12 Rights and Remedies Cumulative 57
SECTION 6.13 Delay or Omission Not Waiver 57
ARTICLE VII. TRUSTEE 57
SECTION 7.01 Duties of Trustee 57
SECTION 7.02 Rights of Trustee 58
SECTION 7.03 Individual Rights of Trustee 59
SECTION 7.04 Trustee's Disclaimer 59
SECTION 7.05 Notice of Default 59
SECTION 7.06 Reports by Trustee to Holders 60
SECTION 7.07 Compensation and Indemnity 60
SECTION 7.08 Replacement of Trustee 61
SECTION 7.09 Successor Trustee by Merger, Etc 62
SECTION 7.10 Eligibility: Disqualification 62
SECTION 7.11 Preferential Collection of Claims Against
Company 62
ARTICLE VIII. DISCHARGE OF INDENTURE; DEFEASANCE 62
SECTION 8.01 Discharge of Indenture 62
SECTION 8.02 Legal Defeasance and Covenant Defeasance 63
SECTION 8.03 Application of Trust Money 66
SECTION 8.04 Repayment to Company 66
SECTION 8.05 Reinstatement 67
SECTION 8.06 Acknowledgment of Discharge by Trustee 67
ARTICLE IX.AMENDMENTS, SUPPLEMENTS AND WAIVERS 67
SECTION 9.01 Without Consent of Holders 67
SECTION 9.02 With Consent of Holders 68
SECTION 9.03 Compliance with TIA 69
SECTION 9.04 Revocation and Effect of Consents 69
SECTION 9.05 Notation on or Exchange of Securities 70
SECTION 9.06 Trustee To Sign Amendments, Etc. 70
ARTICLE X. SUBORDINATION 70
SECTION 10.01Securities Subordinated to Senior Indebtedness70
SECTION 10.02Suspension of Payment on Securities in Certain
Events. 71
SECTION 10.03Securities Subordinated to Prior Payment of
All Senior Indebtedness on Dissolution,
Liquidation or Reorganization of Company. 72
SECTION 10.04Holders to be Subrogated to Rights of Holders
of Senior Indebtedness. 73
SECTION 10.05Obligations of the Company Unconditional. 73
SECTION 10.06Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice. 74
SECTION 10.07Application by Trustee of Assets Deposited
with It. 74
SECTION 10.08No Waiver of Subordination Provisions. 75
SECTION 10.09Holders Authorize Trustee to Effectuate
Subordination of Notes. 75
SECTION 10.10Right of Trustee to Hold Senior Indebtedness.76
SECTION 10.11.This Article X Not To Prevent Events of Default. 76
SECTION 10.12.No Fiduciary Duty of Trustee to Holders of Senior Indebtedness
76
ARTICLE XI.MISCELLANEOUS 77
SECTION 11.01TIA Controls 77
SECTION 11.02Notices 77
SECTION 11.03Communications by Holders with Other Holders78
SECTION 11.04Certificate and Opinion as to Conditions
Precedent 78
SECTION 11.05Statements Required in Certificate or Opinion78
SECTION 11.06Rules by Trustee, Paying Agent, Registrar 79
SECTION 11.07Legal Holidays 79
SECTION 11.08Governing Law 79
SECTION 11.09No Adverse Interpretation of Other Agreements80
SECTION 11.10No Recourse Against Others 80
SECTION 11.11Successors 80
SECTION 11.12Counterparts 80
SECTION 11.13Severability 80
SECTION 11.14Table of Contents, Headings. Etc. 80
Reconciliation and tie between the Trust Indenture
Act of 1939 and this Indenture, dated as of March 19, 1998:
Trust Indenture Initially Refl
Act Section ected in
Indenture S
ection
309 (b)(9) 7.10
310 (a)(1) 7.10
(a)(2) 7.10
(a)(5) 7.10
(b) 7.10
311 (a) 7.11
(b) 7.11
312 (a) 2.05
(b) 11.03
(c) 11.03
313 (a) 7.06
(b) 7.06
(c) 7.06
(d) 4.08
314 (a) 11.02
(c)(3) 5.01
315 (b) 11.02
316 (b) 9.04
INDENTURE, dated as of March 19, 1998, between HEADWAY
CORPORATE RESOURCES INC., a Delaware corporation (the "Company"),
and STATE STREET BANK AND TRUST COMPANY, N.A., a national banking
association, as Trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of
each other party and for the equal and ratable benefit of the
Holders of the Company's Increasing Rate Senior Subordinated
Notes Due 2006:
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION I.1 Definitions.
"Acquired Indebtedness" means with respect to any
person, Indebtedness of another person existing at the time such
other Person becomes a Subsidiary of such person or is merged
with or into such person or a Subsidiary of such Person, and not
incurred in connection with, or in anticipation of, such other
person becoming a Subsidiary of such Person or the merger with or
into such other Person.
"Acquisition" means the acquisition of (i) a
controlling equity or other ownership interest in another Person
(including the purchase of an option, warrant or convertible,
exchangeable or similar type security to acquire such a
controlling interest at the time it becomes exercisable,
convertible or exchangeable by the holder thereof), whether by
purchase of such equity or other ownership interest or upon
exercise of an option or warrant for, or conversion or exchange
of securities into, such equity or other ownership interest, or
(ii) assets of another Person which constitute all or any
material part of the assets of such Person or of a line or lines
of business conducted by such Person.
"Acquisition Documents" means, collectively, (a) that
certain Asset Purchase Agreement dated as of March 31, 1997
between the Company, Headway Corporate Staffing Services of North
Carolina, Inc., Advanced Staffing Solutions, Inc., H. Wade
Gresham and Mark F. Herron, (b) that certain Asset Purchase
Agreement dated as of July 28, 1997 between the Company, ASA
Personnel Services, Inc., Administrative Sales Associates, Inc.,
Administrative Sales Associates Temporaries, Inc., Richard Brody
and Arnold Katz, (c) that certain Asset Purchase Agreement dated
as of September 29, 1997 between the Company, Irene Cohen Temps,
Inc., Quality Outsourcing, Inc., George J. Burt, Richard E. Gaudy
and Peter F. Notaro, (d) that certain Purchase Agreement dated as
of September 30, 1997 between the Company, Headway Corporate
Staffing Services of Connecticut, Inc., Electronic Data
Resources, L.L.C., EDR Associates, Inc., Maurice Dusel, James
Roberts and Michael Russell, (e) that certain Asset Purchase
Agreement, to be dated on or about March 23, 1998, among the
Company, Headway Corporate Staffing Services of North Carolina,
Inc., Select Staffing Services, Inc. and Jack Powell, (f) that
certain Asset Purchase Agreement, to be dated on or about March
23, 1998, among the Company, Cheney Associates, L.L.C. and
Timothy Cheney, an individual doing business under the names
Cheney Associates, Inc. and Cheney Consulting Group, (g) that
certain Stock Purchase Agreement, to be dated on or about March
23, 1998, among the Company, L&M Shore Family Holdings Limited
Partnership, Elder Investments Limited Partnership, Mark Shore
and Linda Elder, and (h) any other purchase agreement entered
into hereafter by the Company and/or any Subsidiaries relating to
the acquisition of any entity or any assets thereof.
"Affiliate" means, with respect to any specified
Person, any other Person who directly or indirectly through one
or more intermediaries controls, or is controlled by, or is under
common control with, such specified Person. The term "control"
means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing.
"Affiliate Transaction" means the conduct of business
or any transactions or series of transactions by the Company or
any of its Subsidiaries with or for the benefit of any of their
respective Affiliates.
"Agent" means any Registrar, Paying Agent or co-
Registrar.
"Agent Members" has the meaning provided in Section
2.16.
"Asset Acquisition" means (i) any capital contribution
(by means of transfer of cash or other property to others or
payment for property or services for the account or use of
others, or otherwise) to, or purchase or acquisition of Capital
Stock in, any other Person by the Company or any of its
Subsidiaries, in either case pursuant to which such Person shall
become a Subsidiary of the Company or any of its Subsidiaries or
shall be merged with or into the Company or any of its
Subsidiaries or (ii) any acquisition by the Company or any of its
Subsidiaries of the assets of any person which constitute
substantially all of an operating unit or business of such
Person.
"Asset Sale" means with respect to any Person, any
direct or indirect sale, issuance, conveyance, transfer, lease,
assignment or other disposition (including, without limitation,
by merger or consolidation or by exchange of assets and whether
by operation of law or otherwise) in a single transaction or
series of transactions, made by such Person or a Subsidiary of
such Person to any other Person of (i) any Capital Stock of such
Person or any Subsidiary of such Person (whether structured as a
sale, issuance or other disposition by such Person or a
Subsidiary of such Person) or (ii) any other Property or asset of
such Person or any Subsidiary of such Person (other than cash or
Cash Equivalents), in each case, other than inventory in the
ordinary course of business and other than isolated transactions
(not involving Capital Stock) which do not exceed $1,000,000
individually and $2,500,000 during any consecutive 12 month
period. With respect to the Company and its Subsidiaries, the
term "Asset Sale" shall not include (a) any disposition of
properties and assets of the Company or any of its Subsidiaries
that is governed under and complies with the requirements set
forth in Article V hereof, (b) any sale by the Company to a
Wholly-Owned Subsidiary of the Company or a sale by a Subsidiary
of the Company to the Company or to a Wholly-Owned Subsidiary of
the Company, (c) any sale by the Company of its Capital Stock
pursuant to a Permitted Acquisition, (d) the sale, lease,
conveyance, disposition or other transfer of all or substantially
all of the assets of the Company as permitted under Section 5.01
or any disposition that constitutes a Change of Control or (e)
the sale, for cash in the amount equal to the Fair Market Value
thereof, of up to 7,072,307 ordinary shares of the common stock
of INCEPTA Group, plc.
"Asset Sale Offer" has the meaning provided in Section
4.17.
"Asset Sale Payment Date" means, with respect to any
Excess Proceeds from an Asset Sale, the earlier of (x) (i) the
360th day following receipt of Net Proceeds (other than Net
Equity Proceeds) and (ii) the 90th day following the receipt of
Net Equity Proceeds, or (y) such earlier date on which an Asset
Sale Offer shall expire.
"Attributable Indebtedness" means, in respect of a
Sale/Leaseback Transaction, as at the time of determination, the
present value (discounted at the interest rate borne, or to be
borne, as the case may be, by the Securities, compounded
annually) of the total obligations of the lessee for rental
payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such
lease has been extended).
"Authorized Representative" means any of the Chief
Executive Officer, President and Chief Operating Officer or any
Senior Vice President of the Company, or with respect to
financial matters only, the Senior Vice President and Director of
Corporate Development, Chief Financial Officer, Chief Operating
Officer or Treasurer of the Company, or any other person
expressly designated by the Board of Directors of the Company (or
the appropriate committee thereof) as an Authorized
Representative of the Company.
"Bankruptcy Law" means Title 11 of the U.S. Code or any
similar Federal, state or foreign law for the relief of debtors.
"Board of Directors" means, with respect to any Person,
the board of directors or other applicable governing body of
such Person or any committee of the board of directors or of such
other governing body of such Person duly authorized, with respect
to any particular matter, to exercise the power of the board of
directors or other applicable governing body of such Person.
"Board Resolution" means, with respect to any Person, a
copy of a resolution certified by the Secretary or an Assistant
Secretary of such Person, to have been duly adopted by the Board
of Directors of such Person and to be in full force and effect on
the date of such certification, and delivered to the Trustee.
"Book-Entry Security" means a Security represented by a
Global Security and registered in the name of the nominee of the
Depository.
"Business Day" means any day that is not a Legal
Holiday.
"Capital Expenditures" means, with respect to the
Company and its Subsidiaries on a consolidated basis, for any
period the sum of (without duplication) (i) all expenditures
(whether paid in cash or accrued as liabilities) by the Company
or any of its Subsidiaries during such period for items that
would be classified as "property, plant or equipment" or
comparable items on the consolidated balance sheet of the Company
and its Subsidiaries, including, without limitation, all
transactional costs incurred in connection with such expenditures
provided the same have been capitalized, excluding, however, the
amount of any Capital Expenditures paid for with proceeds of
casualty insurance as evidenced in writing and submitted to the
Trustee together with any compliance certificate delivered
pursuant to the Credit Agreement, and (ii) with respect to any
Capital Lease entered into by the Company or any of its
Subsidiaries during such period, the capitalized amount of such
Capital Lease, all the foregoing in accordance with GAAP applied
on a Consistent Basis.
"Capital Lease" means all leases which have been or
should be capitalized in accordance with GAAP as in effect from
time to time, including Statement No. 13 of the Financial
Accounting Standards Board and any successor thereof.
"Capitalized Lease Obligation" means any obligation to
pay rent or other amounts under a lease of (or other agreement
conveying the right to use) any property (whether real, personal
or mixed) that is required to be classified and accounted for as
a Capital Lease and, for the purpose of this Indenture, the
amount of such obligation at any date shall be the capitalized
amount thereof at such date, determined in accordance with GAAP.
"Capital Stock" means, with respect to any Person, any
and all shares, interests, participations, rights in, or other
equivalents (however designated and whether voting or non-voting)
of such Person's capital stock or any form of membership
interest, as applicable, whether outstanding on the Issue Date or
issued after the Issue Date, and any and all rights, warrants or
options exercisable or exchangeable for or convertible into such
capital stock.
"Cash Equivalents" means at any time (i) any evidence
of Indebtedness with a maturity of 180 days or less issued or
directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less
than $500,000,000; (iii) commercial paper with a maturity of 180
days or less issued by a corporation (except an Affiliate of the
Company) organized under the laws of any state of the United
States or the District of Columbia and rated at least A-1 by
Standard & Poor's Corporation or at least P-1 by Moody's
Investors Service, Inc.; (iv) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations
issued or unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full
faith and credit of the United States, in each case maturing
within one year from the date of acquisition; provided, however,
that the terms of such agreements comply with the guidelines set
forth in the Federal Financial Agreements of Depository
Institutions with Securities Dealers and Others, as adopted by
the Comptroller of the Currency; and (v) money market funds
investing principally in the types of securities described in
clauses (i) and (ii) above.
"Certificate of Designations" means the Certificate of
Designations, Preferences and Rights of the Series F Preferred
Stock.
"Change of Control" means a change of control of the
Company of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act, whether or not the Company is
then subject to such reporting requirement; provided, that,
without limitation, such a Change of Control shall be deemed to
have occurred if: (i) any "person" (as defined in Sections 13(d)
and 14(d) of the Exchange Act) or "group" (as such term is used
in Section 13(d)(3) of the Exchange Act) other than Permitted
Holders is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing thirty percent (30%) or
more of the combined voting power of the Company's then
outstanding securities; provided, however, that no Change of
Control shall be deemed to have occurred if prior to the
acquisition of such thirty percent (30%) of the combined voting
power of the Company's then outstanding securities, a majority of
the Continuing Directors (as defined below) approves such
acquisition; or (ii) if there shall cease to be a majority of the
Board of Directors of the Company comprised of Continuing
Directors; or (iii) the stockholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) at least eighty percent (80%)
of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after
such merger or consolidation; or (iv) if any recapitalization
event occurs as a result of which the holders of voting
securities of the Company outstanding immediately prior thereto
do not continue to hold at least eighty percent (80%) of the
combined voting power of the voting securities of the Company
immediately after such recapitalization event; or (v) the
stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets; or (vi) a majority of the "named executive
officers" set forth in the Company's most recent Proxy Statement
or Annual Report on Form 10-K or Form 10-KSB, as the case may be
(excluding Edward E. Furash), cease to occupy such positions
within a period of 365 consecutive days. As used herein,
"Continuing Directors" means individuals who as of the Issue Date
constitute the Board of Directors of the Company and any new
director(s) whose election by the Board of Directors for the
Company or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for
election was previously so approved.
"Change of Control Date" has the meaning provided in
Section 4.16.
"Change of Control Offer" has the meaning provided in
Section 4.16.
"Change of Control Payment Date" has the meaning
provided in Section 4.16.
"Company" means the party named as such in this
Indenture until a successor replaces it pursuant to the terms and
conditions of this Indenture and thereafter means such successor.
"Company Order" means a written order or request signed
in the name of the Company by its President or a Vice President,
and by its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary, and delivered to the Trustee.
"Consistent Basis" in reference to the application of
GAAP means the accounting principles observed in the period
referred to are comparable in all material respects to those
applied in the preparation of the audited financial statements of
the Company contained in the Company's Annual Report on Form 10-
KSB for the fiscal year ended December 31, 1997 filed with the
Commission.
"Consolidated EBITDA" means, with respect to the
Company and its Subsidiaries for any Four-Quarter Period (or
other period of Fiscal Quarters as provided in the definitions of
"Consolidated Fixed Charge Ratio" and "Consolidated Interest
Coverage Ratio") ending on the date of computation thereof, the
sum of, without duplication, (i) Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) taxes on income, (iv)
amortization, and (v) depreciation, all determined on a
consolidated basis in accordance with GAAP applied on a
Consistent Basis; provided, however, that with respect to an
Acquisition that is accounted for as a "purchase", for the four
Four-Quarter Periods ending next following the date of such
Acquisition, Consolidated EBITDA shall include the results of
operations of the Person or assets so acquired, which amounts
shall be determined on a historical pro forma basis as if such
Acquisition had been consummated as a "pooling of interests";
provided, further, however, that with respect to disposition,
sale, conveyance, transfer, liquidation or cessation of business
of a Subsidiary of the Company or any division, operating unit or
other business unit of the Company during such measurement
period, Consolidated EBITDA shall exclude the results of
operations of the Subsidiary division, operating unit or other
business unit so disposed, sold, conveyed, transferred,
liquidated or the business of which has ceased.
"Consolidated Fixed Charge Ratio" means, with respect
to the Company and its Subsidiaries for the applicable period
described below ending on the date of computation thereof, the
ratio of (i) Consolidated EBITDA for such period less (without
duplication) Capital Expenditures for such period, to (ii)
Consolidated Fixed Charges for such period; such computation
shall be for (A) the Fiscal Quarter ending June 30, 1998, (B) the
two Fiscal Quarters ending September 30, 1998 and (C) the three
Fiscal Quarters ending December 31, 1998 and thereafter for each
Four-Quarter Period then ended; provided, however, that for
purposes of such computation for the periods ending on the dates
set forth below, the amount of any Earnouts paid during such
period shall be multiplied by the percentage shown opposite such
date:
Date Percentage
June 30, 1998 25%
September 30, 1998 50%
December 31, 1998 75%
"Consolidated Fixed Charges" means, with respect to the
Company and its Subsidiaries for any Four-Quarter Period (or
other period of Fiscal Quarters as provided in the definitions of
"Consolidated Fixed Charge Ratio") ending on the date of
computation thereof, the sum of, without duplication, (i)
Consolidated Interest Expense incurred during such period, (ii)
scheduled principal amounts of Consolidated Funded Indebtedness
(other than the principal amount of borrowings outstanding under
the Credit Agreement) paid during such period, (iii) Earnouts
paid in cash during such period, and (iv) all Restricted Payments
made during such period, all determined on a consolidated basis
in accordance with GAAP applied on a Consistent Basis.
"Consolidated Funded Indebtedness" means, with respect
to the Company and its Subsidiaries, at any time as of which the
amount thereof is to be determined, the sum of (i) Indebtedness
for Money Borrowed of the Company and its Subsidiaries at such
time and (ii) the face amount of all outstanding Letters of
Credit issued for the account of the Company or any of its
Subsidiaries and all obligations (to the extent not duplicative)
arising under such Letters of Credit, all determined on a
consolidated basis in accordance with GAAP applied on a
Consistent Basis.
"Consolidated Interest Coverage Ratio" means, with
respect to the Company and its Subsidiaries for the applicable
period described below ending on the date of computation thereof,
the ratio of (i) Consolidated EBITDA for such period to (ii)
Consolidated Interest Expense for such period; such computation
shall be for (A) the Fiscal Quarter ending June 30, 1998, (B) the
two Fiscal Quarters ending September 30, 1998 and (C) the three
Fiscal Quarters ending December 31, 1998 and thereafter for each
Four-Quarter Period then ended.
"Consolidated Interest Expense" means, with respect to
any period of computation thereof, the gross interest expense of
the Company and its Subsidiaries, including without limitation
(i) the current amortized portion of debt discounts to the extent
included in gross interest expense, (ii) the current amortized
portion of all fees (including fees payable in respect of any
Hedging Obligation) payable in connection with the incurrence of
Indebtedness to the extent included in gross interest expense
(but not including any fees incurred in connection with the ING
Facility, the Credit Agreement and this Agreement or the
termination thereof), and (iii) the portion of any payments made
in connection with Capital Leases allocable to interest expense,
all determined on a consolidated basis in accordance with GAAP
applied on a Consistent Basis.
"Consolidated Leverage Ratio" means, as of the date of
computation thereof, the ratio of (i) Consolidated Funded
Indebtedness determined as at such date to (ii) Consolidated
EBITDA for the Four-Quarter Period ending on (or most recently
ended prior to) such date.
"Consolidated Net Income" means, for any period of
computation thereof, the gross revenues from operations of the
Company and its Subsidiaries (including payments received by the
Company and its Subsidiaries of (i) interest income, and (ii)
dividends and distributions made in the ordinary course of their
businesses by Persons in which investment is permitted pursuant
to this Indenture and the Credit Agreement and not related to an
extraordinary event), less all operating and non-operating
expenses of the Company and its Subsidiaries including taxes on
income, all determined on a consolidated basis in accordance with
GAAP applied on a Consistent Basis; but excluding (for all
purposes other than compliance with Section 4.20) as income: (a)
net gains on the sale, conversion or other disposition of capital
assets, (b) net gains on the acquisition, retirement, sale or
other disposition of Capital Stock and other securities of the
Company or its Subsidiaries, (c) net gains on the collection of
proceeds of life insurance policies, (d) any write-up of any
asset, and (e) any other net gain or credit of an extraordinary
nature as determined in accordance with GAAP applied on a
Consistent Basis.
"Consolidated Net Worth" means, as of any date on which
the amount thereof is to be determined, Consolidated
Shareholders' Equity minus (without duplication of deductions in
respect of items already deducted in arriving at surplus and
retained earnings) all reserves (other than contingency reserves
not allocated to any particular purpose), including without
limitation reserves for depreciation, depletion, amortization,
obsolescence, deferred income taxes, insurance and inventory
valuation all as determined on a consolidated basis in accordance
with GAAP applied on a Consistent Basis.
"Consolidated Shareholders' Equity" means, as of any
date on which the amount thereof is to be determined, the sum of
the following in respect of the Company and its Subsidiaries
(determined on a consolidated basis and excluding any upward
adjustment after the Issue Date due to revaluation of assets):
(i) the amount of issued and outstanding share capital, plus (ii)
the amount of additional paid-in capital and retained earnings
(or, in the case of a deficit, minus the amount of such deficit),
plus (iii) the amount of any foreign currency translation
adjustment (if positive, or, if negative, minus the amount of
such translation adjustment), minus (iv) the amount of any
treasury stock all as determined in accordance with GAAP applied
on a Consistent Basis.
"Contingent Obligation" of any Person means all
contingent liabilities required (or which, upon the creation or
incurring thereof, would be required) to be included in the
financial statements (including footnotes) of such Person in
accordance with GAAP applied on a Consistent Basis, including
Statement No. 5 of the Financial Accounting Standards Board, all
Hedging Obligations and any obligation of such Person
guaranteeing or in effect guaranteeing any Indebtedness, dividend
or other obligation of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, including
obligations of such Person however incurred:
(1) to purchase such Indebtedness or other obligation or
any property or assets constituting security therefor;
(2) to advance or supply funds in any manner (i) for the
purchase or payment of such Indebtedness or other
obligation, or (ii) to maintain a minimum working
capital, net worth or other balance sheet condition or
any income statement condition of the primary obligor;
(3) to grant or convey any Lien, charge or other
encumbrance on any property or assets of such Person to
secure payment of such Indebtedness or other
obligation;
(4) to lease property or to purchase securities or other
property or services primarily for the purpose of
assuring the owner or holder of such Indebtedness or
obligation of the ability of the primary obligor to
make payment of such Indebtedness or other obligation;
or
(5) otherwise to assure the owner of the Indebtedness or
such obligation of the primary obligor against loss in
respect thereof.
; provided, however, in no event shall Earnouts be a Contingent
Obligation hereunder.
"Cost of Acquisition" means, with respect to any
Acquisition, as at the date of entering into any agreement
therefor, the sum of the following (without duplication): (i) the
value of the Capital Stock of the Company or any of its
Subsidiaries to be transferred in connection therewith (as
permitted under this Indenture), (ii) the amount of any cash and
fair market value of other Property (including the unpaid
principal amount of any debt instrument) given as consideration,
(iii) the amount (determined by using the face amount or the
amount payable at maturity, whichever is greater) of any
Indebtedness incurred, assumed or acquired by the Company or any
of its Subsidiaries in connection with such Acquisition, (iv) all
additional purchase price amounts in the form of Earnouts and
Contingent Obligations, (v) all amounts paid in respect of
covenants not to compete, consulting agreements that should be
recorded on financial statements of the Company and its
Subsidiaries in accordance with GAAP, and other affiliated
contracts in connection with such Acquisition, (vi) the aggregate
fair market value of all other consideration given by the Company
or any of its Subsidiaries in connection with such Acquisition,
and (vii) out-of-pocket transaction costs for the services and
expenses of attorneys, accountants and other advisors and
consultants incurred in effecting such transaction, and other
similar transaction costs so incurred and capitalized in
accordance with GAAP. For purposes of determining the Cost of
Acquisition for any transaction, (A) the Capital Stock of the
Company shall be valued (w) if the shares are listed or admitted
for trading on any national securities exchange or included in
The Nasdaq National Market or Nasdaq SmallCap Market, the last
reported sales price as reported on such exchange or Market; (x)
if the shares are not listed or admitted for trading on any
national securities exchange or included in The Nasdaq National
Market or Nasdaq SmallCap Market, the average of the last
reported closing bid and asked quotation for the shares as
reported on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") or a similar service if
NASDAQ is not reporting such information; (y) if the shares are
not listed or admitted for trading on any national securities
exchange or included in The Nasdaq National Market or Nasdaq
SmallCap Market or quoted by NASDAQ or a similar service, the
average of the last reported bid and asked quotation for the
shares as quoted by a market maker in the shares (or if there is
more than one market maker, the bid and asked quotation shall be
obtained from two market makers and the average of the lowest bid
and highest asked quotation); or (z) if the Capital Stock is not
publicly traded, the fair market value as determined in good
faith by a committee composed of the members of the Board of
Directors of the Company and, if requested by the Trustee, or the
Minimum Required Holders (as defined below) determined to be a
reasonable valuation by an independent public accounting firm
with an established national reputation, (B) the Capital Stock of
any Subsidiary shall be valued as determined in good faith by a
committee composed of the members of the Board of Directors of
such Subsidiary and, if requested by the Trustee, or the Minimum
Required Holders determined to be a reasonable valuation by an
independent public accounting firm with an established national
reputation, and (C) with respect to any Acquisition accomplished
pursuant to the exercise of options or warrants or the exchange
or conversion of securities, the Cost of Acquisition shall
include both the cost of acquiring such option, warrant or
exchangeable or convertible security as well as the cost of
exercise, exchange or conversion.
"Credit Agreement" means the $75,000,000 Credit
Agreement, dated as of March 19, 1998, entered into between the
Company and NationsBank, National Association, as agent, and the
lenders party thereto, providing for working capital and other
financing, as the same may at any time be amended, amended and
restated, supplemented or otherwise modified, including any
refinancing, refunding, replacement or extension thereof
permitted hereunder which provides for working capital and other
financing, whether by the same or any other lender or group of
lenders.
"Custodian" means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bankruptcy
Law.
"Default" means any event that is, or after notice or
the passage of time or both would be, an Event of Default.
"Default Amount" shall have the meaning set forth in
Section 6.02.
"Depository" means, with respect to the Securities
issuable or issued in one or more Book-Entry Securities, the
Person specified in Section 2.02 as the Depository with respect
to the Securities until the successor shall have been appointed
and becomes such pursuant to the applicable provisions of this
Indenture, and, thereafter, "Depository" shall mean or include
such successor.
"Disqualified Stock" means with respect to any Person,
any Capital Stock which, by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable, in each case, at the option of the holder thereof),
or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise,
or is exchangeable for Indebtedness, or is redeemable at the
option of the holder thereof, in whole or in part, on or prior to
the Maturity Date.
"Domestic Subsidiary" means a Subsidiary which is
organized under the laws of one of the states or territories
comprising the United States of America.
"Earnouts" has the specific meaning therefor set forth
in each of the Acquisition Documents and collectively means all
such payments, a schedule of such Earnouts with respect to
Acquisitions consummated prior to the Issue Date is set forth on
Schedule 5.35 to the Securities Purchase Agreement.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time.
"Event of Default" has the meaning provided in Section
6.01.
"Excess Proceeds" shall have the meaning set forth in
Section 4.17.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated by
the SEC thereunder.
"Fair Market Value" or "fair value" means, with respect
to any asset or property, the price which could be negotiated in
an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. With
respect to any Person, Fair Market Value shall be determined by
the Board of Directors of such Person (and with respect to the
Company or any of its Subsidiaries, a majority of the Independent
Directors of the Company) acting in good faith and shall be
evidenced by a Board Resolution thereof delivered to the Trustee;
provided, however, that the Board of Directors does not have to
make such determination with respect to the common stock of the
INCEPTA Group, plc.
"Financing" means the consummation of the sale by the
Company of the Securities and $20,000,000 of the Series F
Preferred Stock.
"Financing Documents" means the this Indenture, the
Certificate of Designations, the Stock Purchase Agreement, the
Registration Rights Agreement, the Guaranty Agreement and any
other document executed by or on behalf of the Company in
connection with the Financing.
"Fiscal Quarter" means a three month quarter of a
Fiscal Year and when followed by reference to a year, means the
first, second, third or fourth quarter of such Fiscal Year, as
indicated.
"Fiscal Year" means the twelve month fiscal period of
the Company and its Subsidiaries commencing on January 1 of each
calendar year and ending on December 31 of such calendar year.
"GAAP" means generally accepted accounting principles
in the United States of America as in effect as of the date
hereof and as such principles may be amended from time to time,
including, without limitation, those set forth in the opinions
and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or
in such other statements by such other entity as may be approved
by a significant segment of the accounting profession of the
United States, which are applicable as of the date of
determination.
"GarMark" means GarMark Partners, L.P.
"Global Security" means a Security evidencing all or a
part of the Securities to be issued as Book-Entry Securities,
issued to the Depository in accordance with Section 2.02 and
bearing the legend prescribed in Exhibit B to this Indenture.
"Guarantor" means each Domestic Subsidiary of the
Company now or hereinafter existing which has executed the
Guaranty Agreement.
"Guaranty Agreement" means the Guaranty Agreement,
dated as of March 19, 1998, by and among each of the Company's
Domestic Subsidiaries and the Trustee, for the benefit of the
Holders, substantially in the form on Exhibit F to the Securities
Purchase Agreement, as amended, modified or supplemented from
time to time in accordance with the terms thereof, together with
any exhibits, schedules or attachments thereto.
"HCRI Preferred Stock" means, collectively (a) the
Company's Series E Convertible Preferred Stock containing such
terms as are set forth in the Company's Certification of
Designation filed with the Secretary of State of Delaware on
October 25, 1996, no shares of which are issued and outstanding
on the Closing Date; and (b) the Series F Preferred Stock.
"Hedging Obligations" means any and all obligations of
the Company or any of its Subsidiaries, whether absolute or
contingent and howsoever and whensoever created, arising,
evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any
and all agreements, devices or arrangements designed to protect
at least one of the parties thereto from the fluctuations of
interest rates, exchange rates (including without limitation
commodity exchange rates) or forward rates applicable to such
party's assets, liabilities or exchange transactions, including,
but not limited to, U.S. dollar-denominated or cross-currency
interest rate exchange agreements, forward currency exchange
agreements, commodity exchange agreements, interest rate cap or
collar protection agreements, forward rate currency or interest
rate options, puts, warrants and those commonly known as interest
rate "swap" agreements; and (ii) any and all cancellations,
buybacks, reversals, terminations or assignments of any of the
foregoing.
"Holder" or "Securityholder" means the person in whose
name a Security is registered on the Registrar's books.
"IAI Global Security" means a permanent global security
in a registered form representing the aggregate principal amount
of Securities sold to Institutional Accredited Investors.
"ING Facility" means the credit facility pursuant to
the Fourth Amended and Restated Credit Agreement dated as of
September 15, 1997, by and among the Company, ING (U.S.) Capital
Corporation and the various lenders named therein, as amended,
modified or supplemented from time to time in accordance with the
terms thereof, together with any exhibits, schedules or
attachments thereto.
"Indebtedness" means, with respect to any person,
without duplication, (i) any liability, contingent or otherwise,
of such Person (a) for borrowed money (whether or not the
recourse of the lender is to the whole of the Property of such
Person or only to a portion thereof), (b) evidenced by bonds,
notes, debentures or similar instruments or representing the
balance deferred and unpaid of any part of the purchase price of
Property or other assets (including Investments) or for the cost
of Property or other assets constructed or of improvements
thereto (including any obligation under or in connection with any
letter of credit related thereto), (c) under or in connection
with any letter of credit issued for the account of such Person,
and all drafts drawn, reimbursement obligations or demands for
payment thereunder, or (d) for the payment of money relating to
any Capitalized Lease Obligations; (ii) any liability of others
of the kind described in the preceding clause (i) which the
Person has guaranteed or which is otherwise its legal liability;
(iii) any liability, contingent or otherwise, secured by any Lien
in respect of Property of such Person, whether or not the
obligations secured thereby shall have been assumed by or shall
otherwise be such Person's legal liability, provided, that,
solely in the case of any Indebtedness of the type described in
this clause (iii), recourse for the payment of which is limited
to such Property, the amount of such Indebtedness shall be deemed
to be the lesser of the fair market value of such Property or the
amount of the obligation so secured; and (iv) any and all
deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any liability of the kind
described in any of the preceding clauses (i), (ii) and (iii).
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations
as described above and the maximum liability of such Person in
respect of any such contingent obligations at such date.
"Indebtedness for Money Borrowed" means with respect to
any Person, without duplication, all indebtedness in respect of
money borrowed of such Person, including without limitation all
Capital Leases and the deferred purchase price of any property or
asset, evidenced by a promissory note, bond, debenture or similar
written obligations for the payment of money (including
conditional sales or similar title retention agreements), other
than trade payables incurred in the ordinary course of business.
"Indenture" means this Indenture, as amended or
supplemented from time to time in accordance with the terms
hereof.
"Independent Director" means any director that (i) is
not and has not been an officer or employee of the Company or any
of its Affiliates, (ii) does not have any relationship that, in
the opinion of the Board of Directors of the Company (exclusive
of any such Independent Director), would interfere with his/her
exercise of independent judgment in carrying out the
responsibilities of director and (iii) with respect to any
transaction or series of related transactions, does not have any
material direct or indirect financial interest in or with respect
to such transaction or series of related transactions.
"Initial Holder" means the Holders on the Issue Date
and their respective Affiliates.
"Institutional Accredited Investor" means an
institution that is an "accredited investor" as that term is
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.
"Interest Payment Date" means the stated maturity of an
installment of interest on the Securities.
"Internal Revenue Code" means the Internal Revenue Code
of 1986, as amended to the date hereof and from time to time
hereafter.
"Investment" means, with respect to any Person, any
direct or indirect advance, loan or other extension of credit to
(including any guarantee of a loan or other extension of credit)
or investment in, capital contribution to (by means of any
transfer of cash or other Property to others or any payment for
Property for the account or use of others or otherwise including,
without limitation, amounts paid in advance on account of the
purchase price of merchandise or equipment to be delivered within
one year of the date of advance), or purchase of Capital Stock,
bonds, notes, debentures or other securities issued by, any other
Person.
"Issue Date" means the date of first issuance of the
Securities under this Indenture.
"Legal Holiday" means, with respect to a particular
place of payment, a Saturday, a Sunday or a day on which banking
institutions in New York, New York or at such place of payment
are authorized or obligated by law, executive order or
governmental decree to be closed.
"Lien" means any mortgage, lien, pledge, charge,
security interest, encumbrance, claim, hypothecation, assignment
for security, deposit arrangement or preference or other security
agreement of any kind or nature whatsoever, whether or not filed,
recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement and any
lease deemed to constitute a security interest). For purposes
hereof, a Person shall be deemed to own subject to a Lien any
Property which it has acquired or holds subject to the interest
of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement.
"Material Subsidiary" means, with respect to any
person, any Subsidiary of such person which would be a
"significant subsidiary" pursuant to Article 1-02 of Regulation S-
X.
"Maturity Date" means March 19, 2006.
"Minimum Required Holders" means the Initial Holders of
at least thirty percent (30%) in aggregate principal amount of
the outstanding Securities; provided that in the event that each
Initial Holder, other than GarMark, shall own less than 100% in
the aggregate principal of the outstanding Securities owned by
such Initial Holder on the Issue Date, then such term shall mean
the Holder or Holders of at least thirty-five percent (35%) of
the aggregate principal amount of the outstanding Securities.
"Moore" means Remington Investment Strategies, L.P. and
Moore Global Investments, Ltd. or any of their Affiliates.
"Multiemployer Plan" means a plan described in Section
3(37) of ERISA.
"Net Cash Proceeds" means, with respect to any Asset
Sale the proceeds thereof in the form of cash or Cash
Equivalents, including payments in respect of deferred payment
obligations when received in the form of cash or Cash Equivalents
net of (i) brokerage commissions and other reasonable fees and
expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale; (ii) provisions for all
taxes payable within one year as a result of such Asset Sale;
(iii) payments made to retire Indebtedness secured by the assets
subject to such Asset Sale to the extent required pursuant to the
terms of such Indebtedness; (iv) appropriate amounts to be
provided by the Company or any of its Subsidiaries, as the case
may be, as a reserve, required in accordance with GAAP against
any liabilities associated with such Asset Sale and retained by
the Company or any of its Subsidiaries, as the case may be, after
such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, provided, however,
that the amount of any such reserve at such time that such amount
is no longer required to be provided as a reserve in accordance
with GAAP and is not applied to the liability for which such
reserve was established shall be deemed Net Cash Proceeds; and
(v) any amount required to be paid to any Person owning a
beneficial interest in the Property sold, conveyed, transferred,
leased or otherwise disposed of in an amount proportionate to
such beneficial interest.
"Net Equity Proceeds" means, with respect to an Asset
Sale, the Net Proceeds therefrom relating to the sale of Capital
Stock by the Company or any Subsidiary thereof.
"Net Proceeds" means, with respect to any Person (a) in
the case of any sale of Capital Stock by such Person or common
equity contribution to such Person, the aggregate net proceeds
received by such Person after payment of expenses, commissions
and the like, if any, incurred in connection therewith, (b) in
the case of the issuance of any Indebtedness by such Person, the
aggregate net proceeds received by such Person, after payment of
expenses, commissions and the like incurred in connection
therewith, or (c) in the case of any exchange, exercise,
conversion or surrender of outstanding securities of any kind of
the Company for or into shares of Capital Stock of the Company
which is not Disqualified Stock, the net proceeds received by the
Company upon such exchange, exercise, conversion or surrender
(plus, with respect to the issuance of any such securities after
the Issue Date, the net proceeds received by such Person upon the
issuance of such securities), less any and all payments made to
the holders, e.g., on account of fractional shares, and less all
expenses, commissions and the like incurred by the Company in
connection therewith.
"Non-U.S. Person" means a person who is not a U.S.
person as defined in Regulation S.
"Obligations" means all obligations for principal,
premium, interest, penalties, fees, indemnifications,
reimbursements, damages and other liabilities payable under the
documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the
Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, the Controller, the
Secretary or the Assistant Secretary of such Person.
"Officers' Certificate" means, with respect to any
Person, a certificate signed by two Officers (one of whom shall
be the Chief Financial Officer) or by an Officer and either an
Assistant Treasurer or an Assistant Secretary of such Person and
otherwise complying with the requirements of Sections 11.04 and
11.05.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee complying with the
requirements of Sections 11.04 and 11.05. Unless otherwise
required by the TIA, the legal counsel may be an employee of or
counsel to the Company.
"Paying Agent" has the meaning provided in Section
2.03.
"Permitted Acquisition" means each Acquisition effected
with the consent and approval of the Board of Directors of the
Person being acquired, and with the duly obtained approval of
such shareholders or other holders of equity or other ownership
interest as such Person may be required to obtain, so long as
either (x) the prior written consent of the Required Holders has
been obtained or (y) (i) immediately prior to and immediately
after the consummation of such Acquisition, no Default or Event
of Default has occurred and is continuing, (ii) substantially all
of the sales and operating profits generated by such Person (or
assets) so acquired or invested are derived from a line or lines
of business that are part of, or complimentary to, the executive
search, temporary staffing, pay-rolling and strategic advisory
services as then conducted by the Company and its Subsidiaries,
(iii) (x) for Acquisitions with respect to which the Cost of
Acquisition is less than $7,500,000, a consolidated balance sheet
and statements of income, cash flow and stockholders' equity of
the Person being acquired, or (y) for Acquisitions with respect
to which the Cost of Acquisition is equal to or greater than
$7,500,000, an audited consolidated balance sheet and audited
statements of income, cash flow and stockholders' equity of the
Person being acquired, in each case as of its most recent fiscal
year end are delivered to the Trustee not less than five (5)
Business Days prior to the consummation of such Acquisition, (iv)
pro forma consolidated historical financial statements of the
Company and its Subsidiaries as of the end of the most recent
Fiscal Quarter for the four (4) Fiscal Quarters most recently
ended giving effect to such Acquisition, are delivered to the
Trustee not less than five (5) Business Days prior to the
consummation of such Acquisition, together with a certificate of
an Authorized Representative demonstrating pro forma compliance
with Sections 4.20 and 4.23 hereof after giving effect to such
Acquisition, (v) in the event the Person so acquired is not a
Wholly-Owned Subsidiary, (A) the Company is permitted to make
such acquisition pursuant to Section 4.14 and the Company's
strategic plan includes additional permitted Investment in such
Person sufficient for it to become a Wholly-Owned Subsidiary
within nine (9) months of the date of the initial Investment in
such Person, and (B) the Acquisition complies with the provisions
of Section 4.14(iii), (vi) any Indebtedness included in the Cost
of Acquisition otherwise qualifying as a Permitted Acquisition
hereunder shall be permitted to be incurred pursuant to Section
4.10 hereof and (vii) the pro forma Consolidated Leverage Ratio
giving effect to such Acquisition as certified pursuant to (iv)
above shall not exceed 3.0 to 1.00.
"Permitted Holders" means the initial purchasers of the
Securities and their respective Affiliates.
"Permitted Investments" means (i) obligations of the
United States government due within one year; (ii) certificates
of deposit or Eurodollar deposits due within one year with a
financial institution that is a member of the Federal Reserve
System having combined capital and surplus and undivided profits
of at least $500,000,000 or more; (iii) commercial paper rated at
least A-1 by Standard & Poor's Corporation or at least P-1 by
Moody's Investors Service, Inc.; (iv) debt of any state or
political subdivision that is rated among the two highest rating
categories obtainable from either Standard & Poor's Corporation
or Moody's Investors Service, Inc. and is due within one year;
(v) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or
unconditionally guaranteed by the United States Government or
issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within one
year from the date of acquisition; provided, however, that the
terms of such agreements comply with the guidelines set forth in
the Federal Financial Agreements of Depository Institutions with
Securities Dealers and Others, as adopted by the Comptroller of
the Currency; and (vi) Investments represented by Hedging
Obligations permitted to be made pursuant to Section 4.24.
"Permitted Liens" means, with respect to any Person,
any Lien arising by reason of (a) any judgment, decree or order
of any court, so long as such Lien is being contested in good
faith and is adequately bonded, and any appropriate legal
proceedings which may have been duly initiated for the review of
such judgment, decree or order shall not have been finally
terminated or the period within which such proceedings may be
initiated shall not have expired; (b) Liens arising by operation
of law for taxes, assessments, governmental charges or claims not
yet delinquent or which are being contested in good faith by
appropriate proceedings promptly instituted and diligently
conducted and if a reserve or other appropriate provision, if
any, as shall be required in conformity with GAAP shall have been
made therefore and enforcement is stayed and which Liens are not
yet enforceable against other creditors; (c) security for payment
of workers' compensation or other insurance or social security
legislation; (d) security for the performance of tenders,
contracts (other than contracts for the payment of money) or
leases (including any Capitalized Lease Obligations, provided
that such Capitalized Lease Obligations are permitted to be
incurred pursuant to the terms of Section 4.10 hereof) incurred
in the ordinary course of business; (e) deposits to secure public
or statutory obligations, or in lieu of surety, performance or
appeal bonds, entered into in the ordinary course of business;
(f) Liens arising by operation of law in favor of carriers,
warehousemen, landlords, mechanics, materialmen, laborers,
employees or suppliers, incurred in the ordinary course of
business for sums which are not yet delinquent or are being
contested in good faith by negotiations or by appropriate
proceedings which suspend the collection thereof and if a reserve
or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor and which
Liens are not yet enforceable against other creditors; (g)
easements, rights-of-way, zoning and similar covenants and
restrictions and other similar encumbrances or title defects
which, in the aggregate, are not substantial in amount, and which
do not in any case materially detract from the value of the
Property subject thereto or materially interfere with the
ordinary conduct of the business of the Company or any of its
Subsidiaries; (h) Liens arising in the ordinary course of
business in favor of custom and revenue authorities to secure
payment of custom duties; (i) Liens existing as of the Issue
Date; (j) Liens securing the Indebtedness of the Company and its
Subsidiaries pursuant to Section 4.10(b) hereof; and (k) Liens in
favor of the lenders party to the Credit Agreement securing
Indebtedness of the Company pursuant to Section 4.10(e) hereof.
"Person" means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or any other entity or
organization including a government or political subdivision or
any agency or instrumentality thereof.
"Physical Securities" has the meaning set forth in
Section 2.02.
"Plan" means an employment benefit plan within the
meaning of Section 3(3) of ERISA.
"Preferred Stock" means, with respect to any Person,
any and all shares, interests, participations or other
equivalents (however designated) of such Person's preferred or
preference stock, whether now outstanding or issued after the
Issue Date, and including, without limitation, all classes and
series of preferred or preference stock of such Person.
"Principal" of any Indebtedness (including the
Securities) means the principal of such Indebtedness plus the
premium, if any, on such Indebtedness.
"Private Placement Legend" means the legend initially
set forth on the Securities as set forth in Exhibit A.
"Property" or "property" means any assets or property
of any kind or nature whatsoever, real, personal or mixed
(including fixtures), whether tangible or intangible.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A under the Securities Act.
"Record Date" means the Record Dates specified in the
Securities; provided that if any such date is a Legal Holiday,
the Record Date shall be the first day immediately preceding such
specified day that is not a Legal Holiday.
"Redemption Date" when used with respect to any
Security to be redeemed, means the date fixed for such redemption
pursuant to this Indenture and the Securities.
"Redemption Price" when used with respect to any
Security to be redeemed, means the price fixed for such
redemption pursuant to this Indenture and the Securities;
provided that the Redemption Price prior to the first anniversary
of the Issue Date is 105% of the Principal of the Securities to
be redeemed.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration
Rights Agreement by and among the Company and the investors named
therein, dated as of March 19, 1998, as the same may be amended,
supplemented or otherwise modified from time to time in
accordance with the terms thereof.
"Regulation S" means Regulation S under the Securities
Act.
"Regulation S Global Security" means a permanent global
security in registered form representing the aggregate principal
amount of Securities sold in reliance on Regulation S.
"Representative" means the trustee, agent or
representative in respect of any Senior Indebtedness and shall
mean NationsBank, National Association in such capacity, until
such time as it is no longer the representative pursuant to the
terms of the Credit Agreement; provided, however, that if, and
for so long as, any Senior Indebtedness lacks such a
representative, then the Representative for such Senior
Indebtedness shall at all times constitute the holders of a
majority in outstanding principal amount of such Senior
Indebtedness in respect of any Senior Indebtedness.
"Required Holders" means (i) the Initial Holders
holding at least (A) seventy percent (70%) of the aggregate
principal amount of the outstanding Securities or (B) two thirds
of the aggregate principal amount of the outstanding Securities
on or after the date upon which Moore owns less than one hundred
percent (100%) of the Securities acquired by it on the Issue
Date, or (ii) in the event that each of the Initial Holders,
other than GarMark, shall own less than fifty percent (50%) of
the aggregate principal amount of the outstanding Securities
owned by such Initial Holder on the Issue Date, then such term
shall mean the Holders of at least a majority of the aggregate
principal amount of outstanding Securities.
"Restricted Payment" means any of the following: (i)
the declaration or payment of any dividend or any other
distribution on Capital Stock of the Company or any of its
Subsidiaries or any payment made to the direct or indirect
holders (in their capacities as such) of Capital Stock of the
Company or any of its Subsidiaries (other than (x) dividends or
distributions payable solely in Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to
purchase Capital Stock (other than Disqualified Stock), (y) in
the case of Subsidiaries of the Company, dividends or
distributions payable to the Company or to a Wholly-Owned
Subsidiary of the Company and (z) the redemption, repurchase or
other retirement of the Warrants for an aggregate consideration
not to exceed $3,500,000), (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of the
Company or any of its Subsidiaries, (iii) the making of any
principal payment on, or the purchase, defeasance, repurchase,
redemption or other acquisition or retirement for value, prior to
any scheduled maturity, scheduled repayment or scheduled sinking
fund payment, of any Indebtedness of the Company which is
subordinated in right of payment to the Securities (other than
Indebtedness of the Company acquired in anticipation of
satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of
acquisition), and (iv) the making of any Investment other than
pursuant to clause (i), (ii), (iv) or (v) of Section 4.14 hereof.
"Restricted Security" has the meaning set forth in Rule
l44(a)(3) under the Securities Act.
"Sale/Leaseback Transaction" means any direct or
indirect arrangement with any person providing for the leasing to
the Company or any of its Subsidiaries of any real or tangible
personal property (except for leases between or among the Company
and any of its Subsidiaries), which property or similar property
has been or is to be sold or transferred by the Company or such
Subsidiary to such person in contemplation of such leasing.
"SEC" means the Securities and Exchange Commission.
"Securities" means, the Company's Increasing Rate
Senior Subordinated Notes due 2006, as amended or supplemented
from time to time in accordance with the terms hereof, that are
issued pursuant to the terms and conditions of this Indenture.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated
thereunder.
"Senior Debt Other Default: has the meaning provided in
Section 10.02 hereof.
"Senior Debt Payment Default" has the meaning provided
in Section 10.02 hereof.
"Senior Indebtedness" means all Indebtedness and other
amounts owing under the Credit Agreement or any refinancing,
refunding, replacement or extension thereof.
"Series F Preferred Stock" means the Series F
Convertible Preferred Stock, par value $.0001, of the Company.
"Securities Purchase Agreement" means the Securities
Purchase Agreement by and among the Company and the investors
named therein, dated as of March 19, 1998, as the same may be
amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof.
"Subsidiary" means with respect to any Person (i) a
corporation a majority of whose Capital Stock with voting power,
under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by such Person, by one or more
Subsidiaries of such Person or by such Person and one or more
Subsidiaries of such Person or (ii) any other Person (other than
a corporation) in which such Person, one or more Subsidiaries of
such Person or such Person and one or more subsidiaries of such
Person, directly or indirectly, individually or with another
Person, at the date of determination thereof, has (a) at least a
majority ownership interest or (b) the power to elect or direct
the election of a majority of the directors or other governing
body of such Person.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
SS 77aaa-77bbbb), as amended, as in effect on the date of the
execution of this Indenture.
"Trustee" means the party named as such in this
Indenture until a successor replaces it in accordance with the
provisions of this Indenture and thereafter means such successor.
"Trust Officer" means any officer of the Trustee
assigned by the Trustee to administer its corporate trust
matters.
"U.S. Government Obligations" means direct non-callable
obligations of, or non-callable obligations guaranteed by, the
United States of America for the payment of which obligation or
guarantee the full faith and credit of the United States of
America is pledged.
"U.S. Legal Tender" means such coin or currency of the
United States of America as at the time of payment shall be legal
tender for the payment of public and private debts.
"voting power" means with respect to any Person, the
power under ordinary circumstances, pursuant to the ownership of
shares of any class or classes of Capital Stock, to elect at
least a majority of the board of directors, managers or trustees
of such Person (irrespective of whether or not, at the time,
stock of any other class or classes shall have, or might have,
voting power by reason of the happening of any contingency).
"Warrants" means the Series E Warrants issued by the
Company pursuant to that certain Warrant Purchase Agreement dated
as of May 31, 1996, as hereafter amended.
"Wholly-Owned Subsidiary" means with respect to any
Person any Subsidiary of such person, 100% of the Capital Stock
of which (other than shares of Capital Stock representing any
director's qualifying shares or investments by foreign nationals
mandated by applicable law) is owned by such Person, by a Wholly-
Owned Subsidiary of such Person or by such Person and one or more
Wholly-Owned Subsidiaries of such Person.
SECTION I.2 Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the
TIA, such provision is incorporated by reference in, and made a
part of, this Indenture. The following TIA terms used in this
Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or a
Security holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means
the Trustee.
"obligor" on the indenture securities means the Company
or any other obligor on the Securities.
All other TIA terms used in this Indenture that are
defined by the TIA, defined by TIA reference to another statute
or defined by SEC rule and not otherwise defined herein have the
meanings assigned to them therein.
SECTION I.3 Rules of Construction.
(a) Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and
words in the plural include the singular;
(v) provisions apply to successive events and
transactions;
(vi) the words "include" and "including" shall be
deemed to mean "include, without limitation," and
"including, without limitation";
(vii) "herein," "hereof" and other words of similar
import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(viii) references to Sections or Articles means
references to such Section or Article in this Indenture,
unless stated otherwise; and
(ix) references to sections of or rules under the
Securities Act shall be deemed to include substitute,
replacement or successor sections or rules adopted by the
SEC from time to time.
ARTICLE II.
THE SECURITIES
SECTION II.1 Form and Dating.
The Securities and the Trustee's certificate of
authentication with respect thereto shall be substantially in the
form of Exhibit A hereto, which is hereby incorporated in and
expressly made a part of this Indenture. The Securities may have
notations, legends or endorsements required by law, stock
exchange rules, usage or agreement to which the Company is
subject, including without limitation the legends set forth in
Exhibits A and B hereto. The Company and the Trustee shall
approve the form of the Securities and any notation, legend or
endorsement on them. Each Security shall be dated the date of
its authentication, shall bear interest from the Issue Date and
shall be payable on the Interest Payment Dates and the Maturity
Date.
The terms and provisions contained in the Securities
shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company and the
Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound
thereby.
SECTION II.2 Execution and Authentication.
One Officer shall sign (who shall have been duly
authorized by all requisite corporate actions) the Securities for
the Company by manual or facsimile signature. If an Officer
whose signature is on a Security was an Officer at the time of
such execution but no longer holds that office at the time the
Trustee authenticates the Security, the Security shall
nevertheless be valid. A Security shall not be valid until an
authorized signatory of the Trustee manually signs the
certificate of authentication on the Security. The signature
shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate Securities for original
issue up to an aggregate principal amount of Ten Million dollars
($10,000,000) upon a written order of the Company in the form of
an Officers' Certificate to a Trust Officer directing the Trustee
to authenticate the Securities and certifying that all conditions
precedent to the issuance of the Securities contained herein have
been complied with. Upon the written order of the Company in the
form of an Officers' Certificate, the Trustee shall authenticate
Securities in substitution of Securities issued on the Issue Date
to reflect any name change of the Company. The aggregate
principal amount of Securities outstanding at any time may not
exceed Ten Million dollars ($10,000,000) except as provided in
Section 2.07 hereof.
The Principal and interest on Book-Entry Securities
shall be payable to the Depository or its nominee, as the case
may be, as the sole registered owner and the sole holder of the
Book-Entry Securities represented thereby. The Principal of and
interest on Securities in certificated form ("Physical
Securities") shall be payable at the office of the Paying Agent.
The Trustee may appoint an authenticating agent
reasonably acceptable to the Company to authenticate Securities.
Unless otherwise provided in the appointment, an authenticating
agent may authenticate Securities whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent
has the same rights as an Agent to deal with the Company and
Affiliates of the Company.
The Securities shall be issuable only in registered
form without coupons in denominations of $100,000 and any
integral multiple of $1,000 in excess thereof.
If the Securities are to be issued in the form of one
or more Global Securities, then the Company shall execute and the
Trustee shall authenticate and deliver one or more Global
Securities that (i) shall represent and shall be in minimum
denominations of $1,000, (ii) shall be registered in the name of
the Depository for such Global Security or Securities or the
nominee of such Depository, (iii) shall be delivered to the
Trustee as custodian for such Depository or pursuant to such
Depository's instructions, and (iv) shall bear the legend set
forth in Exhibit B.
SECTION II.3 Registrar and Paying Agent.
The Company shall maintain an office or agency in the
Borough of Manhattan, The City of New York, where (a) Securities
may be presented or surrendered for registration of transfer or
for exchange (the "Registrar"), (b) Securities may be presented
or surrendered for payment (the "Paying Agent"), and (c) notices
and demands to or upon the Company in respect of the Securities
and this Indenture may be served. The Company may also from time
to time designate one or more other offices or agencies where the
Securities may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations
provided, however, that no such designation or rescission shall
in any manner relieve the Company of its obligation to maintain
an office or agency in the Borough of Manhattan, The City of New
York, for such purposes. Neither the Company nor any Affiliate
of the Company shall act as Paying Agent. The Registrar shall
keep a register of the Securities and of their transfer and
exchange. The Company, upon notice to the Trustee, may appoint
one or more co-Registrars and one or more additional paying
agents reasonably acceptable to the Trustee. The term "Paying
Agent" includes any additional paying agent. The Company
initially appoints the Trustee as Registrar, Paying Agent and
agent for service of notices or demands in connection with the
Securities and this Indenture until such time as the Trustee has
resigned or a successor has been appointed. Securities, notices
and demands may be delivered to the Trustee at 61 Broadway, 15th
Floor, New York, New York 10006, Attn: Corporate Trust
Department.
The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, which
agreement shall incorporate the provisions of the TIA. The
agreement shall implement the provisions of this Indenture that
relate to such Agent. The Company shall promptly notify the
Trustee of the name and address of any such Agent. If the
Company fails to maintain a Registrar or Paying Agent, the
Trustee shall act as such and shall be entitled to appropriate
compensation in accordance with Section 7.07 hereof.
SECTION II.4 Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than
the Trustee to agree in writing that each Paying Agent shall hold
in trust for the benefit of the Holders or the Trustee all assets
held by the Paying Agent for the payment of Principal of, or
interest on, the Securities (whether such assets have been
distributed to it by the Company or any other obligor on the
Securities), and shall notify the Trustee of any Default by the
Company (or any other obligor on the Securities) in making any
such payment. The Trustee may at any time during the continuance
of any Default by the Company in making any such payment, upon
written request to a Paying Agent, require such Paying Agent to
distribute all assets held by it to the Trustee and to account
for any assets distributed. The Company at any time may require
a Paying Agent to distribute all assets held by it to the Trustee
and account for any assets disbursed. Upon distribution to the
Trustee of all assets that shall have been delivered by the
Company to the Paying Agent, the Paying Agent shall have no
further liability for such assets.
SECTION II.5 Securityholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of
the names and addresses of the Holders and shall otherwise comply
with TIA 312(a). If the Trustee is not the Registrar, the
Company shall furnish to the Trustee five (5) days before each
Record Date and at such other times as the Trustee may request in
writing a list as of such date and in such form as the Trustee
may reasonably require of the names and addresses of the Holders,
which list may be conclusively relied upon by the Trustee, and
the Company shall otherwise comply with TIA 312(a).
SECTION II.6 Transfer and Exchange.
When Securities in certificated form are presented to
the Registrar or a co-Registrar with a request from the Holder
thereof to register the transfer of such Securities or to
exchange such Securities for an equal principal amount of
Securities of other authorized denominations, the Registrar or co-
Registrar, as the case may be, shall register the transfer or
make the exchange as requested if its requirements for such
transaction are met; provided, however, that the Securities
surrendered for registration of transfer or exchange shall be
duly endorsed or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Registrar, or co-
Registrar, as the case may be, duly executed by the Holder
thereof or such Holder's attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company
shall execute by manual or facsimile signature and issue, and the
Trustee shall authenticate new Securities evidencing such
transfer or exchange at the Registrar's or co-Registrar's
request, as the case may be. No service charge shall be made for
any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith
(other than any such transfer taxes or similar governmental
charge payable upon exchanges or transfers pursuant to Section
2.02, 2.07, 2.10, 3.06, 4.16, 4.17 or 9.05). The Registrar or co-
Registrar shall not be required to register the transfer of or
exchange of any Security (i) during a period beginning at the
opening of business fifteen (15) days before the mailing of a
notice of redemption of Securities and ending at the close of
business on the day of such mailing and (ii) selected for
redemption in whole or in part pursuant to Article III, except
the unredeemed portion of any Security being redeemed in part.
Notwithstanding any other provision of this Section
2.06, a Global Security representing Book-Entry Securities may
not be transferred in whole except by the Depository to a nominee
of the Depository or by a nominee of the Depository to the
Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor depository or a
nominee of such successor depository.
Notwithstanding the foregoing, no Global Security shall
be registered for transfer or exchange, or authenticated and
delivered, whether pursuant to this Section 2.06, Section 2.07,
2.10 or 3.06 or otherwise, in the name of a person other than the
Depository for such Global Security or its nominee until (i) the
Depository notifies the Company that it is unwilling or unable to
continue as Depository for such Global Security or if at any time
the Depository ceases to be a clearing agency registered under
the Exchange Act, and a successor depository is not appointed by
the Company within thirty (30) days, (ii) the Company executes
and delivers to the Trustee a Company Order that all such Global
Securities shall be exchangeable or (iii) there shall have
occurred and be continuing an Event of Default.
Except as provided above, any Security authenticated
and delivered upon registration of transfer or, or in exchange
for, or in lieu of, any Global Security, whether pursuant to this
Section 2.06, Section 2.07, 2.10 or 3.06 or otherwise, shall also
be a Global Security and bear the legend specified in Exhibit B.
SECTION II.7 Replacement Securities.
If a mutilated Security is surrendered to the Trustee
or the Registrar or if the Company and the Trustee receive
evidence to their satisfaction of the destruction, loss or theft
of any Security, the Company shall issue and the Trustee, upon
receipt of a Company Order, shall authenticate a replacement
Security if the Trustee's requirements are met. If required by
the Trustee or the Company, such Holder must provide an indemnity
bond or other indemnity, sufficient in the judgment of both the
Company and the Trustee, to protect the Company, the Trustee or
any Agent from any loss which any of them may suffer if a
Security is replaced. The Company and the Trustee may charge
such Holder for their respective reasonable, out-of-pocket
expenses in replacing a Security, including reasonable fees and
expenses of counsel. Every replacement Security shall constitute
an additional obligation of the Company and shall be entitled to
all benefits of this Indenture equally and proportionately with
all other Securities duly issued hereunder.
SECTION II.8 Outstanding Securities.
Securities outstanding at any time are all the
Securities that have been authenticated by the Trustee except
those canceled by it, those delivered to it for cancellation and
those described in this Section as not outstanding. Except as
set forth in Section 2.09, a Security does not cease to be
outstanding because the Company or any of its Affiliates holds
the Security.
If a Security is replaced pursuant to Section 2.07
(other than a mutilated Security surrendered for replacement), it
ceases to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced Security is held by a bona
fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant
to Section 2.07.
If the principal amount of any Security is considered
paid under Section 4.01 hereof, it ceases to be outstanding and
interest on it ceases to accrue.
If on a Redemption Date or the Maturity Date the Paying
Agent holds U.S. Legal Tender sufficient to pay all of the
Principal and interest due on the Securities payable on that date
and is not prohibited from paying such Principal and interest due
on such date, then on and after such date such Securities cease
to be outstanding and interest on them ceases to accrue.
SECTION II.9 Treasury Securities.
In determining whether the Holders of the required
principal amount of Securities have concurred in any declaration
of acceleration or notice of default or direction, waiver or
consent or any amendment, modification or other change to this
Indenture, the Securities owned by the Company or an Affiliate of
the Company shall be disregarded as though they were not
outstanding, except that, for the purposes of determining whether
the Trustee shall be protected in relying on any such direction,
waiver or consent, only Securities that the Trustee knows are so
owned shall be disregarded.
SECTION II.10 Temporary Securities.
Until definitive Securities are prepared and ready for
delivery, the Company may prepare and the Trustee shall
authenticate temporary Securities upon receipt of a written order
of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary
Securities to be authenticated and the date on which the
temporary Securities are to be authenticated. Temporary
Securities shall be substantially in the form of definitive
Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable
delay, the Company shall prepare and the Trustee shall
authenticate, upon receipt of a written order of the Company
pursuant to Section 2.02, definitive Securities in exchange for
temporary Securities. Until such exchange, Holders of temporary
Securities shall be entitled to the same rights, benefits and
privileges as definitive Securities.
SECTION II.11 Cancellation.
The Company at any time may deliver Securities to the
Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them
for registration of transfer, exchange or payment. The Trustee,
or at the direction of the Trustee, the Registrar or the Paying
Agent (other than the Company or a Subsidiary), and no one else,
shall cancel and, pursuant to a Company Order, shall dispose of
all Securities surrendered for registration of transfer,
exchange, payment, replacement or cancellation and certification
of their destruction (subject to the record retention
requirements of the Exchange Act) shall be delivered to the
Company unless, by a Company order, the Company shall direct that
canceled Securities be returned to it. Subject to Section 2.07,
the Company may not issue new Securities to replace Securities
that it has paid or delivered to the Trustee for cancellation.
If the Company shall acquire any of the Securities, such
acquisition shall not operate as a redemption or satisfaction of
the Indebtedness represented by such Securities unless and until
the same are surrendered to the Trustee for cancellation pursuant
to this Section 2.11.
SECTION II.12 Defaulted Interest.
If the Company defaults in a payment of interest on the
Securities, it shall, unless the Trustee fixes another record
date pursuant to Section 6.10, pay the defaulted interest, plus
(to the extent lawful) any interest payable on the defaulted
interest to the persons who are Holders on a subsequent special
record date, which date shall be a Business Day at least five (5)
Business Days prior to the payment date, in each case at the rate
provided in the Securities and in Section 4.01 hereof. The
Company shall fix or cause to be fixed such special record date
and payment date in a manner reasonably satisfactory to the
Trustee. At least fifteen (15) days before the subsequent
special record date, the Company shall mail or cause to be mailed
to each Holder, with a copy to the Trustee, a notice that states
the subsequent special record date, the payment date and the
amount of defaulted interest, and interest payable on such
defaulted interest, if any, to be paid. The Company may also pay
defaulted interest in any other lawful manner.
SECTION II.13 Deposit of Monies.
On or before 10:00 a.m. on each Interest Payment Date
and the Maturity Date, as the case may be, the Company shall
deposit or cause to be deposited with the Paying Agent, in
immediately available funds, U.S. Legal Tender sufficient to make
cash payments, if any, due on such Interest Payment Date or the
Maturity Date, as the case may be, in a timely manner that
permits the Trustee to remit payment to the Holders on such
Interest Payment Date or the Maturity Date, as the case may be.
SECTION II.14 CUSIP Number.
The Company in issuing the Securities may use one or
more CUSIP numbers, and if so, the Trustee shall use the CUSIP
numbers in notices of redemption or exchange as a convenience to
Holders; provided that any such notice may state that no
representation is made as to the correctness or accuracy of the
CUSIP number printed in the notice or on the Securities, and that
reliance may be placed only on the other identification numbers
printed on the Securities.
SECTION II.15 Restrictive Legends.
Each Global Security and Physical Security that
constitutes a Restricted Security shall bear the Private
Placement Legend on the face thereof until after the second
anniversary of the later of the Issue Date and the last date on
which the Company or any Affiliate of the Company was the owner
of such Security (or any predecessor security) (or such shorter
period of time as permitted by Rule 144(k) under the Securities
Act or any successor provision thereunder) (or such longer period
of time as may be required under the Securities Act or applicable
state securities laws in the opinion of counsel for the Company,
unless otherwise agreed by the Company and the Holder thereof).
Each Global Security shall also bear the legend as set
forth in Exhibit B.
SECTION II.16 Book Entry Provisions for Global Security.
(a) Members of, or participants in, the Depository
("Agent Members") shall have no rights under this Indenture with
respect to any Global Security held on their behalf by the
Depository, or the Trustee as its custodian, or under the Global
Securities, and the Depository may be treated by the Company, the
Trustee and any Agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any Agent of the Company or
the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depository or
impair, as between the Depository and its Agent Members, the
operation of customary practices governing the exercise of the
rights of a Holder of any Security.
(b) Transfers of a Global Security shall be limited to
transfers in whole, but not in part, to the Depository, its
successors or their respective nominees. Interests of beneficial
owners in a Global Security may be transferred or exchanged for
Physical Securities in accordance with the rules and procedures
of the Depository and the provisions of Section 2.17. In
addition, Physical Securities shall be transferred to all
beneficial owners in exchange for their beneficial interests in a
Global Security if (i) the Depository notifies the Company that
it is unwilling or unable to continue as Depository for the
Global Securities and a successor depositary is not appointed by
the Company within ninety (90) days of such notice or (ii) an
Event of Default has occurred and is continuing and the Registrar
has received a written request from the Depository to issue
Physical Securities.
(c) In connection with any transfer or exchange of a
portion of the beneficial interest in a Global Security to
beneficial owners pursuant to paragraph (b) of this Section 2.16,
the Registrar shall (if one or more Physical Securities are to be
issued) reflect on its books and records the date and a decrease
in the principal amount of such Global Securities in an amount
equal to the principal amount of the beneficial interest in the
Global Security to be transferred, and the Company shall execute
and the Trustee shall authenticate and deliver, one or more
Physical Securities of like tenor and amount.
(d) In connection with the transfer of an entire
Global Security to beneficial owners pursuant to paragraph (b) of
this Section 2.16, such Global Security shall be deemed to be
surrendered to the Trustee for cancellation, and the Company
shall execute and the Trustee shall authenticate and deliver, to
each beneficial owner identified by the Depository in exchange
for its beneficial interest in the Global Security, an equal
aggregate principal amount of Physical Security of authorized
denominations.
(e) Any Physical Security constituting a Restricted
Security delivered in exchange for an interest in a Global
Security pursuant to paragraph (c) or (d) of this Section 2.16
shall, except as otherwise provided by paragraphs (a)(i)(x) and
(d) of Section 2.17, bear the Private Placement Legend.
(f) The Holder of a Global Security may grant proxies
and otherwise authorize any Person, including Agent Members and
Persons that may hold interest through Agent Members, to take any
action which a Holder is entitled to take under this Indenture or
the Securities.
SECTION II.17 Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited
Investors and Non-U.S. Persons. The following provisions shall
apply with respect to the registration of any proposed transfer
of a Security constituting a Restricted Security to any
Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) The Registrar shall register the transfer of
any Security constituting a Restricted Security, whether or not
such Security bears the Private Placement Legend, if (x) the
requested transfer is after the second anniversary of the Issue
Date (provided, however, that neither the Company nor any
Affiliate of the Company has held any beneficial interest in such
Security, or portion thereof, at any time on or prior to the
second anniversary of the Issue Date) or (y) (1) in the case of a
transfer to an Institutional Accredited Investor which is not a
QIB (excluding Non-U.S. Persons), the proposed transferee has
delivered to the Registrar a certificate substantially in the
form of Exhibit C hereto or (2) in the case of a transfer to a
Non-U.S. Person, the proposed transferor has delivered to the
Registrar a certificate substantially in the form of Exhibit C
hereto; and
(ii) if the proposed transferee is an Agent Member
and the Securities to be transferred consist of Physical
Securities which after transfer are to be evidence by an interest
in the IAI Global Security or Regulation S Global Security, as
the case may be, upon receipt by the Registrar of (x) written
instructions given in accordance with the Depository's and the
Registrar's procedures and (y) the appropriate certificate, if
any, required by clause (y) of paragraph (i) above, the Registrar
shall register the transfer and reflect on its books and records
the date and an increase in the principal amount of the IAI
Global Security to be transferred, and the Trustee shall cancel
the Physical Securities so transferred; and
(iii) if the proposed transferor is an Agent
Member seeking to transfer an interest in a Global Security, upon
receipt by the Registrar of (x) written instructions given in
accordance with Depository's and the Registrar's procedures and
(y) the appropriate certificate, if any, required by clause (y)
of paragraph (i) above, the Registrar shall register the transfer
and reflect on its books and records the date and (a) a decrease
in the principal amount of the Global Security from which such
interests are to be transferred in an amount equal to be the
principal amount of the Securities to be transferred and (B) an
increase in the principal amount of the IAI Global Security or
the Regulation S Global Security, as the case may be, in an
amount equal to the principal amount of the Securities to be
transferred.
(b) Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed transfer
of a Security constituting a Restricted Security to a QIB
(excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer of
any Restricted Security if such transfer is being made by a
proposed transferor who has checked the box provided for on the
form of Security stating, or has otherwise advised the Company
and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who
has signed the certification provided for on the form of Security
stating, or has otherwise advised the Company and the Registrar
in writing, that it is purchasing the Security for its own
account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB
within the meaning of Rule 144A, and is aware that the sale to it
is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent
Member, and the Securities to be transferred consist of Physical
Securities which after transfer are to be evidenced by an
interest in a Global Security, upon receipt by the Registrar of
written instructions given in accordance with the Depository's
and the Registrar's procedures, the Registrar shall reflect on
its books and records the date and an increase in the principal
amount of such Global Security in an amount equal to the
principal amount of the Physical Securities to be transferred,
and the Trustee shall cancel the Physical Securities so
transferred; and
(iii) if the proposed transferor is an Agent
Member seeking to transfer an interest in the IAI Global Security
or the Regulation S Global Security, upon receipt by the
Registrar of written instructions given in accordance with the
Depository's and the Registrar's procedures, the Registrar shall
register the transfer and reflect on its books and records the
date and (A) a decrease in the principal amount of the IAI Global
Security or the Regulation S Global Security, as the case may be,
in an amount equal to the principal amount of the Securities to
be transferred and (B) an increase in the principal amount of the
Global Security in an amount equal to the principal amount of the
Securities to be transferred.
(c) Restrictions on Transfer and Exchange of Global
Securities. Notwithstanding any other provisions of this
Indenture, a Global Security may not be transferred as a whole
except by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository or any such nominee
to a successor Depository or a nominee of such successor
Depository.
(d) Private Placement Legend. Upon the transfer,
exchange or replacement of Securities not bearing the Private
Placement Legend, the Registrar shall deliver Securities that do
not bear the Private Placement Legend. Upon the transfer,
exchange or replacement of Securities bearing the Private
Placement Legend, the Registrar shall deliver only Securities
that bear the Private Placement Legend unless (i) the requested
transfer is after the second anniversary of the Issue Date
(provided, however, that, to the knowledge of the Trustee,
neither the Company nor any Affiliate of the Company has held any
beneficial interest in such Security, or portion thereof, at any
time prior to or on the second anniversary of the Issue Date), or
(ii) there is delivered to the Registrar an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the
effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the
provisions of the Securities Act.
(e) General. By its acceptance of any Security
bearing the Private Placement Legend, each Holder of such a
Security acknowledges the restrictions on transfer of such Note
set forth in this Indenture and in the Private Placement Legend
and agrees that it will transfer such Security only as provided
in this Indenture.
The Registrar shall retain copies of all letters,
notices and other written communications received pursuant to
Section 2.16 or this Section 2.17. The Company shall have the
right to inspect and make copies of all such letters, notices or
other written communications at any reasonable time during the
Registrar's normal business hours upon the giving of reasonable
written notice to the Registrar.
(f) Transfers of Securities Held by Affiliates. Any
certificate (i) evidencing a Security that has been transferred
to an Affiliate of the Company within two (2) years after the
Issue Date, as evidenced by a notation on the Assignment Form for
such transfer or in the representation letter delivered in
respect thereof or (ii) evidencing a Security that has been
acquired from an Affiliate (other than by an Affiliate) in a
transaction or a chain of transactions not involving any public
offering, shall, until two (2) years after the last date on which
the Company or any Affiliate of the Company was an owner of such
Security, in each case, bear the Private Placement Legend, unless
otherwise agreed by the Company (with written notice thereof to
the Trustee).
ARTICLE III.
REDEMPTION
SECTION III.1 Notices to Trustee.
If the Company elects to redeem Securities pursuant to
paragraph 5 of the Securities, it shall notify the Trustee and
the Paying Agent in writing of the Redemption Date, the
Redemption Price and the principal amount of the Securities to be
redeemed and whether it wants the Trustee to give notice of
redemption to the Holders (at the Company's expense) at least
forty-five (45) days (unless a shorter notice shall be
satisfactory to the Trustee) but not more than sixty (60) days
before the Redemption Date, together with an Officers'
Certificate stating that such redemption will comply with the
conditions contained herein and in the Securities. Any such
notice may be canceled at any time prior to notice of such
redemption being mailed to any Holder and shall thereby be void
and of no effect. Notwithstanding anything set forth in this
Article III, the Company shall at all times comply with Article X
hereof.
SECTION III.2 Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed,
the Trustee shall select the Securities to be redeemed pro rata
in proportion to the relative number of Securities of each
Holder. The Trustee shall make the selection not more than sixty
(60) days and not less than thirty (30) days before the
Redemption Date from the Securities outstanding and not
previously called for redemption. The Trustee shall promptly
notify the Company in writing of the Securities selected for
redemption and, in the case of any Security selected for partial
redemption, the principal amount thereof to be redeemed.
Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for
redemption.
SECTION III.3 Notice of Redemption.
At least thirty (30) days but not more than sixty (60)
days before a Redemption Date, the Company shall mail a notice of
redemption by first class mail to each Holder whose Securities
are to be redeemed at the address of such Holder appearing in the
Security register maintained by the Registrar. At the Company's
request, the Trustee shall give the notice of redemption in the
Company's name and at the Company's expense. Each notice of
redemption shall identify the Securities to be redeemed and shall
state:
(i) the Redemption Date;
(ii) the Redemption Price and the amount of accrued
interest, if any, to be paid;
(iii) the name and address of the Paying Agent;
(iv) that Securities called for redemption must be
surrendered to the Paying Agent to collect the Redemption
Price and accrued interest, if any;
(v) that, unless the Company defaults in making the
redemption payment or such redemption payment is prevented
for any reason, interest on Securities called for redemption
ceases to accrue on and after the Redemption Date, and the
only remaining right of the Holders of such Securities is to
receive payment of the Redemption Price upon surrender to
the Paying Agent of the Securities redeemed;
(vi) if fewer than all the Securities are to be
redeemed, the identification of the particular Securities
(or portion thereof) to be redeemed, as well as the
aggregate principal amount of Securities to be redeemed and
the aggregate principal amount of Securities to be
outstanding after such partial redemption;
(vii) if any Security is being redeemed in part,
the portion of the principal amount of such Security to be
redeemed and that, after the Redemption Date, and upon
surrender of such Security, a new Security or Securities in
the aggregate principal amount equal to the unredeemed
portion thereof will be issued without charge to the
Security holder;
(viii) the CUSIP number, if any, relating to such
Securities pursuant to Section 2.14 hereof; and
(ix) that the notice is being sent pursuant to this
Section 3.03 and pursuant to the optional redemption
provisions of the Securities.
SECTION III.4 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with
Section 3.03, Securities called for redemption become due and
payable on the Redemption Date and at the Redemption Price. Upon
surrender to the Trustee or Paying Agent, such Securities called
for redemption shall be paid at the Redemption Price plus accrued
and unpaid interest, if any, to the Redemption Date, but interest
installments whose maturity is on or prior to such Redemption
Date will be payable on the relevant Interest Payment Dates to
the Holders of record at the close of business on the relevant
Record Dates referred to in the Securities.
Notice of redemption shall be deemed to be given when
mailed to each Holder in the manner herein provided whether or
not the Holder receives such Notice. In any event, failure to
give such notice, or any defect therein, shall not affect the
validity of the proceedings for the redemption of any other
Security.
SECTION III.5 Deposit of Redemption Price.
On or prior to each Redemption Date, the Company shall
deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the Redemption Price of all Securities to be redeemed on that
date. Upon the written request of the Company, the Paying Agent
shall promptly return to the Company any U.S. Legal Tender so
deposited which is not required for that purpose except with
respect to monies owed as obligations to the Trustee pursuant to
Article VII.
If the Company complies with the preceding paragraph,
interest on the Securities to be redeemed will cease to accrue on
the applicable Redemption Date, whether or not such Securities
are presented for payment. If any Security called for redemption
shall not be so paid upon surrender for redemption, interest will
be paid, from the Redemption Date until such Redemption Price is
paid, on the unpaid Principal of and on any interest not paid on
such unpaid Principal, in each case, at the rate provided in the
Securities.
SECTION III.6 Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in
part, the Company shall issue and the Trustee shall authenticate
for the Holder, at the expense of the Company, a new Security or
Securities equal in principal amount to the unredeemed portion of
the Security surrendered.
ARTICLE IV.
COVENANTS
SECTION IV.1 Payment of Securities.
The Company shall pay the Principal of and interest on
the Securities on the dates and in the manner provided in the
Securities and this Indenture. An installment of Principal of or
interest on the Securities shall be considered paid on the date
it is due if the Trustee or Paying Agent holds on that date U.S.
Legal Tender designated for and sufficient to pay the installment
and/or interest then due and is not prohibited from paying such
installment on such date.
The Company shall pay interest on (i) overdue Principal
at the rate set forth in the second paragraph of paragraph 1 of
the Securities, and (ii) overdue installments of interest at the
same rate, to the extent lawful.
SECTION IV.2 Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan,
The City of New York, the office or agency required under Section
2.03. The Company shall give prior notice to the Trustee of the
location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders,
notices and demands described in such Section 2.03 may be made or
served at the address of the Trustee set forth in Section 2.03.
The Company may also from time to time designate one or
more other offices or agencies where the Securities may be
presented or surrendered for any or all such purposes and may
from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or
agency in the Borough of Manhattan, The City of New York, for
such purposes. The Company shall give prompt written notice to
the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency. The
Company hereby initially designates the corporate trust office of
the Trustee set forth in Section 2.03 as such office.
SECTION IV.3 Corporate Existence.
Except as otherwise permitted by Article V, the Company
shall do or cause to be done all things necessary to preserve and
keep in full force and effect its existence and the existence of
each of its Subsidiaries, in accordance with the respective
organizational documents of each of them and the rights (charter
and statutory) and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be
required to preserve, with respect to itself, any right or
franchise, and with respect to any of its Subsidiaries, any such
existence, right or franchise, if (a) the Board of Directors of
the Company shall determine reasonably and in good faith that the
preservation thereof is no longer desirable in the conduct of the
business of the Company and (b) the loss thereof is not adverse
in any material respect to the Holders.
SECTION IV.4 Payment of Taxes and Other Claims.
The Company shall and shall cause each of its
Subsidiaries to, pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all
taxes, assessments and governmental charges (including
withholding taxes and any penalties, interest and additions to
taxes) levied or imposed upon it or any of its Subsidiaries or
properties of it or any of its Subsidiaries, and (ii) all lawful
claims for labor, materials and supplies that, if unpaid, might
by law become a Lien upon the property of it or any of its
Subsidiaries; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged
any such tax, assessment, charge or claim if either (a) the
amount, applicability or validity thereof is being contested in
good faith by appropriate proceedings and an adequate reserve has
been established therefor to the extent required by GAAP, or (b)
the failure to make such payment or effect such discharge
(together with all other such failures) would not have a material
adverse effect on the financial condition or results of
operations of the Company and its Subsidiaries, taken as a whole.
SECTION IV.5 Maintenance of Properties and Insurance.
(a) The Company shall cause all Properties used or useful
in the conduct of its business or the business of any of its
Subsidiaries to be maintained and kept in satisfactory condition,
repair and working order and supplied with all necessary
equipment and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all
as in its judgment may be necessary, so that the business carried
on in connection therewith may be properly and advantageously
conducted at all times unless the failure to so maintain such
properties (together with all other such failures) would not have
a material adverse effect on the financial condition or results
of operations of the Company and its Subsidiaries taken as a
whole; provided, however, that nothing in this Section 4.05 shall
prevent the Company or any of its Subsidiary from discontinuing
the operation or maintenance of any of such properties or
disposing of any of them if such discontinuance or disposal is
either (i) in the ordinary course of business, (ii) in the good
faith judgment of the Board of Directors of the Company or the
Subsidiary concerned, or of the senior officers of the Company or
such Subsidiary, as the case may be, desirable in the conduct of
the business of the Company or such Subsidiary, as the case may
be, or (iii) is otherwise permitted by this Indenture.
(b) The Company shall provide or cause to be provided, for
itself and each of its Subsidiaries, insurance (including
appropriate self-insurance) against loss or damage of the kinds
that, in the reasonable, good faith opinion of the Company are
adequate and appropriate for the conduct of the business of the
Company and such Subsidiaries in a prudent manner, with reputable
insurers or with the government of the United States of America
or an agency or instrumentality thereof, in such amounts, with
such deductibles, and by such methods as shall be customary, in
the reasonable, good faith opinion of the Company, for companies
similarly situated in the industry, unless the failure to provide
such insurance (together with all other such failures) would not
have a material adverse effect on the financial condition or
results of operations of the Company and its Subsidiaries, taken
as a whole.
(c) The Company shall and shall cause each of its
Subsidiaries to keep proper books of record and account, in which
full and correct entries shall be made of all financial
transactions and the assets and business of the Company and each
Subsidiary in accordance with GAAP consistently applied to the
Company and its Subsidiaries taken as a whole.
SECTION IV.6 Compliance Certificates; Notice of Default.
(a) The Company shall deliver to the Trustee, within sixty
(60) days after the end of each of the Company's first three
fiscal quarters and within ninety (90) days after the end of the
Company's fiscal year, an Officers' Certificate stating that a
review of the Company's activities and the activities of its
Subsidiaries during the preceding fiscal period has been made
under the supervision of the signing Officers with a view to
determining whether it has kept, observed, performed and
fulfilled its obligations under this Indenture and further
stating, as to each such Officer signing such certificate, that
to the best of his knowledge, the Company during such preceding
fiscal period has kept, observed, performed and fulfilled each
and every such covenant and no Default or Event of Default
occurred during such period and at the date of such certificate
there is no Default or Event of Default that has occurred and is
continuing or, if such signers do know of such Default or Event
of Default, the certificate shall describe the Default or Event
of Default and its status with particularity and what action the
Company has taken or proposes to take with respect thereto. The
Officers' Certificate shall also include all calculations
necessary to show covenant compliance. The Officers' Certificate
shall also notify the Trustee should the Company elect to change
the manner in which it fixes its fiscal year end.
(b) So long as (and to the extent) not contrary to the then
current recommendations of the American Institute of Certified
Public Accountants, the Company shall deliver to the Trustee
within ninety (90) days after the end of each fiscal year a
written statement by a nationally recognized firm of independent
public accountants stating (A) that their audit examination has
included a review of the terms of this Indenture and the
Securities as they relate to accounting matters, and (B) whether,
in connection with their audit examination, any Default or Event
of Default has come to their attention and if such a Default or
Event of Default has come to their attention, specifying the
nature and period of existence thereof.
(c) The Company will deliver to the Trustee promptly, and
in any event within ten (10) days after the Company becomes aware
or should reasonably have become aware of the occurrence of any
Default or Event of Default, an Officers' Certificate describing
such Default or Event of Default and its status with
particularity and what action the Company is taking or proposes
to take with respect thereto.
SECTION IV.7 Compliance with Laws.
The Company shall comply, and shall cause each of its
Subsidiaries to comply, with the respective organizational
documents of each of them and all applicable statutes, rules,
regulations, orders and restrictions of the United States of
America, all states, provinces and municipalities thereof, and of
any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing,
in respect of the conduct of their respective businesses and the
ownership of their respective properties, except such the
noncompliance with which would not in the aggregate have a
material adverse effect on the financial condition or results of
operations of the Company and its Subsidiaries taken as a whole.
SECTION IV.8 SEC Reports and Other Information.
(a) To the extent permitted by applicable law or
regulation, whether or not the Company is subject to Section
13(a) or 15(d) of the Exchange Act, the Company shall file with
the SEC the annual reports, quarterly reports and other documents
which the Company would have been required to file with the SEC
pursuant to such Sections 13(a) and 15(d) if the Company were so
subject, such documents to be filed with the SEC on or prior to
the respective dates (the "Required Filing Dates") by which the
Company would have been required so to file such documents if the
Company were so subject. The Company shall comply with its
reporting and filing obligations under the applicable federal
securities laws. The Company shall also in any event (x) within
fifteen (15) days after each Required Filing Date (i) transmit by
mail to all Holders, as their names and addresses appear in the
register of Securities maintained by the Registrar, without cost
to such Holders and (ii) file with the Trustee, copies of the
annual reports, quarterly reports and other documents which the
Company would have been required to file with the SEC pursuant to
Sections 13(a) and 15(d) of the Exchange Act if the Company were
subject to such Sections and (y) if filing such documents by the
Company with the SEC is not permitted under the Exchange Act,
promptly upon written request supply copies of such documents to
any prospective Holder. In any event, such annual reports will
contain consolidated financial statements and notes thereto,
together with an opinion thereon expressed by an independent
public accounting firm with an established national reputation
and management's discussion and analysis of financial condition
and results of operations, and such quarterly reports will
contain unaudited condensed consolidated financial statements for
the first three quarters of each fiscal year. Upon qualification
of this Indenture under the TIA, the Company shall also comply
with the provisions of TIA 314(a).
(b) At any time when the Company is not subject to Section
13 or 15(d) of the Exchange Act, upon the request of a Holder,
the Company will promptly furnish or cause to be furnished such
information as is specified pursuant to Rule 144A(d)(4) under the
Securities Act (or any successor provision thereto) to such
Holder or to a prospective purchaser of such Security designated
by such Holder, as the case may be, in order to permit compliance
by such Holder with Rule 144A under the Securities Act.
SECTION IV.9 Waiver of Stay Extension or Usury Laws.
The Company covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law or any usury law or other
law that would prohibit or forgive the Company from paying all or
any portion of the Principal of or interest on the Securities as
contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit
or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted
to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
SECTION IV.10 Limitation on Indebtedness.
The Company shall not, and shall not cause or permit
any of its Subsidiaries to, directly or indirectly, create,
incur, assume, issue, guarantee or in any manner become liable
for or with respect to the payment of, any Attributable
Indebtedness or Indebtedness (including any Acquired
Indebtedness), except that the Company and its Subsidiaries may
incur (each of which shall be given independent effect):
(a) Indebtedness of the Company evidenced by the Securities
or otherwise arising under this Indenture;
(b) Indebtedness of the Company and its Subsidiaries
outstanding from time to time pursuant to the Credit Agreement
not to exceed at any one time $75.0 million in the aggregate,
minus the amount of Indebtedness pursuant to the Credit Agreement
repaid after the Issue Date with the Net Cash Proceeds from an
Asset Sale pursuant to Section 4.17;
(c) Indebtedness of the Company and its Subsidiaries
outstanding on the Issue Date; provided, none of the instruments
and agreements evidencing or governing such Indebtedness shall be
amended, modified or supplemented after the Issue Date to change
any terms of subordination, payment of Principal, interest, fees
or other amounts due, or rights of conversion, put, exchange or
other similar rights or any other covenants, terms or conditions
thereof to be less favorable to the Holders than such terms,
rights and conditions as is effect on the Issue Date.
(d) purchase money Indebtedness of the Company described in
Section 4.13(d) not to exceed an aggregate outstanding amount at
any time of $3,000,000;
(e) Indebtedness of the Company, in an aggregate principal
amount not to exceed $7,500,000 if, (x) immediately after giving
pro forma effect to the incurrence thereof, no Default or Event
of Default shall have occurred and (y) the aggregate amount of
Indebtedness that the Company could borrow under the Credit
Agreement pursuant to the terms thereof and clause (b) above is
less than $5,000,000;
(f) Indebtedness of a Subsidiary of the Company issued to
and held by the Company or a Wholly-Owned Subsidiary of the
Company; provided, however, that any transfer of such
Indebtedness (other than to the Company or a Wholly-Owned
Subsidiary of the Company) shall be deemed, in such case, to
constitute a new incurrence of such Indebtedness by the issuer
thereof;
(g) Indebtedness of the Company owed to or held by a Wholly-
Owned Subsidiary of the Company that is unsecured and
subordinated in right of payment to the Securities; provided,
however, that any subsequent issuance or transfer of any Capital
Stock which results in any such other Wholly-Owned Subsidiary
ceasing to be a Wholly-Owned Subsidiary of the Company, or any
transfer of such Indebtedness (other than to a Wholly-Owned
Subsidiary of the Company), shall be deemed in each case to
constitute a new incurrence of such Indebtedness by the Company;
(h) Indebtedness represented by Hedging Obligations of the
Company or its Subsidiaries with respect to Indebtedness of the
Company or its Subsidiaries (which Indebtedness is otherwise
permitted to be incurred under this Section 4.10 and which
Hedging Obligations are otherwise permitted to be incurred under
Section 4.24) to the extent the notional principal amount of such
Hedging Obligations does not exceed the principal amount of the
Indebtedness to which such Hedging Obligations relate;
(i) any replacements, renewals, refinancings and extensions
of Indebtedness incurred under clauses (a), (b), (c), (d), (e),
(f) and (g) above provided that (i) any such replacement,
renewal, refinancing and extension (x) shall not provide for any
mandatory redemption, amortization or sinking fund requirement in
an amount greater than or at a time prior to the amounts and
times specified in the Indebtedness being replaced, renewed,
refinanced or extended and (y) shall be contractually
subordinated to the Securities at least to the extent, if at all,
that the Indebtedness being replaced, renewed, refinanced or
extended is subordinate to the Securities, (ii) any such
Indebtedness of any person must be replaced, refinanced or
extended with Indebtedness incurred by such person or by the
Company, (iii) the principal amount of Indebtedness incurred
pursuant to this clause (i) (or, if such Indebtedness provides
for an amount less than the principal amount thereof to be due
and payable upon a declaration of acceleration of the maturity
thereof, the original issue price of such Indebtedness) shall not
exceed the sum of the principal amount (or with respect to
Indebtedness which provides for an amount less than the principal
amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof, the accreted value thereof)
of Indebtedness so replaced, renewed, refinanced or extended,
plus accrued interest, the amount of any premium required to be
paid in connection with such replacement, renewal, refinancing or
extension pursuant to the terms of such Indebtedness or the
amount of any premium reasonably determined by the Company as
necessary to accomplish such replacement, renewal, refinancing or
extension by means of a tender offer or privately negotiated
purchase and the amount of fees and expenses incurred in
connection therewith, (iv) the covenants, terms and conditions of
any such extension, renewal, refunding or refinancing
Indebtedness (and of any agreement or instrument entered into in
connection therewith) are no less favorable to the Holders than
the terms of the Indebtedness as in effect prior to such action,
and (v) immediately prior to and immediately after giving effect
to any such extension, renewal, refunding or refinancing, no
Default or Event of Default shall have occurred and be
continuing; and
(j) the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of
business.
SECTION IV.11 Limitation on Restricted Payments.
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, make any Restricted
Payment, unless at the time of and after giving effect to such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and
be continuing or occur as a consequence thereof;
(b) the Company could incur at least $1.00 of Indebtedness
pursuant to clause (e) of Section 4.10 hereof; and
(c) the aggregate of all Restricted Payments declared or
made after the Issue Date through and including the date of such
Restricted Payment does not exceed the sum of (1) 50% of the
Company's Consolidated Net Income (or in the event such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit) from and including April 1, 1998 to and including the
last day of the fiscal quarter immediately preceding the date of
such Restricted Payment.
The provisions of this Section 4.11 shall not prohibit
(i) the payment of any dividend within sixty (60) days after the
date of declaration thereof, if such payment would comply with
the provisions of this Indenture at the date of the declaration
of such payment, (ii) the retirement of any shares of Capital
Stock of the Company or Indebtedness of the Company which is
subordinated in right of payment to the Securities by conversion
into, or by an exchange for, shares of Capital Stock of the
Company that are not Disqualified Stock or out of the Net
Proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of other shares of Capital Stock
(other than Disqualified Stock) of the Company, and (iii) the
redemption or retirement of Indebtedness of the Company which is
subordinated in right of payment to the Securities in exchange
for, by conversion into, or out of the Net Proceeds of, a
substantially concurrent sale of subordinated Indebtedness of the
Company (other than to a Subsidiary of the Company) that is
contractually subordinated in right of payment to the Securities
at least to the same extent that the Indebtedness being redeemed
or retired is subordinated to the Securities.
In determining the amount of Restricted Payments
permissible under clause (c) above, amounts expended pursuant to
clauses (i) and (ii) above shall be included as Restricted
Payments.
Not later than the date of making any Restricted
Payment (other than the dividend payments on the Series F
Preferred Stock), the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations
required by this Section 4.11 were computed, which calculations
may be based upon the Company's latest available financial
statements.
So long as no Default or Event of Default shall have
occurred and be continuing, or occur as a consequence thereof,
the provisions of this Section 4.11 shall not prohibit (i) the
declaration or payment of the dividends payable on the Series F
Preferred Sock as set forth in the Certificate of Designations
and (ii) purchases, in open market transactions, of Common Stock
in connection with the exercise of any warrants or options of the
Company, provided the payments made in connection with such
purchases do not exceed $500,000 in the aggregate in any Fiscal
Year or $2,000,000 in the aggregate during the term of this
Agreement.
SECTION IV.12 Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective or enter into any
agreement with any person that would cause any consensual
encumbrance or restriction of any kind on the ability of any
Subsidiary of the Company to (a) pay dividends, in cash or
otherwise, or make any other distributions on its Capital Stock
or any other interest or participation in, or measured by, its
profits owned by, or pay any Indebtedness owed to, the Company or
any of its Subsidiaries, (b) make loans or advances to the
Company or any of its Subsidiaries or (c) transfer any of its
Properties to the Company or any of its Subsidiaries, except, in
each case, for such encumbrances or restrictions existing under
or contemplated by or by reason of (i) any restrictions existing
under the Credit Agreement as in effect on the Issue Date, (ii)
any restrictions existing under any agreement that refinances,
replaces, amends or extends an agreement containing a restriction
permitted by clause (i) above; provided that the terms and
conditions of any such restrictions are not materially less
favorable to the holders of the Securities than those under or
pursuant to the agreement being refinanced, replaced, amended or
extended or (iii) customary non-assignment or sublease provisions
of any agreement of the Company or its Subsidiaries.
SECTION IV.13 Limitation on Liens.
Other than Permitted Liens, the Company shall not, and
the Company shall not permit, cause or suffer any of its
Subsidiaries to, create, incur, assume or suffer to exist any
Lien, charge or other encumbrance of any kind with respect to any
property or assets now owned or hereafter acquired by it, which
(a) secures Indebtedness of the Company subordinated in right of
payment to the Securities, unless the Securities are secured by a
Lien on such property that is senior to such Lien, (b) secures
Indebtedness of the Company which is pari passu in right of
payment with the Securities, unless the Securities are secured by
a Lien on such Property that is equal and ratable with such Lien,
(c) secures Indebtedness incurred to refinance Indebtedness which
has been secured by a Lien permitted under this Indenture and is
permitted to be refinanced under this Indenture, to the extent
such Liens extend to or cover Property of the Company or any of
its Subsidiaries not securing the Indebtedness so refinanced or
increase the extent of such Liens, or (d) purchase money Liens to
secure Indebtedness permitted under this Indenture (or as
extended or renewed as permitted under this Indenture) and
incurred to purchase fixed assets, unless such Indebtedness
represents not less than seventy-five percent (75%) and not more
than one hundred percent (100%) of the purchase price of such
assets as of the date of purchase thereof and no Property other
than the assets so purchased secures such Indebtedness.
Notwithstanding the foregoing, Liens shall be permitted
by the previous clauses (a) and (b) only to the extent that any
Indebtedness secured by such Liens is incurred pursuant to and in
accordance with this Indenture.
SECTION IV.14 Limitation on Investments, Loans and Advances.
The Company shall not make, and shall not permit any of
its Subsidiaries to make, any Investment, except: (i)
Investments by the Company or any of its Subsidiaries in any
Wholly-Owned Subsidiary of the Company (including any such
Investment pursuant to which a Person becomes a Wholly-Owned
Subsidiary of the Company) or in the Company by any of its
Subsidiaries; (ii) Investments represented by receivables created
or acquired in the ordinary course of business or the settlement
of such receivables in the ordinary course of business; (iii)
Investments permitted to be made pursuant to Section 4.11; (iv)
Investments represented by advances to employees, officers and
directors of the Company or its Subsidiaries made in the ordinary
course of business and consistent with reasonable and customary
business practices; (v) Permitted Investments; (vi) Investments
permitted to be made with the Net Cash Proceeds of Asset Sales
pursuant to Section 4.17; (vii) Investments existing on the Issue
Date which are set forth on Schedule 5.36 to the Securities
Purchase Agreement; (viii) Investments in Hedging Obligations
permitted under Section 4.24; (ix) Investments represented by
loans or advances to Subsidiaries which are not Guarantors
provided that (y) the aggregate outstanding principal amount of
such Investments shall not at any time exceed $1,000,000 and (z)
the repayment of such Investments is subordinated to the rights
of the Holders under this Indenture and the Guaranty Agreements;
and (x) Investments permitted to be made pursuant to Section
4.10(f) and Section 4.10(g).
SECTION IV.15 Limitation on Transactions with Affiliates.
The Company will not, and will not permit, cause or
suffer, any of its Subsidiaries to, participate in an Affiliate
Transaction, except in good faith and on terms that are no less
favorable to the Company or such Subsidiary, as the case may be,
than those that could have been obtained in a comparable
transaction on an arm's length basis from a person not an
Affiliate of the Company or such Subsidiary. With respect to any
Affiliate Transaction (and each series of related Affiliate
Transactions which are similar or part of a common plan)
involving aggregate payments or other market value in excess of
$1,000,000, the Company shall deliver an Officers' Certificate to
the Trustee certifying that such Affiliate Transaction (or series
of related Affiliate Transactions) complies with the foregoing
provisions and that such Affiliate Transaction (or series of
related Affiliate Transactions) was approved by a majority of the
Independent Directors of the Company and the Board of Directors
of the Company as a whole. Notwithstanding the foregoing, the
restrictions set forth in this Section 4.15 shall not apply to
(i) any employment agreement, consulting agreement and
indemnification obligations entered into by the Company or any of
its Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such
Subsidiary, (ii) the payment of reasonable and customary fees to
directors of the Company who are not employees of the Company,
and (iv) transactions permitted under Sections 4.10, 4.11 and
4.14 hereof.
SECTION IV.16 Change of Control.
(a) Upon the occurrence of a Change of Control (the date of
such occurrence being the "Change of Control Date"), the Company
shall notify or cause to be notified the Holders in writing of
such occurrence and shall make an offer to purchase (the "Change
of Control Offer"), on a Business Day (the "Change of Control
Payment Date") not later than sixty (60) days following the
Change of Control Date, all Securities then outstanding at the
Redemption Price plus accrued and unpaid interest, if any, to the
Change of Control Payment Date. The Change of Control Offer
shall remain open for at least twenty (20) Business Days and
until 5:00 p.m., New York City time, on the Business Day next
preceding the Change of Control Payment Date. Within ten (10)
days after the Change of Control Date requiring the Company to
make a Change of Control Offer pursuant to this Section 4.16, the
Company shall so notify the Trustee. Such notice shall be
accompanied by an Officers' Certificate setting forth the
circumstances and relevant facts regarding such Change of
Control. In connection with such notification to the Trustee,
the Company may instruct the Trustee to give, at the cost and
expense of the Company, the notice required to be given by clause
(b) below.
(b) Notice of a Change of Control Offer shall be sent, by
first class mail, to each Holder not less than twenty-five (25)
days nor more than forty-five (45) days before the Change of
Control Payment Date, with copies to the Trustee, which notice
shall, consistent with the provisions of this Section 4.16,
govern the terms of the Change of Control Offer. Such notice
shall contain all instructions and materials necessary to enable
such Holders to tender Securities pursuant to the Change of
Control Offer and shall state:
(i) that the Change of Control Offer is being made
pursuant to this Section 4.16 and that all Securities
properly tendered will be accepted for payment;
(ii) the Redemption Price (including the amount of
accrued interest) and the Change of Control Payment Date;
(iii) that any Security not tendered will continue
to accrue interest in accordance with the terms thereof;
(iv) that, unless the Company defaults in making
payment therefor, any Security accepted for payment pursuant
to the Change of Control Offer shall cease to accrue
interest after the Change of Control Payment Date;
(v) that Holders electing to have a Security purchased
pursuant to a Change of Control Offer will be required to
surrender the Security, with the form entitled "Option of
Holder to Elect Purchase" on the last page of the Security
completed, to the Paying Agent at the address specified in
the notice prior to 5:00 p.m., New York City time, on the
Business Day prior to the Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00
p.m., New York City time, on the Business Day prior to the
Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder,
the principal amount of the Securities the Holder delivered
for purchase, the Security certificate number (if any) and a
statement that such Holder is withdrawing its election to
have such Security purchased;
(vii) that Holders whose Securities are purchased
only in part will be issued new Securities in a principal
amount equal to the unpurchased portion of the Securities
surrendered; and
(viii) the circumstances and relevant facts
regarding such Change of Control.
(c) On or before the Change of Control Payment Date, the
Company shall (i) accept for payment Securities or portions
thereof tendered pursuant to the Change of Control Offer, (ii)
deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the purchase price of all Securities so tendered, and (iii)
deliver to the Trustee Securities so accepted together with an
Officers' Certificate stating the Securities or portions thereof
being purchased by the Company. The Paying Agent shall promptly
mail to the Holders of Securities so accepted payment in an
amount equal to the Redemption Price, and the Trustee shall
promptly authenticate and mail to such Holders new Securities
equal in principal amount to any unpurchased portion of the
Securities surrendered. The Paying Agent shall, upon written
request, return to the Company any U.S. Legal Tender not required
to fund the payment for Securities accepted for payment by the
Company. If any Security called for redemption shall not be so
paid upon surrender for redemption because of the failure of the
Company to comply with this clause (c), interest will be paid on
the unpaid Redemption Price from the Change of Control Payment
Date until such Redemption Price is paid, at the rate provided in
the Securities. Any Securities not so accepted shall be promptly
mailed by the Company to the Holder thereof.
(d) The Company shall comply, to the extent applicable,
with the requirements of Section 14(e) of the Exchange Act and
any other securities laws or regulations in connection with the
repurchase of securities pursuant to a Change of Control Offer.
To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Section 4.16,
the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its
obligations under this Section 4.16 by virtue thereof.
(e) The Company will, to the extent required to or
permitted by applicable Laws, publicly announce the results of
the Change of Control Offer on or as soon as practicable after
the Change of Control Payment Date.
SECTION IV.17 Disposition of Proceeds of Asset Sales.
(a) The Company will not, and will not permit any of its
Subsidiaries to, make any Asset Sale unless (i) the Company or
the applicable Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to
the Fair Market Value of the assets sold or otherwise disposed of
and (ii) at least eighty (85%) of the Net Proceeds received by
the Company or such Subsidiary, as the case may be, from such
Asset Sale shall be in the form of cash or Cash Equivalents (with
Indebtedness of the Company or its Subsidiaries assumed by the
purchaser being counted as cash for such purposes if the Company
and its Subsidiaries are permanently released from all liability
therefor); provided, however, that 100% of the Net Proceeds
received by the Company or such Subsidiary, as the case may be,
in such Asset Sale from the sale or other disposition of Capital
Stock shall be in the form of cash or Cash Equivalents.
(b) The Company shall or shall cause its Subsidiaries to,
within (i) 180 days of receipt of any Net Cash Proceeds (other
than Net Equity Proceeds) from an Asset Sale and (ii) within 90
days of the receipt of any Net Equity Proceeds from an Asset
Sale:
(x) apply such Net Cash Proceeds to permanently prepay
Indebtedness outstanding under the Credit Agreement and
effect a permanent reduction of the commitment available
under such Credit Agreement; or
(y) apply such Net Cash Proceeds to (1) make a
Permitted Acquisition or (2) acquire or construct capital
assets of the Company or any of its Subsidiaries in lines
of business related to the Company's and its Subsidiaries'
businesses as in existence on the Issue Date; provided, that
only Net Cash Proceeds that do not constitute Net Equity
Proceeds may be applied as provided in this clause (y).
To the extent such Net Cash Proceeds are not applied as provided
in the previous clauses (x) and (y) such Net Cash Proceeds shall
constitute "Excess Proceeds" subject to disposition as provided
in clause (c) below.
(c) When the aggregate amount of unutilized Excess Proceeds
equals or exceeds $2,500,000, the Company shall make an offer to
repurchase (the "Asset Sale Offer") on the Asset Sale Payment
Date an aggregate principal amount of the Securities equal to
such entire unutilized Company Excess Proceeds (and not just the
amount in excess of $2,500,000) at a price in cash equal to the
Redemption Price, plus accrued interest, if any, to the Asset
Sale Payment Date. The Company shall, subject to the provisions
described herein, be required to repurchase all Securities
validly tendered into such Asset Sale Offer and not withdrawn.
Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset to zero and any unutilized Excess
Proceeds may be utilized by the Company for any purpose.
(d) The Company shall provide the Trustee with prompt
notice of the occurrence of an Asset Sale Offer. Such notice
shall be accompanied by an Officers' Certificate setting forth
(i) a statement to the effect that the Company or any of its
Subsidiaries has made an Asset Sale and (ii) the aggregate
principal amount of Securities offered to be purchased and the
Redemption Price.
(e) Notice of an Asset Sale Offer shall be sent, by first
class mail, by the Company (or caused to be mailed by the
Company), with a copy to the Trustee, to all Holders of
Securities not less than thirty (30) days nor more than sixty
(60) days before the Asset Sale Payment Date at their last
registered address. The Asset Sale Offer shall remain open from
the time of mailing for at least twenty (20) Business Days and
until at least 5:00 p.m., New York City time, on the Business Day
next preceding the Asset Sale Payment Date. The notice to the
Holders shall contain all instructions and materials necessary to
enable such Holders to tender Securities pursuant to the Asset
Sale Offer. At the Company's request, the Trustee shall give, at
the cost and expense of the Company, the notice required by this
paragraph (e). Such notice shall state:
(i) that the Asset Sale Offer is being made pursuant
to this Section 4.17;
(ii) the Redemption Price (including the amount of
accrued interest, if any) for each Security and the Asset
Sale Payment Date;
(iii) that any Security not tendered or accepted
for payment will continue to accrue interest in accordance
with the terms thereof;
(iv) that unless the Company defaults on making payment
therefor, any Security accepted for payment pursuant to the
Asset Sale Offer shall cease to accrue interest after the
Asset Sale Payment Date;
(v) that Holders electing to have a Security purchased
pursuant to an Asset Sale Offer will be required to
surrender the Security, with the form entitled "Option of
Holder to Elect Purchase" on the last page of the Security
completed, to the Paying Agent at the address specified in
the notice prior to 5:00 p.m., New York City time, on the
Business Day prior to the Asset Sale Payment Date;
(vi) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00
p.m., New York City time, on the Business Day prior to the
Asset Sale Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder,
the principal amount of Securities the Holder delivered for
purchase, the Security certificate number (if any) and a
statement that such Holder is withdrawing his election to
have such Securities purchased;
(vii) that if Securities in a principal amount in
excess of the principal amount of the Securities to be
acquired pursuant to the Asset Sale Offer are tendered and
not withdrawn pursuant to the Asset Sale Offer, the Company
shall purchase Securities on a pro rata basis among the
Securities tendered (with such adjustment as may be deemed
appropriate by the Company so that only Securities in
denominations of $1,000 or integral multiples of $1,000
shall be so acquired);
(viii) that Holders whose Securities are purchased
only in part will be issued new Securities in a principal
amount equal to the unpurchased portion of the Securities
surrendered; and
(ix) the instructions that Holders must follow in order
to tender their Securities.
(f) On or before an Asset Sale Payment Date, the Company
shall (i) accept for payment, on a pro rata basis, the Securities
or portions thereof tendered pursuant to the Asset Sale Offer
(subject to adjustment as contemplated by paragraph (vii) above),
(ii) deposit with the Paying Agent U.S. Legal Tender sufficient
to pay the purchase price of all Securities or portions thereof
so tendered, and (iii) deliver to the Paying Agent the Securities
so accepted together with an Officers' Certificate identifying
the Securities or portions thereof accepted for payment by the
Company. The Paying Agent shall promptly mail to Holders of
Securities tendered to and accepted for payment an amount equal
to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders new Securities equal in
principal amount to any unpurchased portion of the Securities
surrendered. Any Securities not so accepted shall, upon written
request, be promptly mailed or delivered by the Company to the
Holder thereof. The Paying Agent shall return to the Company any
U.S. Legal Tender not required to fund the payment for Securities
accepted for payment by the Company. The Company will publicly
announce the results of the Asset Sale Offer as promptly as
practicable following the Asset Sale Payment Date.
(g) The Company shall comply, to the extent applicable,
with the requirements of Section 14(e) of the Exchange Act and
any other securities laws or regulations in connection with the
repurchase of Securities pursuant to an Asset Sale Offer. To the
extent that the provisions of any securities laws or regulations
conflict with provisions of this Section 4.17, the Company shall
comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this
Section 4.17 by virtue thereof.
SECTION IV.18 Limitation on Issuances and Sales of Preferred
Stock by Subsidiaries.
The Company (i) will not permit any of its Subsidiaries
to issue any Preferred Stock (other than to the Company or to a
Wholly-Owned Subsidiary of the Company) and (ii) will not permit
any person (other than the Company or a Wholly-Owned Subsidiary
of the Company) to own any Preferred Stock of any Subsidiary of
the Company.
SECTION IV.19 Limitation on Liquidations, Dissolutions, Mergers
and Consolidation.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution), or convey
sell, lease, assign, transfer or otherwise dispose of, all or
substantially all of its property, business or assets, or make
any material change in its present method of conducting business,
except, (i) any Subsidiary of the Company may be merged or
consolidated with or into the Company (provided that the Company
shall be the continuing or surviving corporation) or with or into
any one or more Wholly-Owned Subsidiaries of the Company
(provided that a Wholly-Owned Subsidiary of the Company shall be
the continuing or surviving corporation) and after giving effect
to any of such transactions, no Default or Event of Default shall
exist; and (ii) any Wholly-Owned Subsidiary of the Company may
sell, lease, transfer or otherwise dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to the Company
or any of its Wholly-Owned Subsidiaries.
SECTION IV.20 Net Worth.
The Company will not and will not permit any of its
Subsidiaries to permit Consolidated Net Worth to be less than (i)
eighty percent (80%) of the Consolidated Net Worth of the Company
as of the Issue Date, plus the amount of the Net Cash Proceeds
from the sale of the Series F Preferred Stock to be issued
pursuant to the Securities Purchase Agreement, and (ii) as at the
last day of each succeeding Fiscal Quarter of the Company and
until (but excluding) the last day of the next following Fiscal
Quarter of the Company, the sum of (A) the amount of Consolidated
Net Worth required to be maintained pursuant to this Section 4.20
as at the end of the immediately preceding Fiscal Quarter, plus
(B) sixty-five percent (65%) of Consolidated Net Income (with no
reduction for net losses during any period) for the Fiscal
Quarter of the Company ending on such day (including within
"Consolidated Net Income" certain items otherwise excluded as
provided for in the definition of "Consolidated Net Income", less
cash dividends paid with respect to the HCRI Preferred Stock),
plus (C) one hundred percent (100%) of the aggregate amount of
all increases in the stated capital and additional paid-in
capital accounts of the Company resulting from the issuance of
Capital Stock of the Company; provided, however, in the event all
the outstanding Warrants are redeemed, purchased, put, called,
exercised or otherwise no longer outstanding (pursuant to the
terms hereof) as of March 31, 1999, then in such event the
minimum Consolidated Net Worth under (i) above shall be
recalculated to be an amount equal to 68% of the Consolidated Net
Worth as at the Issue Date and corresponding adjustments under
(ii)(A) above shall be made accordingly.
SECTION IV.21 ERISA Compliance.
The Company will not and will not permit any of its
Subsidiaries to, directly or indirectly, (i) engage in a
"prohibited transaction," as such term is defined in Section 406
of ERISA or Section 4975 of the Internal Revenue Code, with
respect to any Plan or Multiemployer Plan or knowingly consent to
any other "party in interest" or any "disqualified person," as
such terms are defined in Section 3(14) of ERISA or Section
4975(e)(2) of the Internal Revenue Code, respectively, engaging
in any "prohibited transaction," with respect to any Plan or
Multiemployer Plan maintained by the Company or any of its
Subsidiaries; (ii) permit any Plan maintained by the Company or
any of its Subsidiaries to incur any "accumulated funding
deficiency," as defined in Section 302 of ERISA or Section 412 of
the Internal Revenue Code, unless such incurrence shall have been
waived in advance by the Internal Revenue Services; (iii)
terminate any Plan in a manner which could result in the
imposition of a Lien on any property of the Company or any of its
Subsidiaries pursuant to Section 4068 of ERISA; (iv) breach, or
knowingly permit any employee of officer or any trustee or
administrator of any Plan maintained by the Company or any of its
Subsidiaries to breach, any fiduciary responsibility imposed
under Title I of ERISA with respect to any Plan; (v) engage in
any transaction which would result in the incurrence of a
liability under section 4069 of ERISA; or (vi) fail to make
contributions to a Plan or Multiemployer Plan which results in
the imposition of a Lien on any property of the Company or any of
its Subsidiaries pursuant to Section 302(f) of ERISA or Section
412(n) of the Internal Revenue Code.
SECTION IV.22 Limitation on Acquisitions.
The Company will not and will not permit any of its
Subsidiaries to enter into any agreement, contract, binding
commitment or other arrangement providing for any Acquisition, or
take any action to solicit the tender of securities or proxies in
respect thereof in order to effect any Acquisition, other than
(i) Permitted Acquisitions, (ii) that certain acquisition
pursuant to, and in accordance with the terms of, the Asset
Purchase Agreement, to be dated on or about March 23, 1998, among
the Company, Headway Corporate Staffing Services of North
Carolina, Inc., Select Staffing Services, Inc. and Jack Powell,
(iii) that certain acquisition pursuant to, and in accordance
with the terms of, the Asset Purchase Agreement, to be dated on
or about March 23, 1998, among the Company, Cheney Associates,
L.L.C. and Timothy Cheney, an individual doing business under the
names Cheney Associates, Inc. and Cheney Consulting Group, and
(iv) that certain acquisition pursuant to, and in accordance with
the terms of, the Stock Purchase Agreement, to be dated on or
about March 23, 1998, among the Company, L&M Shore Family
Holdings Limited Partnership, Elder Investments Limited
Partnership, Mark Shore and Linda Elder.
SECTION IV.23 Certain Consolidated Ratios.
The Company will not and will not permit any of its
Subsidiaries to:
(a) permit at any time the Consolidated Leverage Ratio as
of the end of each four-quarter period ending during the
applicable period set forth below, to be greater than that ratio
set forth opposite each such period:
Consolidated Leverage Ratio
Period Must Not Be Greater Than
Issue Date through and including 3.75 to 1.00
September 30, 1999
October 1, 1999 through and including 3.5 to 1.00
September 30, 2001
October 1, 2001 and thereafter 3.0 to 1.00;
(b) permit at any time the Consolidated Fixed Charge Ratio
to be less than 1.35 to 1.00; and
(c) permit at any time the Consolidated Interest Coverage
Ratio to be less than 3.0 to 1.00.
SECTION IV.24 Limitation on Hedging Obligations.
The Company will not and will not permit any of its
Subsidiaries to incur any Hedging Obligations or enter into any
agreements, arrangements, devices or instruments relating to
Hedging Obligations, except for Hedging Obligations the aggregate
notional amount of which does not exceed, the aggregate at any
time the lower of (i) 45,000,000, and (ii) 60% of the aggregate
commitment under the Credit Agreement, less any permanent
reductions in such commitment.
SECTION IV.25 Sale of Subsidiaries.
The Company will not sell, convey, transfer, assign or
otherwise dispose of any Subsidiary of the Company or any
division, operating unit or other business unit of the Company
that, on a pro forma basis, constitutes more than 20% of the pro
forma Consolidated EBITDA of the Company.
SECTION IV.26 Conduct of Business.
The Company shall not, and shall not permit any of its
Subsidiaries to, engage in any business other than the business
engaged in on the Issue Date.
SECTION IV.27 Additional Guarantors.
The Company shall cause each newly formed or acquired
Domestic Subsidiary to execute the Guaranty Agreement within
fifteen (15) Business Days of the formation or acquisition of
such Subsidiary.
ARTICLE V.
SUCCESSOR CORPORATION
SECTION V.1 Consolidation, Merger, Conveyance, Transfer or
Lease.
The Company shall not consolidate with or merge with or
into or sell, assign, convey, lease, transfer or otherwise
dispose of all or substantially all of its properties and assets
(determined on a consolidated basis for the Company and its
Subsidiaries, taken as a whole) to another Person or Persons, in
a single transaction or through a series of related transactions,
or cause or permit any of its Subsidiaries to do any of the
foregoing, unless:
(a) the Company is the continuing Person, or the Person
formed by or surviving such consolidation or merger or the Person
to which such sale, assignment, conveyance, lease, transfer or
other disposition is made (the "surviving entity") is a
corporation organized and validly existing under the laws of the
United States, any State thereof or the District of Columbia;
(b) the surviving entity shall expressly assume, by a
supplemental indenture executed and delivered to the Trustee, in
form and substance reasonably satisfactory to the Trustee, all of
the obligations of the Company under the Securities and this
Indenture;
(c) immediately before and immediately after giving effect
to such transaction, or series of transactions (including,
without limitation, any Indebtedness incurred or anticipated to
be incurred in connection with or in respect of such transaction
or series of transactions), no Default or Event of Default shall
have occurred and be continuing;
(d) the Company or the surviving entity (in the case of a
merger or consolidation involving the Company or any sale,
assignment, conveyance, lease, transfer or other disposition of
all or substantially all of the Company's properties and assets)
shall immediately after giving effect to such transaction or
series of transactions (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection
with or in respect of such transaction or series of transactions)
have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such
transaction or series of transactions;
(e) immediately after giving effect to such transaction or
series of transactions, the Company or the surviving entity (in
the case of a merger or consolidation involving the Company or
any sale, assignment, conveyance, lease, transfer or other
disposition of all or substantially all of the Company's assets)
could incur $1.00 of Indebtedness pursuant to clause (e) of
Section 4.10 hereof;
(f) the Company or the surviving entity shall have
delivered to the Trustee an Officers' Certificate and an Opinion
of Counsel, each stating that (i) such consolidation, merger,
sale, assignment, conveyance, lease, transfer or other
disposition, (ii) if a supplemental indenture is required in
connection with such transaction or series of transactions, such
supplemental indenture complies with this Section 5.01, and (iii)
all conditions precedent in this Indenture relating to the
transaction or series of transactions have been satisfied; and
(g) the Company has delivered to the Trustee an opinion or
certificate of a nationally recognized firm of independent public
accountant complying with the applicable provisions of TIA
314(c)(3) and setting forth the computation of the Consolidated
Net Worth (i) of the surviving entity as provided in Section
5.01(d) and the ability of the Company or the surviving entity to
incur at least $1.00 in additional Indebtedness as provided in
Section 5.01(e), immediately following the transaction, and (ii)
of the Company, immediately preceding such transaction, in
accordance with clause (d) or (e) above, certifying to the
accuracy thereof.
SECTION V.2 Successor Entity Substituted.
Upon any consolidation, merger or any transfer of all
or substantially all of the assets of the Company in accordance
with Section 5.01, the surviving entity formed by such
consolidation or into or with which the Company is merged or to
which such transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such surviving entity
had been named as the Company herein and the Company shall be
discharged from all obligations and covenants under the Indenture
and the Securities.
ARTICLE VI.
DEFAULT AND REMEDIES
SECTION VI.1 Events of Default.
An "Event of Default" occurs if:
(i) the Company defaults in the payment of interest on
any Security when the same becomes due and payable and
continuance of any such default for a period of thirty (30) days;
or
(ii) the Company defaults in the payment of the
Principal of or premium on any Security as and when due and
payable (including a default in payment upon an offer to purchase
required to be made by this Indenture); or
(iii) the Company defaults in the performance, or
breach, of any material covenant, obligation or agreement in the
Securities or this Indenture (other than defaults specified in
clause (i) or (ii) above), and such default or breach continues
for a period of thirty (30) days after written notice to the
Company by the Trustee or to the Company and the Trustee by the
Holders of at least 30% in aggregate principal amount of the
outstanding Securities; or
(iv) the failure by the Company to observe or perform
any material covenant, obligation or agreement contained in the
Securities Purchase Agreement or the Registration Rights
Agreement and such failure continues for a period of thirty (30)
days; or
(v) a Series F Stock Event of Default (as such term is
defined in the Certificate of Designations) has occurred and is
continuing (including, without limitation, the Company's failure
to pay any dividend or the failure to make any redemption payment
that it is obligated to make, whether or not such payment is
legally permissible or conflicts with any other agreement to
which the Company or any of its Subsidiaries is a party or by
which any of its or their respective Properties are bound); or
(vi) any representation or warranty contained in the
Financing Documents or any writing furnished by the Company or
any of its Subsidiaries to any Holder, contains any untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading; or
(vii) failure by the Company or any of its
Subsidiaries (a) to make any payment when due with respect to any
other Indebtedness under one or more classes or issues of
Indebtedness which one or more classes or issues of Indebtedness
are in an aggregate principal amount of $5,000,000 or more and,
with respect to Indebtedness under the Credit Agreement, such
failure results in acceleration of the maturity thereof; or (b)
to perform any term, covenant, condition, or provision of one or
more classes or issues of Indebtedness which one or more classes
or issues of Indebtedness are in an aggregate principal amount of
$5,000,000 or more, which failure, in the case of this clause
(b), results in an acceleration of the maturity thereof; or
(viii) one or more judgments, orders or decrees for
the payment of money in excess of $2,500,000, either individually
or in an aggregate amount, shall be entered against the Company
or any of its Subsidiaries or any of their respective properties
and shall not be discharged and there shall have been a period of
thirty (30) days during which a stay of enforcement of such
judgment or order, by reason of pending appeal or otherwise,
shall not be in effect; or
(ix) any of the Financing Documents ceases to be in
full force and effect (other than as a result of termination
pursuant to its terms) or any such Financing Document or any of
its material provisions is declared or asserted to be null and
void or otherwise becomes unenforceable in accordance with its
terms;
(x) the Company or any Subsidiary redeems, or calls
for redemption, or purchases or enters into any agreement with
respect to the redemption or purchase, or the holders thereof
exercise any rights to cause the redemption, of any shares of
Series F Preferred Stock;
(xi) the Company or any Material Subsidiary of the
Company pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding with
respect to itself,
(B) consents to the entry of an order for relief
against it in an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of
it or for all or any material part of its property,
(D) makes a general assignment for the benefit of
its creditors,
(E) consents to or acquiesces in the institution
of bankruptcy or insolvency proceedings against it,
(F) shall generally not pay its debts when such
debts become due or shall admit in writing its
inability to pay its debts generally, or
(G) takes any corporate action in furtherance of
or to facilitate, conditionally or otherwise, any of
the foregoing; or
(xii) a court of competent jurisdiction enters a
decree, judgment or order under any Bankruptcy Law that:
(A) is for relief against the Company or any
Material Subsidiary of the Company in an involuntary
case or proceeding,
(B) appoints a Custodian of the Company or any
Material Subsidiary of the Company for all or
substantially all of its properties, or
(C) orders the winding-up or liquidation of the
Company or any Material Subsidiary of the Company, and
in each case the order or decree remains unstayed and
in effect for sixty (60) days; or
(xiii) this Indenture ceases to be in full force and
effect or ceases to give the Trustee, an any material
respect, the liens, rights, powers and privileges purported
to be created thereby, in each case, as determined by a
court of competent jurisdiction.
The Company shall, within sixty (60) days following the
end of each of its first three Fiscal Quarters, and within ninety
(90) days following the end of each of its Fiscal Years, file
with the Trustee an Officers' Certificate certifying that the
Company has performed all of its obligations under this Indenture
in all material respects and that no Event of Default has
occurred during the preceding Fiscal Quarter or Fiscal Year, as
the case may be, or in the event any such Event of Default has
occurred, the facts and circumstances resulting in such Event of
Default. The Company shall promptly upon the occurrence thereof
provide notice to the Trustee of an Event of Default.
SECTION VI.2 Acceleration.
If an Event of Default (other than an Event of Default
specified in clause (xi) or (xii) above with respect to the
Company or any Material Subsidiary of the Company) occurs and is
continuing, then the Trustee or the Holders of at least thirty
percent (30%) in aggregate principal amount of the outstanding
Securities may, by written notice to the Company and the Trustee,
and the Trustee upon the request of the Holders of not less than
thirty percent (30%) in aggregate principal amount of the
outstanding Securities shall, subject in each case to Section
10.02(e), declare the Principal of and accrued and unpaid
interest, if any, on all the Securities on the date of such
declaration to be due and payable immediately together with an
amount equal to the premium that would be payable if all
outstanding Securities at the time were redeemed by the Company,
or any Material Subsidiary of the Company, pursuant to Article
III hereof (the "Default Amount"). Upon any such declaration,
the Default Amount shall become due and payable immediately. If
an Event of Default specified in clause (xi) or (xii) above with
respect to the Company occurs and is continuing, then the Default
Amount on all of the Securities shall ipso facto become and be
immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder.
After a declaration of acceleration, the Required
Holders may, by notice to the Trustee, rescind such declaration
of acceleration if all existing Events of Default have been cured
or waived, other than nonpayment of the Default Amount on the
Securities that have become due solely as a result of such
acceleration and if the rescission of acceleration would not
conflict with any judgment, order or decree by a court of
competent jurisdiction. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION VI.3 Other Remedies.
If an Event of Default occurs and is continuing, the
Trustee may, subject to Section 10.02(e), pursue any available
remedy by proceeding at law or in equity to collect the payment
of Principal of, or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture
as may be required or permitted thereunder.
The Trustee may maintain a proceeding even if it does
not possess any of the Securities or does not produce any of them
in the proceeding. A delay or omission by the Trustee or any
Securityholder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default.
No remedy is exclusive of any other remedy. All available
remedies are cumulative to the extent permitted by law.
SECTION VI.4 Waiver of Past Defaults.
Subject to Sections 6.02, 6.07 and 9.02, the Required
Holders by notice to the Trustee may waive an existing Default or
Event of Default and its consequences, except a Default in the
payment of Principal of or interest on any Security as specified
in clauses (i) and (ii) of Section 6.01 or in respect of any
provision hereof which cannot be modified or amended without the
consent of the Holder so affected pursuant to Section 9.02. When
a Default or Event of Default is so waived, it shall be deemed
cured and ceases to exist, but no such waiver shall extend to any
subsequent or other Default or impair any right consequent
thereon.
SECTION VI.5 Control by Required Holders.
The Required Holders may direct the time, method and
place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on it
including, without limitation, any remedies provided for in
Section 6.03. Subject to Section 7.01, however, the Trustee may
refuse to follow any direction that conflicts with any law or
this Indenture that the Trustee determines may be unduly
prejudicial to the rights of another Securityholder, or that may
involve the Trustee in personal liability unless the Trustee has
asked for and received indemnification reasonably satisfactory to
it against any loss, liability or expense caused by its following
such direction; provided that the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent
with such direction.
SECTION VI.6 Limitation on Suits.
A Securityholder may not pursue any remedy with respect
to this Indenture or the Securities unless:
(a) the Holder gives to the Trustee notice of a continuing
Event of Default;
(b) Holders of at least thirty percent (30%) in principal
amount of the outstanding Securities make a written request to
the Trustee to pursue the remedy;
(c) such Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or
expense to be incurred in compliance with such request;
(d) the Trustee does not comply with the request within
thirty (30) days after receipt of the request and the offer of
indemnity; and
(e) during such thirty (30) day period the Required Holders
do not give the Trustee a direction which, in the opinion of the
Trustee, is inconsistent with the request.
A Securityholder may not use this Indenture to
prejudice the rights of another Securityholder or to obtain a
preference or priority over such other Securityholder.
SECTION VI.7 Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture,
except as set forth in Article X, the right of any Holder to
receive payment of Principal of and interest on a Security, on or
after the respective due dates expressed in such Security, or to
bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without
the consent of such Holder.
SECTION VI.8 Collection Suit by Trustee.
If an Event of Default in payment of Principal or
interest specified in clause (i) or (ii) of Section 6.01 occurs
and is continuing, the Trustee may recover judgment in its own
name and as trustee of an express trust against the Company or
any other obligor on the Securities for the whole amount of
Principal and accrued interest remaining unpaid, together with
interest on overdue Principal and, to the extent that payment of
such interest is lawful, interest on overdue installments of
interest, in each case at the rate per annum borne by the
Securities and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
SECTION VI.9 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other
papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, taxes, disbursements and
advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relating to
the Company or any other obligor upon the Securities, any of
their respective creditors or any of their respective property
and shall be entitled and empowered to collect and receive any
monies or other securities or property payable or deliverable
upon the conversion or exchange of the Securities or upon any
such claims and to distribute the same, and any Custodian in any
such judicial proceedings is hereby authorized by each
Securityholder to make such payments to the Trustee and, in the
event that the Trustee shall consent to the making of such
payments directly to the Securityholders, to first pay to the
Trustee any amount due to it for the reasonable compensation,
expenses, taxes, disbursements and advances of the Trustee, its
agent and counsel, and any other amounts due the Trustee under
Section 7.07. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or
adopt on behalf of any Security holder any plan of
reorganization, arrangement, adjustment or composition affecting
the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any
Security holder in any such proceeding.
SECTION VI.10 Priorities.
If the Trustee collects any money pursuant to this
Article VI, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section
7.07;
Second: to Holders for Principal, interest and
premiums owing under the Securities, ratably, according to
the amounts due and payable on the Securities for Principal,
in the following order of priority: first to any premiums,
then to interest and lastly to Principal; and
Third: to the Company or any other obligor on the
Securities, as their interests may appear, or as a court of
competent jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix
a record date and payment date for any payment to Securityholders
pursuant to this Section 6.10.
SECTION VI.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy
under this Indenture or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the
suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by a Holder or Holders of
more than ten percent (10%) in principal amount of the
outstanding Securities.
SECTION VI.12 Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every
other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION VI.13 Delay or Omission Not Waiver.
No delay or omission by the Trustee or by any Holder of any
Security to exercise any right or remedy arising upon any Event
of Default shall impair the exercise of any such right or remedy
or constitute a waiver of any such Event of Default. Every right
and remedy given by this Article VI or by law to the Trustee or
to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as
the case may be.
ARTICLE VII.
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by
this Indenture and covenants and agrees to perform the same, as
herein expressed.
SECTION VII.1 Duties of Trustee.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture and use the same degree of
care and skill in its exercise thereof as a prudent person would
exercise or use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of a Default or an Event
of Default:
(i) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and
no covenants or obligations shall be implied in this
Indenture that are adverse to the Trustee.
(ii) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they
conform to the requirements of this Indenture but need not
verify the accuracy of the contents thereof.
(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act, or its
own willful misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section 7.01;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 6.05.
(d) The Trustee may refuse to perform any duty or exercise
any right or power unless it receives indemnity reasonably
satisfactory to it against any loss, liability or expense.
(e) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(f) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c), (d) and (e) of
this Section 7.01.
(g) The Trustee shall not be liable for interest on any
money or assets received by it except as the Trustee may agree
with the Company. Assets held in trust by the Trustee need not
be segregated from other assets except to the extent required by
law.
SECTION VII.2 Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in
acting or refraining from acting upon any document believed by it
to be genuine and to have been signed or presented by the proper
person. The Trustee need not investigate any fact or matter
stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate or
an Opinion of Counsel, which shall conform to Sections 11.04 and
11.05 hereof. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may consult with counsel and the advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon.
(d) The Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of
any agent (other than the negligence or misconduct of an agent
who is an employee of the Trustee) appointed with due care.
(e) The Trustee shall not be liable for any action that it
takes or omits to take in good faith which it believes to be
authorized or within its rights or powers, provided that the
Trustee's conduct does not constitute negligence or bad faith.
(f) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, notice, request,
direction, consent, order, bond, debenture, or other paper or
document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled, upon
reasonable notice to the Company, to examine the books, records,
and premises of the Company, personally or by agent or attorney.
(g) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the
request, order or direction of any of the Holders pursuant to the
provisions of this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against
the costs, expenses and liabilities which may be incurred by it
in compliance with such request, order or direction.
SECTION VII.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may
become the owner or pledgee of Securities and may otherwise deal
with the Company, any Subsidiary of the Company or their
respective Affiliates with the same rights it would have if it
were not Trustee. Any Agent may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11
hereof.
SECTION VII.4 Trustee's Disclaimer.
The Trustee makes no representation as to the validity
or adequacy of this Indenture or the Securities. Further, the
Trustee shall not be accountable for the Company's use of the
proceeds from the Securities, nor be responsible for any
statement in the Securities other than the Trustee's certificate
of authentication.
SECTION VII.5 Notice of Default.
If a Default or an Event of Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall
mail to each Securityholder, as their names and addresses appear
on the Securityholder list described in Section 2.05 hereof,
notice of the Default or Event of Default within thirty (30) days
after such Default or Event of Default has occurred, unless such
Default or Event of Default shall have been cured or waived.
Except in the case of a Default or an Event of Default in payment
of Principal of or interest on, any Security, and a Default or
Event of Default that resulted from the failure to comply with
Section 4.16, 4.17 or 5.01 hereof, the Trustee may withhold the
notice if and so long as its Board of Directors, the executive
committee of its Board of Directors or a committee of its
directors and/or Trust Officers in good faith determines that
withholding the notice is in the interest of the Securityholders.
SECTION VII.6 Reports by Trustee to Holders.
If required by law, within sixty (60) days after each
May 15 beginning with the May 15 following the date of this
Indenture, the Trustee shall mail to the Holders, at the
Company's expense, a brief report dated as of such reporting date
that complies with TIA 313(a) (but if no event described in TIA
313(a) has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also
shall comply with TIA 313(b)(2) to the extent applicable. The
Trustee shall also transmit by mail all reports as required by
TIA 313(c).
A copy of each report at the time of its mailing to
Holders shall be filed with the SEC and each stock exchange or
market on which the Securities are listed or quoted. The Company
shall notify the Trustee when the Securities are listed on any
stock exchange or quoted on any market.
SECTION VII.7 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time
reasonable compensation for all services rendered by it
hereunder. The Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all tax
obligations imposed on the Trustee related to this Indenture and
all reasonable out-of-pocket expenses incurred or made by it.
Such expenses shall include the reasonable fees and expenses of
the Trustee's agents, compensation and counsel.
The Company shall indemnify the Trustee and its agents
for, and hold them harmless against, any loss, liability or
expense incurred by them without negligence, bad faith or willful
misconduct on their part, arising out of or in connection with
the administration of this trust including the reasonable costs
and expenses of enforcing this Indenture against the Company
(including Section 7.07 hereof) and of defending themselves
against any claim (whether asserted by any Security holder or the
Company) or liability in connection with the exercise or
performance of any of their rights, powers or duties hereunder.
The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity.
The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel
and the Company shall pay the reasonable fees and expenses of
such counsel; provided that the Company will not be required to
pay such fees and expenses if they assume the Trustee's defense
and there is no conflict of interest between the Company and the
Trustee in connection with such defense as reasonably determined
by the Trustee. The Company need not pay for any settlement made
without its written consent. The Company need not reimburse any
expense or indemnify against any loss or liability to the extent
incurred by the Trustee through its negligence, bad faith or
willful misconduct.
To secure the Company's payment obligations in this
Section 7.07, the Trustee shall have a lien prior to the
Securities on all assets or money held or collected by the
Trustee, in its capacity as Trustee, except assets or money held
in trust to pay Principal of or interest on Securities.
When the Trustee incurs expenses or renders services
after an Event of Default specified in Section 6.01(xi) or (xii)
occurs, such expenses and the compensation for such services are
intended to constitute expenses of administration under any
Bankruptcy Law.
SECTION VII.8 Replacement of Trustee.
A resignation or removal of the Trustee and appointment
of a successor Trustee shall become effective only upon the
successor Trustee's acceptance of appointment as provided in this
Section 7.08.
The Trustee may resign by so notifying the Company in
writing at least thirty (30) days prior to the date of the
proposed resignation; provided, however, that no such resignation
shall be effective until a successor Trustee has accepted its
appointment pursuant to this Section 7.08. The Required Holders
may remove the Trustee by so notifying the Company and the
Trustee and may appoint a successor Trustee with the Company's
consent. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.01 or 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or
an order for relief is entered with respect to the Trustee under
any Bankruptcy Law;
(c) a receiver Custodian or other public officer takes
charge of the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason, the Company shall
notify each Holder of such event and shall promptly appoint a
successor Trustee. Within one (1) year after the successor
Trustee takes office, the Required Holders may appoint a
successor Trustee to replace the successor Trustee appointed by
the Company.
A successor Trustee shall deliver a written acceptance
of its appointment to the retiring Trustee and to the Company.
Immediately after that, the retiring Trustee shall transfer all
property held by it as Trustee to the successor Trustee, subject
to the lien provided in Section 7.07, the resignation or removal
of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Security holder.
If a successor Trustee does not take office within
sixty (60) days after the retiring Trustee resigns or is removed,
the retiring Trustee, the Company or the Holders of at least ten
percent (10%) in principal amount of the outstanding Securities
may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Security holder may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor
Trustee.
Notwithstanding replacement of the Trustee pursuant to
this Section 7.08, the Company's obligations under Section 7.07
shall continue for the benefit of the retiring Trustee.
SECTION VII.9 Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts
into, or transfers all or substantially all of its corporate
trust business to, another corporation, the resulting, surviving
or transferee corporation without any further act shall, if such
resulting, surviving or transferee corporation is otherwise
eligible hereunder, be the successor Trustee.
SECTION VII.10 Eligibility: Disqualification.
This Indenture shall always have a Trustee who
satisfies the requirement of TIA 310(a)(1) and 310(a)(5). The
Trustee (or in the case of a corporation included in a bank
holding company system, the related bank holding company) shall
always have a combined capital and surplus of at least
$500,000,000 as set forth in its most recent published annual
report of condition. In addition, if the Trustee is a
corporation included in a bank holding company system, the
Trustee, independently of such bank holding company, shall meet
the capital requirements of TIA 310(a)(2). The Trustee shall
comply with TIA 310(b) including the optional provision
permitted by the second sentence of TIA 309(b)(9); provided,
however, that there shall be excluded from the operation of TIA
310(b)(1) any indenture or indentures under which other
securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if the requirements
for such exclusion set forth in TIA 310(b)(1) are met.
SECTION VII.11 Preferential Collection of Claims Against
Company.
The Trustee shall comply with TIA 311(a), excluding
any creditor relationship listed in TIA 311(b). A Trustee who
has resigned or been removed shall be subject to TIA 311(a) to
the extent indicated therein.
ARTICLE VIII.
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION VIII.1 Discharge of Indenture.
This Indenture shall cease to be of further effect
(except that the Company's obligations under Sections 7.07, 8.04
and 8.05 shall survive) as to all outstanding Securities when all
such Securities theretofore authenticated and delivered (except
lost, stolen or destroyed Securities which have been replaced or
paid and Securities for the payment of which money has
theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or
discharged from such trust) have been delivered to the Trustee
for cancellation and the Company has paid all sums payable
hereunder. In addition, the Company may terminate all of its
obligations under this Indenture (except the Company's
obligations under Sections 7.07, 8.04 and 8.05) if:
(a) either (i) pursuant and subject to compliance with
Article III, the Company shall have given notice to the Trustee
and mailed a notice of redemption to each Holder of the
redemption of all of the Securities or (ii) all Securities have
otherwise become due and payable in accordance with the terms of
this Indenture (including the provisions of Article X).
(b) the Company shall have irrevocably deposited or caused
to be deposited with the Trustee or a trustee satisfactory to the
Trustee, under the terms of an irrevocable trust agreement in
form and substance satisfactory to the Trustee, as trust funds in
trust solely for the benefit of the Holders for that purpose,
U.S. Legal Tender sufficient to pay Principal of and interest, if
any, on the outstanding Securities to redemption; provided that
the Trustee shall have been irrevocably instructed to apply such
U.S. Legal Tender to the payment of said Principal and interest
with respect to the Securities;
(c) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent providing for the termination of
the Company's obligation under the Securities and this Indenture
have been complied with; and
(d) the Company shall have paid all sums payable by it
hereunder.
Notwithstanding the foregoing paragraph, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 4.01, 4.02,
7.07, 7.08, 8.03, 8.04 and 8.05 hereof shall survive until the
Securities are no longer outstanding. After the Securities are
no longer outstanding, the Company's obligations in Sections
7.07, 8.04 and 8.05 hereof shall survive.
After such delivery or irrevocable deposit the Trustee
upon request shall acknowledge in writing the discharge of the
Company's obligations under the Securities and this Indenture
except for those surviving obligations specified above.
SECTION VIII.2 Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option by Board Resolution, at
any time, with respect to the Securities, elect to have either
paragraph (b) or paragraph (c) below be applied to the
outstanding Securities upon compliance with the conditions set
forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (b), the Company shall be
deemed to have been released and discharged from its obligations
with respect to the outstanding Securities on the date the
conditions set forth in paragraph (d) below are satisfied
(hereinafter, "legal defeasance"). For this purpose, such legal
defeasance means that the Company shall be deemed to have paid
and discharged the entire indebtedness represented by the
outstanding Securities, which shall thereafter be deemed to be
"outstanding" only for the purposes of paragraph (e) below and
the other Sections of and matters under this Indenture referred
to in (i) and (ii) below, and to have satisfied all its other
obligations under such Securities and this Indenture insofar as
such Securities are concerned (and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (i) the rights of
Holders of outstanding Securities to receive solely from the
trust fund described in paragraph (d) below and as more fully set
forth in such paragraph, payments in respect of the Principal of
and interest on such Securities when such payments are due, (ii)
the Company's obligations with respect to such Securities under
Sections 2.03, 2.04, 2.05, 2.06, 2.07, 4.02, 7.07, 7.08, 8.03,
8.04 and 8.05, (iii) the rights, powers, trusts, duties and
immunities of the Trustee hereunder, and (iv) this Section 8.02.
Subject to compliance with this Section 8.02, the Company may
exercise its option under this paragraph (b) notwithstanding the
prior exercise of its option under paragraph (c) below with
respect to the Securities.
(c) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (c), the Company shall be
released and discharged from its obligations under any covenant
contained in Article V and in Sections 4.10 through 4.18 with
respect to the outstanding Securities on and after the date the
conditions set forth in paragraph (d) below are satisfied
(hereinafter, "covenant defeasance"), and the Securities shall
thereafter be deemed to be not "outstanding" for the purpose of
any direction, waiver, consent or declaration or act of Holders
(and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all
other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to the outstanding
Securities, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default
under Section 6.01, but, except as specified above, the remainder
of this Indenture and such Securities shall be unaffected
thereby.
(d) The following shall be the conditions to application of
either paragraph (b) or paragraph (c) above to the outstanding
Securities:
(i) the Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee
satisfying the requirements of Section 7.10 who shall agree
to comply with the provisions of this Section 8.02
applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as
security for, and dedicated solely to, the benefit of the
Holders of such Securities, (A) U.S. Legal Tender in an
amount, or (B) U.S. Government Obligations which through the
scheduled payment of Principal of and interest in respect
thereof in accordance with their terms will provide (without
giving effect to the reinvestment of any interest thereon),
not later than one (1) day before the due date of any
payment, U.S. Legal Tender in an amount, or (C) a
combination thereof, sufficient, in the opinion of a
nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to
the Trustee, to pay and discharge and which shall be applied
by the Trustee (or other qualifying trustee) to pay and
discharge Principal of and interest, on the outstanding
Securities on the Maturity Date of such principal or
installment of principal or interest in accordance with the
terms of this Indenture and of such Securities; provided,
however, that the Trustee (or other qualifying trustee)
shall have received an irrevocable Company Order instructing
the Trustee (or other qualifying trustee) to apply such U.S.
Legal Tender or the proceeds of such U.S. Government
Obligations to said payments with respect to the Securities;
(ii) no Default or Event of Default or event which with
notice or lapse of time or both would become a Default or an
Event of Default with respect to the Securities shall have
occurred and be continuing on the date of such deposit or,
in so far as Sections 6.01(xi) and (xii) are concerned, at
any time during the period ending on the 91st day after the
date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration
of such period);
(iii) such legal defeasance or covenant defeasance
shall not result in a breach or violation of, or constitute
a Default or Event of Default under, this Indenture or any
other agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which any of them is
bound;
(iv) in the case of an election under paragraph (b)
above, the Company shall have delivered to the Trustee an
Opinion of Counsel stating that (x) the Company has received
from, or there has been published by, the Internal Revenue
Service a ruling, or (y) since the date of this Indenture,
there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon
such opinion shall confirm that, the Holders of the
outstanding Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of such
legal defeasance and will be subject to Federal income tax
on the same amounts, in the same manner and at the same
times as would have been the case if such legal defeasance
had not occurred;
(v) in the case of an election under paragraph (c)
above, the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Holders of the
outstanding Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of such
covenant defeasance and will be subject to Federal income
tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant
defeasance had not occurred;
(vi) in the case of an election under either paragraph
(b) or (c) above, an Opinion of Counsel to the effect that,
(x) the trust funds will not be subject to any rights of any
other holders of any other Indebtedness of the Company after
the 91st day following the deposit, and (y) after the 91st
day following the deposit, the trust funds will not be
subject to the effect of any applicable Bankruptcy Law;
(vii) the Company shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that (A) all conditions precedent provided for
relating to either the legal defeasance under paragraph (b)
above or the covenant defeasance under paragraph (c) above,
as the case may be, have been complied with; and (B) if any
other Indebtedness of the Company (including, without
limitation, the Senior Indebtedness) shall then be
outstanding, such legal defeasance will not violate the
provisions of the agreements or instruments evidencing such
Indebtedness; and
(viii) the Company shall have delivered to the
Trustee an Officers' Certificate stating that the deposit
was not made by the Company with the intent of preferring
the Holders of the Securities over other creditors of the
Company or with the intent of defeating, hindering, delaying
or defrauding creditors of the Company or others.
(e) All money and U.S. Government Obligations (including
the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this paragraph
(e), the "Trustee") pursuant to paragraph (d) above in respect of
the outstanding Securities shall be held in trust and applied by
the Trustee, in accordance with the provisions of such Securities
and this Indenture, to the payment, either directly or through
any Paying Agent as the Trustee may determine, to the Holders of
such Securities of all sums due and to become due thereon in
respect of Principal, and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against
any tax, fee or other charge imposed on or assessed against the
U.S. Government Obligations deposited pursuant to paragraph (d)
above or the Principal and interest received in respect thereof
other than any such tax, fee or other charge which by law is for
the account of the Holders of the outstanding Securities.
Anything in this Section 8.02 to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company
from time to time upon the request, in writing, by the Company
any money or U.S. Government Obligations held by it as provided
in paragraph (d) above which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in
excess of the amount thereof which would then be required to be
deposited to effect an equivalent legal defeasance or covenant
defeasance.
SECTION VIII.3 Application of Trust Money.
The Trustee shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to
Sections 8.01 and 8.02, and shall apply the deposited U.S. Legal
Tender and the U.S. Legal Tender from U.S. Government Obligations
in accordance with this Indenture to the payment of Principal of
and interest on the Securities.
SECTION VIII.4 Repayment to Company.
Subject to Sections 7.07, 8.01 and 8.02, the Trustee
shall, subject to Article X, promptly pay to the Company, upon
receipt by the Trustee of an Officers' Certificate, any excess
money, determined in accordance with Sections 8.02(d)(i) and (e),
held by it at any time. The Trustee and the Paying Agent shall
pay to the Company upon receipt by the Trustee or the Paying
Agent, as the case may be, of an Officers' Certificate, any money
held by it for the payment of Principal or interest that remains
unclaimed for two (2) years, provided, however, that the Trustee
and the Paying Agent before being required to make any payment
may, but need not, at the expense of the Company, cause to be
published once in a newspaper of general circulation in The City
of New York or mail to each Holder entitled to such money notice
that such money remains unclaimed and that after a date specified
therein, which shall be at least thirty (30) days from the date
of such publication or mailing, any unclaimed balance of such
money then remaining will be repaid to the Company. After
payment to the Company, Securityholders entitled to money must
look solely to the Company for payment as general creditors
unless an applicable abandoned property law designates another
person.
SECTION VIII.5 Reinstatement.
If the Trustee or Paying Agent is unable to apply any
U.S. Legal Tender or U.S. Government Obligations in accordance
with this Indenture by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such
application, then and only then the Company's obligations under
this Indenture and the Securities shall be revived and reinstated
as though no deposit had been made pursuant to this Indenture
until such time as the Trustee is permitted to apply all such
U.S. Legal Tender or U.S. Government Obligations in accordance
with this Indenture; provided, however, that if the Company has
made any payment of Principal of or interest on of any Securities
because of the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such
Securities to receive such payment from the U.S. Legal Tender or
U.S. Government Obligations held by the Trustee or Paying Agent.
SECTION VIII.6 Acknowledgment of Discharge by Trustee.
After (i) the conditions of Section 8.02 have been
satisfied, (ii) the Company has paid or caused to be paid all
other sums payable hereunder by the Company, and (iii) the
Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent
referred to in clause (i) above relating to the satisfaction and
discharge of this Indenture have been complied with, the Trustee
upon written request shall acknowledge in writing the discharge
of the Company's obligations under this Indenture except for
those surviving obligations specified in Section 8.01.
ARTICLE IX.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION IX.1 Without Consent of Holders.
The Company, when authorized by its Board Resolution,
and the Trustee, together, may without notice to or the consent
of any Securityholder amend, waive or supplement this Indenture
or the Securities:
(i) to cure any ambiguity, defect or inconsistency or to
make any other provisions with respect to matters or questions
arising under this Indenture; provided that such action does not
adversely affect the rights of any Holder;
(ii) to add to the covenants of the Company for the benefit
of the Holders, or to surrender any right or power herein
conferred upon the Company, or to provide any additional rights
or benefits to the Holders;
(iii) to evidence the succession of another person to
the Company, and the assumption by any such successor of the
obligations of the Company herein and in the Securities in
accordance with Article V;
(iv) to provide for uncertificated Securities in addition to
or in place of certificated Securities;
(v) to make any other change that does not adversely affect
the rights of any Securityholders hereunder;
(vi) to comply with the TIA; or
(vii) to comply with any requirements of the SEC in
connection with the qualification of this Indenture under the
TIA;
provided that the Company has delivered to the Trustee an Opinion
of Counsel and an Officers' Certificate, each stating that such
amendment or supplement complies with the provisions of this
Section 9.01.
SECTION IX.2 With Consent of Holders.
Subject to Section 6.07, the Company when authorized by
its Board Resolution, and the Trustee, together, with the written
consent of the Required Holders, may amend or supplement this
Indenture or the Securities, without notice to any other
Securityholders. However, without the consent of each
Securityholder affected, no amendment, supplement or waiver,
including a waiver pursuant to Section 6.04, may:
(i) reduce the principal amount of any Security or premium,
if any, with respect thereto;
(ii) change the Maturity Date of, or alter the redemption or
repurchase or other provisions of the Securities, in a manner
that adversely affects the rights of any Holder;
(iii) reduce the percentage in principal amount
outstanding of Securities which must consent to an amendment,
supplement or waiver or consent to take any action under this
Indenture or the Securities;
(iv) impair the right to institute suit for the enforcement
of any payment on or with respect to the Securities;
(v) make any changes in the provisions concerning waivers
of Defaults or Events of Default by Holders of the Securities or
the rights of Holders to recover the principal of, interest on,
or redemption payment with respect to, any Security;
(vi) make any change in or affecting the ranking of the
Securities with respect to any other obligation of the Company or
any Subsidiary in a way that adversely affects the rights of any
Holder;
(vii) reduce the interest rate or extend the time for
payment of interest, if any, on the Securities;
(viii) make the principal of, premium, if any, or the
interest on, any Security payable with anything, at any place of
payment or in any manner other then as provided for in this
Indenture and the Security as in effect on the date hereof;
(ix) following the mailing of a Change of Control Offer,
modify the provisions of this Indenture with respect to such
Change of Control Offer in a manner adverse to any Holder; or
(x) make any changes in this Section 9.02 in a manner that
adversely affects the rights of any Holder.
It shall not be necessary for the consent of the
Holders under this Section to approve the particular form of any
proposed amendment, supplement or waiver, but it shall be
sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this
Section 9.02 becomes effective, the Company shall mail to the
Holders affected thereby a notice briefly describing the
amendment, supplement or waiver. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment,
supplement or waiver.
SECTION IX.3 Compliance with TIA.
Every amendment, waiver or supplement of this Indenture
or the Securities shall comply with the TIA as then in effect.
SECTION IX.4 Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes
effective, a consent to it by a Holder is a continuing consent by
the Holder and every subsequent Holder of a Security or portion
of a Security that evidences the same debt as the consenting
Holder's Security, even if notation of the consent is not made on
any Security. However, prior to becoming effective, any such
Holder or subsequent Holder may revoke the consent as to his
Security or portion of his Security by notice to the Trustee or
the Company if such notice is received by the Trustee or the
Company before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the
requisite principal amount of Securities have consented (and not
theretofore revoked such consent) to the amendment, supplement or
waiver. Notwithstanding the above, nothing in this paragraph
shall impair the right of any Securityholder under 316(b) of the
TIA.
The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled
to consent to any amendment, supplement or waiver. If a record
date is fixed, then notwithstanding the last sentence of the
immediately preceding paragraph, those persons who were Holders
at such record date (or their duly designated proxies), and only
those persons, shall be entitled to revoke any consent previously
given, whether or not such persons continue to be Holders after
such record date. No such consent shall be valid or effective
for more than ninety (90) days after such record date unless
consents from Holders of the principal amount of Securities
required hereunder for such amendment, supplement or waiver to be
effective shall have been given and not revoked within such
ninety (90) day period.
After an amendment, supplement or waiver becomes
effective, it shall bind every Securityholder, unless it makes a
change described in any of clauses (i) through (x) of Section
9.02, in which case, the amendment, supplement or waiver shall
bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security
that evidences the same debt as the consenting Holder's Security;
provided, however, that any such waiver shall not impair or
affect the right of any Holder to receive payment of Principal of
and interest on a Security, on or after the respective dates set
for such amounts to become due and payable expressed in such
Security, or to bring suit for the enforcement of any such
payment on or after such respective dates.
SECTION IX.5 Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms
of a Security, the Trustee may require the Holder of the Security
to deliver the Security to the Trustee. The Trustee may place an
appropriate notation on the Security about the changed terms and
return the Security to the Holder. Alternatively, if the Company
or the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new
Security that reflects the changed terms. Failure to make the
appropriate notation or issue a new Security shall not affect the
validity and effect of such amendment, supplement or waiver.
SECTION IX.6 Trustee To Sign Amendments, Etc.
Subject to the next sentence, the Trustee shall execute
any amendment, supplement or waiver authorized pursuant to this
Article IX, provided, however, that the Trustee may, but shall
not be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or
immunities under this Indenture. The Trustee shall be entitled
to receive, and shall be fully protected in relying upon, an
Opinion of Counsel and an Officers' Certificate each stating that
the execution of any amendment, supplement or waiver is
authorized or permitted by this Indenture.
ARTICLE X.
SUBORDINATION
SECTION X.1 Securities Subordinated to Senior Indebtedness.
The Company covenants and agrees, and each Holder (and
each Person holding any Security, whether upon original issue, or
upon transfer, assignment or exchange thereof) of the Securities,
by its acceptance thereof, likewise covenants and agrees that:
(i) all Securities shall be issued subject to the provisions of
this Article X; (ii) the payment of the Principal of, and
interest on, the Securities by the Company shall, to the extent
and in the manner herein set forth, be subordinated and junior in
right of payment to the prior payment in full, in cash or Cash
Equivalents, of the Senior Indebtedness; and (iii) the
subordination is for the benefit of, and shall be relied upon and
be enforceable directly by, the holders of Senior Indebtedness.
The Company and each Holder hereby agree not to amend, modify or
change in any manner any provision of this Article X (and any
defined term used in this Article X) so that the terms and
conditions hereof, as so amended, modified or changed, are less
favorable to the holders of the Senior Indebtedness and their
Representative than the terms hereof on the Issue Date, without
the prior written consent of the necessary holders of Senior
Indebtedness as required under the Credit Agreement.
SECTION X.2 Suspension of Payment on Securities in Certain
Events.
(a) If (i) any default occurs and is continuing after the
expiration of any applicable cure period (each a "Senior Debt
Payment Default"), in the payment when due, whether at maturity,
upon any redemption, by declaration or otherwise, of any
Principal of, or interest on the Senior Indebtedness, or fees or
other amounts due under the terms of the Credit Agreement, and
(ii) the Representative of the holders of the Senior Indebtedness
gives written notice (a "Default Notice") of such Senior Debt
Payment Default to the Trustee, then no payment of any kind or
character shall be made by or on behalf of the Company or any
other Person on its behalf with respect to any Principal of, or
interest on or fees or other amounts due with respect to, the
Securities or to redeem, repurchase or otherwise acquire any of
the Securities for cash or property or otherwise, until such
payment is made in full or Senior Payment Default has been cured,
waived or has ceased to exist.
(b) If (i) any event of default other than a Senior Debt
Payment Default (a "Senior Debt Other Default") occurs and is
continuing with respect to the Senior Indebtedness, as such
Senior Debt Other Default is defined in the instrument creating
or evidencing such Senior Indebtedness, permitting the holders of
such Senior Indebtedness to accelerate the maturity thereof, and
(ii) the Representative of the holders of the Senior
Indebtedness gives a Default Notice to the Trustee, then until
the earlier of (A) the Trustee receiving notice from the
Representative of the holders of the Senior Indebtedness
terminating the Blockage Period (as defined below), (B) the date
on which the Senior Debt Other Default giving rise to the
Blockage Period is cured or waived, or (C) 180 days after the
delivery of such Default Notice (the "Blockage Period"), neither
the Company nor any other Person on its behalf shall make any
payment of any kind or character with respect to any Principal
of, or interest on, or fees or other amounts due with respect to
the Securities, or redeem, repurchase or otherwise acquire any
of the Securities for cash or property or otherwise; provided,
however, that if such Senior Indebtedness has not been
accelerated or become the subject of judicial proceedings within
the Blockage Period, then the Company shall resume making any and
all required payments in respect of the Securities. At the
expiration or termination, as applicable, of such Blockage Period
the Company shall promptly pay to the Trustee all sums not paid
during such Blockage Period as a result of this subsection (b).
Notwithstanding anything herein to the contrary, in no event will
a Blockage Period extend beyond 180 days from the date of the
Senior Debt Other Default and only one such Blockage Period may
be commenced within any period of 360 consecutive days. No
Senior Debt Other Default or event which, with the giving of
notice and/or lapse of time or otherwise, would become a Senior
Debt Other Default which existed on the date of the commencement
of such Blockage Period, may be used as the basis for declaring
any subsequent Blockage Period unless such Senior Debt Other
Default or event, as the case may be, shall in the interim have
been cured or waived for a period of not less than ninety (90)
consecutive days.
(c) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such
payment is prohibited by Sections 10.02(a) and (b), then unless
and until such payment is no longer prohibited by this Section
10.02, such payment shall be held in trust for the benefit of,
and shall as soon practicable be paid over or delivered to, the
Representative of the holders of the Senior Indebtedness. No
amount paid by the Company, or any other Person on its behalf, to
the Trustee or any Holder of the Securities, and paid over by
such Person to the Representative of the holders of the Senior
Indebtedness pursuant to this Article X shall, as between the
Company and the Holders of the Securities, be deemed a payment by
the Company to or on account of any payments due in respect of
the Securities.
(d) The Company shall give prompt written notice to the
Trustee of any Senior Debt Payment Default or any Senior Debt
Other Default, under the Senior Indebtedness or under any
agreement pursuant to which Senior Indebtedness may have been
issued. Failure to give such notice shall not affect the
subordination of the Securities to the Senior Indebtedness
provided in this Article X.
(e) Nothing contained in this Article X shall limit the
right of the Trustee or the Holders of Securities to take any
action to accelerate the maturity of the Securities pursuant to
Section 6.02 or to pursue any rights or remedies available under
this Indenture or otherwise; provided that the Trustee or the
Holders shall, prior to commencing any such action, provide the
Representative of the holders of the Senior Indebtedness with
five (5) days prior written notice of its intention to take such
action; provided further that all Senior Indebtedness thereafter
due or declared to be due shall first be paid in full, in cash or
Cash Equivalents, before the Holders are entitled to receive any
payment of any kind or character with respect to Principal of, or
interest on or fees or other amounts due with respect to, the
Securities.
SECTION X.3 Securities Subordinated to Prior Payment of All
Senior Indebtedness on Dissolution, Liquidation or Reorganization
of Company.
(a) Upon any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or
securities, to creditors upon any liquidation, dissolution,
winding-up, reorganization, assignment for the benefit of
creditors or marshaling of assets of the Company or in a
bankruptcy, reorganization, insolvency, receivership or other
similar proceeding relating to the Company or its property,
whether voluntary or involuntary, all Senior Indebtedness shall
first be paid in full in, cash or Cash Equivalents (or such
payment shall be duly provided for), before any payment or
distribution of any kind or character is made on account of any
Principal of, or interest on, or fees or other amounts due with
respect to, the Securities, or for the acquisition of any of the
Securities for cash or property or otherwise. Upon any such
dissolution, winding-up, liquidation, reorganization,
receivership or similar proceeding, any payment or distribution
of assets of the Company of any kind or character, whether in
cash, property or securities, to which the Holders of the
Securities or the Trustee under this Indenture would be entitled,
except for the provisions hereof, shall be paid by the Company or
by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by
the Holders or by the Trustee under this Indenture if received by
them, to the Representative of the holders of the Senior
Indebtedness, for application to the payment of Senior
Indebtedness remaining unpaid until all such Senior Indebtedness
has been paid in full, in cash or Cash Equivalents, after giving
effect to any concurrent payment, distribution or provision
therefor to or for the holders of Senior Indebtedness.
(b) To the extent any payment of Senior Indebtedness
(whether by or on behalf of the Company, as proceeds of security
or enforcement of any right of setoff or otherwise) is declared
to be fraudulent or preferential, set aside or required to be
paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then, if such
payment is recovered by, or paid over to, such receiver, trustee
in bankruptcy, liquidating trustee, agent or other similar
Person, the Senior Indebtedness or part thereof originally
intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment has not occurred.
(c) The consolidation of the Company with, or the merger of
the Company with or into, another corporation or the liquidation
or dissolution of the Company following the conveyance or
transfer of all or substantially all of its assets, to another
corporation upon the terms and conditions provided in Article V
hereof and as long as permitted under the terms of the Senior
Indebtedness shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section if
such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, assume in writing, to the
reasonable satisfaction of the Representative, the Company's
obligations hereunder in accordance with Article V hereof.
(d) The Company shall give prompt written notice to the
Trustee of any dissolution, winding-up, liquidation or
reorganization of the Company, but failure to give such notice
shall not affect the subordination of the Securities to the
Senior Indebtedness provided in this Article X.
SECTION X.4 Holders to be Subrogated to Rights of Holders of
Senior Indebtedness.
Subject to the payment in full, in cash or Cash
Equivalents, of the Senior Indebtedness, the Holders shall be
subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions of cash, property or securities
of the Company applicable to the Senior Indebtedness until the
Securities shall be paid or converted in full. For the purposes
of such subrogation, no such payments or distributions of cash,
property or securities of the Company to the holders of the
Senior Indebtedness by or on behalf of the Company or by or on
behalf of the Holders by virtue of this Article X which otherwise
would have been made to the Holders shall, as between the Company
and the Holders, be deemed to be a payment by the Company to or
on account of the Senior Indebtedness, it being understood that
the provisions of this Article X are and are intended solely for
the purpose of defining the relative rights of the Holders of the
Securities, on the one hand, and the holders of the Senior
Indebtedness, on the other hand.
SECTION X.5 Obligations of the Company Unconditional.
Nothing contained in this Article X or elsewhere in
this Indenture or in the Securities, is intended to or shall
impair, as between the Company and the Holders, the obligation of
the Company, which is absolute and unconditional, to pay to the
Holders the principal of, and interest on, the Securities as and
when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of the Company other than the
holders of the Senior Indebtedness, nor shall anything herein or
therein prevent the Trustee or any Holder from exercising all
remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article
X of the holders of Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise
of any such remedy. Upon any payment or distribution of cash,
property or securities of the Company referred to in this
Article X, the Trustee, subject to the provisions of Sections
7.01 and 7.02, and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in
which any liquidation, dissolution, winding-up or reorganization
proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidating trustee or agent or other
Person making any payment or distribution to the Trustee or to
the Holders for the purpose of ascertaining (i) the Persons
entitled to participate in such payment or distribution, (ii) the
holders of Senior Indebtedness and other Indebtedness of the
Company, (iii) the amount thereof or payable thereon, (iv) the
amount or amounts paid or distributed thereon, and (iv) all other
facts pertinent thereto or to this Article X. Nothing in this
Article X shall apply to the claims of, or payments to, the
Trustee under or pursuant to Section 7.07. The Trustee, subject
to Section 1.01, shall be entitled to rely on the delivery to it
of a written notice by a Person representing himself or itself to
be the Representative of the holders of the Senior Indebtedness.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a
Representative of the holders of the Senior Indebtedness, the
Trustee may request such Person to furnish evidence thereof to
the reasonable satisfaction of the Trustee, and if such evidence
is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to right of such Person
to receive such payment on behalf of the holders of the Secured
Indebtedness.
SECTION X.6 Trustee Entitled to Assume Payments Not Prohibited
in Absence of Notice.
The Company shall give prompt written notice to the
Trustee of any fact known to the Company which would prohibit the
making of any payment to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article X.
Regardless of anything to the contrary contained in this Article
X or elsewhere in this Indenture, the Trustee shall not be
charged with knowledge of the existence of any Senior Debt
Payment Default or Senior Debt Other Default or of any other
facts which would prohibit the making of any payment to or by the
Trustee unless and until the Trustee shall have received notice
in writing from the Company, or from a holder of Senior
Indebtedness or a Representative thereof, together with proof
satisfactory to the Trustee of such holding of Senior
Indebtedness or of the authority of such Representative, and,
prior to the receipt of any such written notice, the Trustee
shall be entitled to assume (in the absence of actual knowledge
to the contrary), subject to the provisions of Section 7.01 and
7.02 that no such facts exist.
SECTION X.7 Application by Trustee of Assets Deposited with It.
U.S. Legal Tender or U.S. Government Obligations
deposited in trust with the Trustee pursuant to and in accordance
with Sections 8.01 and 8.02 shall be for the sole benefit of the
Holders of the Securities and, to the extent allocated for the
payment of Securities, shall not be subject to the subordination
provisions of this Article X. Otherwise, any deposit of assets,
property or securities by or on behalf of the Company with the
Trustee or any Paying Agent (whether or not in trust) for the
payment of Principal of, or interest on, any Securities shall be
subject to the provisions of this Article X; provided, however,
that if prior to the second Business Day preceding the date on
which by the terms of this Indenture any such assets may become
distributable for any purpose (including, without limitation, the
payment of either Principal of, or interest on, any Security) the
Trustee or such Paying Agent shall not have received with respect
to such assets the notice provided for in Section 10.06, then the
Trustee or such Paying Agent shall have full power and authority
to receive such assets and to apply the same to the purpose for
which they were received, and shall not be affected by any notice
to the contrary received by it on or after such date. Nothing
contained in this Section 10.07 shall limit the right of the
holders of Senior Indebtedness to recover payments as
contemplated by this Article X.
SECTION X.8 No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at
any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or
failure to act, in good faith, by any such holder, or by any non-
compliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof
any such holder may have or be otherwise charged with.
(b) Without limiting the generality of subsection (a) of
this Section 10.08, the holders of Senior Indebtedness may, at
any time and from time to time, without the consent of or notice
to the Trustees or the Holders, without incurring responsibility
to the Holders and without impairing or releasing the
subordination provided in this Article X or the obligations
hereunder of the Holders to the holders of Senior Indebtedness,
do any one or more of the following: (1) change the manner,
place, terms or time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding; (2)
sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness; (3)
release any Person liable in any manner for the collection or
payment of Senior Indebtedness; and (4) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION X.9 Holders Authorize Trustee to Effectuate
Subordination of Notes.
Each Holder of the Securities by such Holders'
acceptance thereof authorizes and expressly directs the Trustee
on his behalf to take such action as may be necessary or
appropriate to effectuate, as between the Holders and the holders
of Senior Indebtedness, the subordination provisions contained in
this Article X, and appoints the Trustee such Holders' attorney-
in-fact for such purpose, including, in the event of any
liquidation, dissolution, winding-up, reorganization, assignment
for the benefit of creditors or marshaling of assets of the
Company (whether in bankruptcy, insolvency or receivership
proceedings or upon assignment for the benefit of creditors or
otherwise) tending towards liquidation of the business and assets
of the Company, the immediate filing of a claim for the unpaid
balance of such Holder's Securities in the form required in said
proceedings and cause said claim to be approved. If the Trustee
does not file a proper claim or proof of debt in the form
required in such proceeding prior to thirty (30) days before the
expiration of the time to file such claim or proof, then any of
the holders of the Senior Indebtedness or their Representative is
hereby authorized, but is not obligated, to file an appropriate
claim for and on behalf of the Holders of said Securities.
Nothing herein contained shall be deemed to authorize the Trustee
or the holders of Senior Indebtedness or their Representative to
authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder
thereof, or to authorized the Trustee or the holders of Senior
Indebtedness or their Representative to vote in respect of the
claim of any Holder in any such proceeding.
SECTION X.10 Right of Trustee to Hold Senior Indebtedness.
The Trustee and any agent of the Company shall be
entitled to all the rights set forth in this Article X with
respect to any Senior Indebtedness which may at any time be held
by it in its individual or any other capacity to the same extent
as any other holder of Senior Indebtedness and nothing in this
Indenture shall deprive the Trustee or any such agent of any of
its rights as such holder.
With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this
Article X, and no implied covenants or obligations with respect
to the holders of Senior Indebtedness shall be read into this
Indenture against the Trustee.
Whenever a distribution is to be made or a notice given
to holders or owners of Senior Indebtedness, the distribution
will be made and the notice will be given to their
Representative.
SECTION 10.11. This Article X Not To Prevent Events of Default.
The failure to make a payment on account of Principal
of, or interest on, the Securities by reason of any provision of
this Article X will not be construed as preventing the occurrence
of an Event of Default.
Nothing contained in this Article X shall limit the
right of the Trustee or the Holders of the Securities to take
any action to accelerate the maturity of the Securities pursuant
to Article VI or to pursue any rights or remedies hereunder or
under applicable law, subject to the rights, if any, under this
Article X of the holders, from time to time, of Senior
Indebtedness.
SECTION 10.12. No Fiduciary Duty of Trustee to Holders of Senior
Indebtedness.
The Trustee shall not be deemed to owe any fiduciary
duty to the holders of Senior Indebtedness, and it undertakes to
perform or observe such of its covenants and obligations as are
specifically set forth in this Article X, and no implied
covenants or obligations with respect to the Senior Indebtedness
shall be read into this Indenture against the Trustee. The
Trustee shall not be liable to any such holders (other than for
its willful misconduct or gross negligence) if it shall pay over
or deliver to the Holders or the Company or any other Person
money or assets in compliance with the terms of this Indenture.
Nothing in this Section 10.12 shall affect the obligation of any
Person other than the Trustee to hold such payment for the
benefit of, and to pay such payment over to, the holders of
Senior Indebtedness or their Representative.
ARTICLE XI.
MISCELLANEOUS
SECTION XI.1 TIA Controls.
If any provision of this Indenture limits, qualifies,
or conflicts with another provision which is required to be
included in this Indenture by the TIA, the required provision
shall control.
SECTION XI.2 Notices.
Any notices or other communications required or
permitted hereunder shall be in writing, and shall be
sufficiently given if made by hand delivery, by telex, by
telecopier or registered or certified mail, postage prepaid,
return receipt requested, or overnight courier addressed as
follows:
if to the Company:
Headway Corporate Resources, Inc.
850 Third Avenue
New York, NY 10022
Attention: Barry Roseman, President and Chief
Operating Officer
Fax: (212) 508-3540
with a copy to:
Christy & Viener
Rockefeller Center
620 Fifth Avenue
New York, New York 10020
Attention: Richard B. Salomon, Esq.
Fax: (212) 632-5555
if to the Trustee:
State Street Bank and Trust Company, N. A.
61 Broadway
15th Floor
New York, NY 10006
Attention: Corporate Trust Department
Fax: (212) 612-3202
Each of the Company and the Trustee by written notice
to each other may designate additional or different addresses for
notices. Any notice or communication to the Company or the
Trustee shall be deemed to have been given or made as of the date
so delivered, if personally delivered; when answered back, if
telexed; when receipt is acknowledged, if faxed; five (5)
calendar days after mailing, if sent by registered or certified
mail, postage prepaid (except that a notice of change of address
shall not be deemed to have been given until actually received by
the addressee); and the next Business Day after timely delivery
to the courier, if sent by overnight air courier guaranteeing
next day delivery.
Any notice or communication mailed to a Securityholder,
including any notice delivered in connection with TIA 310(b),
TIA 313(c), TIA 314(a) and TIA 315(b) shall be mailed to him
by first class mail or other equivalent means at his address as
it appears on the registration books of the Registrar and shall
be sufficiently given to him if so mailed within the time
prescribed.
Failure to mail a notice or communication to a
Securityholder or any defect in it shall not affect its
sufficiency with respect to other Securityholders. If a notice
or communication is mailed in the manner provided above, it is
duly given, whether or not the addressee receives it.
SECTION XI.3 Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA 312(b)
with other Securityholders with respect to their rights under
this Indenture or the Securities. The Company, the Trustee, the
Registrar and any other person shall have the protection of TIA
312(c).
SECTION XI.4 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the
Trustee to take any action under this Indenture, the Company
shall furnish to the Trustee at the request of the Trustee:
(a) an Officers' Certificate (in form and substance
reasonably satisfactory to the Trustee) stating that, in the
opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed action
have been complied with; and
(b) an Opinion of Counsel (in form and reasonably
satisfactory to the Trustee) stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION XI.5 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture shall
include:
(a) a statement that the person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such person, he has
made such examination or investigation as is necessary to enable
him or her to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of
each such person, such condition or covenant has been complied
with; provided, however, that, with respect to certain matters of
fact not involving any legal conclusion, an Opinion of Counsel
may, upon the consent of the parties relying on such opinion,
rely on an Officers' Certificate or certificates of public
officials.
SECTION XI.6 Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance
with the Trustee's customary practices for action by or at a
meeting of Securityholders. The Paying Agent or Registrar may
make reasonable rules and set reasonable requirements for its
functions.
SECTION XI.7 Legal Holidays.
If a payment date is a Legal Holiday at such place,
payment may be made at such place on the next succeeding day that
is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION XI.8 Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE
OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
THE PARTIES HERETO AGREE TO IRREVOCABLY SUBMIT TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING
IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
INDENTURE AND THE SECURITIES, AND IRREVOCABLY ACCEPT FOR
THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE
PARTIES HERETO IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY
OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
THE VENUE OR THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY
HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
COMPANY IN ANY OTHER JURISDICTION.
SECTION XI.9 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another
indenture, loan or debt agreement of the Company or any of its
Subsidiaries, except to the extent necessary to interpret the
meanings of provisions or defined terms specifically incorporated
by reference. Any such indenture, loan or debt agreement may not
be used to interpret this Indenture, except to the extent
necessary to interpret the meanings of provisions or defined
terms specifically incorporated by reference.
SECTION XI.10 No Recourse Against Others.
A director, officer, employee, stockholder or
Affiliate, as such, of the Company and each of its Subsidiaries
shall not have any liability for any obligations of the Company
under the Securities or the Indenture or for any claim based on,
in respect of or by reason of such obligations or their creation.
Each Securityholder by accepting a Security waives and releases
all such liability. Such waiver and release are part of the
consideration for the issuance of the Securities.
SECTION XI.11 Successors.
All agreements of the Company in this Indenture and the
Securities shall bind its successors and assigns. All agreements
of the Trustee in this Indenture shall bind its successors and
assigns.
SECTION XI.12 Counterparts.
This Indenture may be executed in any number of counterparts
and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be and original and all of
which taken together shall constitute one and the same agreement.
SECTION XI.13 Severability.
In case any provision in this Indenture or in the
Securities shall be held invalid, illegal or unenforceable, in
any respect for any reason, the validity, legality and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby; it being intended that all of
the provisions hereof shall be enforceable to the full extent of
the law.
SECTION XI.14 Table of Contents, Headings. Etc.
The table of contents, cross-reference sheet and
headings of the Articles and Sections of this Indenture have been
inserted for convenience of reference only, and are not to be
considered a part hereof, and shall in no way modify or restrict
any of the terms or provisions hereof.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
HEADWAY CORPORATE
RESOURCES, INC., as Issuer
By: /s/ Signature
STATE STREET BANK AND
TRUST COMPANY, N.A., as
Trustee
By: /s/ Signature
E-281
Exhibit No. 9
Form 8-K
Headway Corporate Resources, Inc.
SEC File No. 0-23170
EXHIBIT A
[FORM OF SECURITY]
THE OFFER AND SALE OF THE SECURITIES REPRESENTED HEREBY
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT" ) OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES NOT TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501
(a)(1), (2), (3) or (7) OF REGULATION D UNDER THE SECURITIES ACT)
(AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION
IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2)
AGREES THAT IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO (X) THE DATE WHICH IS TWO YEARS AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER
OF THIS SECURITY (OR ANY PREDECESSOR SECURITY) AND (Y) SUCH LATER
DATE, IF ANY, AS MAY BE REQUIRED BY ANY SUBSEQUENT CHANGE IN
APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE") EXCEPT
(A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH IS, AS OF THE DATE OF SUCH OFFER, SALE OR TRANSFER,
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT, THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPHS (a)(l),
(a)(2), (a)(3) OR (a)(7) OF RULE 501 UNDER THE SECURITIES ACT
THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR" FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT
TO THE COMPANY'S AND THE TRUSTEE'S RIGHT IN THEIR SOLE DISCRETION
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES
(C), (D), (E) OR (F) TO REQUIRE THE DELIVERY OF OPINIONS OF
COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND IN THE CASE OF THE FOREGOING CLAUSE (E), TO
REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM ATTACHED AS
EXHIBIT D TO THE INDENTURE (A COPY OF WHICH CAN BE OBTAINED FROM
THE TRUSTEE) IS COMPLETED AND DELIVERED BY THE TRANSFEREE TO EACH
OF THEM. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
IN REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS
A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING
RESTRICTIONS. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
THIS SECURITY MAY BE TRANSFERRED ONLY IN COMPLIANCE
WITH THE RESTRICTIVE LEGEND WHICH APPEARS ON THE PRECEDING PAGES
OF THIS SECURITY.
HEADWAY CORPORATE RESOURCES, INC.
Increasing Rate Senior Subordinated Note Due 2006
No. $
HEADWAY CORPORATE RESOURCES, INC., a Delaware
corporation (the "Company," which term includes any successor
entity), for value received promises to pay to
____________________ or registered assigns, the principal sum of
________________ dollars ($ _________________) on March 19, 2006.
Interest Payment Dates: March 30, June 30, September
30, and December 30, beginning June 30, 1998.
Record Dates: February 28, May 28, August 28, and
November 28, beginning May 28, 1998.
Reference is made to the further provisions of this
Security contained herein, which will for all purposes have the
same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this
Security to be signed manually or by facsimile by its duly
authorized officers.
Dated: March 19, 1998
HEADWAY CORPORATE
RESOURCES, INC.
By:________________________
Name:
Title:
Attest:
By:________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities in the within-mentioned
Indenture.
STATE STREET BANK AND
TRUST COMPANY, N.A., as
Trustee
By:_____________________________
Authorized Signer
HEADWAY CORPORATE RESOURCES, INC.
Increasing Rate Senior Subordinated Note Due 2006
Capitalized terms used and not otherwise defined herein
shall have the meanings ascribed to them in the Indenture, dated
as of March 19, 1998 (the "Indenture"), as amended from time to
time, by and between Headway Corporate Resources, Inc., a
Delaware corporation (the "Company") and State Street Bank and
Trust Company, N.A., as trustee (the "Trustee").
1. Interest.
HEADWAY CORPORATE RESOURCES, INC., a Delaware
corporation (the "Company"), promises to pay interest on the
unpaid principal amount of this Security at an initial rate of
twelve percent (12%) per annum and, to the extent not earlier
redeemed, increasing to fourteen percent (14%) per annum
commencing on March 19, 2001; provided, however, that upon the
occurrence and during the continuance of an Event of Default (as
defined in the Indenture) the Company will pay interest on the
unpaid principal amount of this Security at the foregoing
applicable rates plus an additional five percent (5%) per annum
(such increased interest rate is hereinafter referred to as the
"Default Rate"). The Company will pay interest quarterly in
arrears on March 30, June 30, September 30 and December 30 of
each year or if any such day is not a Business Day, on the next
succeeding Business Day (the "Interest Payment Date"), commencing
June 30, 1998. Interest on the Securities will accrue from the
most recent date to which interest has been paid or, if no
interest has been paid, from the date of issuance; provided,
however, that if there is no existing Default in the payment of
interest, and if this Security is authenticated between a record
date referred to on the face hereof and the next succeeding
Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date. Interest shall accrue with
respect to principal on this Security to, but not including the
date of repayment of such principal; provided, however, that if
payment to the Paying Agent occurs after 10:00 a.m., New York
City time, interest shall be deemed to accrue until the following
Business Day. On each Interest Payment Date, interest on the
Securities will be paid for the immediately preceding accrual
period.
To the extent lawful, the Company shall pay interest
(including post-petition interest in any proceeding under any
Bankruptcy Law) on (i) overdue Principal, if any, at the Default
Rate, compounded semiannually; and (ii) overdue installments of
interest, if any (without regard to any applicable grace period)
at the same rate, compounded semiannually. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment.
The Company shall pay interest on the Securities
(except defaulted interest) to the persons who are the registered
Holders at the close of business on the Record Date immediately
preceding the Interest Payment Date even if the Securities are
canceled on registration of transfer or registration of exchange
after such Record Date. Except as set forth in the Indenture,
Holders must surrender Securities to the Paying Agent to collect
principal payments. The Securities will be payable as to
Principal and interest at the office or agency of the Company
maintained for such purpose within the City and State of New
York, or, at the option of the Company, payment of interest may
be made by check mailed to the Holders of the Securities at their
addresses set forth in the register of Holders. If this Security
is a Global Security, all payments in respect of this Security
will be made to the Depository or its nominee in immediately
available funds in accordance with customary procedures
established from time to time by the Depository.
3. Paying Agent and Registrar.
Initially, the Trustee under the Indenture will act as
Paying Agent and Registrar. The Company may change any Paying
Agent, Registrar or co- Registrar without notice to the Holders.
The Company or any of its Subsidiaries may act as Registrar.
4. Indenture.
The Company issued the Securities under an Indenture,
dated as of March 19, 1998 (the "Indenture"), between the Company
and the Trustee. This Security is one of a duly authorized issue
of Securities of the Company designated as its Increasing Rate
Senior Subordinated Notes Due 2006 (the "Securities"). Each
Holder, by accepting the Securities, agrees to be bound by all
the terms and provisions of the Indenture, as the same may be
amended from time to time in accordance with its terms. The
terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code 77aaa-77bbbb) (the "TIA"),
as in effect on the date of the Indenture. Notwithstanding
anything to the contrary herein, the Securities are subject to
all such terms, and Holders are referred to the Indenture and the
TIA for a statement of such terms. The Securities are unsecured
obligations of the Company limited (except as otherwise provided
in the Indenture) in aggregate principal amount to $10,000,000
plus amounts, if any, sufficient to pay interest and premium, if
any, on outstanding Securities as set forth in Paragraph 2
hereof. The obligations of the Company under the Note and the
Indenture are guaranteed pursuant to, and in accordance with,
that certain Guaranty Agreement, dated as of March 19, 1998,
between certain subsidiaries of the Company and the Trustee.
5. Optional Redemption.
On and after March 19, 1999, the Securities may be
redeemed, at the option of the Company, in whole dollar amounts
of at least $1,000,000 of principal (unless the remaining
outstanding amount of the Note is less than $1,000,000) at a
redemption price equal to a percentage of the principal amount
thereof, as set forth in the immediately succeeding paragraph,
plus accrued interest, if any, to the Redemption Date (subject to
the right of Holders of record on relevant Record Dates to
receive interest due on an Interest Payment Date). The Company
may at any time or from time to time purchase Securities from
Securityholders in market transactions and such purchases shall
not be considered redemptions.
The redemption price as a percentage of the principal
amount shall be as follows, if the Securities are redeemed during
the twelve (12) period beginning March 19, of the years indicated
below (the "Redemption Price"):
Year Percentage of Principal Amount
1999 105%
2000 103%
2001 101%
2002 and thereafter 100%
If the Redemption Date is subsequent to a Record Date
with respect to any Interest Payment Date and on or prior to such
Interest Payment Date, then such accrued interest, if any, will
be paid to the person in whose name such Securities are
registered at the close of business on such Record Date and no
other interest will be payable thereon. In the event of a
partial redemption, the Trustee will select the Securities to be
redeemed pro rata or by such manner as the Trustee deems fair to
the Holders of the Securities. In the event of any conflict
between the Security and the Indenture, the Indenture shall
govern.
6. Notice of Redemption.
Notice of redemption will be mailed by first class mail
at least thirty (30) days but not more than sixty (60) days
before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only
in multiples of $1,000.
Except as set forth in the Indenture, from and after
any Redemption Date, if on such Redemption Date the Paying Agent
holds U.S. Legal Tender sufficient for the redemption of the
Securities called for redemption on such Redemption Date, then,
unless the Company defaults in the payment of the Redemption
Price or the Paying Agent is otherwise prohibited from paying the
Redemption Price, the Securities called for redemption will cease
to bear interest and the only right of the Holders of such
Securities will be to receive payment of the Redemption Price.
7. Offers to Purchase.
If there is a Change of Control (as defined in the
Indenture), the Company will be required to offer to purchase all
Securities at the Redemption Price, plus accrued and unpaid
interest to the date of purchase. Holders of Securities that are
subject to an offer to purchase will receive an offer to purchase
from the Company prior to any related purchase date, and may
elect to have such Securities purchased as set forth in the
Indenture.
If the Company consummates any Asset Sale (as defined
in the Indenture), the Company may be required to utilize certain
of the Net Cash Proceeds (as defined in the Indenture) received
from such Asset Sale, to an offer to redeem Securities at the
Redemption Price, plus accrued and unpaid interest to the date of
redemption. Holders of Securities which are the subject of an
offer to redeem will receive an offer to redeem from the Company
prior to any related purchase date, and may elect to have such
Securities redeemed as set forth in the Indenture.
8. Subordination.
The Indebtedness evidenced by the Securities is, to the
extent and in the manner provided in the Indenture, subordinate
and subject in right of payment to the prior payment in full of
all Senior Indebtedness (as defined in the Indenture), and this
Security is issued subject to such provisions. Each Holder of
this Security, by accepting the same, (a) agrees to and shall be
bound by such provisions, (b) authorized and directs the Trustee,
on behalf of such holder, to take such action as may be necessary
or appropriate to effectuate the subordination as provided in the
Indenture, and (c) appoints the Trustee attorney-in-fact of such
Holder for such purpose.
9. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons,
in denominations of $1,000 and integral multiples of $1,000. A
Holder shall register the transfer of or exchange Securities in
accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements
and transfer documents and to pay certain taxes or similar
governmental charges required by law and as permitted by the
Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for
redemption. No service charge shall be made for any registration
of transfer or exchange or redemption of Securities, but the
Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.
The Company need not exchange or register the transfer of any
Security or portion of a Security selected for redemption, except
for the unredeemed portion of any Security being redeemed in
part. Also, it need not exchange or register the transfer of any
Securities for a period of fifteen (15) days before a selection
of Securities to be redeemed or during the period between a
record date and the corresponding Interest Payment Date.
10. Discharge Prior to Redemption or Maturity: Defeasance.
The Company's obligations pursuant to the Indenture
will be discharged, except for obligations pursuant to certain
sections thereof, subject to the terms of the Indenture, upon the
payment of all the Securities or upon the irrevocable deposit
with the Trustee of U.S. Legal Tender sufficient to pay when due
Principal of and interest, if any, on the Securities to maturity
or redemption, as the case may be.
The Indenture contains provisions (which provisions
apply to this Security) for defeasance at any time of (a) the
entire Indebtedness of the Company on this Security or (b)
certain restrictive covenants and the Defaults and Events of
Default related thereto, in each case upon compliance by the
Company with certain conditions set forth therein.
11. Amendment: Supplement: Waiver.
Subject to certain exceptions, the Indenture or the
Securities may be amended or supplemented with the written
consent of the Required Holders (as defined in the Indenture),
and any existing Default or Event of Default or compliance with
any provision may be waived with the consent of the Required
Holders. Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Securities
to, cure among other things, any ambiguity, defect or
inconsistency, provide for uncertificated Securities in addition
to or in place of certificated Securities, comply with Article V
of the Indenture or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA,
or make any other change that does not adversely affect the
rights of any Holder of a Security.
12. Restrictive Covenants.
The Indenture contains certain covenants that, among
other things, limit the ability of the Company and its
Subsidiaries to incur additional Indebtedness, transfer or sell
assets, pay dividends, make certain other Restricted Payments and
Investments, create Liens or enter into transactions with
Affiliates and mergers. The Company must report quarterly to the
Trustee on compliance with such limitations.
13. Defaults and Remedies.
If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least thirty percent (30%) in the
aggregate principal amount of Securities then outstanding may
declare all the Securities to be due and payable in the manner,
at the time and with the effect provided in the Indenture.
Holders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee is not obligated to
enforce the Indenture or the Securities unless it has received
indemnity reasonably satisfactory to it. The Indenture permits,
subject to certain limitations therein provided, the Required
Holders to direct the Trustee in its exercise of any trust or
power.
14. Trustee Dealings with Company.
Subject to certain limitations imposed by the TIA, the
Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may
otherwise deal with the Company, its Subsidiaries or their
respective Affiliates, as if it were not the Trustee.
15. No Recourse Against Others.
A stockholder, director, officer, employee or
incorporator, as such, of the Company or any of its Subsidiaries
shall not have any liability for any obligation of the Company
under the Securities or the Indenture or for any claim based on,
in respect of or by reason of, such obligations or their
creation, including with respect to any certificates delivered
hereunder or thereunder from any such person. Each Holder of a
Security by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration
for the issuance of the Securities.
16. Authentication.
This Security shall not be valid until the Trustee or
authenticating agent manually signs the certificate of
authentication on this Security.
17. Governing Law.
The Indenture and this security shall be governed by
and construed in accordance with the laws of the State of New
York, as applied to contracts made and performed within the State
of New York without regard to principles of conflicts of laws.
18. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a
Holder of a Security or an assignee, such as: TEN COM (tenants in
common), TEN ENT (tenants by the entireties), JT TEN (joint
tenants with right of survivorship and not as tenants in common),
CUST (Custodian), and U/G/M/A (Uniform Gifts to Minors Act).
19. CUSIP Numbers.
Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the
Company may cause CUSIP numbers to be printed on the Securities
immediately prior to the qualification of the Indenture under the
TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the
other identification numbers printed hereon.
20. Indenture.
Each Holder, by accepting a Security, agrees to be
bound by all of the terms and provisions of the Indenture, as the
same may be amended from time to time.
The Company will furnish to any Holder of a Security
upon written request and without charge a copy of the Indenture.
Requests may be made to: Headway Corporate Resources, Inc., 850
Third Avenue, New York, New York 10022, Attn.: President.
21. Successors.
When a successor assumes all the obligations of its
predecessor under the Securities and the Indenture and the
transaction complies with the terms of Article V of the
Indenture, the predecessor will be released from those
obligations.
22. Unclaimed Money.
If money for the payment of Principal or interest
remains unclaimed for two (2)years, the Trustee or Paying Agent
shall return the money to the Company upon its request. After
that, all liability of the Trustee and Paying Agent with respect
to such money shall cease and Holders entitled to money must look
to the Company for payment.
23. Certain Information Obligations.
At any time when the Company is not subject to Section
13 or 15(d) of the Securities Exchange Act of 1934, upon the
request of a Holder of a Note, the Company will promptly furnish
or cause to be furnished such information as is specified
pursuant to Rule 144A(d)(4) under the Securities Act (or any
successor provision thereto) to such Holder or to a prospective
purchaser of such Note designated by such Holder, as the case may
be, in order to permit compliance by such Holder with Rule 144A
under the Securities Act.
[FORM OF ASSIGNMENT]
I or we assign this Security to
(Print or type name, address and zip code of assignee)
Please insert Social Security or other
identifying number of assignee
and irrevocably appoint ______________________ agent to transfer
this Security on the books of the Company. The agent may
substitute another to act for it.
In connection with any transfer of any of the Securities
evidenced by this certificate occurring prior to (x) the date
which is two years after the later of the date of original issue
and the last date on which the Company or any affiliate of the
Company was the owner of such Securities, or any predecessor
thereto, and (y) such later date, if any, as may be required by
any subsequent change in applicable law (the "Resale Restriction
Termination Date"), the undersigned confirms that it has not
utilized any general solicitation or general advertising in
connection with the transfer and that such Securities are being
transferred:
CHECK ONE BOX BELOW
(1) to the Company; or
(2) pursuant to a registration statement which has
been declared effective under the Securities Act; or
(3) pursuant to and in compliance with Rule 144A under the
Securities Act; or
(4) pursuant to and in compliance with Regulation S under
the Securities Act; or
(5) to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) that has furnished to the Company and
the Trustee the Transferee Certificate in the form
attached as Exhibit C to the Indenture (such Transferee
Certificate can be obtained from the Trustee); or
(6) pursuant to another available exemption from the
registration requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Securities evidenced by this certificate in
the name of any person other than the registered holder thereof;
provided, however, that if box (3), (4), (5) or (6) is checked,
the Company and the Trustee may require, prior to registering any
such transfer of the Securities, in their sole discretion, such
opinions of counsel, certifications and/or other information
satisfactory to each of them to confirm that such transfer is
being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Trustee or
Registrar shall not be obligated to register this Security in the
name of any person other than the Holder hereof unless and until
the conditions to any such transfer of registration set forth
herein and in Section 2.06 of the Indenture shall have been
satisfied.
Dated:_______________
Signed:______________________________________________
(Sign exactly as your name appears on
the front of this Security)
Signature Guarantee:
___________________________________________________________
NOTICE: Signature must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Bond Registrar which
requirements will include membership or
participation in the Securities Transfer Agents
Medallion Program or such other "signature
guarantee program" as may be determined by the
Bond Registrar in addition to, or in substitution
for, the Securities Transfer Agents Medallion
Program, all in accordance with the Securities
Exchange Act of 1934, as amended.
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Security purchased by
the Company pursuant to Section 4.16 or Section 4.17 of the
Indenture, check the appropriate box:
Section 4.16 (Change in Control)
Section 4.17 (Asset Sale)
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.16 or Section 4.17
of the Indenture, state the amount: $ ________________
Date:______________________ Signature:
_______________________________
(Sign exactly as your
name appears on the front
of this Security)
Tax Identification No.:
__________________
Signature
Guarantee:_______________________________________________________
______
EXHIBIT B
[FORM OF LEGEND FOR BOOK-ENTRY SECURITIES]
Any Global Security authenticated and delivered
hereunder shall bear a legend (which would be in addition to any
other legends required in the case of a Restricted Security) in
substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING
OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED
IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR
A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT EXCHANGEABLE
FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN
THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF
THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY
A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
E-282
Exhibit No. 10
Form 8-K
Headway Corporate Resources, Inc.
SEC File No. 0-23170
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "Guaranty Agreement" or this
"Guaranty"), dated as of March 19, 1998, is made by EACH OF THE
UNDERSIGNED (each a "Guarantor", and collectively, the
"Guarantors") to the Trustee for the benefit of EACH HOLDER OF
THE NOTES (collectively the "Guaranty Parties") issued pursuant
to the Note Indenture (as defined below). All capitalized terms
used but not otherwise defined herein shall have the respective
meanings assigned thereto in the Note Indenture.
W I T N E S S E T H:
WHEREAS, the Guaranty Parties have agreed to acquire from
Headway Corporate Resources, Inc., a Delaware corporation (the
"Company"), those certain Increasing Rate Senior Subordinated
Notes (the "Notes") pursuant to the Indenture dated as of March
19, 1998 between the Company and State Street Bank and Trust
Company, N.A. as trustee ("Trustee") (as from time to time
amended, revised, modified, supplemented or amended and restated,
the "Note Indenture"); and
WHEREAS, each Guarantor is a Subsidiary of the Company and
will materially benefit from the proceeds of Notes issued
pursuant the Note Indenture and the other transactions to be
consummated concurrently therewith, and each Guarantor is willing
to enter into this Guaranty Agreement to provide an inducement
for the Guaranty Parties to acquire such Notes issued pursuant
to, and governed by the provisions of, the Note Indenture;
NOW, THEREFORE, in order to induce the Guaranty Parties to
acquire the Notes pursuant to the Note Indenture and the other
Financing Documents and in consideration of the premises and the
mutual covenants contained herein, the parties hereto agree as
follows:
1. Guaranty. Each Guarantor hereby jointly and
severally, unconditionally, absolutely, continually and
irrevocably guarantees to the Guaranty Parties the payment and
performance in full of the Company's Liabilities (as defined
below). For all purposes of this Guaranty Agreement, "Company's
Liabilities" means: (a) the Company's prompt payment in full,
when due or declared due and at all such times, of all
Obligations and all other amounts pursuant to the terms of Note
Indenture, the Notes, and all other documents executed in
connection with the Note Indenture heretofore, now or at any time
or times hereafter owing, arising, due or payable from the
Company to any one or more of the Guaranty Parties, including
without limitation principal, interest, premium or fee
(including, but not limited to, trustee's fees and attorneys'
fees and expenses); and (b) the Company's prompt, full and
faithful performance, observance and discharge of each and every
agreement, undertaking, covenant and provision to be performed,
observed or discharged by the Company under the Note Indenture
and all other documents executed in connection therewith. Each
Guarantor's obligations to the under this Guaranty Agreement are
hereinafter collectively referred to as the "Guarantors'
Obligations"; provided, however, that the liability of each
Guarantor individually with respect to the Guarantors'
Obligations shall be limited to an aggregate amount equal to the
largest amount that would not render its obligations hereunder
subject to avoidance under Section 548 of the United States
Bankruptcy Code or any comparable provisions of any applicable
state law.
Each Guarantor agrees that it is jointly and severally,
directly and primarily liable for the Company's Liabilities.
2. Payment. If the Company shall default in payment or
performance of any Company's Liabilities when and as the same
shall become due, whether according to the terms of the Note
Indenture, by acceleration, or otherwise, or upon the occurrence
of any other Event of Default under the Note Indenture that has
not been cured or waived, then each Guarantor, upon demand
thereof by the Trustee or its successors or assigns, or by the
Required Holders (as defined in the Note Indenture) will, as of
the date of such demand, fully pay to the Trustee, for the
benefit of the Guaranty Parties, subject to any restriction set
forth in Section 1 hereof, an amount equal to all Guarantor's
Obligations then due and owing.
3. Unconditional Obligations. This is a guaranty of
payment and not of collection. The Guarantors' Obligations under
this Guaranty Agreement shall be joint and several, absolute and
unconditional irrespective of the validity, legality or
enforceability of the Note Indenture, the Notes or any other
Financing Document or any other guaranty of the Company's
Liabilities, and shall not be affected by any action taken under
the Note Indenture, the Notes or any other Financing Document,
any other guaranty of the Company's Liabilities, or any other
agreement between any Guaranty Party and the Company or any other
person, in the exercise of any right or power therein conferred,
or by any failure or omission to enforce any right conferred
thereby, or by any waiver of any covenant or condition therein
provided, or by any acceleration of the maturity of any of the
Company's Liabilities, or by the dissolution of the Company or
the combination or consolidation of the Company into or with
another entity or any transfer or disposition of any assets of
the Company or by any extension or renewal of the Note Indenture,
any of the Notes or any other Financing Document, in whole or in
part, or by any modification, alteration, amendment or addition
of or to the Note Indenture, any of the Notes or any other
Financing Document, any other guaranty of the Company's
Liabilities, or any other agreement between any Guaranty Party
and the Company or any other Person, or by any other circumstance
whatsoever (with or without notice to or knowledge of any
Guarantor) which may or might in any manner or to any extent vary
the risks of any Guarantor, or might otherwise constitute a legal
or equitable discharge of a surety or guarantor; it being the
purpose and intent of the parties hereto that this Guaranty
Agreement and the Guarantors' Obligations hereunder shall be
absolute and unconditional under any and all circumstances and
shall not be discharged except by payment as herein provided.
4. Currency and Funds of Payment. Each Guarantor hereby
guarantees that the Guarantors' Obligations will be paid in
lawful currency of the United States of America and in
immediately available funds, regardless of any law, regulation or
decree now or hereafter in effect that might in any manner affect
the Company's Liabilities, or the rights of any Guaranty Party
with respect thereto as against the Company, or cause or permit
to be invoked any alteration in the time, amount or manner of
payment by the Company of any or all of the Company's
Liabilities.
5. Events of Default. In the event that (a) any
Guarantor shall file a petition to take advantage of any
insolvency statute; (b) any Guarantor shall commence or suffer to
exist a proceeding for the appointment of a receiver, trustee,
liquidator or conservator of itself or of the whole or
substantially all of its property; (c) any Guarantor shall file a
petition or answer seeking reorganization or arrangement or
similar relief under the Federal bankruptcy laws or any other
applicable law or statute of the United States of America or any
state or similar law of any other country; (d) a court of
competent jurisdiction shall enter an order, judgment or decree
appointing a custodian, receiver, trustee, liquidator or
conservator of any Guarantor or of the whole or substantially all
of its properties, or approve a petition filed against any
Guarantor seeking reorganization or arrangement or similar relief
under the Federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state or similar
law of any other country, or if, under the provisions of any
other law for the relief or aid of debtors, a court of competent
jurisdiction shall assume custody or control of any Guarantor or
of the whole or substantially all of its properties and such
order, judgment, decree, approval or assumption remains unstayed
or undismissed for a period of sixty (60) consecutive days; (e)
there is commenced against any Guarantor any proceeding or
petition seeking reorganization, arrangement or similar relief
under the Federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state, which
proceeding or petition remains unstayed or undismissed for a
period of sixty (60) consecutive days; (f) there shall occur and
be continuing an Event of Default under the Note Indenture; (g)
any default shall occur in the payment of amounts due hereunder;
or (h) any other default in compliance with the terms hereof
shall occur which remains uncured or unwaived for a period of
thirty (30) days after the earlier of the date notice of such
default is received by an officer of such Guarantor or the date
an officer of such Guarantor otherwise has knowledge of such
default (each of the foregoing an "Event of Default" hereunder),
then and without notice thereof or demand therefor, so long as
such Event of Default shall be continuing, the Guarantors'
Obligations shall immediately become due and payable.
6. Suits. Each Guarantor from time to time shall pay to
the Trustee for the benefit of the Guaranty Parties, on demand,
as set forth in the Note Indenture, the Guarantors' Obligations
as they become or are declared due, and in the event such payment
is not made forthwith, the Trustee or the Holders or any of them
may proceed to suit against any one or more or all of the
Guarantors. At the Holders' election, one or more and successive
or concurrent suits may be brought hereon by the Trustee or
Holders against any one or more or all of the Guarantors, whether
or not suit has been commenced against the Company, any other
guarantor of the Company's Liabilities, or any other Person and
whether or not the Trustee or any Holder has taken or failed to
take any other action to collect all or any portion of the
Company's Liabilities.
7. Set-Off and Waiver. Each Guarantor waives any right
to assert against the Trustee or any Holder as a defense,
counterclaim, set-off or cross claim, any defense (legal or
equitable) or other claim which such Guarantor may now or at any
time hereafter have against the Company, the Trustee or the
Holders, without waiving any additional defenses, set-offs,
counterclaims or other claims otherwise available to such
Guarantor. If at any time hereafter the Trustee or any Holder
employs counsel for advice or other representation to enforce the
Guarantors' Obligations that arise out of an Event of Default,
then, in any of the foregoing events, all of the reasonable
attorneys' fees arising from such services and all expenses,
costs and charges in any way or respect arising in connection
therewith or relating thereto shall be jointly and severally paid
by the Guarantors to the Trustee, for the benefit of the Guaranty
Parties, on demand.
8. Waiver; Subrogation.
(a) Each Guarantor hereby waives notice of the
following events or occurrences: (i) the Trustee's acceptance of
this Guaranty Agreement; (ii) the Holders' heretofore, now or
from time to time hereafter loaning monies or giving or extending
credit to or for the benefit of the Company, whether pursuant to
the Note Indenture or the Notes or any amendments, modifications,
or supplements thereto, or replacements or extensions thereof;
(iii) the Trustee, the Holders or the Company heretofore, now or
at any time hereafter, obtaining, amending, substituting for,
releasing, waiving or modifying the Note Indenture, the Notes or
any other Financing Documents; (iv) presentment, demand, notices
of default, non-payment, partial payment and protest; (v) the
Trustee or the Holders heretofore, now or at any time hereafter
granting to the Company (or any other party liable to the Holders
on account of the Company's Liabilities) any indulgence or
extensions of time of payment of the Company's Liabilities; and
(vi) the Trustee or the Holders heretofore, now or at any time
hereafter accepting from the Company or any other person, any
partial payment or payments on account of the Company's
Liabilities or any collateral securing the payment thereof or the
Trustee settling, subordinating, compromising, discharging or
releasing the same. Each Guarantor agrees that the Trustee and
each Holder may heretofore, now or at any time hereafter do any
or all of the foregoing in such manner, upon such terms and at
such times as the Trustee or any Holder, in its sole and absolute
discretion, deems advisable, without in any way or respect
impairing, affecting, reducing or releasing such Guarantor from
the Guarantors' Obligations, and each Guarantor hereby consents
to each and all of the foregoing events or occurrences.
(b) Each Guarantor hereby agrees that payment or
performance by such Guarantor of the Guarantors' Obligations
under this Guaranty Agreement may be enforced by the Trustee on
behalf of the Guaranty Parties upon demand by the Trustee or by
the Required Holders, to such Guarantor without such person being
required, each Guarantor expressly waiving any right it may have
to require such person, to prosecute collection or seek to
enforce or resort to any remedies against the Company or any
other Guarantor or any other guarantor of the Company's
Liabilities, it being expressly understood, acknowledged and
agreed to by each Guarantor that demand under this Guaranty
Agreement may be made by the Trustee, or by the Required Holders,
and the provisions hereof enforced by such person, effective as
of the first date any Event of Default occurs and is continuing
under the Note Indenture. The Guarantors' Obligations shall in
no way be impaired, affected, reduced, or released by reason of
the Trustee's or any Holder's failure or delay to do or take any
of the acts, actions or things described in this Guaranty
Agreement including, without limiting the generality of the
foregoing, those acts, actions and things described in this
Section 8.
(c) Each Guarantor further agrees with respect to this
Guaranty Agreement that it shall have no right of subrogation,
reimbursement or indemnity, nor any right of recourse to security
for the Company's Liabilities. This waiver is expressly intended
to prevent the existence of any claim in respect to such
reimbursement by the Guarantor against the estate of Company
within the meaning of Section 101 of the Bankruptcy Code, and to
prevent the Guarantor from constituting a creditor of Company in
respect of such reimbursement within the meaning of Section
547(b) of the Bankruptcy Code in the event of a subsequent case
involving the Company.
9. Effectiveness; Enforceability. This Guaranty
Agreement shall be effective as of the date hereof and shall
continue in full force and effect until terminated in accordance
with Section 17 hereof. The Trustee shall give each Guarantor
written notice of such termination at each Guarantor's address
set forth herein. This Guaranty Agreement shall be binding upon
and inure to the benefit of each Guarantor, the Trustee and the
Holders and their respective successors and assigns. Any claim
or claims that the Trustee and the Holders may at any time
hereafter have against any Guarantor under this Guaranty
Agreement may be asserted by the Trustee or any Holder by written
notice directed to any one or more or all of the Guarantors at
the address specified in the Securities Purchase Agreement.
10. Representations and Warranties. Each Guarantor
represents and warrants to the Trustee for the benefit of the
Guaranty Parties that it is duly authorized to execute, deliver
and perform this Guaranty Agreement, that this Guaranty Agreement
is legal, valid, binding and enforceable against such Guarantor
in accordance with its terms except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles; and that such
Guarantor's execution, delivery and performance of this Guaranty
Agreement does not violate or constitute a breach of its
certificate of incorporation or other documents of corporate
governance or any agreement to which such Guarantor is a party,
or any applicable laws, in each case, which violation or breach
could reasonably be expected to have a Material Adverse Effect
with respect to such Guarantor.
11. Subordination. The Guarantors' Obligations to the
Guaranty Parties shall be subordinated and junior in right of
payment to the prior payment in full of the Senior Indebtedness,
including, without limitation, payment by any or all of the
Guarantors pursuant to the Guaranty Agreement, to the extent and
in the manner set forth in Article X of the Note Indenture.
12. Expenses. Each Guarantor agrees to be jointly and
severally liable for the payment of all reasonable fees and
expenses, including attorney's fees, incurred by the Trustee or
any Holder in connection with the enforcement of this Guaranty
Agreement.
13. Reinstatement. Each Guarantor agrees that this
Guaranty Agreement shall continue to be effective or be
reinstated, as the case may be, at any time payment received by
the Trustee under the Note Indenture or this Guaranty Agreement
is rescinded or must be restored for any reason.
14. Counterparts. This Guaranty Agreement may be executed
in any number of counterparts, each of which shall be deemed to
be an original as against any party whose signature appears
thereon, and all of which shall constitute one and the same
instrument.
15. Reliance. Each Guarantor represents and warrants to
the Trustee, for the benefit of the Holders, that: (a) such
Guarantor has adequate means to obtain from Company, on a
continuing basis, information concerning Company and Company's
financial condition and affairs and has full and complete access
to Company's books and records; (b) such Guarantor is not relying
on the Trustee or any Holder, its or their employees, Trustees or
other representatives, to provide such information, now or in the
future; (c) such Guarantor is executing this Guaranty Agreement
freely and deliberately, and understands the obligations and
financial risk undertaken by providing this Guaranty; (d) such
Guarantor has relied solely on the Guarantor's own independent
investigation, appraisal and analysis of Company and Company's
financial condition and affairs in deciding to provide this
Guaranty and is fully aware of the same; and (e) such Guarantor
has not depended or relied on the Trustee or any Holder, its or
their employees, Trustees or representatives, for any information
whatsoever concerning the Company or the Company's financial
condition and affairs or other matters material to such
Guarantor's decision to provide this Guaranty or for any
counseling, guidance, or special consideration or any promise
therefor with respect to such decision. Each Guarantor agrees
that neither the Trustee nor any Holder has any duty or
responsibility whatsoever, now or in the future, to provide to
any Guarantor any information concerning Company or Company's
financial condition and affairs, other than as expressly provided
herein, and that, if such Guarantor receives any such information
from the Trustee or any Holder, its or their employees, Trustees
or other representatives, such Guarantor will independently
verify the information and will not rely on the Trustee or any
Holder, its or their employees, Trustees or other
representatives, with respect to such information.
16. Notices. Any notice shall be conclusively deemed to
have been received by any party hereto and be effective (i) on
the day on which delivered (including hand delivery by commercial
courier service) to such party (against receipt therefor), (ii)
on the date of receipt at such address or telefacsimile number as
may from time to time be specified by such party in written
notice to the other parties hereto or otherwise received), in the
case of notice by telegram or telefacsimile, respectively (where
the receipt of such message is verified by return), or (iii) on
the fifth Business Day after the day on which mailed, if sent
prepaid by certified or registered mail, return receipt
requested, in each case delivered, transmitted or mailed, as the
case may be, to the address or telefacsimile number, as
appropriate, set forth below or such other address or number as
such party shall specify by notice hereunder:
(a) if to any Guarantor:
Headway Corporate Resources, Inc.
850 Third Avenue
New York, New York 10022
Attention: Barry S. Roseman
President and Chief Executive Officer
Telephone: (212) 508-3500
Telefacsimile: (212) 508-3540
with a copy to:
Christy & Viener
620 Fifth Avenue
New York, New York 10020-2457
Attention: Richard B. Salomon, Esq.
Telephone: (212) 632-5500
Telefacsimile: (212) 632-5555
(b) if to the Trustee:
State Street Bank and Trust Company, N.A.
61 Broadway, 15th Floor
New York, New York 10006
Attention: Corporate Trust Division
Telephone: (212) 612-3201
Telefacsimile: (212) 612-3202
with a copy to:
Carter, Ledyard & Milburn
2 Wall Street
New York, New York 10005
Attention: James Gadsden, Esq.
Telephone: (212) 732-3200
Telefacsimile: (212) 732-3232
17. Termination. This Guaranty Agreement and all
obligations of the Guarantors hereunder shall terminate without
delivery of any instrument or performance of any act by any party
on the satisfaction on full of the Company's Obligations set
forth in the Notes and the Note Indenture.
18. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the heirs, legal
representatives, successors and assigns of the respective parties
hereto.
19. Governing Law; Waivers of Trial by Jury, Etc.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED,
IN SUCH STATE NOTWITHSTANDING ITS EXECUTION AND DELIVERY
OUTSIDE SUCH STATE.
(b) EACH GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY
AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY
STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK,
STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY WAIVES
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE IN, OR TO THE EXERCISE OF JURISDICTION
OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH
SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS
GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY
SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING.
(c) EACH GUARANTOR AGREES THAT SERVICE OF PROCESS MAY
BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND
COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR
PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE
PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED IN SECTION 16
HEREOF OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER
THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF
SHALL PRECLUDE ANY GUARANTY PARTY FROM BRINGING ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER FINANCING DOCUMENT IN THE COURTS OF
ANY JURISDICTION WHERE ANY GUARANTOR OR ANY OF SUCH PARTY'S
PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT
PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION,
EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN
RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING OBJECTION TO
THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY
OTHER COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE
AVAILABLE UNDER APPLICABLE LAW.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED
OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH
THE FOREGOING, EACH GUARANTOR AND THE TRUSTEE ON BEHALF OF
THE GUARANTY PARTIES HEREBY AGREE, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY
WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT
ANY SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION
OR PROCEEDING.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement on the day and year first written above.
GUARANTORS:
HEADWAY CORPORATE STAFFING
SERVICES, INC.
CERTIFIED TECHNICAL STAFFING, INC.
CORPORATE STAFFING
ALTERNATIVES, INC.
HEADWAY CORPORATE STAFFING SERVICES
OF NEW YORK, INC.
HEADWAY PERSONNEL, INC.
HEADWAY CORPORATE STAFFING SERVICES
OF NORTH CAROLINA, INC.
HEADWAY CORPORATE STAFFING SERVICES
OF CONNECTICUT, INC.
ASA PERSONNEL SERVICES, L.L.C.
E.D.R. ASSOCIATES, INC.
WHITNEY PARTNERS, L.L.C.
HCSS HOLDINGS, INC.
HCSS EAST, INC.
HCSS WEST, INC.
CHENEY ASSOCIATES, L.L.C.
By: (Signature)
TRUSTEE:
STATE STREET BANK AND TRUST
COMPANY, N.A.
Trustee for the Holders
By: (Signature)
E-389
Exhibit No. 11
Form 8-K
Headway Corporate Resources, Inc.
SEC File No. 0-23170
CREDIT AGREEMENT
by and among
HEADWAY CORPORATE RESOURCES, INC.,
as Borrower,
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent and as Lender
and
THE LENDERS PARTY HERETO FROM TIME TO TIME
March 19, 1998
TABLE OF CONTENTS
ARTICLE IDefinitions and Terms
1.1. Definitions 2
1.2. Rules of Interpretation 27
ARTICLE IIThe Revolving Credit Facility
2.1. Revolving Loans 28
2.2. Payment of Interest 30
2.3. Payment of Principal 30
2.4. Manner of Payment 30
2.5. Notes 31
2.6. Pro Rata Payments 31
2.7. Voluntary Commitment Reductions 31
2.8. Conversions and Elections of Subsequent Interest
Periods 32
2.9. Increase and Decrease in Available Amounts 32
2.10. Unused Fee 32
2.11. Deficiency Advances 32
2.12. Use of Proceeds 33
2.13. Mandatory Reductions in Commitment 33
ARTICLE IIILetters of Credit
3.1. Letters of Credit 33
3.2. Reimbursement. 34
3.3. Letter of Credit Facility Fees 38
3.4. Administrative Fees 38
ARTICLE IVSecurity
4.1. Security 38
4.2. Guaranty 38
4.3. Information Regarding Collateral 38
4.4. Intellectual Property. 39
4.5. Pledged Stock. 39
4.6 Pledge and Subordination of Intercompany Notes 39
4.7 Further Assurances. 39
ARTICLE VChange in Circumstances
5.1 Increased Cost and Reduced Return. 40
5.2 Limitation on Types of Loans. 41
5.3 Illegality 42
5.4 Treatment of Affected Loans. 42
5.5 Compensation 42
5.6 Taxes. 43
5.7 Replacement Banks 44
ARTICLE VIConditions to Making Loans and Issuing Letters of
Credit
6.1. Conditions of Initial Advance. 45
6.2. Conditions of Loans and Letters of Credit. 49
ARTICLE VIIRepresentations and Warranties
7.1. Organization and Authority 50
7.2. Loan Documents 50
7.3. Solvency 51
7.4. Subsidiaries and Stockholders 51
7.5. Ownership Interests 51
7.6. Financial Condition 51
7.7. Title to Properties 52
7.8. Taxes 52
7.9. Other Agreements 52
7.10. Litigation 53
7.11. Margin Stock 53
7.12. Investment Company 53
7.13. Intellectual Property. 53
7.14. No Untrue Statement 53
7.15. No Consents, Etc. 54
7.16. Employee Benefit Plans 54
7.17. No Default 55
7.18. Environmental Matters 55
7.19. Employment Matters 56
7.20. RICO 56
ARTICLE VIIIAffirmative Covenants
8.1. Financial Reports, Etc. 57
8.2. Maintain Properties 59
8.3. Existence, Qualification, Etc. 59
8.4. Regulations and Taxes 59
8.5. Insurance 59
8.6. True Books 60
8.7. Right of Inspection 60
8.8. Observe all Laws 60
8.9. Governmental Licenses 60
8.10. Covenants Extending to Other Persons 60
8.11. Officer's Knowledge of Default 60
8.12. Suits or Other Proceedings 60
8.13. Notice of Environmental Complaint or Condition 61
8.14. Environmental Compliance 61
8.15. Indemnification 61
8.16. Further Assurances 62
8.17. Employee Benefit Plans 62
8.18. Continued Operations 63
8.19. New Subsidiaries 63
ARTICLE IXNegative Covenants
9.1. Financial Covenants 65
9.2. Acquisitions 66
9.3. Liens 66
9.4. Indebtedness 67
9.5. Transfer of Assets 68
9.6. Investments 68
9.7. Merger or Consolidation 69
9.8. Restricted Payments 69
9.9. Transactions with Affiliates 70
9.10. Compliance with ERISA 70
9.11. Fiscal Year 71
9.12. Dissolution, Etc. 71
9.13. Change of Control 71
9.14. Hedging Obligations 71
9.15. Negative Pledge Clauses 71
9.16. Restrict Payment of Dividends 71
9.17. Subordinated Debt and Preferred Stock 71
ARTICLE XEvents of Default and Acceleration
10.1. Events of Default 72
10.2. Agent to Act 75
10.3. Cumulative Rights 75
10.4. No Waiver 75
10.5. Allocation of Proceeds 76
ARTICLE XIThe Agent
11.1. Appointment 76
11.2. Attorneys-in-fact 77
11.3. Limitation on Liability 77
11.4. Reliance 77
11.5. Notice of Default 77
11.6. No Representations 78
11.7. Indemnification 78
11.8. Lender 78
11.9. Resignation 79
11.10. Sharing of Payments, etc. 79
11.11. Fees 80
ARTICLE XIIMiscellaneous
12.1. Assignments and Participations 80
12.2. Notices 81
12.3. Setoff 83
12.4. Survival 83
12.5. Expenses 83
12.6. Amendments 84
12.7. Counterparts 84
12.8. Termination 84
12.9. Indemnification; Limitation of Liability 85
12.10. Severability 86
12.11. Entire Agreement 86
12.12. Agreement Controls 86
12.13. Usury Savings Clause 86
12.14. Confidentiality 87
12.15. Termination of Prior Credit Facilities 87
12.16. Acknowlegements 87
12.17. Governing Law; Waiver of Jury Trial 87
EXHIBIT A Applicable Commitment Percentages A-1
EXHIBIT B Form of Assignment and Acceptance B-1
EXHIBIT C Notice of Appointment (or Revocation) of
Authorized Representative C-1
EXHIBIT D Form of Borrowing Notice D-1
EXHIBIT E Form of Interest Rate Selection Notice E-1
EXHIBIT F Form of Revolving Note F-1
EXHIBIT H Compliance Certificate H-1
EXHIBIT I Form of Guaranty I-1
EXHIBIT J Form of Security Agreement J-1
EXHIBIT K Form of Pledge Agreement K-1
EXHIBIT L Form of LC Account Agreement L-1
EXHIBIT M Form of Subordination Agreement M-1
EXHIBIT N Form of Intercompany Note Pledge N-1
EXHIBIT O Form of Intellectual Property Security
Agreement O-1
EXHIBIT P Form of Intercompany Notes P-1
Schedule 1.2 Existing Debt S-1
Schedule 4.3 Information Regarding Collateral S-2
Schedule 7.4 Subsidiaries and Investments in Other Persons S-3
Schedule 7.7 Liens S-5
Schedule 7.8 Tax Matters S-6
Schedule 7.10 Litigation S-7
Schedule 7.18 Environmental Matters S-8
Schedule 9.9 Affiliate Transactions S-9
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of March 19, 1998 (the
"Agreement"), is made by and among HEADWAY CORPORATE RESOURCES,
INC., a Delaware corporation having its principal place of
business in New York, New York (the "Borrower"), NATIONSBANK,
NATIONAL ASSOCIATION, a national banking association organized
and existing under the laws of the United States, in its capacity
as a Lender and as the Issuing Bank (each as hereinafter defined)
("NationsBank" and collectively with each other financial
institution executing and delivering a signature page hereto and
each other financial institution which may hereafter execute and
deliver an instrument of assignment with respect to this
Agreement pursuant to Section 12.1, the "Lenders"), and
NATIONSBANK, NATIONAL ASSOCIATION , a national banking
association organized and existing under the laws of the United
States, in its capacity as agent for the Lenders (in such
capacity, and together with any successor agent appointed in
accordance with the terms of Section 11.9, the "Agent");
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lenders make
available to the Borrower a $75,000,000 revolving credit facility
which shall include a $5,000,000 letter of credit sublimit for
the issuance of standby letters of credit the proceeds of which
are to be used to refinance certain Existing Debt (as hereinafter
defined) of the Borrower, to redeem, repurchase or otherwise
obtain surrender of the Warrants (as hereinafter defined), to
finance general working capital needs, including the making of
Acquisitions and Capital Expenditures permitted hereunder, and to
provide for the general corporate purposes of the Borrower; and
WHEREAS, the Lenders are willing to make such revolving
credit and letter of credit facilities available to the Borrower
upon the terms and conditions set forth herein;
NOW, THEREFORE, the Borrower, the Lenders and the Agent
hereby agree as follows:
ARTICLE I
Definitions and Terms
I.1. Definitions. For the purposes of this Agreement, in
addition to the definitions set forth above, the following terms
shall have the respective meanings set forth below:
"Acquisition" means the acquisition of (i) a
controlling equity or other ownership interest in another
Person (including the purchase of an option, warrant or
convertible or similar type security to acquire such a
controlling interest at the time it becomes exercisable by
the holder thereof), whether by purchase of such equity or
other ownership interest or upon exercise of an option or
warrant for, or conversion of securities into, such equity
or other ownership interest, or (ii) assets of another
Person which constitute all or any material part of the
assets of such Person or of a line or lines of business
conducted by such Person.
"Acquisition Documents" means, collectively, (a) that
certain Asset Purchase Agreement dated as of March 31, 1997
between the Borrower, Headway Corporate Staffing Services of
North Carolina, Inc., Advanced Staffing Solutions, Inc., H.
Wade Gresham and Mark F. Herron, (b) that certain Asset
Purchase Agreement dated as of July 28, 1997 between the
Borrower, ASA Personnel Services, Inc., Administrative Sales
Associates Temporaries Inc., Administrative Sales
Associates, Inc., Richard Brody and Arnold Katz (c) that
certain Asset Purchase Agreement dated as of September 29,
1997 between the Borrower, Irene Cohen Temps, Inc., Quality
Outsourcing, Inc., George J. Burt, Richard E. Gaudi and
Peter F. Notaro (d) that certain Purchase Agreement dated
as of September 30, 1997 between the Borrower, Headway
Corporate Staffing Services of Connecticut, Inc.,
Electronic Data Resources, L.L.C., Maurice Dusel, James
Roberts and Michael Russell, (e) that certain Asset Purchase
Agreement, to be dated on or about March 23, 1998, among the
Borrower, Cheney Associates, L.L.C. and Timothy Cheney, an
individual doing business under the names Cheney Associates
and Cheney Consulting Group, (f) that certain Stock Purchase
Agreement, to be dated on or about March 23, 1998, among the
Borrower, L&M Shore Family Holdings Limited Partnership,
Elder Investments Limited Partnership, Mark Shore and Linda
Elder, (g) that certain Asset Purchase Agreement to be dated
on or about March 23, 1998, among the Borrower, Headway
Corporate Staffing Services of North Carolina, Inc., Select
Staffing Services, Inc. and Jack Powell, and (h) any other
purchase agreement entered into hereafter by the Borrower
and any Subsidiaries relating to the acquisition of any
company or any assets thereof which is permitted hereunder.
"Advance" means a borrowing under the Revolving Credit
Facility consisting of a Base Rate Loan or a Eurodollar Rate
Loan.
"Affiliate" means any Person (i) which directly or
indirectly through one or more intermediaries controls, or
is controlled by, or is under common control, with the
Borrower; or (ii) which beneficially owns or holds 10% or
more of any class of the outstanding Voting Stock (or in the
case of a Person which is not a corporation, 10% or more of
the equity or other ownership interest) of the Borrower; or
(iii) 10% or more of any class of the outstanding voting
stock (or in the case of a Person which is not a
corporation, 10% or more of the equity or other ownership
interest) of which is beneficially owned or held by the
Borrower. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction
of the management and policies of a Person, whether through
ownership of Voting Stock, by contract or otherwise.
"Applicable Commitment Percentage" means, with respect
to each Lender at any time, a fraction, the numerator of
which shall be such Lender's Revolving Credit Commitment and
the denominator of which shall be the Total Revolving Credit
Commitment, which Applicable Commitment Percentage for each
Lender as of the Closing Date is as set forth in Exhibit A;
provided that the Applicable Commitment Percentage of each
Lender shall be increased or decreased to reflect any
assignments to or by such Lender effected in accordance with
Section 12.1.
"Applicable Lending Office" means, for each Lender and
for each Type of Loan, the "Lending Office" of such Lender
(or of an affiliate of such Lender) designated for such Type
of Loan on the signature pages hereof or such other office
of such Lender (or an affiliate of such Lender) as such
Lender may from time to time specify to the Agent and the
Borrower by written notice in accordance with the terms
hereof as the office by which its Loans of such Type are to
be made and maintained.
"Applicable Margin" means for purposes of calculating
(i) the applicable interest rate for the Interest Period for
any Eurodollar Rate Loan, (ii) the applicable interest rate
for any Base Rate Loan, (iii) the applicable rate to
determine the fee for the issuance of Letters of Credit and
(iv) the applicable rate of the Unused Fee for any date for
purposes of Section 2.10 hereof, that percent per annum set
forth below, which shall be (A) determined at the end of
each Fiscal Quarter (each, a "Determination Date") based
upon the computations set forth in the compliance
certificates delivered to the Agent pursuant to Sections
8.1(a)(ii) and 8.1(b)(ii) hereof, subject to review and
approval of such computations by the Agent, and any change
in the Applicable Margin shall be effective commencing on
the fifth Business Day following the date such certificate
is actually received (or, if earlier, the date such
certificate was required to be delivered under such
sections) (the "Compliance Date") until the next following
Compliance Date; provided however, if the Borrower shall
fail to deliver any such certificate within the time period
required by Section 8.1, then the Applicable Margin for
Eurodollar Rate Loans, for Base Rate Loans, for the Letter
of Credit Fee and for the Unused Fee shall be that shown
for Pricing Level II below until the appropriate certificate
is so delivered and (B) applicable to all Eurodollar Rate
Loans and Base Rate Loans made, renewed or converted,
Letters of Credit outstanding and any Unused Fee due and
payable, on or after the most recent Compliance Date to
occur based upon the Consolidated Leverage Ratio as at the
Determination Date, as specified below:
Prici Consolidated Applica Applicab Applica Applicab
ng Leverage ble le ble le
Level Ratio Margin Margin Margin Margin
for for Base for for
Eurodol Rate Letter Unused
lar Loans of Fee
Rate Credit
Loans Fee
I. Less than 1.000% .000% 1.000% .250%
1.25 to 1.00
II. Less than 1.500% .250% 1.500% .375%
2.25 to 1.00
but greater
than or
equal to
1.25 to 1.00
III. Greater than 2.000% .750% 2.000% .500%
or equal to
2.25 to 1.00
; provided that at all times from the Closing Date up
to and including the Compliance Date immediately
following the Closing Date, the Applicable Margin for
Eurodollar Rate Loans, for Base Rate Loans, for the
Letter of Credit Fee and for the Unused Fee shall be
that shown for Pricing Level II above.
"Applications for Letters of Credit" means,
collectively, the applications for letters of credit,
or similar documentation, executed by the Borrower from
time to time and delivered to the Issuing Bank to
support the issuance of Letters of Credit.
"Assignment and Acceptance" shall mean an
Assignment and Acceptance in the form of Exhibit B
(with blanks appropriately filled in) delivered to the
Agent in connection with an assignment of a Lender's
interest under this Agreement pursuant to Section 12.1.
"Authorized Representative" means any of the Chief
Executive Officer, President and Chief Operating
Officer or any Senior Vice President of the Borrower,
or with respect to financial matters only, the Senior
Vice President and Director of Corporate Development,
Chief Financial Officer, Chief Operating Officer or
Treasurer of the Borrower, or any other person
expressly designated by the Board of Directors of the
Borrower (or the appropriate committee thereof) as an
Authorized Representative of the Borrower, as set forth
from time to time in a certificate in the form of
Exhibit C.
"Base Rate", for any day, means the per annum rate
of interest equal to the sum of (x) the greater of (i)
the Prime Rate or (ii) the Federal Funds Effective Rate
plus one-half of one percent (.50%) plus (y) the
Applicable Margin. Any change in the Base Rate
resulting from a change in the Prime Rate or the
Federal Funds Effective Rate shall become effective as
of 12:01 A.M. of the Business Day on which each such
change occurs.
"Base Rate Loan" means a Loan for which the rate
of interest is determined by reference to the Base
Rate.
"Base Rate Refunding Loan" means a Base Rate Loan
to satisfy Reimbursement Obligations arising from a
drawing under a Letter of Credit.
"Board" means the Board of Governors of the
Federal Reserve System (or any successor body).
"Borrower's Account" means a demand deposit
account number 3751024413 or any successor account with
the Agent, which may be maintained at one or more
offices of the Agent or an agent of the Agent.
"Borrowing Notice" means the notice delivered by
an Authorized Representative in connection with an
Advance under the Revolving Credit Facility, in the
form of Exhibit D.
"Business Day" means (i) with respect to any Base
Rate Loan, any day which is not a Saturday, Sunday or a
day on which banks in the States of New York and North
Carolina are authorized or obligated by law, executive
order or governmental decree to be closed, and (ii)
with respect to any Eurodollar Rate Loan, any day which
is a Business Day, as described above, and on which the
relevant international financial markets are open for
the transaction of business contemplated by this
Agreement in London, England, New York, New York and
Charlotte, North Carolina.
"Capital Expenditures" means, with respect to the
Borrower and its Subsidiaries on a consolidated basis,
for any period the sum of (without duplication) (i) all
expenditures (whether paid in cash or accrued as
liabilities) by the Borrower or any Subsidiary during
such period for items that would be classified as
"property, plant or equipment" or comparable items on
the consolidated balance sheet of the Borrower and its
Subsidiaries, including without limitation all
transactional costs incurred in connection with such
expenditures provided the same have been capitalized,
excluding, however, the amount of any Capital
Expenditures paid for with proceeds of casualty
insurance as evidenced in writing and submitted to the
Agent together with any compliance certificate
delivered pursuant to Section 8.1(a) or (b), and (ii)
for all purposes other than the determination of the
Consolidated Fixed Charge Ratio, the present value of
the lease payments due during such period under any
Capital Lease entered into by the Borrower or its
Subsidiaries over the term of such Capital Lease
applying a discount rate equal to the interest rate
provided in such lease (or in the absence of a stated
interest rate, that rate used in the preparation of the
financial statements described in Section 8.1(a)), all
the foregoing in accordance with GAAP applied on a
Consistent Basis.
"Capital Leases" means all leases which have been
or should be capitalized in accordance with GAAP as in
effect from time to time including Statement No. 13 of
the Financial Accounting Standards Board and any
successor thereof.
"Change of Control" means, at any time:
(i) any "person" or "group" (each as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange
Act), either (A) becomes the "beneficial owner"
(as defined in Rule 13d-3 of the Exchange Act),
directly or indirectly, of Voting Stock of the
Borrower (or securities convertible into or
exchangeable for such Voting Stock) representing
30% or more of the combined voting power of all
Voting Stock of the Borrower (on a fully diluted
basis), or (B) otherwise has the ability, directly
or indirectly, to elect a majority of the Board of
Directors of the Borrower;
(ii) during any period of up to 24
consecutive months, commencing on the Closing
Date, a majority of the individuals who at the end
of such 24-month period were Directors of the
Borrower had not been Directors of the Borrower at
the beginning of such 24-month period; or
(iii) the occurrence of a "Change of Control",
as defined or described in the Indenture referred
to in the definition of "Subordinated Debt" or in
the Certificate of Designation with respect to the
Series F Convertible Preferred Stock referred to
in the definition of "Preferred Stock;"
provided, however, that the conversion of the Series F
Convertible Preferred Stock referred to in the
definition of "Preferred Stock" shall not constitute a
Change in Control.
"Closing Date" means the date as of which this
Agreement is executed by the Borrower, the Lenders and
the Agent and on which the conditions set forth in
Section 6.1 have been satisfied.
"Code" means the Internal Revenue Code of 1986, as
amended, and any regulations promulgated thereunder.
"Collateral" means, collectively, all property of
the Borrower, any Guarantor or any other Person in
which the Agent or any Lender is granted a Lien under
any Security Instrument as security for all or any
portion of the Obligations.
"Collateral Termination Date" means the date when
all Revolving Credit Outstandings and all Letter of
Credit Outstandings together with all accrued and
unpaid interest thereon have been paid, except for such
Letter of Credit Outstandings as have been fully cash
collateralized in accordance with Section 10.1(B), all
Revolving Credit Commitments and Letter of Credit
Commitments shall have terminated or expired, and the
Borrower shall have fully, finally and irrevocably paid
and satisfied all Obligations.
"Compliance Date" has the meaning therefor set
forth in the definition of "Applicable Margin."
"Consistent Basis" in reference to the application
of GAAP means the accounting principles observed in the
period referred to are comparable in all material
respects to those applied in the preparation of the
audited financial statements of the Borrower referred
to in Section 7.6(a).
"Consolidated EBITDA" means, with respect to the
Borrower and its Subsidiaries for any Four-Quarter
Period (or other period of Fiscal Quarters as provided
in the definitions of "Consolidated Fixed Charge Ratio"
and "Consolidated Interest Coverage Ratio") ending on
the date of computation thereof, the sum of, without
duplication, (i) Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) taxes on income,
(iv) amortization, and (v) depreciation, all determined
on a consolidated basis in accordance with GAAP applied
on a Consistent Basis; provided, however, that with
respect to an Acquisition that is accounted for as a
"purchase", for the four Four-Quarter Periods ending
next following the date of such Acquisition,
Consolidated EBITDA shall include the results of
operations of the Person or assets so acquired, which
amounts shall be determined on a historical pro forma
basis as if such Acquisition had been consummated as a
"pooling of interests"; provided, further, however,
that with respect to disposition, sale, conveyance,
transfer, liquidation or cessation of business of a
Subsidiary of the Borrower or any division, operating
unit or other business unit of the Borrower during such
measurement period, Consolidated EBITDA shall exclude
the results of operations of the Subsidiary, division,
operating unit or other business unit so disposed,
sold, conveyed, transferred, liquidated or the business
of which has ceased.
"Consolidated Fixed Charge Ratio" means, with
respect to the Borrower and its Subsidiaries for the
applicable period described below ending on the date of
computation thereof, the ratio of (i) Consolidated
EBITDA for such period less (without duplication)
Capital Expenditures for such period, to (ii)
Consolidated Fixed Charges for such period; such
computation shall be for (A) the Fiscal Quarter ending
June 30, 1998, (B) the two Fiscal Quarters ending
September 30, 1998 and (C) the three Fiscal Quarters
ending December 31, 1998 and thereafter for each Four-
Quarter Period then ended; provided, however, that for
purposes of such computation for the periods ending on
the dates set forth below, the amount of any Earnouts
paid in cash during such period shall be multiplied by
the percentage shown opposite such date:
Date
Percentage
June 30, 1998
25%
September 30, 1998 50
December 31, 1998
75
"Consolidated Fixed Charges" means, with respect
to the Borrower and its Subsidiaries for any Four-
Quarter Period (or other period of Fiscal Quarters as
provided in the definition of "Consolidated Fixed
Charge Ratio") ending on the date of computation
thereof, the sum of, without duplication, (i)
Consolidated Interest Expense incurred during such
period, (ii) scheduled principal amounts of
Consolidated Funded Indebtedness (other than Revolving
Credit Outstandings) paid during such period, (iii)
Earnouts paid in cash during such period, and (iv) all
Restricted Payments made during such period, all
determined on a consolidated basis in accordance with
GAAP applied on a Consistent Basis.
"Consolidated Funded Indebtedness" means, with
respect to the Borrower and its Subsidiaries, at any
time as of which the amount thereof is to be
determined, the sum of (i) Indebtedness for Money
Borrowed of the Borrower and its Subsidiaries at such
time and (ii) the face amount of all outstanding
Letters of Credit issued for the account of the
Borrower or any of its Subsidiaries and all obligations
(to the extent not duplicative) arising under such
Letters of Credit, all determined on a consolidated
basis in accordance with GAAP applied on a Consistent
Basis.
"Consolidated Interest Coverage Ratio" means, with
respect to the Borrower and its Subsidiaries for the
applicable period described below ending on the date of
computation thereof, the ratio of (i) Consolidated
EBITDA for such period to (ii) Consolidated Interest
Expense for such period; such computation shall be for
(A) the Fiscal Quarter ending June 30, 1998, (B) the
two Fiscal Quarters ending September 30, 1998 and (C)
the three Fiscal Quarters ending December 31, 1998 and
thereafter for each Four-Quarter Period then ended.
"Consolidated Interest Expense" means, with
respect to any period of computation thereof, the gross
interest expense of the Borrower and its Subsidiaries,
including without limitation (i) the current amortized
portion of debt discounts to the extent included in
gross interest expense, (ii) the current amortized
portion of all fees (including fees payable in respect
of any Swap Agreement) payable in connection with the
incurrence of Indebtedness to the extent included in
gross interest expense (but not including any fees
incurred in connection with the ING Facility referenced
on Schedule 1.2 or the termination thereof, this
Agreement or the Subordinated Debt) and (iii) the
portion of any payments made in connection with Capital
Leases allocable to interest expense, all determined on
a consolidated basis in accordance with GAAP applied on
a Consistent Basis.
"Consolidated Leverage Ratio" means, as of the
date of computation thereof, the ratio of (i)
Consolidated Funded Indebtedness determined as at such
date to (ii) Consolidated EBITDA for the Four-Quarter
Period ending on (or most recently ended prior to) such
date.
"Consolidated Net Income" means, for any period of
computation thereof, the gross revenues from operations
of the Borrower and its Subsidiaries (including
payments received by the Borrower and its Subsidiaries
of (i) interest income, and (ii) dividends and
distributions made in the ordinary course of their
businesses by Persons in which investment is permitted
pursuant to this Agreement and not related to an
extraordinary event), less all operating and non-
operating expenses of the Borrower and its Subsidiaries
including taxes on income, all determined on a
consolidated basis in accordance with GAAP applied on a
Consistent Basis; but excluding (for all purposes other
than compliance with Section 9.1(a) hereof) as income:
(i) net gains on the sale, conversion or other
disposition of capital assets, (ii) net gains on the
acquisition, retirement, sale or other disposition of
capital stock and other securities of the Borrower or
its Subsidiaries, (iii) net gains on the collection of
proceeds of life insurance policies, (iv) any write-up
of any asset, and (v) any other net gain or credit of
an extraordinary nature as determined in accordance
with GAAP applied on a Consistent Basis.
"Consolidated Net Worth" means, as of any date on
which the amount thereof is to be determined,
Consolidated Shareholders' Equity minus (without
duplication of deductions in respect of items already
deducted in arriving at surplus and retained earnings)
all reserves (other than contingency reserves not
allocated to any particular purpose), including without
limitation reserves for depreciation, depletion,
amortization, obsolescence, deferred income taxes,
insurance and inventory valuation all as determined on
a consolidated basis in accordance with GAAP applied on
a Consistent Basis.
"Consolidated Shareholders' Equity" means, as of
any date on which the amount thereof is to be
determined, the sum of the following in respect of the
Borrower and its Subsidiaries (determined on a
consolidated basis and excluding any upward adjustment
after the Closing Date due to revaluation of assets):
(i) the amount of issued and outstanding share capital,
plus (ii) the amount of additional paid-in capital and
retained earnings (or, in the case of a deficit, minus
the amount of such deficit), plus (iii) the amount of
any foreign currency translation adjustment (if
positive, or, if negative, minus the amount of such
translation adjustment), minus (iv) the amount of any
treasury stock, all as determined in accordance with
GAAP applied on a Consistent Basis.
"Contingent Obligation" of any Person means all
contingent liabilities required (or which, upon the
creation or incurring thereof, would be required) to be
included in the financial statements (including
footnotes) of such Person in accordance with GAAP
applied on a Consistent Basis, including Statement No.
5 of the Financial Accounting Standards Board, all
Hedging Obligations and any obligation of such Person
guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation of any other
Person (the "primary obligor") in any manner, whether
directly or indirectly, including obligations of such
Person however incurred:
(1) to purchase such Indebtedness or other
obligation or any property or assets
constituting security therefor;
(2) to advance or supply funds in any manner
(i) for the purchase or payment of such
Indebtedness or other obligation, or
(ii) to maintain a minimum working
capital, net worth or other balance
sheet condition or any income statement
condition of the primary obligor;
(3) to grant or convey any Lien, charge or
other encumbrance on any property or
assets of such Person to secure payment
of such Indebtedness or other
obligation;
(4) to lease property or to purchase
securities or other property or services
primarily for the purpose of assuring
the owner or holder of such Indebtedness
or obligation of the ability of the
primary obligor to make payment of such
Indebtedness or other obligation; or
(5) otherwise to assure the owner of the
Indebtedness or such obligation of the
primary obligor against loss in respect
thereof.
; provided, however, in no event shall Earnouts be a
Contingent Obligation hereunder.
"Continue", "Continuation", and "Continued" shall
refer to the continuation pursuant to Section 2.8
hereof of a Eurodollar Rate Loan of one Type as a
Eurodollar Rate Loan of the same Type from one Interest
Period to the next Interest Period.
"Convert", "Conversion", and "Converted" shall
refer to a conversion pursuant to Section 2.8 or
Article V of one Type of Loan into another Type of
Loan.
"Cost of Acquisition" means, with respect to any
Acquisition, as at the date of entering into any
agreement therefor, the sum of the following (without
duplication): (i) the value of the capital stock,
warrants or options to acquire capital stock of the
Borrower or any Subsidiary to be transferred in
connection therewith, (ii) the amount of any cash and
fair market value of other property (excluding property
described in clause (i) and the unpaid principal amount
of any debt instrument) given as consideration, (iii)
the amount (determined by using the face amount or the
amount payable at maturity, whichever is greater) of
any Indebtedness incurred, assumed or acquired by the
Borrower or any Subsidiary in connection with such
Acquisition, (iv) all additional purchase price amounts
in the form of Earnouts and other contingent
obligations that should be recorded on the financial
statements of the Borrower and its Subsidiaries in
accordance with GAAP, (v) all amounts paid in respect
of covenants not to compete, consulting agreements that
should be recorded on financial statements of the
Borrower and its Subsidiaries in accordance with GAAP,
and other affiliated contracts in connection with such
Acquisition, (vi) the aggregate fair market value of
all other consideration given by the Borrower or any
Subsidiary in connection with such Acquisition, and
(vii) out-of-pocket transaction costs for the services
and expenses of attorneys, accountants and other
consultants incurred in effecting such transaction, and
other similar transaction costs so incurred and
capitalized in accordance with GAAP. For purposes of
determining the Cost of Acquisition for any
transaction, (A) the capital stock of the Borrower
shall be valued (I) in the case of capital stock that
is then designated as a national market system security
or as a Small-Cap security by the National Association
of Securities Dealers, Inc. ("NASDAQ") or is listed on
a national securities exchange, the average of the last
reported bid and ask quotations or the last prices
reported thereon, and (II) with respect to shares that
are not freely tradeable (excluding restricted shares)
as determined by a committee composed of the members of
the Board of Directors of the Borrower and, if
requested by the Agent, determined to be a reasonable
valuation by the independent public accountants
referred to in Section 8.1(a), (B) the capital stock of
any Subsidiary shall be valued as determined by a
committee composed of the members of the Board of
Directors of such Subsidiary and, if requested by the
Agent, determined to be a reasonable valuation by the
independent public accountants referred to in Section
8.1(a), and (C) with respect to any Acquisition
accomplished pursuant to the exercise of options or
warrants or the conversion of securities, the Cost of
Acquisition shall include both the cost of acquiring
such option, warrant or convertible security as well as
the cost of exercise or conversion.
"Credit Party" means, collectively, the Borrower
and each Guarantor.
"Default" means any event, act or condition which,
with the giving or receipt of notice or lapse of time
or both, would constitute an Event of Default
hereunder.
"Default Rate" means (i) with respect to each
Eurodollar Rate Loan, until the end of the Interest
Period applicable thereto, a rate of two percent (2%)
above the Eurodollar Rate applicable to such Loan, and
thereafter at a rate of interest per annum which shall
be two percent (2%) above the Base Rate, (ii) with
respect to Base Rate Loans, at a rate of interest per
annum which shall be two percent (2%) above the Base
Rate and (iii) in any case, the maximum rate permitted
by applicable law, if lower.
"Determination Date" has the meaning therefor set
forth in the definition of "Applicable Margin."
"Direct Foreign Subsidiary" means any Foreign
Subsidiary a majority of whose outstanding Voting
Stock is owned by the Borrower or a Domestic
Subsidiary.
"Dollars" and the symbol "$" means dollars
constituting legal tender for the payment of public and
private debts in the United States of America.
"Domestic Subsidiary" means a Subsidiary which is
organized under the laws of one of the states or
territories comprising the United States of America.
"Earnouts" has the specific meaning therefor set
forth in each of the Acquisition Documents and
collectively means all such payments.
"Eligible Assignee" means (i) a Lender, (ii) an
affiliate of a Lender, and (iii) any other Person
approved by the Agent and, unless an Event of Default
has occurred and is continuing at the time any
assignment is effected in accordance with Section 12.1,
the Borrower, such approval not to be unreasonably
withheld or delayed by the Borrower; provided, however,
that neither the Borrower nor an affiliate of the
Borrower shall qualify as an Eligible Assignee.
"Eligible Securities" means the following
obligations and any other obligations previously
approved in writing by the Agent:
(a) Government Securities;
(b) obligations of any corporation organized
under the laws of any state of the United States
of America or under the laws of any other nation,
payable in Dollars in the United States of
America, expressed to mature not later than 90
days following the date of issuance thereof and
rated in an investment grade rating category by
S&P and Moody's;
(c) interest bearing demand or time deposits
issued by any Lender or certificates of deposit
maturing within one year from the date of issuance
thereof and issued by a bank or trust company
organized under the laws of the United States or
of any state thereof having capital surplus and
undivided profits aggregating at least
$400,000,000 and being rated "A-" or better by S&P
and "A-3" or better by Moody's;
(d) Municipal Obligations; and
(e) repurchase agreements entered into with
(i) any financial institution whose debt
obligations or commercial paper are rated "A" by
either of S&P or Moody's or "A-1" by S&P or "P-1"
by Moody's, or (ii) any Lender.
"Employee Benefit Plan" means any employee benefit
plan within the meaning of Section 3(3) of ERISA which
(i) is maintained for employees of the Borrower or any
of its ERISA Affiliates, (ii) is assumed by the
Borrower or any of its ERISA Affiliates in connection
with any Acquisition or (iii) has at any time been
maintained for the employees of the Borrower or any
current or former ERISA Affiliate.
"Environmental Laws" means any federal, state or
local statute, law, ordinance, code, rule, regulation,
order, or decree, regulating, relating to, or imposing
liability or standards of conduct concerning, any
environmental matters or conditions, environmental
protection or conservation, including without
limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended; the
Superfund Amendments and Reauthorization Act of 1986,
as amended; the Resource Conservation and Recovery Act,
as amended; the Toxic Substances Control Act, as
amended; the Clean Air Act, as amended; the Clean Water
Act, as amended; together with all regulations
promulgated thereunder, and any other "Superfund" or
"Superlien" law.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and
any successor statute and all rules and regulations
promulgated thereunder.
"ERISA Affiliate", as applied to the Borrower,
means any Person or trade or business which is a member
of a group which is under common control with the
Borrower, who together with the Borrower, is treated as
a single employer within the meaning of Section 414(b),
(c), (m) or (o) of the Code.
"Eurodollar Rate Loan" means a Loan for which the
rate of interest is determined by reference to the
Eurodollar Rate.
"Eurodollar Rate" means the interest rate per
annum calculated according to the following formula:
Eurodollar = Eurodollar Base
Rate + Applicable
Rate 1- Eurodollar Reserve Percentage Margin
"Eurodollar Base Rate" means, for any Eurodollar
Loan for any Interest Period therefor, the rate per
annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any
successor page) as the London interbank offered rate
for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such
Interest Period. If for any reason such rate is not
available, the term "Eurodollar Base Rate" shall mean,
for any Eurodollar Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank
offered rate for deposits in Dollars at approximately
11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable
to such Interest Period; provided, however, if more
than one rate is specified on Reuters Screen LIBO Page,
the applicable rate shall be the arithmetic mean of all
such rates (rounded upwards, if necessary, to the
nearest 1/100 of 1%).
"Eurodollar Reserve Percentage" means, at any
time, the maximum rate at which reserves (including,
without limitation, any marginal, special,
supplemental, or emergency reserves) are required to be
maintained under regulations issued from time to time
by the Board of Governors of the Federal Reserve System
(or any successor) by member banks of the Federal
Reserve System against "Eurocurrency liabilities" (as
such term is used in Regulation D). Without limiting
the effect of the foregoing, the Eurodollar Reserve
Percentage shall reflect any other reserves required to
be maintained by such member banks with respect to (i)
any category of liabilities which includes deposits by
reference to which the Eurodollar Rate is to be
determined, or (ii) any category of extensions of
credit or other assets which include Eurodollar Rate
Loans. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any
change in the Eurodollar Reserve Percentage.
"Event of Default" means any of the occurrences
set forth as such in Section 10.1.
"Exchange Act" means the Securities Exchange Act
of 1934, as amended, and the regulations promulgated
thereunder.
"Executive Officer" means the Chief Executive
Officer, the President and Chief Operating Officer, the
Chief Financial Officer, the Treasurer and any Senior
Vice President of the Borrower or any other person who,
by whatever title, has control over or responsibility
for the management and operations of the Borrower.
"Existing Debt" means such Consolidated Funded
Indebtedness as set forth on Schedule 1.2.
"Federal Funds Effective Rate" means, for any day,
the rate per annum (rounded upward to the nearest
1/100th of 1%) equal to the weighted average of the
rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if such day
is not a Business Day, the Federal Funds Effective Rate
for such day shall be such rate on such transactions on
the next preceding Business Day, and (ii) if no such
rate is so published on such next succeeding Business
Day, the Federal Funds Effective Rate for such day
shall be the average rate charged to the Agent (in its
individual capacity) on such day on such transaction as
determined by the Agent.
"Fiscal Month" means each approximately 30-day
fiscal period of the Borrower and its Subsidiaries
beginning on a Sunday and ending on the Saturday of
each calendar month closest to (whether before or
after) the last day of such calendar month.
"Fiscal Quarter" means a three-month quarter of a
Fiscal Year and when followed by reference to a year,
means the first, second, third or fourth quarter of
such Fiscal Year, as indicated.
"Fiscal Year" means the twelve month fiscal period
of the Borrower and its Subsidiaries commencing on
January 1 of each calendar year and ending on December
31 of such calendar year.
"Foreign Benefit Law" means any applicable
statute, law, ordinance, code, rule, regulation, order
or decree of any foreign nation or any province, state,
territory, protectorate or other political subdivision
thereof regulating, relating to, or imposing liability
or standards of conduct concerning, any Employee
Benefit Plan.
"Foreign Subsidiary" means any Subsidiary that is
not a Domestic Subsidiary.
"Four-Quarter Period" means a period of four full
consecutive Fiscal Quarters of the Borrower and its
Subsidiaries, taken together as one accounting period.
"GAAP" or "Generally Accepted Accounting
Principles" means generally accepted accounting
principles, being those principles of accounting set
forth in pronouncements of the Financial Accounting
Standards Board, the American Institute of Certified
Public Accountants or which have other substantial
authoritative support and are applicable in the
circumstances as of the date of a report.
"Government Securities" means direct obligations
of, or obligations the timely payment of principal and
interest on which are fully and unconditionally
guaranteed by, the United States of America which have
a maturity of not greater than one year.
"Governmental Authority" shall mean any Federal,
state, municipal, national or other governmental
department, commission, board, bureau, court, agency or
instrumentality or political subdivision thereof or any
entity or officer exercising executive, legislative,
judicial, regulatory or administrative functions of or
pertaining to any government or any court, in each case
whether associated with a state of the United States,
the United States, or a foreign entity or government.
"Grantor" has the meaning therefor set forth in
Section 4.3.
"Guarantor" means each Domestic Subsidiary now or
hereafter existing, which has executed a Guaranty.
"Guaranty" means, collectively (or individually as
the context may indicate) (i) the Guaranty Agreement
dated as of the date hereof between each Domestic
Subsidiary existing on the Closing Date and the Agent
for the benefit of the Lenders, in the form of Exhibit
I, and (ii) any other Guaranty Agreement in the form of
Exhibit I delivered to the Agent pursuant to Section
8.19, all as hereafter amended, supplemented or
replaced from time to time.
"Hazardous Material" means and includes any
pollutant, contaminant, or hazardous, toxic or
dangerous waste, substance or material (including
without limitation petroleum products, asbestos-
containing materials and lead), the generation,
handling, storage, transportation, disposal, treatment,
release, discharge or emission of which is subject to
any Environmental Law.
"Hedging Obligations" means any and all
obligations of the Borrower or any Subsidiary, whether
absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all
renewals, extensions and modifications thereof and
substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect
at least one of the parties thereto from the
fluctuations of interest rates, exchange rates
(including without limitation commodity exchange rates)
or forward rates applicable to such party's assets,
liabilities or exchange transactions, including, but
not limited to, Dollar-denominated or cross-currency
interest rate exchange agreements, forward currency
exchange agreements, commodity exchange agreements,
interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts,
warrants and those commonly known as interest rate
"swap" agreements; and (ii) any and all cancellations,
buybacks, reversals, terminations or assignments of any
of the foregoing.
"Indebtedness" means with respect to any Person,
without duplication, all indebtedness of such Person
relating to its Reimbursement Obligations or any other
reimbursement obligations under this Agreement, all
Indebtedness for Money Borrowed, all indebtedness of
such Person for the acquisition of property or arising
under Hedging Obligations, all indebtedness of such
Person secured by any Lien on the property of such
Person whether or not such indebtedness is assumed, all
liability of such Person by way of endorsements (other
than for collection or deposit in the ordinary course
of business), all Contingent Obligations, that portion
of obligations with respect to Capital Leases and other
items which in accordance with GAAP is required to be
classified as a liability on a balance sheet of such
Person; but excluding all accounts payable in the
ordinary course of business so long as payment therefor
is due within one year; provided that in no event shall
the term Indebtedness include surplus and retained
earnings, lease obligations (other than pursuant to
Capital Leases), reserves for deferred income taxes and
investment credits, other deferred credits or reserves,
or deferred compensation obligations.
"Indebtedness for Money Borrowed" means with
respect to any Person, without duplication, all
indebtedness in respect of money borrowed of such
Person, including without limitation all Capital Leases
and the deferred purchase price of any property or
asset, evidenced by a promissory note, bond, debenture
or similar written obligation for the payment of money
(including conditional sales or similar title retention
agreements), other than trade payables incurred in the
ordinary course of business.
"Intellectual Property Assignments" means those
certain Assignments of Patents, Trademarks, Copyrights
and Licenses in the form attached to the Intellectual
Property Security Agreement as Exhibit A, to be filed
upon acceleration of the Obligations hereunder, as from
time to time amended, supplemented or restated.
"Intellectual Property Security Agreement" means,
collectively (or individually as the context may
indicate), (i) that certain Intellectual Property
Security Agreement in the form of Exhibit O dated as of
the date hereof, and (ii) all IPSA Supplements, all
between the Borrower and certain Guarantors in favor of
the Agent for the benefit of the Lenders to
collaterally secure payment and performance of their
respective obligations hereunder and under the
Guaranty, as applicable, all as hereafter amended,
supplemented or replaced from time to time.
"Intercompany Advance" means a loan or advance
heretofore or hereafter made by an Intercompany Note
Holder to the Borrower, a Domestic Subsidiary or Direct
Foreign Subsidiary of the Borrower, which is evidenced
by an Intercompany Note in which the Agent has a valid,
duly perfected, first priority Lien under the
Intercompany Note Pledge Agreement, and the repayment
of which is subordinated to the rights of the Agent and
the Lenders under the Loan Documents in accordance to
the provisions set forth in the Intercompany Notes or
in the Subordination Agreement.
"Intercompany Notes" means, collectively, the
promissory notes heretofore issued and described on
Schedule A to the Intercompany Note Pledge Agreement
and promissory notes hereafter issued in the form
attached as Exhibit P hereto (with appropriate
insertions) outstanding from time to time evidencing
the Intercompany Advances.
"Intercompany Note Holder" means, at any date, the
Borrower and any Domestic Subsidiary of the Borrower
who has extended any Intercompany Advance that remains
outstanding at such date.
"Intercompany Note Pledge Agreement" means,
collectively (or individually as the contest may
indicate) (i) that certain Intercompany Note Pledge
Agreement of even date herewith between the Borrower,
certain Subsidiaries and the Agent, substantially in
the form of Exhibit P, and (ii) any other Intercompany
Note Pledge Agreement in the form of Exhibit P
delivered to the Agent pursuant to Section 8.19,
pursuant to which the Agent is granted a Lien in the
Intercompany Notes held by such Intercompany Note
Holder, in each case as the same may be amended,
supplemented or restated from time to time.
"Interest Period" means, for each Eurodollar Rate
Loan, a period commencing on the date such Eurodollar
Rate Loan is made, continued, or converted and ending,
at the Borrower's option, on the date one, two, three
or, if available from each Lender, six months
thereafter as notified to the Agent by the Authorized
Representative three (3) Business Days prior to the
beginning of such Interest Period; provided, that,
(i) if the Authorized Representative
fails to notify the Agent of the length of an
Interest Period three (3) Business Days prior to
the first day of such Interest Period, the Loan
for which such Interest Period was to be
determined shall be deemed to be a Base Rate Loan
as of the first day thereof;
(ii) if an Interest Period for a
Eurodollar Rate Loan would end on a day which is
not a Business Day, such Interest Period shall be
extended to the next Business Day (unless such
extension would cause the applicable Interest
Period to end in the succeeding calendar month, in
which case such Interest Period shall end on the
next preceding Business Day);
(iii) any Interest Period which
begins on the last Business Day of a calendar
month (or on a day for which there is no
numerically corresponding day in the calendar
month at the end of such Interest Period) shall
end on the last Business Day of a calendar month;
(iv) no Interest Period shall extend
past the Stated Termination Date; and
(v) there shall not be more than ten
(10) Interest Periods in effect on any day.
"Interest Rate Selection Notice" means the written
notice delivered by an Authorized Representative in
connection with the election of a subsequent Interest
Period for any Eurodollar Rate Loan or the conversion
of any Eurodollar Rate Loan into a Base Rate Loan or
the conversion of any Base Rate Loan into a Eurodollar
Rate Loan, in the form of Exhibit E.
"IPSA Supplement" means any supplement to the
Intellectual Property Security Agreement in the form of
Exhibit B to Exhibit O, with appropriate revisions as
to the identity of the grantor.
"Issuing Bank" means initially NationsBank as the
issuer of Letters of Credit under Article III, and
thereafter any Lender which may succeed NationsBank as
the issuer of Letters of Credit under Article III.
"LC Account Agreement" means the LC Account
Agreement dated as of the date hereof between the
Borrower and the Issuing Bank, as amended, modified or
supplemented from time to time, in the form of Exhibit
L.
"Lending Office" means, as to each Lender, the
Lending Office of such Lender designated on the
signature pages hereof or in an Assignment and
Acceptance or such other office of such Lender (or of
an affiliate of such Lender) as such Lender may from
time to time specify to the Authorized Representative
and the Agent as the office by which its Loans are to
be made and maintained.
"Letter of Credit" means a standby letter of
credit issued by the Issuing Bank for the account of
the Borrower in favor of a Person advancing credit or
securing an obligation on behalf of the Borrower.
"Letter of Credit Commitment" means, with respect
to each Lender, the obligation of such Lender to
acquire Participations in respect of Letters of Credit
and Reimbursement Obligations up to an aggregate amount
at any one time outstanding equal to such Lender's
Applicable Commitment Percentage of the Total Letter of
Credit Commitment as the same may be increased or
decreased from time to time pursuant to this Agreement.
"Letter of Credit Facility" means the facility
described in Article III providing for the issuance by
the Issuing Bank for the account of the Borrower of
Letters of Credit in an aggregate stated amount at any
time outstanding not exceeding the Total Letter of
Credit Commitment.
"Letter of Credit Outstandings" means, as of any
date of determination, the aggregate amount remaining
undrawn under all Letters of Credit then outstanding
plus the principal amount of all Reimbursement
Obligations then outstanding.
"Lien" means any interest in property securing any
obligation owed to, or a claim by, a Person other than
the owner of the property, whether such interest is
based on the common law, statute or contract, and
including but not limited to the lien, trust or
security interest arising from a mortgage, encumbrance,
pledge, security agreement, conditional sale or trust
receipt or a lease, consignment or bailment for
security purposes. For the purposes of this Agreement,
the Borrower and any Subsidiary shall be deemed to be
the owner of any property which it has acquired or
holds subject to a conditional sale agreement,
financing lease, or other arrangement pursuant to which
title to the property has been retained by or vested in
some other Person for security purposes.
"Loan" or "Loans" means any borrowing pursuant to
an Advance under the Revolving Credit Facility.
"Loan Documents" means this Agreement, the Notes,
the Security Instruments, the Guaranties, the
Subordination Agreement, the Applications for Letters
of Credit and all other instruments and documents
heretofore or hereafter executed or delivered to or in
favor of any Lender or the Agent in connection with the
Loans made and transactions contemplated under this
Agreement, as the same may be amended, supplemented or
replaced from time to time.
"Material Adverse Effect" means a material adverse
effect on (i) the business, properties, prospects,
operations or condition, financial or otherwise, of the
Borrower and its Subsidiaries on a consolidated basis,
(ii) the ability of any Material Credit Party to pay or
perform its respective obligations, liabilities and
indebtedness under the Loan Documents as such payment
or performance becomes due in accordance with the terms
thereof, or (iii) the rights, powers and remedies of
the Agent or any Lender under any Loan Document or the
validity, legality or enforceability thereof (including
for purposes of clauses (ii) and (iii) the imposition
of burdensome conditions thereon).
"Material Credit Party" means (i) any direct or
indirect Subsidiary which has EBITDA, as defined below,
greater than 5% of Consolidated EBITDA (calculated for
the most recent period for which the Agent has received
the financial information required under Section 8.1)
and (ii) for purposes of clause (ii) of the definition
of Material Adverse Effect, all direct and indirect
Subsidiaries, including without limitation each
Material Subsidiary under (i) above, which,
collectively, have EBITDA equal to or greater than 95%
of Consolidated EBITDA (as calculated under (ii)
above). For purposes of this definition, "EBITDA"
means, with respect to any Subsidiary, Consolidated
EBITDA as calculated for such Subsidiary without regard
to the Borrower or any other Subsidiary.
"Moody's" means Moody's Investors Services, Inc.
"Multiemployer Plan" means a "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA to which the
Borrower or any ERISA Affiliate is making, or is
accruing an obligation to make, contributions or has
made, or been obligated to make, contributions within
the preceding six (6) Fiscal Years.
"Municipal Obligations" means general obligations
issued by, and supported by the full taxing authority
of, any state of the United States of America or of any
municipal corporation or other public body organized
under the laws of any such state which are rated in the
highest investment rating category by both S&P and
Moody's.
"Net Proceeds" means (i) in respect of the
issuance of equity or Indebtedness or the sale, lease
or other disposition of assets, the amount of cash,
cash equivalents and the market value of marketable
securities, as and when received, net of all legal,
accounting, banking, underwriting, title and recording
fees and expenses, commissions, discounts and all other
reasonable and ordinary expenses incurred in connection
therewith and all taxes required to be paid or accrued
as a consequence of such transaction and (ii) in
respect of proceeds of insurance or resulting from the
taking of any asset by eminent domain, the amount of
cash, cash equivalents and market value of marketable
securities as and when received, net of all legal,
title and recording fees and expenses incurred in
connection therewith and all taxes required to be paid
or accrued as a consequence of such transaction.
"NMS" means NationsBanc Montgomery Securities LLC.
"Notes" means, collectively, the promissory notes
of the Borrower evidencing Loans executed and delivered
to the Lenders substantially in the form of Exhibit F.
"Obligations" means the obligations, liabilities
and Indebtedness of the Borrower with respect to (i)
the principal and interest on the Loans, (ii) the
Reimbursement Obligations and otherwise in respect of
the Letters of Credit, (iii) all liabilities of the
Borrower to any Lender or its affiliates which arise
under a Swap Agreement, and (iv) the payment and
performance of all other obligations, liabilities and
Indebtedness of the Borrower to the Lenders, the Agent,
or NMS under any one or more of the other Loan
Documents or with respect to the Loans or Letters of
Credit.
"Operating Documents" means with respect to any
corporation, limited liability company, partnership,
limited partnership, limited liability partnership or
other legally authorized incorporated or unincorporated
entity, the bylaws, operating agreement, partnership
agreement, limited partnership agreement or other
applicable documents relating to the operation,
governance or management of such entity.
"Organizational Action" means with respect to any
corporation, limited liability company, partnership,
limited partnership, limited liability partnership or
other legally authorized incorporated or unincorporated
entity, any corporate, organizational or partnership
action (including any required shareholder, member or
partner action), or other similar official action, as
applicable, taken by such entity.
"Organizational Documents" means with respect to
any corporation, limited liability company,
partnership, limited partnership, limited liability
partnership or other legally authorized incorporated or
unincorporated entity, the articles of incorporation,
certificate of incorporation, articles of
organization, certificate of limited partnership or
other applicable organizational or charter documents
relating to the creation of such entity.
"Outstandings" means, collectively, at any date,
the Letter of Credit Outstandings and Revolving Credit
Outstandings on such date.
"Participation" means, with respect to any Lender
(other than the Issuing Bank) and a Letter of Credit,
the extension of credit represented by the
participation of such Lender hereunder in the liability
of the Issuing Bank in respect of a Letter of Credit
issued by the Issuing Bank in accordance with the terms
hereof.
"PBGC" means the Pension Benefit Guaranty
Corporation and any successor thereto.
"Pension Plan" means any employee pension benefit
plan within the meaning of Section 3(2) of ERISA, other
than a Multiemployer Plan, which is subject to the
provisions of Title IV of ERISA or Section 412 of the
Code and which (i) is maintained for employees of the
Borrower or any of its ERISA Affiliates or is assumed
by the Borrower or any of its ERISA Affiliates in
connection with any Acquisition or (ii) has at any time
been maintained for the employees of the Borrower or
any current or former ERISA Affiliate.
"Permitted Acquisition" means each Acquisition
effected with the consent and approval of the board of
directors or other applicable governing body of the
Person being acquired, and with the duly obtained
approval of such shareholders or other holders of
equity or other ownership interest as such Person may
be required to obtain, so long as either (A) the prior
written consent of the Required Lenders has been
obtained or (B) (i) immediately prior to and
immediately after the consummation of such Acquisition,
no Default or Event of Default has occurred and is
continuing, (ii) substantially all of the sales and
operating profits generated by such Person (or assets)
so acquired or invested are derived from a line or
lines of business that are part of, or complimentary,
to the executive search, temporary staffing, pay-
rolling and strategic advisory services as then
conducted by the Borrower and its Subsidiaries, (iii)
an audited consolidated balance sheet and audited
statements of income, cash flow and stockholders'
equity of the Person being acquired as of its most
recent fiscal year end are delivered to the Agent not
less than five (5) Business Days prior to the
consummation of such Acquisition, (iv) pro forma
consolidated historical financial statements of the
Borrower and its Subsidiaries as of the end of the most
recent Fiscal Quarter for the four Fiscal Quarters most
recently ended giving effect to such Acquisition are
delivered to the Agent not less than five (5) Business
Days prior to the consummation of such Acquisition,
together with a certificate of an Authorized
Representative demonstrating pro forma compliance with
Section 9.1 hereof after giving effect to such
Acquisition, (v) the aggregate Cost of Acquisition
(excluding the value of any capital stock given as part
of the Cost of Acquisition) with respect to any
Acquisition consummated shall not exceed $5,000,000,
(vi) in the event the Person so acquired is not a
Subsidiary, the Borrower's strategic plan includes
additional permitted investment in such Person
sufficient for it to become a Subsidiary, (vii) any
Advance to finance such Acquisition otherwise
qualifying as a Permitted Acquisition hereunder shall
be in compliance with Section 2.12 hereof and (viii)
the pro forma Consolidated Leverage Ratio after giving
effect to such Acquisition shall not exceed 2.50 to
1.00.
"Permitted Liens" means collectively each of the
Liens set forth in Sections 9.3(a)-(h).
"Person" means an individual, partnership,
corporation, cooperative, trust, unincorporated
organization, association, joint venture or a
government or agency or political subdivision thereof.
"Pledge Agreement" means, collectively (or
individually as the context may indicate), (i) that
certain Pledge Agreement in the form of Exhibit K dated
as of the date hereof, and (ii) all Pledge Agreement
Supplements, all between the Borrower and certain
Domestic Subsidiaries, as pledgors, and the Agent for
the benefit of the Lenders, as pledgee, pledging (A)
100% of the capital stock or equity or other ownership
interest of each Domestic Subsidiary specified therein
owned by the Borrower and/or another Domestic
Subsidiary and (B) 66% of the voting share capital and
100% of the nonvoting share capital or equity or other
ownership interest and related interests and rights of
each Direct Foreign Subsidiary, and securing the
obligations of each pledgor under this Agreement and
the Notes or the Guaranty, as applicable, all as
hereafter amended, supplemented or replaced from time
to time.
"Pledge Agreement Supplement" means a supplement
to the Pledge Agreement in the for of Exhibit A to
Exhibit K, with appropriate revisions as to the
identity of the pledgor.
"Pledged Stock" has the meaning given to such term
in the Pledge Agreement.
"Preferred Stock" means, collectively, (a) the
Company's Series E Convertible Preferred Stock
containing such terms as are set forth in the
Borrower's Certificate of Designation filed with the
Secretary of State of Delaware on October 25, 1996,
none of which are issued or outstanding on the Closing
Date; and (b) the Series F Convertible Preferred Stock
which is being issued by the Borrower on the Closing
Date for a total consideration of not less than
$20,000,000 and with a maturity of not less than eight
years from the Closing Date and containing such terms
as are set forth in the Borrower's Certificate of
Designation filed with the Secretary of State of
Delaware on or before the Closing Date.
"Prime Rate" means the rate of interest per annum
announced publicly by the Agent as its prime rate from
time to time. The Prime Rate is not necessarily the
best or the lowest rate of interest offered by the
Agent.
"Principal Office" means the office of the Agent
at NationsBank, National Association, Independence
Center, 15th Floor, NC1 001-15-04, Charlotte, North
Carolina 28255, Attention: Agency Services, or such
other office and address as the Agent may from time to
time designate.
"Regulation D" means Regulation D of the Board as
the same may be amended or supplemented from time to
time.
"Regulatory Change" means any change effective
after the Closing Date in United States Federal or
state laws or regulations (including Regulation D and
capital adequacy regulations) or foreign laws or
regulations or the adoption or making after such date
of any interpretations, directives or requests applying
to a class of banks, which includes any of the Lenders,
under any United States Federal or state or foreign
laws or regulations (whether or not having the force of
law) by any court or governmental or monetary authority
charged with the interpretation or administration
thereof or compliance by any Lender with any request or
directive regarding capital adequacy, whether or not
having the force of law, and whether or not failure to
comply therewith would be unlawful and whether or not
published or proposed prior to the date hereof.
"Reimbursement Obligation" shall mean at any time,
the obligation of the Borrower with respect to any
Letter of Credit to reimburse the Issuing Bank and the
Lenders to the extent of their respective
Participations (including by the receipt by the Issuing
Bank of proceeds of Base Rate Refunding Loans pursuant
to Section 3.2) for amounts theretofore paid by the
Issuing Bank pursuant to a drawing under such Letter of
Credit.
"Required Lenders" means, as of any date, Lenders
on such date having Credit Exposures (as defined below)
aggregating at least (i) if there shall be fewer than
three (3) Lenders, 100% of the aggregate Credit
Exposures of all Lenders on such date, and (ii) if
there shall be three (3) or more Lenders, 66.67% or
more of the aggregate Credit Exposures of all the
Lenders on such date. For purposes of the preceding
sentence, the amount of the "Credit Exposure" of each
Lender shall be equal to the aggregate principal amount
of the Loans owing to such Lender plus the amount of
such Lender's Applicable Commitment Percentage of
Letter of Credit Outstandings plus the aggregate
unutilized amounts of such Lender's Revolving Credit
Commitment (after accounting for such Lender's
Applicable Commitment Percentage of any Letter of
Credit Outstandings); provided that if any Lender shall
have failed to pay to the Issuing Bank its Applicable
Commitment Percentage of any drawing under any Letter
of Credit resulting in an outstanding Reimbursement
Obligation, such Lender's Credit Exposure attributable
to Letter of Credit Outstandings shall be deemed to be
held by the Issuing Bank for purposes of this
definition.
"Replacement Bank" means (i) any Lender or Lenders
selected by the Borrower or (ii) one or a group of
banks or other financial institutions selected by the
Borrower and acceptable to and approved by the Agent
and the Required Lenders in their reasonable
discretion, any of which shall replace any then
existing Lender or Lenders pursuant to Section 4.7
hereof and have a Revolving Credit Commitment equal in
amount to the Revolving Credit Commitment of the
replaced Lender or Lenders.
"Restricted Payment" means (a) any dividend or
other distribution, direct or indirect, on account of
any shares of any class of stock of the Borrower or any
Subsidiary (other than those payable or distributable
solely to the Borrower or any Guarantor) now or
hereafter outstanding, including without limitation the
Preferred Stock, except a dividend payable solely in
shares of a class of stock to the holders of that
class; (b) any redemption, conversion, exchange,
retirement or similar payment, purchase or other
acquisition for value, direct or indirect, of any
Indebtedness, including without limitation the
Subordinated Debt, or of any shares of any class of
stock of the Borrower or any Subsidiary (other than
those payable or distributable solely to the Borrower
or any Guarantor) now or hereafter outstanding,
including without limitation the Preferred Stock other
than with respect to, and specifically excluding, its
conversion; (c) any payment (other than to the Borrower
or any Guarantor) made to redeem, repurchase or retire,
or to obtain the surrender of, any outstanding warrants
(other than payments not exceeding $3,500,000 in the
aggregate made in connection with redeeming,
repurchasing or retiring or obtaining the surrender of
the Warrants), options or other rights to acquire
shares of any class of stock of the Borrower or any
Subsidiary now or hereafter outstanding, including
without limitation the Preferred Stock; and (d) any
issuance and sale of capital stock of any Subsidiary of
the Borrower (or any option, warrant or right to
acquire such stock) other than to the Borrower or any
Guarantor.
"Revolving Credit Commitment" means, with respect
to each Lender, the obligation of such Lender to make
Loans to the Borrower up to an aggregate principal
amount at any one time outstanding equal to such
Lender's Applicable Commitment Percentage of the Total
Revolving Credit Commitment.
"Revolving Credit Facility" means the facility
described in Article II hereof providing for Loans to
the Borrower by the Lenders at any time outstanding up
to the aggregate principal amount of the Total
Revolving Credit Commitment less all Revolving Credit
Outstandings.
"Revolving Credit Outstandings" means, as of any
date of determination, the aggregate principal amount
of all Loans then outstanding.
"Revolving Credit Termination Date" means the
earlier to occur of (i) the Stated Termination Date or
(ii) such date of termination of Lenders' obligations
pursuant to Section 10.1 upon the occurrence of an
Event of Default, or (iii) such date as the Borrower
may voluntarily and permanently terminate the Revolving
Credit Facility by payment in full of all Revolving
Credit Outstandings and Letter of Credit Outstandings
together with all accrued and unpaid interest thereon,
except for such Letter of Credit Outstandings as have
been fully cash collateralized in accordance with
Section 10.1(B), all Revolving Credit Commitments and
Letter of Credit Commitments shall have terminated or
expired, and the Borrower shall have fully, finally and
irrevocably paid and satisfied all Obligations.
"S&P" means Standard & Poor's, a division of The
McGraw-Hill Companies.
"Security Agreement" means, collectively (or
individually as the context may indicate), (i) that
certain Security Agreement dated as of the date hereof
between each Credit Party and the Agent in the form of
Exhibit J, and (ii) any additional Security Agreement
in the form of Exhibit J delivered to the Agent
pursuant to Section 8.19 or Article IV all as hereafter
amended, supplemented or replaced from time to time.
"Security Instruments" means, collectively, the
Pledge Agreement, the Mortgage of Shares dated as of
the Closing Date executed by Whitney Partners, L.L.C.,
the Security Agreement, the Intellectual Property
Security Agreement, the Intellectual Property
Assignment, the LC Account Agreement, the Intercompany
Note Pledge Agreement, the Subordination Agreement,
landlord waivers and all other agreements, instruments
and other documents, whether now existing or hereafter
in effect, pursuant to which any Credit Party shall
grant or convey to the Agent or the Lenders a Lien in
property as security for all or any portion of the
Obligations, as any of them may be amended, modified or
supplemented from time to time.
"Single Employer Plan" means any employee pension
benefit plan covered by Title IV of ERISA in respect of
which the Borrower or any Subsidiary is an "employer"
as described in Section 4001(b) of ERISA and which is
not a Multiemployer Plan.
"Solvent" means, when used with respect to any
Person, that at the time of determination:
(i) the fair value of its assets (both
at fair valuation and at present fair saleable
value on an orderly basis) is in excess of the
total amount of its liabilities, including
Contingent Obligations; and
(ii) it is then able and expects to be
able to pay its debts as they mature; and
(iii) it does not have unreasonably
small capital to carry on its business as
conducted and as proposed to be conducted.
"Stated Termination Date" means March 19, 2003.
"Subordinated Debt" means the Senior Subordinated
Notes issued by the Borrower on the Closing Date in the
original principal amount of $10,000,000 with a final
maturity of not less than eight years from the Closing
Date pursuant to the terms of the Indenture of even
date herewith between the Borrower, as Issuer, and
State Street Bank and Trust Company, N.A., as Trustee.
"Subordinated Debt Documents" means, collectively,
the Securities Purchase Agreement of even date herewith
by and among the Borrower, GarMark Partners, L.P., and
Moore Global Investments, Ltd., Remington Investment
Strategies, L.P. and NationsBanc Montgomery Securities,
LLC, and the Indenture of even date, herewith between
the Borrower, as Issuer, and State Street Bank and
Trust Company, N.A., as Trustee, pursuant to the terms
of which the Subordinated Debt has been issued by the
Borrower on the Closing Date, as amended from time to
time thereof without violation of Section 9.4 hereof,
each Senior Subordinated Note issued by the Borrower
thereunder and all other agreements, instruments,
certificates and documents issued from time to time in
connection therewith.
"Subordination Agreement" means, collectively (or
individually as the context may indicate), (i) the
Subordination Agreement dated as of the date hereof
between the Credit Parties and the Agent in the form of
Exhibit O, and (ii) any additional Subordination
Agreement in the form of Exhibit O delivered to the
Agent pursuant to Section 8.19 or Article IV all as
hereafter modified, amended or supplemented from time
to time.
"Subsidiary" means any corporation or other entity
in which more than 50% of its outstanding voting stock
or more than 50% of all equity or other ownership
interests is owned directly or indirectly by the
Borrower and/or by one or more of the Subsidiaries.
"Swap Agreement" means one or more agreements
between the Borrower and any Person with respect to
Indebtedness evidenced by any or all of the Notes, on
terms mutually acceptable to the Borrower and such
Person and approved by each of the Lenders, which
agreements create Hedging Obligations; provided,
however, that no such approval of the Lenders shall be
required to the extent such agreements are entered into
between the Borrower and any Lender.
"Termination Event" means: (i) a "Reportable
Event" described in Section 4043 of ERISA and the
regulations issued thereunder (unless the notice
requirement has been waived by applicable regulation);
or (ii) the withdrawal of the Borrower or any ERISA
Affiliate from a Pension Plan during a plan year in
which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA or was deemed such under
Section 4068(f) of ERISA; or (iii) the termination of a
Pension Plan, the filing of a notice of intent to
terminate a Pension Plan or the treatment of a Pension
Plan amendment as a termination under Section 4041 of
ERISA; or (iv) the institution of proceedings to
terminate a Pension Plan by the PBGC; or (v) any other
event or condition which would constitute grounds under
Section 4042(a) of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension
Plan; or (vi) the partial or complete withdrawal of the
Borrower or any ERISA Affiliate from a Multiemployer
Plan; or (vii) the imposition of a Lien pursuant to
Section 412 of the Code or Section 302 of ERISA; or
(viii) any event or condition which results in the
reorganization or insolvency of a Multiemployer Plan
under Section 4241 or Section 4245 of ERISA,
respectively; or (ix) any event or condition which
results in the termination of a Multiemployer Plan
under Section 4041A of ERISA or the institution by the
PBGC of proceedings to terminate a Multiemployer Plan
under Section 4042 of ERISA.
"Total Letter of Credit Commitment" means an
aggregate stated amount not to exceed $5,000,000.
"Total Revolving Credit Commitment" means the
maximum aggregate principal amount at any time
outstanding equal to $75,000,000, as reduced from time
to time in accordance with Sections 2.7 and 2.13.
"Type" shall mean any type of Loan (i.e., a Base
Rate Loan or a Eurodollar Rate Loan).
"Unused Fee" has the meaning assigned to such term
in Section 2.10.
"Voting Stock" means shares of capital stock
issued by a corporation, or equivalent interests in any
other Person, the holders of which are ordinarily, in
the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar
functions) of such Person, even if the right so to vote
has been suspended by the happening of such a
contingency.
"Warrants" means the Series E Warrants issued by
the Borrower pursuant to that certain Warrant Purchase
Agreement dated as of May 31, 1996, as thereafter
amended.
I.2. Rules of Interpretation.
(a) All accounting terms not specifically defined
herein shall have the meanings assigned to such terms
and shall be interpreted in accordance with GAAP
applied on a Consistent Basis.
(b) Each term defined in Article 1 or 9 of the
New York Uniform Commercial Code shall have the meaning
given therein unless otherwise defined herein, except
to the extent that the Uniform Commercial Code of
another jurisdiction is controlling, in which case such
terms shall have the meaning given in the Uniform
Commercial Code of the applicable jurisdiction.
(c) The headings, subheadings and table of
contents used herein or in any other Loan Document are
solely for convenience of reference and shall not
constitute a part of any such document or affect the
meaning, construction or effect of any provision
thereof.
(d) Except as otherwise expressly provided,
references herein to articles, sections, paragraphs,
clauses, annexes, appendices, exhibits and schedules
are references to articles, sections, paragraphs,
clauses, annexes, appendices, exhibits and schedules in
or to this Agreement.
(e) All definitions set forth herein or in any
other Loan Document shall apply to the singular as well
as the plural form of such defined term, and all
references to the masculine gender shall include
reference to the feminine or neuter gender, and vice
versa, as the context may require.
(f) When used herein or in any other Loan
Document, words such as "hereunder", "hereto", "hereof"
and "herein" and other words of like import shall,
unless the context clearly indicates to the contrary,
refer to the whole of the applicable document and not
to any particular article, section, subsection,
paragraph or clause thereof.
(g) References to "including" means including
without limiting the generality of any description
preceding such term.
(h) All dates and times of day specified herein
shall refer to such dates and times at Charlotte, North
Carolina.
ARTICLE II
The Revolving Credit Facility
II.1. Revolving Loans.
(a) Commitment. Subject to the terms and
conditions of this Agreement, each Lender severally
agrees to make Advances to the Borrower under the
Revolving Credit Facility from time to time from the
Closing Date until the Revolving Credit Termination
Date on a pro rata basis as to the total borrowing
requested by the Borrower on any day determined by such
Lender's Applicable Commitment Percentage up to but not
exceeding the Revolving Credit Commitment of such
Lender; provided, however, that the Lenders will not be
required and shall have no obligation to make any such
Advance (i) so long as a Default or an Event of Default
has occurred and is continuing or (ii) if the Agent has
accelerated the maturity of any of the Notes as a
result of an Event of Default; provided further,
however, that immediately after giving effect to each
such Advance, the principal amount of Revolving Credit
Outstandings plus Letter of Credit Outstandings shall
not exceed the Total Revolving Credit Commitment.
Within such limits, the Borrower may borrow, repay and
reborrow under the Revolving Credit Facility on a
Business Day from the Closing Date until, but (as to
borrowings and reborrowings) not including, the
Revolving Credit Termination Date; provided; however,
that (y) no Loan that is a Eurodollar Rate Loan shall
be made which has an Interest Period that extends
beyond the Stated Termination Date and (z) each
Revolving Loan that is a Eurodollar Rate Loan may,
subject to the provisions of Sections 2.7 and 2.13, be
repaid only on the last day of the Interest Period with
respect thereto unless such payment is accompanied by
the additional payment, if any, required by Section 5.5
(b) Amounts. Except as otherwise permitted by
the Lenders from time to time, the aggregate unpaid
principal amount of the Outstandings shall not exceed
at any time the Total Revolving Credit Commitment. In
the event there shall be outstanding any such excess,
the Borrower shall immediately make such payments and
prepayments as shall be necessary to comply with this
Section 2.1(b). Each Loan hereunder, other than Base
Rate Refunding Loans, and each conversion under Section
2.8, shall be in an amount of at least (i) $1,500,000
with respect to Eurodollar Rate Loans and $500,000 with
respect to Base Rate Loans, and, (ii) if greater than
such amounts, an integral multiple of $500,000 with
respect to Eurodollar Rate Loans and $100,000 with
respect to Base Rate Loans.
(c) Advances. (i) An Authorized Representative
shall give the Agent (1) at least three Business Days'
irrevocable written notice by telefacsimile
transmission of a Borrowing Notice or Interest Rate
Selection Notice (as applicable) with appropriate
insertions, effective upon receipt, of each Loan that
is a Eurodollar Rate Loan (whether representing an
additional borrowing hereunder or the conversion of a
borrowing hereunder from Base Rate Loans to Eurodollar
Rate Loans) prior to 10:30 A.M. and (2) irrevocable
written notice by telefacsimile transmission of a
Borrowing Notice or Interest Rate Selection Notice (as
applicable) with appropriate insertions, effective upon
receipt, of each Loan (other than Base Rate Refunding
Loans to the extent the same are effected without
notice pursuant to Section 2.1(c)(iv)) that is a Base
Rate Loan (whether representing an additional borrowing
hereunder or the conversion of borrowing hereunder from
Eurodollar Rate Loans to Base Rate Loans) prior to
10:30 A.M. on the day of such proposed Loan. Each such
notice shall specify the amount of the borrowing, the
type of Loan (Base Rate or Eurodollar Rate), the date
of borrowing and, if a Eurodollar Rate Loan, the
Interest Period to be used in the computation of
interest. Notice of receipt of such Borrowing Notice
or Interest Rate Selection Notice, as the case may be,
together with the amount of each Lender's portion of an
Advance requested thereunder, shall be provided by the
Agent to each Lender by telefacsimile transmission with
reasonable promptness, but (provided the Agent shall
have received such notice by 10:30 A.M.) not later than
1:00 P.M. on the same day as the Agent's receipt of
such notice.
(ii) Not later than 2:00 P.M. on the date
specified for each borrowing under this Section 2.1,
each Lender shall, pursuant to the terms and subject to
the conditions of this Agreement, make the amount of
the Advance or Advances to be made by it on such day
available by wire transfer to the Agent in the amount
of its pro rata share, determined according to such
Lender's Applicable Commitment Percentage of the Loan
or Loans to be made on such day. Such wire transfer
shall be directed to the Agent at the Principal Office
and shall be in the form of Dollars constituting
immediately available funds. The amount so received by
the Agent shall, subject to the terms and conditions of
this Agreement, be made available to the Borrower by
delivery of the proceeds thereof to the Borrower's
Account or otherwise as shall be directed in the
applicable Borrowing Notice by the Authorized
Representative and reasonably acceptable to the Agent.
(iii) The Borrower shall have the option to
elect the duration of the initial and any subsequent
Interest Periods and to convert the Loans in accordance
with Section 2.8. Eurodollar Rate Loans and Base Rate
Loans may be outstanding at the same time, provided,
however, there shall not be outstanding at any one time
Eurodollar Rate Loans having more than ten (10)
different Interest Periods. If the Agent does not
receive a Borrowing Notice or an Interest Rate
Selection Notice giving notice of election of the
duration of an Interest Period or of conversion of any
Loan to or continuation of a Loan as a Eurodollar Rate
Loan by the time prescribed by Sections 2.1(c) or 2.8,
the Borrower shall be deemed to have elected to convert
such Loan to (or continue such Loan as) a Base Rate
Loan until the Borrower notifies the Agent in
accordance with Section 2.8.
(iv) Notwithstanding the foregoing, if a
drawing is made under any Letter of Credit, such
drawing is honored by the Issuing Bank prior to the
Stated Termination Date, and the Borrower shall not as
of the immediately following Business Day fully
reimburse the Issuing Bank in respect of such drawing,
provided that the conditions to making a Loan as herein
provided shall then be satisfied, the Reimbursement
Obligation arising from such drawing shall be paid to
the Issuing Bank by the Agent without the requirement
of notice to or from the Borrower from immediately
available funds which shall be advanced on the Business
Day immediately following the date of payment of such
draw by the Issuing Bank as a Base Rate Refunding Loan
by each Lender under the Revolving Credit Facility in
an amount equal to such Lender's Applicable Commitment
Percentage of such Reimbursement Obligation. Notices
to and payments by the Lenders with respect to any Base
Rate Refunding Loan shall be made in accordance with
Section 3.2(c). Any such Base Rate Refunding Loan shall
be advanced as, and shall continue as, a Base Rate Loan
unless and until the Borrower converts such Base Rate
Loan in accordance with the terms of Section 2.8.
II.2. Payment of Interest.
(a) The Borrower shall pay interest to the Agent
for the account of each Lender on the outstanding and
unpaid principal amount of each Loan made by such
Lender for the period commencing on the date of such
Loan until such Loan shall be paid, continued or
converted, as the case may be, at the then applicable
Base Rate for Base Rate Loans or applicable Eurodollar
Rate for Eurodollar Rate Loans, as designated by the
Authorized Representative pursuant to Section 2.1;
provided, however, that if any amount shall not be paid
when due (at maturity, by acceleration or otherwise),
all amounts outstanding hereunder shall bear interest
thereafter at the Default Rate.
(b) Interest on each Loan shall be computed on
the basis of a year of 360 days and calculated in each
case for the actual number of days elapsed. Interest
on each Loan shall be paid (i) quarterly in arrears on
the last Business Day of each March, June, September
and December commencing June, 1998 for each Base Rate
Loan, (ii) on the last day of the applicable Interest
Period for each Eurodollar Rate Loan and, if such
Interest Period extends for more than three months, at
intervals of three months after the first day of such
Interest Period, and (iii) upon payment in full of the
principal amount of such Loan and termination of this
Agreement.
II.3. Payment of Principal. The principal amount
of each Loan shall be due and payable to the Agent for the
benefit of each Lender in full on the Revolving Credit
Termination Date, or earlier as specifically provided
herein. The principal amount of any Base Rate Loan may be
prepaid in whole or in part at any time. The principal
amount of any Eurodollar Rate Loan may be prepaid only at
the end of the applicable Interest Period unless the
Borrower shall pay to the Agent for the account of the
Lenders the additional amount, if any, required under
Section 5.4. All prepayments of Loans made by the Borrower
shall be in the amount of (i) $1,500,000 with respect to
Eurodollar Rate Loans and $500,000 with respect to Base Rate
Loans or (ii) such greater amount which is an integral
multiple of $500,000 with respect to Eurodollar Rate Loans
and $100,000 with respect to Base Rate Loans or (iii) the
amount equal to all Revolving Credit Outstandings, or (iv)
such other amount as necessary to comply with Section 2.1(b)
or Section 2.7.
II.4. Manner of Payment.
(a) Each payment of principal (including any
prepayment) and payment of interest and fees, and any
other amount required to be paid to the Lenders with
respect to the Loans, shall be made to the Agent at the
Principal Office, for the account of each Lender, in
Dollars and in immediately available funds before 12:30
P.M. on the date such payment is due.
(b) The Agent shall deem any payment made by or
on behalf of the Borrower hereunder that is not made
both in Dollars and in immediately available funds and
prior to 12:30 P.M. to be a non-conforming payment.
Any such payment shall not be deemed to be received by
the Agent until the later of (i) the time such funds
become available funds and (ii) the next Business Day.
Any non-conforming payment may constitute or become a
Default or Event of Default in accordance with the
terms of Sections 10.1(a) and (b). Interest shall
continue to accrue on any principal as to which a non-
conforming payment is made until the later of (x) the
date such funds become available funds or (y) the next
Business Day at the Default Rate from the date such
amount was due and payable.
(c) In the event that any payment hereunder or
under the Notes becomes due and payable on a day other
than a Business Day, then such due date shall be
extended to the next succeeding Business Day unless
provided otherwise under clause (ii) of the definition
of "Interest Period"; provided that interest shall
continue to accrue during the period of any such
extension and provided further, that in no event shall
any such due date be extended beyond the Revolving
Credit Termination Date.
II.5. Notes. Loans made by each Lender shall be
evidenced by the Note payable to the order of such Lender in
the respective amount of its Applicable Commitment
Percentage of the Revolving Credit Commitment, which Note
shall be dated the Closing Date or a later date pursuant to
an Assignment and Acceptance and shall be duly completed,
executed and delivered by the Borrower.
II.6. Pro Rata Payments. Except as otherwise
provided herein, (a) each payment on account of the
principal of and interest on the Loans and the fees
described in Section 2.10 shall be made to the Agent for the
account of the Lenders pro rata based on their Applicable
Commitment Percentages, (b) all payments to be made by the
Borrower for the account of each of the Lenders on account
of principal, interest and fees, shall be made without
diminution, setoff, recoupment or counterclaim, and (c) the
Agent will promptly (but in any event, prior to 2:30 P.M. on
the date such payment is received or deemed to be received)
distribute to the Lenders in immediately available funds
payments received in fully collected, immediately available
funds from the Borrower.
II.7. Voluntary Commitment Reductions. The
Borrower shall, by notice from an Authorized Representative,
have the right from time to time, upon not less than three
(3) Business Days' written notice to the Agent, effective
upon receipt, to reduce the Total Revolving Credit
Commitment. The Agent shall give each Lender, within one (1)
Business Day of receipt of such notice, telefacsimile
notice, or telephonic notice (confirmed in writing), of such
reduction. Each such reduction shall be in the aggregate
amount of $5,000,000 or such greater amount which is in an
integral multiple of $1,000,000, or the entire remaining
Total Revolving Credit Commitment, and shall permanently
reduce the Total Revolving Credit Commitment. Each
reduction of the Total Revolving Credit Commitment shall be
accompanied by payment of the Loans to the extent that the
principal amount of Revolving Credit Outstandings plus
Letter of Credit Outstandings exceeds the Total Revolving
Credit Commitment after giving effect to such reduction,
together with accrued and unpaid interest on the amounts
prepaid. No such reduction shall result in the payment of
any Eurodollar Rate Loan other than on the last day of the
Interest Period of such Eurodollar Rate Loan unless such
prepayment is accompanied by amounts due, if any, under
Section 5.4.
II.8. Conversions and Elections of Subsequent
Interest Periods. Subject to the limitations set forth
below and in Article V, the Borrower may:
(a) upon delivery, effective upon receipt, of a
properly completed Interest Rate Selection Notice to
the Agent on or before 10:30 A.M. on any Business Day,
convert all or a part of Eurodollar Rate Loans to Base
Rate Loans on the last day of the Interest Period for
such Eurodollar Rate Loans; and
(b) provided that no Default or Event of Default
shall have occurred and be continuing, upon delivery,
effective upon receipt, of a properly completed
Interest Rate Selection Notice to the Agent on or
before 10:30 A.M. three Business Days' prior to the
date of such election or conversion:
(i) elect a subsequent Interest Period for
all or a portion of Eurodollar Rate Loans to begin
on the last day of the then current Interest
Period for such Eurodollar Rate Loans; and
(ii) convert Base Rate Loans to Eurodollar
Rate Loans on any Business Day.
Each election and conversion pursuant to this
Section 2.8 shall be subject to the limitations on
Eurodollar Rate Loans set forth in the definition of
"Interest Period" herein and in Sections 2.1 and 2.3
and Article V. The Agent shall give written notice to
each Lender of such notice of election or conversion
prior to 1:00 P.M. on the day such notice of election
or conversion is received. All such continuations or
conversions of Loans shall be effected pro rata based
on the Applicable Commitment Percentages of the
Lenders.
II.9. Increase and Decrease in Available Amounts.
The amount of the Total Revolving Credit Commitment which
shall be available to the Borrower as Advances shall be
reduced by the aggregate amount of Revolving Credit
Outstandings and Letter of Credit Outstandings.
II.10. Unused Fee. For the period beginning on the
Closing Date and ending on the Revolving Credit Termination
Date, the Borrower agrees to pay to the Agent, for the pro
rata benefit of the Lenders based on their Applicable
Commitment Percentages, a quarterly unused fee (the "Unused
Fee") equal in amount to the product of the Applicable
Margin for calculating the Unused Fee multiplied by the
average daily amount by which Total Revolving Credit
Commitment exceeds Outstandings. The Unused Fees shall be
due in arrears on the last Business Day of each March, June,
September and December commencing June, 1998 to and on the
Revolving Credit Termination Date. Notwithstanding the
foregoing, so long as any Lender fails to make available any
portion of its Revolving Credit Commitment when requested,
such Lender shall not be entitled to receive payment of its
pro rata share of the Unused Fee until such Lender shall
make available such portion. The Unused Fee shall be
calculated on the basis of a year of 360 days for the actual
number of days elapsed.
II.11. Deficiency Advances. No Lender shall be
responsible for any default of any other Lender in respect
to such other Lender's obligation to make any Loan or fund
its purchase of any Participation hereunder nor shall the
Revolving Credit Commitment of any Lender hereunder be
increased as a result of such default of any other Lender.
Without limiting the generality of the foregoing, in the
event any Lender shall fail to advance funds to the Borrower
under the Revolving Credit Facility as herein provided, the
Agent may in its discretion, but shall not be obligated to,
advance under the Note in its favor as a Lender all or any
portion of such amount or amounts (each, a "deficiency
advance") and shall thereafter be entitled to payments of
principal of and interest on such deficiency advance in the
same manner and at the same interest rate or rates to which
such other Lender would have been entitled had it made such
advance under its Note; provided that, upon payment to the
Agent from such other Lender of the entire outstanding
amount of each such deficiency advance, together with
accrued and unpaid interest thereon, from the most recent
date or dates interest was paid to the Agent by the Borrower
on each Loan comprising the deficiency advance at the
interest rate per annum for overnight borrowing by the Agent
from the Federal Reserve Bank, then such payment shall be
credited against the applicable Note of the Agent in full
payment of such deficiency advance and the Borrower shall be
deemed to have borrowed the amount of such deficiency
advance from such other Lender as of the most recent date or
dates, as the case may be, upon which any payments of
interest were made by the Borrower thereon.
II.12. Use of Proceeds. The proceeds of the Loans
made pursuant to the Revolving Credit Facility hereunder
shall be used by the Borrower to repay in full all Existing
Debt, to redeem, repurchase or otherwise obtain surrender of
all or portion of the Warrants, as permitted hereunder, for
general working capital needs, including the making of
Acquisitions and Capital Expenditures permitted hereunder,
and other general corporate purposes. In no event may
Borrower incur an Obligation with the intention and for the
specific purpose of using the proceeds of such Loan for
payment of any obligations of any Credit Party then or
thereafter outstanding with respect to the Subordinated Debt
or the Preferred Stock.
II.13. Mandatory Reductions in Commitment. In
addition to the required payments of principal of the Loans
set forth in Section 2.3 hereof and any optional payments of
principal of the Loans effected under Sections 2.3 and 2.7
hereof, the Total Revolving Credit Commitment shall be
reduced by $5,000,000 on the third anniversary of the
Closing Date to the maximum aggregate principal amount at
any time of $70,000,000 and by an additional $10,000,000 on
the fourth anniversary of the Closing Date to the maximum
aggregate principal amount at any time of $60,000,000. In
the event that after such reduction the amount of
Outstandings exceeds the Total Revolving Credit Commitment,
the Borrower shall make at the same time a prepayment of the
Outstandings in the amount of such excess in compliance with
Section 2.1(b).
ARTICLE III
Letters of Credit
III.1. Letters of Credit. The Issuing Bank agrees,
subject to the terms and conditions of this Agreement, upon
request of the Borrower to issue from time to time for the
account of the Borrower Letters of Credit upon delivery to
the Issuing Bank of an Application for Letter of Credit
relating thereto in form and content acceptable to the
Issuing Bank; provided, that (i) the Letter of Credit
Outstandings shall not exceed the Total Letter of Credit
Commitment and (ii) no Letter of Credit shall be issued if,
after giving effect thereto, Letter of Credit Outstandings
plus Revolving Credit Outstandings shall exceed the Total
Revolving Credit Commitment. No Letter of Credit shall have
an expiry date (including all rights of the Borrower or any
beneficiary named in such Letter of Credit to require
renewal) or payment date occurring later than the earlier to
occur of twelve months after the date of its issuance or
five Business Days prior to the Stated Termination Date.
III.2. Reimbursement.
(a) The Borrower hereby unconditionally agrees to
pay to the Issuing Bank immediately on demand at such
office as the Issuing Bank shall designate all amounts
required to pay all drafts drawn under the Letters of
Credit and all reasonable expenses incurred by the
Issuing Bank in connection with the Letters of Credit,
and in any event and without demand to place in
possession of the Issuing Bank (which shall include
Advances under the Revolving Credit Facility if
permitted by Section 2.1) sufficient funds to pay all
debts and liabilities arising under any Letter of
Credit. The Issuing Bank agrees to give the Borrower
prompt notice of any request for a draw under a Letter
of Credit. The Issuing Bank may charge any account the
Borrower may have with it for any and all amounts the
Issuing Bank pays under a Letter of Credit, plus
charges and reasonable expenses as from time to time
agreed to by the Issuing Bank and the Borrower;
provided that to the extent permitted by Section
2.1(c)(iv), such amounts shall be paid pursuant to
Advances under the Revolving Credit Facility. The
Borrower agrees to pay the Issuing Bank interest on any
Reimbursement Obligations not paid on the day on which
drawing is paid on the corresponding Letter of Credit
at the Base Rate plus the Applicable Margin for such
day, and thereafter at the Base Rate plus two percent
(2.0%), or the maximum rate permitted by applicable
law, if lower, such rates to be calculated on the basis
of a year of 360 days for actual days elapsed
commencing on the date of such drawing until such
Reimbursement Obligation is so paid by direct
reimbursement by the Borrower or by a Base Rate
Refunding Loan.
(b) In accordance with the provisions of Section
2.1(c), the Issuing Bank shall notify the Agent of any
drawing under any Letter of Credit promptly following
the receipt by the Issuing Bank of such drawing.
(c) Each Lender (other than the Issuing Bank)
shall automatically acquire on the date of issuance
thereof, a Participation in the liability of the
Issuing Bank in respect of each Letter of Credit in an
amount equal to such Lender's Applicable Commitment
Percentage of such liability, and each Lender (other
than the Issuing Bank) thereby shall absolutely,
unconditionally and irrevocably assume, and shall be
unconditionally obligated to pay to the Issuing Bank as
hereinafter described, its Applicable Commitment
Percentage of the liability of the Issuing Bank under
such Letter of Credit.
(d) If a drawing is presented under any Letter of
Credit in accordance with the terms thereof and paid by
the Issuing Bank and the Borrower shall not fully
reimburse the Issuing Bank in respect thereof as of the
immediately following Business Day, then notice of such
drawing and payment shall be provided promptly by the
Issuing Bank to the Agent and the Agent shall provide
notice to each Lender by telephone or telefacsimile
transmission.
(i) If the conditions to making a Base
Rate Refunding Loan to repay such Reimbursement
Obligations as herein provided are then satisfied,
each of the Lenders (including the Issuing Bank in
its capacity as Lender) shall advance its pro rata
share of such Base Rate Refunding Loan pursuant to
Section 2.1, except as otherwise set forth below.
If the conditions to making a Base Rate Refunding
Loan as herein provided shall not then be
satisfied, each of the Lenders (including the
Issuing Bank in its capacity as Lender) shall fund
by payment to the Agent for the account of the
Issuing Bank at the Principal Office in Dollars
and in immediately available funds the purchase
from the Issuing Bank of its respective
Participation in the related Reimbursement
Obligation in an amount equal to its respective
Applicable Commitment Percentage of such drawing
under such Letter of Credit.
(ii) If notice to the Lenders of a
drawing under any Letter of Credit is given by the
Agent at or before 12:00 noon on any Business Day,
each Lender shall, pursuant to the conditions
specified in Section 2.1(c)(iv), either make a
Base Rate Refunding Loan or fund the purchase of
its Participation in the amount of such Lender's
Applicable Commitment Percentage of such drawing
or payment and shall pay such amount to the Agent
for the account of the Issuing Bank at the
Principal Office in Dollars and in immediately
available funds before 2:30 P.M. on the same
Business Day. If notice to the Lenders of a
drawing under a Letter of Credit is given by the
Agent after 12:00 noon on any Business Day, each
Lender shall, pursuant to the conditions specified
in Section 2.1(c)(iv), either make a Base Rate
Refunding Loan or fund the purchase of its
Participation in the amount of such Lender's
Applicable Commitment Percentage of such drawing
or payment and shall pay such amount to the Agent
for the account of the Issuing Bank at the
Principal Office in Dollars and in immediately
available funds before 12:00 noon on the next
following Business Day.
(iii) Simultaneously with the making
of each payment by a Lender (other than an advance
of a Base Rate Refunding Loan) to the Issuing Bank
pursuant to clause (i), such Lender shall,
automatically and without any further action on
the part of the Issuing Bank or such Lender,
acquire a Participation in an amount equal to such
payment (excluding the portion thereof
constituting interest accrued prior to the date
the Lender made its payment) in the related
Reimbursement Obligation of the Borrower.
(iv) Each Lender's obligation to make
payment to the Agent for the account of the
Issuing Bank pursuant to this Section 3.2(d), and
the right of the Issuing Bank to receive the same,
shall be absolute and unconditional, shall not be
affected by any circumstance whatsoever and shall
be made without any offset, abatement, withholding
or reduction whatsoever. If any Lender is
obligated to pay but does not pay amounts to the
Agent for the account of the Issuing Bank in full
upon such request as required by this Section
3.2(d), such Lender shall, on demand, pay to the
Agent for the account of the Issuing Bank interest
on the unpaid amount for each day during the
period commencing on the date of notice given to
such Lender pursuant to this Section 3.2(d) until
such Lender pays such amount to the Agent for the
account of the Issuing Bank in full at the
interest rate per annum for overnight borrowing by
the Agent from the Federal Reserve Bank.
(v) In the event the Lenders have
purchased Participations in any Reimbursement
Obligation as set forth in clauses (i) and (iii)
above, then at any time payment (in fully
collected, immediately available funds) of such
Reimbursement Obligation, in whole or in part, is
received by Issuing Bank from the Borrower,
Issuing Bank shall promptly pay to the Agent which
shall forward to each Lender an amount equal to
its Applicable Commitment Percentage of such
payment from the Borrower.
(e) Not later than ten days following the end of
each calendar quarter, the Issuing Bank shall deliver
to each Lender a notice describing the aggregate
undrawn amount of all Letters of Credit at the end of
such quarter. Upon the request of any Lender from time
to time, the Issuing Bank shall deliver to the Agent,
and the Agent shall deliver to such Lender, any other
information reasonably requested by such Lender with
respect to each Letter of Credit outstanding.
(f) The issuance by the Issuing Bank of each
Letter of Credit shall, in addition to the conditions
precedent set forth in Article VI, be subject to the
conditions that such Letter of Credit be in such form
and contain such terms as shall be reasonably
satisfactory to the Issuing Bank consistent with the
then current practices and procedures of the Issuing
Bank with respect to similar letters of credit, and the
Borrower shall have executed and delivered such other
instruments and agreements relating to such Letters of
Credit as the Issuing Bank shall have reasonably
requested consistent with such practices and
procedures; provided, however, that in the event any
provisions of such Letters of Credit are in conflict
with any of the express terms herein contained, the
provisions of this Agreement shall prevail. All
Letters of Credit shall be issued pursuant to and
subject to the Uniform Customs and Practice for
Documentary Credits, 1993 revision, International
Chamber of Commerce Publication No. 500 and all
subsequent amendments and revisions thereto.
(g) The Borrower agrees that Issuing Bank may, in
its sole discretion, accept or pay, as complying with
the terms of any Letter of Credit, any drafts or other
documents otherwise in order which may be signed or
issued by an administrator, executor, trustee in
bankruptcy, debtor in possession, assignee for the
benefit of creditors, liquidator, receiver, attorney in
fact or other legal representative of a party who is
authorized under such Letter of Credit to draw or issue
any drafts or other documents.
(h) Without limiting the generality of the
provisions of Section 12.9, the Borrower hereby agrees
to indemnify and hold harmless the Issuing Bank, each
other Lender and the Agent from and against any and all
claims and damages, losses, liabilities, reasonable
costs and expenses which the Issuing Bank, such other
Lender or the Agent may incur (or which may be claimed
against the Issuing Bank, such other Lender or the
Agent) by any Person by reason of or in connection with
the issuance or transfer of or payment or failure to
pay under any Letter of Credit; provided that the
Borrower shall not be required to indemnify the Issuing
Bank, any other Lender or the Agent for any claims,
damages, losses, liabilities, costs or expenses to the
extent, but only to the extent, (i) caused by the
willful misconduct or gross negligence of the party to
be indemnified or (ii) caused by the failure of the
Issuing Bank to pay under any Letter of Credit after
the presentation to it of a request for payment
strictly complying with the terms and conditions of
such Letter of Credit, unless such payment is
prohibited by any law, regulation, court order or
decree.
(i) Without limiting the Borrower's rights as set
forth in Section 3.2(h), the obligation of the Borrower
immediately to reimburse the Issuing Bank for drawings
made under Letters of Credit and the Issuing Bank's
right to receive such payment shall be absolute,
unconditional and irrevocable, and such obligations of
the Borrower shall be performed strictly in accordance
with the terms of this Agreement and such Letters of
Credit and the related Applications for any Letter of
Credit, under all circumstances whatsoever, including
the following circumstances:
(i) any lack of validity or
enforceability of the Letter of Credit, the
obligation supported by the Letter of Credit or
any other agreement or instrument relating thereto
(collectively, the "Related LC Documents");
(ii) any amendment or waiver of or any
consent to or departure from all or any of the
Related LC Documents;
(iii) the existence of any claim,
setoff, defense (other than the defense of payment
in accordance with the terms of this Agreement) or
other rights which the Borrower may have at any
time against any beneficiary or any transferee of
a Letter of Credit (or any persons or entities for
whom any such beneficiary or any such transferee
may be acting), the Agent, the Lenders or any
other Person, whether in connection with the Loan
Documents, the Related LC Documents or any
unrelated transaction;
(iv) any breach of contract or other
dispute between the Borrower and any beneficiary
or any transferee of a Letter of Credit (or any
persons or entities for whom such beneficiary or
any such transferee may be acting), the Agent, the
Lenders or any other Person;
(v) any draft, statement or any other
document presented under the Letter of Credit
proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement
therein being untrue or inaccurate in any respect
whatsoever;
(vi) any delay, extension of time,
renewal, compromise or other indulgence or
modification granted or agreed to by the Agent,
with or without notice to or approval by the
Borrower in respect of any of the Borrower's
Obligations under this Agreement; or
(vii) any other circumstance or
happening whatsoever, whether or not similar to
any of the foregoing.
III.3. Letter of Credit Facility Fees. The Borrower
shall pay to the Agent, for the pro rata benefit of the
Lenders based on their Applicable Commitment Percentages, a
fee on the aggregate amount available to be drawn on each
outstanding Letter of Credit at a rate equal to the
Applicable Margin for Letter of Credit fees. Such fees
shall be due with respect to each Letter of Credit quarterly
in arrears on the last day of each March, June, September
and December, the first such payment to be made on the first
such date occurring after the date of issuance of a Letter
of Credit. The fees described in this Section 3.3 shall be
calculated on the basis of a year of 360 days for the actual
number of days elapsed.
III.4. Administrative Fees. The Borrower shall pay
to the Issuing Bank a fronting fee and other administrative
fees in connection with the Letters of Credit in such
amounts and at such times as the Issuing Bank and the
Borrower shall agree from time to time.
ARTICLE IV
Security
IV.1. Security. As security for the full and
timely payment and performance of all Obligations, the
Credit Parties shall on or before the Closing Date do or
cause to be done all things necessary in the opinion of the
Agent and its counsel to grant to the Agent for the benefit
of the Agent and the Lenders a duly perfected first priority
Lien in all Collateral subject to no prior Lien or other
encumbrance or restriction on transfer other than
restrictions on transfer imposed by applicable securities
laws and other than any Permitted Liens then or at any time
thereafter existing on any such Collateral.
IV.2. Guaranty.
(a) To guarantee the full and timely payment and
performance of all Obligations now existing or
hereafter arising, each Domestic Subsidiary shall cause
to be delivered to the Agent, in form and substance
reasonably acceptable to the Agent, on or before the
Closing Date, the Guaranty.
(b) As security for the full and timely payment
and performance of the Guaranty, the Guarantors shall
cause to be delivered to the Agent, in form and
substance reasonably acceptable to the Agent, on or
before the Closing Date the Security Instruments to
which they are party, and such duly executed and filed
Uniform Commercial Code financing statements sufficient
to grant to the Agent a valid, duly perfected security
interest in the Collateral described therein, subject
to no prior Liens other than Permitted Liens.
IV.3. Information Regarding Collateral. The
Borrower represents, warrants and covenants that (i) the
chief executive office of the Borrower and each other Person
providing Collateral pursuant to a Security Instrument
(each, a "Grantor") at the Closing Date is located at the
address or addresses specified on Schedule 4.3, and (ii)
Schedule 4.3 contains a true and complete list of (a) the
name and address of each Grantor and of each other Person
that has effected any merger or consolidation with a Grantor
or contributed or transferred to a Grantor any property
constituting Collateral at any time since January 1, 1998
(excluding Persons making sales in the ordinary course of
their businesses to a Grantor of property constituting
inventory in the hands of such seller), (b) each location in
which goods constituting Collateral are located (together
with the name of each owner of the property located at such
address if not the applicable Grantor, and a summary
description of the relationship between the applicable
Grantor and such Person), and (c) each trade style used by
any Grantor and the purposes for which it is used. The
Borrower shall not change, or shall permit any other Grantor
to change, the location of its chief executive office or any
location specified in clause (ii)(b) of the immediately
preceding sentence, or use or permit any other Grantor to
use, any additional trade style, except upon giving not less
than thirty (30) days' prior written notice to the Agent and
taking or causing to be taken all such action at Borrower's
or such other Grantor's expense as required under the terms
of the applicable Security Instruments and as may be
reasonably requested by the Agent to perfect or maintain the
perfection of the Lien of the Agent for the benefit of
itself and the Lenders in Collateral including but not
limited to delivering revised schedules to the Security
Agreement to the Agent.
IV.4. Intellectual Property. As security for the
full and timely payment and performance of (i) all
Obligations now existing or hereafter arising and (ii)
certain Guarantors' obligations under the Guaranty, the
Borrower shall, and shall cause each Domestic Subsidiary to,
on or before the Closing Date deliver to the Agent, in form
and substance reasonably acceptable to the Agent, the
Intellectual Property Security Agreement and the
Intellectual Property Assignment. The Borrower hereby
agrees to pledge, or cause to be pledged, all intellectual
property interests and licenses hereafter acquired or
created and owned by the Borrower and any Domestic
Subsidiary within fifteen (15) days of the acquisition or
creation of such intellectual property or license by
execution of an IPSA Supplement.
IV.5. Pledged Stock. As security for the full and
timely payment and performance of (i) all Obligations now
existing or hereafter arising and (ii) certain Guarantors'
obligations under the Guaranty, the Borrower shall, and
shall cause each Domestic Subsidiary to, on or before the
Closing Date deliver to the Agent, in form and substance
reasonably acceptable to the Agent, the Pledge Agreement.
The Borrower hereby agrees to pledge, or cause to be
pledged, (a) 100% of the capital stock or equity or other
ownership interest of each Domestic Subsidiary and (b) 66%
of the voting share capital and 100% of the nonvoting share
capital and related interests and rights of each Direct
Foreign Subsidiary as may be hereafter issued or acquired
by the Borrower or any Domestic Subsidiary within fifteen
(15) days of the acquisition or issuance of such capital
stock, equity or other ownership interest by execution of a
Pledge Agreement Supplement.
4.6 Pledge and Subordination of Intercompany Notes.
As security for the full and timely payment and performance
of (i) all Obligations now existing or hereafter arising and
(ii) each Guarantor's Obligations (as defined in the
Guaranty), the Borrower shall cause the Intercompany Note
Holders to deliver the Intercompany Note Pledge Agreement to
the Agent for the benefit of the Lenders. The Borrower
hereby agrees to cause the Intercompany Note Holders now
existing or hereafter acquired or created to pledge, grant a
Lien and collaterally assign to the Agent for the benefit of
the Lenders all Intercompany Notes now existing or hereafter
arising.
4.7 Further Assurances. At the request of the Agent,
the Borrower will or will cause its Subsidiaries, as the
case may be, to execute by its duly authorized officers,
alone or with the Agent, any certificate, instrument,
statement or document, or to procure any such certificate,
instrument, statement or document, or to take such other
action (and pay all connected costs) which the Agent
reasonably deems necessary from time to time to create,
continue or preserve the liens and security interests in
Collateral (and the perfection and priority thereof) of the
Agent contemplated hereby and by the other Loan Documents
and specifically including all Collateral acquired by any
Credit Party after the Closing Date.
ARTICLE V
Change in Circumstances
5.1 Increased Cost and Reduced Return.
(a) If, after the date hereof, any Lender shall have
determined that the adoption of any applicable law, rule, or
regulation, or any change in any applicable law, rule, or
regulation, or any change in the interpretation or
administration thereof by any governmental authority,
central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by
any Lender (or its Applicable Lending Office) with any
request or directive (whether or not having the force of
law) of any such governmental authority, central bank, or
comparable agency:
(i) shall subject such Lender (or its
Applicable Lending Office) to any tax, duty, or other
charge with respect to any Eurodollar Rate Loans, its
Note, or its obligation to make Eurodollar Rate Loans,
or change the basis of taxation of any amounts payable
to such Lender (or its Applicable Lending Office) under
this Agreement or its Note in respect of any Eurodollar
Rate Loans (other than taxes imposed on the overall net
income of such Lender by the jurisdiction in which such
Lender has its principal office or such Applicable
Lending Office);
(ii) shall impose, modify, or deem applicable
any reserve, special deposit, assessment, or similar
requirement (other than the Eurodollar Reserve
Percentage utilized in the determination of the
Eurodollar Rate) relating to any extensions of credit
or other assets of, or any deposits with or other
liabilities or commitments of, such Lender (or its
Applicable Lending Office), including the Revolving
Credit Commitment of such Lender hereunder; or
(iii) shall impose on such Lender (or its
Applicable Lending Office) or on the London interbank
market any other condition affecting this Agreement or
its Note or any of such extensions of credit or
liabilities or commitments;
and the result of any of the foregoing is to increase the
cost to such Lender (or its Applicable Lending Office) of
making, Converting into, Continuing, or maintaining any
Loans or to reduce any sum received or receivable by such
Lender (or its Applicable Lending Office) under this
Agreement or its Note with respect to any Eurodollar Rate
Loans, then the Borrower shall pay to such Lender on demand
such amount or amounts as will compensate such Lender for
such increased cost or reduction. If any Lender requests
compensation by the Borrower under this Section 5.1(a), the
Borrower may, by notice to such Lender (with a copy to the
Agent), suspend the obligation of such Lender to make or
Continue Loans of the Type with respect to which such
compensation is requested, or to Convert Loans of any other
Type into Loans of such Type, until the event or condition
giving rise to such request ceases to be in effect (in which
case the provisions of Section 5.4 shall be applicable);
provided that such suspension shall not affect the right of
such Lender to receive the compensation so requested.
(b) If, after the date hereof, any Lender shall have
determined that the adoption of any applicable law, rule, or
regulation regarding capital adequacy or any change therein
or in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof,
or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such
governmental authority, central bank, or comparable agency,
has or would have the effect of reducing the rate of return
on the capital of such Lender or any corporation controlling
such Lender as a consequence of such Lender's obligations
hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption,
change, request, or directive (taking into consideration the
policies of such Lender or such corporation with respect to
capital adequacy), then from time to time upon demand the
Borrower shall pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction.
(c) Each Lender shall promptly notify the Borrower and
the Agent of any event of which it has knowledge, occurring
after the date hereof, which will entitle such Lender to
compensation pursuant to this Section 5.1 and will designate
a different Applicable Lending Office if such designation
will avoid the need for, or reduce the amount of, such
compensation and will not, in the judgment of such Lender,
be otherwise disadvantageous to it. Any Lender claiming
compensation under this Section 5.1 shall furnish to the
Borrower and the Agent, within 120 days of notifying the
Borrower of any event described in the proceeding sentence,
a statement setting forth the additional amount or amounts
to be paid to it hereunder which shall be conclusive in the
absence of manifest error. In determining such amount, such
Lender may use any reasonable averaging and attribution
methods.
5.2 Limitation on Types of Loans. If on or prior to
the first day of any Interest Period for any Eurodollar Rate
Loan:
(a) the Agent determines (which determination
shall be conclusive) that by reason of circumstances
affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate
for such Interest Period; or
(b) the Required Lenders determine (which
determination shall be conclusive) and notify the Agent
that the Eurodollar Rate will not adequately and fairly
reflect the cost to the Lenders of funding Eurodollar
Rate Loans for such Interest Period;
then the Agent shall give the Borrower prompt notice thereof
specifying the relevant Type of Loans and the relevant
amounts or periods, and so long as such condition remains in
effect, the Lenders shall be under no obligation to make
additional Loans of such Type, Continue Loans of such Type,
or to Convert Loans of any other Type into Loans of such
Type and the Borrower shall, on the last day(s) of the then
current Interest Period(s) for the outstanding Loans of the
affected Type, either prepay such Loans or Convert such
Loans into another Type of Loan in accordance with the terms
of this Agreement.
5.3 Illegality. Notwithstanding any other provision
of this Agreement, in the event that it becomes unlawful for
any Lender or its Applicable Lending Office to make,
maintain, or fund Eurodollar Rate Loans hereunder, then such
Lender shall promptly notify the Borrower thereof and such
Lender's obligation to make or Continue Eurodollar Rate
Loans and to Convert other Types of Loans into Eurodollar
Rate Loans shall be suspended until such time as such Lender
may again make, maintain, and fund Eurodollar Rate Loans (in
which case the provisions of Section 5.4 shall be
applicable).
5.4 Treatment of Affected Loans. If the obligation of
any Lender to make a Eurodollar Rate Loan or to Continue, or
to Convert Loans of any other Type into, Loans of a
particular Type shall be suspended pursuant to Section 5.1
or 5.3 hereof (Loans of such Type being herein called
"Affected Loans" and such Type being herein called the
"Affected Type"), such Lender's Affected Loans shall be
automatically Converted into Base Rate Loans on the last
day(s) of the then current Interest Period(s) for Affected
Loans (or, in the case of a Conversion required by Section
5.3 hereof, on such earlier date as such Lender may specify
to the Borrower with a copy to the Agent) and, unless and
until such Lender gives notice as provided below that the
circumstances specified in Section 5.1 or 5.3 hereof that
gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Affected
Loans have been so Converted, all payments and
prepayments of principal that would otherwise be
applied to such Lender's Affected Loans shall be
applied instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or
Continued by such Lender as Loans of the Affected Type
shall be made or Continued instead as Base Rate Loans,
and all Loans of such Lender that would otherwise be
Converted into Loans of the Affected Type shall be
Converted instead into (or shall remain as) Base Rate
Loans.
If such Lender gives notice to the Borrower (with a copy to
the Agent) that the circumstances specified in Section 5.1
or 5.3 hereof that gave rise to the Conversion of such
Lender's Affected Loans pursuant to this Section 5.4 no
longer exist (which such Lender agrees to do promptly upon
such circumstances ceasing to exist) at a time when Loans of
the Affected Type made by other Lenders are outstanding,
such Lender's Base Rate Loans shall be automatically
Converted, on the first day(s) of the next succeeding
Interest Period(s) for such outstanding Loans of the
Affected Type, to the extent necessary so that, after giving
effect thereto, all Loans held by the Lenders holding Loans
of the Affected Type and by such Lender are held pro rata
(as to principal amounts, Types, and Interest Periods) in
accordance with their respective Revolving Credit
Commitments.
5.5 Compensation. Upon the request of any Lender, the
Borrower shall pay to such Lender such amount or amounts as
shall be sufficient (in the reasonable opinion of such
Lender) to compensate it for any loss, cost, or expense
(including loss of anticipated profits) incurred by it as a
result of:
(a) any payment, prepayment, or Conversion of a
Eurodollar Rate Loan for any reason (including, without
limitation, the acceleration of the Loans pursuant to
Section 10.1) on a date other than the last day of the
Interest Period for such Loan; or
(b) any failure by the Borrower for any reason
(including, without limitation, the failure of any
condition precedent specified in Article VI to be
satisfied) to borrow, Convert, Continue, or prepay a
Eurodollar Rate Loan on the date for such borrowing,
Conversion, Continuation, or prepayment specified in
the relevant notice of borrowing, prepayment,
Continuation, or Conversion under this Agreement.
5.6 Taxes. (a) Any and all payments by the Borrower
to or for the account of any Lender or the Agent hereunder
or under any other Loan Document shall be made free and
clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender and the Agent, taxes
imposed on its income, and franchise taxes imposed on it, by
the jurisdiction under the laws of which such Lender (or its
Applicable Lending Office) or the Agent (as the case may be)
is organized or any political subdivision thereof (all such
non-excluded taxes, duties, levies, imposts, deductions,
charges, withholdings, and liabilities being hereinafter
referred to as "Taxes"). If the Borrower shall be required
by law to deduct any Taxes from or in respect of any sum
payable under this Agreement or any other Loan Document to
any Lender or the Agent, (i) the sum payable shall be
increased as necessary so that after making all required
deductions (including deductions applicable to additional
sums payable under this Section 5.6) such Lender or the
Agent receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower
shall make such deductions, (iii) the Borrower shall pay the
full amount deducted to the relevant taxation authority or
other authority in accordance with applicable law, and (iv)
the Borrower shall furnish to the Agent, at its address
referred to in Section 12.2, the original or a certified
copy of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any and
all present or future stamp or documentary taxes and any
other excise or property taxes or charges or similar levies
which arise from any payment made under this Agreement or
any other Loan Document or from the execution or delivery
of, or otherwise with respect to, this Agreement or any
other Loan Document (hereinafter referred to as "Other
Taxes").
(c) The Borrower agrees to indemnify each Lender and
the Agent for the full amount of Taxes and Other Taxes
(including, without limitation, any Taxes or Other Taxes
imposed or asserted by any jurisdiction on amounts payable
under this Section 5.6) paid by such Lender or the Agent (as
the case may be) and any liability (including penalties,
interest, and expenses) arising therefrom or with respect
thereto.
(d) Each Lender organized under the laws of a
jurisdiction outside the United States, on or prior to
the date of its execution and delivery of this Agreement
in the case of each Lender listed on the signature pages
hereof and on or prior to the date on which it becomes a
Lender in the case of each other Lender, and from time
to time thereafter if requested in writing by the
Borrower or the Agent (but only so long as such Lender
remains lawfully able to do so), shall provide the
Borrower and the Agent with (i) Internal Revenue Service
Form 1001 or 4224, as appropriate, or any successor form
prescribed by the Internal Revenue Service, certifying
that such Lender is entitled to benefits under an income
tax treaty to which the United States is a party which
reduces the rate of withholding tax on payments of
interest or certifying that the income receivable
pursuant to this Agreement is effectively connected with
the conduct of a trade or business in the United States,
(ii) Internal Revenue Service Form W-8 or W-9, as
appropriate, or any successor form prescribed by the
Internal Revenue Service, and (iii) any other form or
certificate required by any taxing authority (including
any certificate required by Sections 871(h) and 881(c)
of the Internal Revenue Code), certifying that such
Lender is entitled to an exemption from or a reduced
rate of tax on payments pursuant to this Agreement or
any of the other Loan Documents.
(e) For any period with respect to which a Lender
has failed to provide the Borrower and the Agent with the
appropriate form pursuant to Section 5.6(d) (unless such
failure is due to a change in treaty, law, or regulation
occurring subsequent to the date on which a form
originally was required to be provided), such Lender
shall not be entitled to indemnification under Section
5.6(a) or 5.6(b) with respect to Taxes imposed by the
United States; provided, however, that should a Lender,
which is otherwise exempt from or subject to a reduced
rate of withholding tax, become subject to Taxes because
of its failure to deliver a form required hereunder, the
Borrower shall take such steps as such Lender shall
reasonably request to assist such Lender to recover such
Taxes.
(f) If the Borrower is required to pay additional
amounts to or for the account of any Lender pursuant to
this Section 5.6, then such Lender will agree to use
reasonable efforts to change the jurisdiction of its
Applicable Lending Office so as to eliminate or reduce
any such additional payment which may thereafter accrue
if such change, in the judgment of such Lender, is not
otherwise disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any
payment of Taxes, the Borrower shall furnish to the Agent
the original or a certified copy of a receipt evidencing
such payment.
(h) Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements and
obligations of the Borrower contained in this Section 5.6
shall survive the termination of the Revolving Credit
Commitments and the payment in full of the Notes.
5.7 Replacement Banks. In the event that any
Lender (a) shall have its obligation to make or continue,
or convert other Loans into, Eurodollar Rate Loans
suspended pursuant to this Article V for a period in
excess of sixty (60) days, or (b) shall request
compensation for Additional Costs pursuant to Section 5.1
hereof, then the Borrower may terminate such Lender's
Revolving Credit Commitment by repaying in full the
amount of all principal and interest due under such
Lender's Notes and all other amounts due hereunder and
providing for a Replacement Bank.
ARTICLE VI
Conditions to Making Loans and Issuing Letters of Credit
VI.1. Conditions of Initial Advance. The
obligation of the Lenders to make the initial Advance
under the Revolving Credit Facility, and of the Issuing
Bank to issue any Letter of Credit, is subject to the
conditions precedent that:
(a) the Agent shall have received on the
Closing Date, in form and substance satisfactory to
the Agent and Lenders, the following:
(i) fully executed originals of each
of this Agreement, the Notes, the Guaranty, the
Security Instruments and the other Loan
Documents, together with all schedules and
exhibits thereto;
(ii) evidence that the Borrower has,
concurrently with the Advance to be made on the
Closing Date, issued the Subordinated Debt and
the Preferred Stock, the terms and conditions
of all of which, including the Subordinated
Debt Documents, must be satisfactory in form
and substance to the Agent and the Lenders;
(iii) the favorable written
opinion or opinions with respect to the Loan
Documents and the transactions contemplated
thereby of counsel to the Credit Parties dated
the Closing Date, including counsel in each
jurisdiction in which any Collateral may be
located, special U.S. intellectual property
counsel as to issues related to Collateral, all
addressed to the Agent and the Lenders and
satisfactory to Smith Helms Mulliss & Moore,
L.L.P., special counsel to the Agent,
substantially in the form of Exhibit G;
(iv) resolutions of the boards of
directors or other appropriate governing body
(or of the appropriate committee thereof) of
each Credit Party certified by its secretary or
assistant secretary as of the Closing Date,
approving and adopting the Loan Documents to be
executed by such Person, and authorizing the
execution and delivery thereof;
(v) specimen signatures of officers
of each Credit Party executing the Loan
Documents on behalf of such Credit Party,
certified by the secretary or assistant
secretary of such Credit Party;
(vi) the Organizational Documents of
each Credit Party certified as of a recent
date, as acceptable to the Agent, by the
Secretary of State of their respective states
of organization;
(vii) the Operating Documents of
each Credit Party certified as of the Closing
Date as true and correct by its secretary or
assistant secretary;
(viii) certificates issued as of a recent date,
as acceptable to the Agent, by the Secretary of State
of its respective state of organization of each Credit
Party as to the due existence and good standing of such
Credit Party;
(ix) appropriate certificates of good standing,
issued in respect of each Credit Party as of a recent
date by the Secretary of State or comparable official
of each jurisdiction in which the failure to be
qualified to do business or authorized so to conduct
business could have a Material Adverse Effect;
(x) notice of appointment of the initial
Authorized Representative(s);
(xi) [RESERVED]
(xii) evidence of all insurance required by
the Loan Documents;
(xiii) an initial Borrowing Notice, if any,
and, if elected by the Borrower, Interest Rate
Selection Notice;
(xiv) evidence of the filing of Uniform
Commercial Code financing statements reflecting the
filing in all places required by applicable law to
perfect the Liens of the Agent for the benefit of the
Lenders under the Security Instruments as a first
priority Lien as to items of Collateral in which a
security interest may be perfected by the filing of
financing statements, and such other documents and/or
evidence of other actions as may be necessary under
applicable law to perfect the Liens of the Agent for
the benefit of the Lenders under the Security
Instruments as a first priority Lien in and to such
other Collateral as the Agent may require;
(xv) all stock certificates or registrar's pledge
certificates evidencing all the Pledged Stock,
accompanied, as applicable, by duly executed stock
powers in blank affixed thereto;
(xvi) release and termination agreements in
form and substance acceptable to the Lenders for each
creditor of Existing Debt that is not a Lender on the
Closing Date;
(xvii) copies of all documents and certificates
evidencing or governing the Subordinated Debt and the
Preferred Stock in form and substance acceptable to the
Lenders and certified by an Authorized Representative
to be true, correct and complete;
(xviii) a report prepared by Coopers & Lybrand
on the inventory and accounts receivable (including
aging of the accounts receivable), accounts payable,
controls and systems of the Borrower and the Guarantors
in form and substance acceptable to the Agent;
(xix) (A) the audited financial statements
referred to in Section 7.6(a) in form and substance
acceptable to the Lenders, (B) consolidated financial
statements for the Borrower and its Subsidiaries for
the fiscal years ending December 31, 1996 and December
31, 1997, respectively, including balance sheets,
income, cash flow and shareholders' equity statements
audited by an independent public accountant of
recognized national standing and prepared in conformity
with GAAP, together with a quarterly budget for Fiscal
Year 1998 and the Borrower's five-year projected
operating budget and (C) a written review of the
Borrower's pro forma income statement prepared by
Coopers & Lybrand and satisfactory to the Agent;
(xx) copies of any other documents or agreements
evidencing or governing any Consolidated Funded
Indebtedness (other than any Capital Lease for which
the present value of the lease payments due thereunder
is less than $200,000, applying a discount rate equal
to the interest rate provided in such lease, all such
leases being so indicated on Schedule 1.2) of any
Credit Party to be outstanding on the Closing Date, and
after giving effect to the repayment and termination of
all Existing Debt and certified by an Authorized
Representative to be true, correct and complete;
(xxi) Intercompany Notes existing as of the
Closing Date together with endorsements or instruments
of assignment executed in blank and attached thereto;
(xxii) consent by makers of Intercompany Notes
to pledge under the Intercompany Note Pledge Agreement;
(xxiii) all fees payable by the Borrower on the
Closing Date to the Agent and the Lenders have been
paid in full;
(xxiv) Uniform Commercial Code search results
showing only Permitted Liens;
(xxv) review of information with results
satisfactory to the Agent and its counsel as to such
matters as litigation, tax, accounting, labor,
insurance, pension liabilities (actual or contingent),
real estate leases, material contracts, debt
agreements, property ownership and contingent
liabilities with respect to the Borrower and its
Subsidiaries; and
(xxvi) such other documents, instruments,
certificates and opinions as the Agent or any Lender
may reasonably request on or prior to the Closing Date
in connection with the consummation of the transactions
contemplated hereby;
(b) Each of the following shall have occurred or be
true and be so certified by the Credit Parties to the
Lenders:
(i) Except as disclosed in Schedule 7.10, there
shall not be any action, suit, investigation or
proceeding pending or threatened in any court or before
any arbitrator or governmental instrumentality that
could reasonably be expected to have a Material Adverse
Effect;
(ii) The Borrower shall be in compliance with all
existing material financial and contractual obligations
before and, on a pro forma basis, immediately after
giving effect to the financings contemplated thereby
(including the Revolving Credit Facility and the Letter
of Credit Facility) and any other transactions
contemplated hereby; and
(iii) The Borrower, its Subsidiaries and any
other Credit Party shall have received all government,
shareholder and third-party approvals, consents and
waivers, and shall have made or given all necessary
filings and notices, as shall be required to consummate
the transactions contemplated hereby without the
occurrence of any default under, conflict with or
violation of (A) any applicable law, rule, regulation,
order or decree of any court or other Governmental
Authority or arbitral authority, (B) the Organizational
Documents of any Credit Party or (C) any agreement,
document or instrument to which any of the Borrower or
any other Credit Party is a party or by which any of
them or their properties is bound, if such default,
conflict or violation could reasonably be expected to
result in a Material Adverse Effect; and all applicable
waiting periods shall have expired without any action
being taken or threatened in writing by any authority
that could restrain, prevent or impose any material
adverse conditions on the making of the Loans, or other
transactions contemplated hereby, and no law or
regulation shall be applicable which in the reasonable
judgment of the Agent could have such effect; and
(c) In the good faith judgment of the Agent and the
Lenders:
(i) There shall not have occurred a material
adverse change in the business, assets, revenues,
operations, conditions (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as
a whole since December 31, 1997 or in the assumptions,
facts or information contained in the financial
statements, budgets, projections or pro forma balance
sheets most recently delivered to the Agent by the
Borrower;
(ii) There shall not have occurred and be
continuing an adverse change in the market for
syndicated credit facilities similar in nature to the
Revolving Credit Facility and the Letter of Credit
Facility or a disruption of, or a material adverse
change in, financial, banking or capital market
conditions, in each case as determined by the Agent in
its reasonable discretion;
(iii) All financial statements, documents,
appraisals, audits and other items to be delivered
pursuant to Section 6.1(a) in form and substance
acceptable to the Lenders shall have been reviewed by
the Agent and reasonably determined thereby to be so
acceptable; and
(iv) There shall not have occurred or exist (A) an
engagement in hostilities by the United States of
America or other national or international emergency or
calamity, (B) a general suspension of or material
limitation on trading on the New York Stock Exchange or
other national securities exchange, (C) the declaration
of a general banking moratorium by any applicable
Governmental Authority or the imposition by any
applicable Governmental Authority of any material
limitation on transactions of the type contemplated by
the Loan Documents, or (D) any other material
disruption of financial or capital markets that could
reasonably be expected to adversely affect the
transactions contemplated under the Loan Documents.
VI.2. Conditions of Loans and Letters of Credit. The
obligations of the Lenders to make any Revolving Loans, and the
Issuing Bank to issue Letters of Credit, hereunder on or
subsequent to the Closing Date are subject to the satisfaction of
the following conditions:
(a) the Agent shall have received a Borrowing Notice
if required by Article II;
(b) in the case of the issuance of a Letter of Credit,
the Borrower shall have executed and delivered to the
Issuing Bank an Application for Letter of Credit in form and
content acceptable to the Issuing Bank together with such
other instruments and documents as it shall request;
(c) the representations and warranties of the Borrower
and its Subsidiaries set forth in Article VII and in each of
the other Loan Documents shall be true and correct in all
material respects on and as of the date of such Advance or
Letter of Credit issuance or renewal, with the same effect
as though such representations and warranties had been made
on and as of such date, except that the financial statements
referred to in Section 7.6(a) shall be deemed to be those
financial statements most recently delivered to the Agent
and the Lenders pursuant to Section 8.1 from the date
financial statements are delivered to the Agent and the
Lenders in accordance with such Section;
(d) at the time of each Advance or the issuance of a
Letter of Credit, no Material Adverse Effect shall have
occurred and be continuing;
(e) at the time of (and after giving effect to) each
Advance or the issuance of a Letter of Credit, no Default or
Event of Default shall have occurred and be continuing; and
(f) immediately after giving effect to:
(i) a Loan, the aggregate principal balance of
all outstanding Loans for each Lender shall not exceed
such Lender's Revolving Credit Commitment;
(ii) a Letter of Credit or renewal thereof, the
aggregate principal balance of all outstanding
Participations in Letters of Credit and Reimbursement
Obligations (or in the case of the Issuing Bank, its
remaining interest after deduction of all
Participations in Letters of Credit and Reimbursement
Obligations of other Lenders) for each Lender and in
the aggregate shall not exceed, respectively, (X) such
Lender's Letter of Credit Commitment or (Y) the Total
Letter of Credit Commitment; and
(iii) a Loan or a Letter of Credit or renewal
thereof, the sum of Letter of Credit Outstandings plus
Revolving Credit Outstandings shall not exceed the
Total Revolving Credit Commitment.
ARTICLE VII
Representations and Warranties
The Borrower represents and warrants with respect to itself
and each other Credit Party (which representations and warranties
shall survive the delivery of the documents mentioned herein and
the making of Loans), that:
VII.1. Organization and Authority.
(a) Each Credit Party is a corporation or partnership
duly organized and validly existing under the laws of the
jurisdiction of its formation;
(b) Each Credit Party (x) has the requisite power and
authority to own its properties and assets and to carry on
its business as now being conducted and as contemplated in
the Loan Documents, and (y) is qualified to do business in
every jurisdiction in which failure so to qualify would have
a Material Adverse Effect;
(c) The Borrower has the power and authority to
execute, deliver and perform this Agreement and the Notes,
and to borrow hereunder, and to execute, deliver and perform
each of the other Loan Documents to which it is a party;
(d) Each Guarantor has the power and authority to
execute, deliver and perform the Guaranty and each of the
other Loan Documents to which it is a party; and
(e) When executed and delivered, each of the Loan
Documents to which any Credit Party is a party will be the
legal, valid and binding obligation or agreement, as the
case may be, of such Credit Party, enforceable against such
Credit Party in accordance with its terms, subject to the
effect of any applicable bankruptcy, moratorium, insolvency,
reorganization or other similar law affecting the
enforceability of creditors' rights generally and to the
effect of general principles of equity (whether considered
in a proceeding at law or in equity).
VII.2. Loan Documents. The execution, delivery and
performance by each Credit Party of each of the Loan Documents to
which it is a party:
(a) have been duly authorized by all requisite
Organizational Action (including any required shareholder
approval) of each Credit Party required for the lawful
execution, delivery and performance thereof;
(b) do not violate any provisions of (i) applicable
law, rule or regulation, (ii) any judgment, writ, order,
determination, decree or arbitral award of any Governmental
Authority or arbitral authority binding on any Credit Party
or its properties, or (iii) the Organizational Documents or
Operating Documents of any Credit Party;
(c) does not and will not be in conflict with, result
in a breach of or constitute an event of default, or an
event which, with notice or lapse of time or both, would
constitute an event of default, under any contract,
indenture, agreement or other instrument or document to
which any Credit Party is a party, or by which the
properties or assets of any Credit Party are bound and such
conflict, breach or event of default could reasonably be
expected to result in a Material Adverse Effect; and
(d) does not and will not result in the creation or
imposition of any Lien upon any of the properties or assets
of any Credit Party except any Liens in favor of the Agent
and the Lenders created by the Security Instruments.
VII.3. Solvency. The Borrower and each other Credit
Party is Solvent after giving effect to the transactions
contemplated by the Loan Documents.
VII.4. Subsidiaries and Stockholders. The Borrower has
no Subsidiaries other than those Persons listed as Subsidiaries
in Schedule 7.4 and additional Subsidiaries created or acquired
after the Closing Date in compliance with Section 8.19. Schedule
7.4 states as of the date hereof the organizational form of each
entity, the authorized and issued capitalization of the Borrower
and each Subsidiary listed thereon, the number of shares or other
equity interests of each class of capital stock or interest
issued and outstanding of each such Subsidiary and the number
and/or percentage of outstanding shares or other equity interest
(including options, warrants and other rights to acquire any
interest) of each such class of capital stock or other equity
interest owned by Borrower or by any such Subsidiary. The
outstanding shares or other equity interests of each such
Subsidiary have been duly authorized and validly issued and are
fully paid and nonassessable; and Borrower and each such
Subsidiary owns beneficially and of record all the shares and
other interests it is listed as owning in Schedule 7.4, free and
clear of any Lien.
VII.5. Ownership Interests. The Borrower owns no
interest in any Person other than (i) the Persons listed in
Schedule 7.4, (ii) equity investments in Persons not constituting
Subsidiaries permitted under Section 9.7 and (iii) additional
Subsidiaries created or acquired after the Closing Date in
compliance with Section 8.19.
VII.6. Financial Condition.
(a) The Borrower has heretofore furnished to each
Lender an audited consolidated balance sheet of the
Borrower and its Subsidiaries as at December 31, 1997, and
the notes thereto and the related consolidated statements of
income, stockholders' equity and cash flows for the Fiscal
Year then ended as examined and certified by Ernst & Young
and the unaudited consolidating balance sheets of the
Borrower and its Subsidiaries as at such date and related
unaudited consolidating statements of income, stockholders'
equity and cash flows (without footnotes). Except as set
forth therein, such financial statements (including the
notes thereto with respect to audited statements) present
fairly the financial condition of the Borrower and its
Subsidiaries as of the end of such Fiscal Year and results
of their operations and the changes in stockholders' equity
for the Fiscal Year then ended, all in conformity with GAAP
applied on a Consistent Basis;
(b) Since the later of (i) the date of the audited
financial statements delivered pursuant Section 7.6(a)
hereof or (ii) the date of the audited financial statements
most recently delivered pursuant to Section 8.1(a) hereof,
there has been no Material Adverse Effect nor have the
businesses or properties of any Material Credit Party been
materially adversely affected except as set forth on
Schedule 7.6; and
(c) Except as set forth in the financial statements
referred to in Section 7.6(a) or in Schedule 7.6 or as
permitted by Section 9.4, neither the Borrower nor any
Subsidiary has incurred, other than in the ordinary course
of business, any material Indebtedness, Contingent
Obligation or other commitment or liability which remains
outstanding or unsatisfied.
VII.7. Title to Properties. The Borrower and each other
Credit Party has good and marketable title to all its real and
personal properties, subject to no transfer restrictions or Liens
of any kind, except for the transfer restrictions and Liens
described in Schedule 7.7 and Permitted Liens.
VII.8. Taxes. Except as set forth in Schedule 7.8, the
Borrower and each of its Subsidiaries has filed or caused to be
filed all Federal, state and local tax returns which are required
to be filed by it and, except for taxes and assessments being
contested in good faith by appropriate proceedings diligently
conducted and against which reserves reflected in the financial
statements described in Section 7.6(a) as required by GAAP have
been established, have paid or caused to be paid all taxes as
shown on said returns or on any assessment received by it, to the
extent that such taxes have become due.
VII.9. Other Agreements. Neither the Borrower nor any
other Credit Party is
(a) a party to or subject to any judgment, order,
decree, agreement, lease or instrument, or subject to other
restrictions, which individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect; or
(b) in default in the performance, observance or
fulfilment of any of the obligations, covenants or
conditions contained in any agreement or instrument to which
the Borrower or any Subsidiary is a party, which default
has, or if not remedied within any applicable grace period
could reasonably be likely to have, a Material Adverse
Effect.
VII.10. Litigation. Except as set forth in Schedule 7.10,
there is no action, suit, investigation or proceeding at law or
in equity or by or before any governmental instrumentality or
agency or arbitral body pending, or, to the knowledge of the
Borrower, threatened by or against the Borrower or any other
Credit Party or affecting the Borrower or any other Credit Party
or any properties or rights of the Borrower or any other Credit
Party, which could reasonably be likely to have a Material
Adverse Effect.
VII.11. Margin Stock. The proceeds of the borrowings made
hereunder will be used by the Borrower only for the purposes
expressly authorized herein. None of such proceeds will be used,
directly or indirectly, for the purpose of purchasing or carrying
any margin stock or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry
margin stock or for any other purpose which might constitute any
of the Loans under this Agreement a "purpose credit" within the
meaning of said Regulation U or Regulation X (12 C.F.R. Part 224)
of the Board. Neither the Borrower nor any agent acting in its
behalf has taken or will take any action which might cause this
Agreement or any of the documents or instruments delivered
pursuant hereto to violate any regulation of the Board or to
violate the Securities Exchange Act of 1934, as amended, or the
Securities Act of 1933, as amended, or any state securities laws,
in each case as in effect on the date hereof.
VII.12. Investment Company. Neither the Borrower nor any
other Credit Party is an "investment company," or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an
"investment company", as such terms are defined in the Investment
Company Act of 1940, as amended (15 U.S.C. 80a1, et seq.). The
application of the proceeds of the Loans and repayment thereof by
the Borrower and the performance by the Borrower and the other
Credit Parties of the transactions contemplated by the Loan
Documents will not violate any provision of said Act, or any
rule, regulation or order issued by the Securities and Exchange
Commission thereunder, in each case as in effect on the date
hereof.
VII.13. Intellectual Property. The Borrower and each
other Credit Party owns or has the right to use, under valid
license agreements or otherwise, all patents, licenses,
franchises, trademarks, trademark rights, trade names, trade name
rights, trade secrets and copyrights necessary and material to
the conduct of its businesses as now conducted and as
contemplated by the Loan Documents, without known conflict with
any patent, license, franchise, trademark, trade secret, trade
name, copyright, other proprietary right of any other Person.
VII.14. No Untrue Statement. Neither (a) this Agreement
nor any other Loan Document or certificate or document executed
and delivered by or on behalf of the Borrower or any other Credit
Party in accordance with or pursuant to any Loan Document nor (b)
any statement, representation, or warranty provided to the Agent
in connection with the negotiation or preparation of the Loan
Documents (which shall include marketing materials prepared and
distributed in connection with syndication of the Revolving
Credit Facility) contains any misrepresentation or untrue
statement of material fact or omits to state a material fact
necessary, in light of the circumstances under which it was made,
in order to make any such warranty, representation or statement
contained therein not misleading.
VII.15. No Consents, Etc. Neither the respective
businesses or properties of the Borrower or any Subsidiary, nor
any relationship between the Borrower or any Subsidiary and any
other Person, nor any circumstance in connection with the
execution, delivery and performance of the Loan Documents and the
transactions contemplated thereby, is such as to require a
consent, approval or authorization of, or filing, registration or
qualification with, any Governmental Authority or any other
Person on the part of the Borrower or any Subsidiary as a
condition to the execution, delivery and performance of, or
consummation of the transactions contemplated by the Loan
Documents, which, if not obtained or effected, could be
reasonably likely to have a Material Adverse Effect, or if so,
such consent, approval, authorization, filing, registration or
qualification has been duly obtained or effected, as the case may
be.
VII.16. Employee Benefit Plans.
(a) The Borrower and each ERISA Affiliate is in
compliance with all applicable provisions of the Code and
ERISA and the regulations and published interpretations
thereunder and in compliance with all Foreign Benefit Laws
with respect to all Employee Benefit Plans except (i) to the
extent such a failure to maintain compliance could not
reasonably be expected to result in a Material Adverse
Effect; or (ii) for any required amendments for which the
remedial amendment period as defined in Section 401(b) of
the Code has not yet expired. Each Employee Benefit Plan
that is intended to be qualified under Section 401(a) of the
Code has been determined by the Internal Revenue Service to
be so qualified, and each trust related to such plan has
been determined to be exempt under Section 501(a) of the
Code. No material liability has been incurred by the
Borrower or any ERISA Affiliate which remains unsatisfied
for any taxes or penalties with respect to any Employee
Benefit Plan or any Multiemployer Plan;
(b) Neither the Borrower nor any ERISA Affiliate has
(i) engaged in a nonexempt prohibited transaction described
in Section 4975 of the Code or Section 406 of ERISA
affecting any of the Employee Benefit Plans or the trusts
created thereunder which could subject any such Employee
Benefit Plan or trust to a material tax or penalty on
prohibited transactions imposed under Internal Revenue Code
Section 4975 or ERISA, (ii) incurred any accumulated funding
deficiency with respect to any Employee Benefit Plan,
whether or not waived, or any other liability to the PBGC
which remains outstanding other than the payment of premiums
and there are no premium payments which are due and unpaid,
(iii) failed to make a required contribution or payment to a
Multiemployer Plan, or (iv) failed to make a required
installment or other required payment under Section 412 of
the Code, Section 302 of ERISA or the terms of such Employee
Benefit Plan;
(c) No Termination Event has occurred within the last
six years or is reasonably expected to occur with respect to
any Pension Plan or Multiemployer Plan, and neither the
Borrower nor any ERISA Affiliate has incurred any unpaid
withdrawal liability with respect to any Multiemployer Plan;
(d) The present value of all vested accrued benefits
under each Employee Benefit Plan which is subject to Title
IV of ERISA, did not, as of the most recent valuation date
for each such plan, exceed the then current value of the
assets of such Employee Benefit Plan allocable to such
benefits;
(e) To the best of the Borrower's knowledge, each
Employee Benefit Plan subject to Title IV of ERISA,
maintained by the Borrower or any ERISA Affiliate, has been
administered in accordance with its terms in all material
respects and is in compliance in all material respects with
all applicable requirements of ERISA and other applicable
laws, regulations and rules except to the extent such a
failure to so administer or to maintain compliance could not
reasonably be expected to result in a Material Adverse
Effect;
(f) The consummation of the Loans and the issuance of
the Letters of Credit provided for herein will not involve
any prohibited transaction under ERISA which is not subject
to a statutory or administrative exemption; and
(g) No proceeding, claim, lawsuit and/or investigation
exists or, to the best knowledge of the Borrower after due
inquiry, is threatened concerning or involving any Employee
Benefit Plan, which, if determined adversely to the Borrower
or any ERISA Affiliate, would have a Material Adverse
Effect.
VII.17. No Default. As of the date hereof, there does not
exist any Default or Event of Default hereunder.
VII.18. Environmental Matters. Except as set forth in
Schedule 7.18:
(a) The Borrower and each Subsidiary is in compliance
with all applicable Environmental Laws in all material
respects, and has been issued and maintains all required
federal, state and local permits, licenses, certificates and
approvals pertaining to Hazardous Materials that are
necessary to the conduct of its business. Neither the
Borrower nor any Subsidiary has been notified of any pending
or threatened action, suit, proceeding or investigation, and
neither the Borrower nor any Subsidiary is aware of any
fact, which (i) calls into question, or could reasonably be
expected to call into question, material compliance by the
Borrower or any Subsidiary with any Environmental Laws, (ii)
seeks, or could reasonably be expected to form the basis of
a meritorious proceeding to seek, to suspend, revoke or
terminate any license, permit, certification or approval
necessary for the operation of the Borrower's or any
Subsidiary's facility or the generation, handling, storage,
treatment or disposal of any Hazardous Material that is
necessary to the conduct of its business, or (iii) seeks to
cause, or could reasonably be expected to form the basis of
a meritorious proceeding to cause, any property of the
Borrower or any other Credit Party to be subject to any
material restrictions on ownership, use, occupancy or
transferability under any Environmental Law, or (iv)
constitutes a reasonable basis to conclude that the Borrower
or any Subsidiary is a potentially responsible party with
regard to any release or threatened release of a Hazardous
Material; and
(b) Neither the Borrower nor any Subsidiary, nor, to
the best of the Borrower's knowledge, any previous owner or
operator of any real property owned or operated by the
Borrower or any Subsidiary or any other Person, has managed,
generated, stored, released, treated, or disposed of any
Hazardous Material on any portion of such property, or
transferred or caused to be transferred any Hazardous
Material from such property to any other location except in
material compliance with all Environmental Laws. Except for
Hazardous Materials necessary for the routine maintenance of
the properties owned or operated by the Borrower and its
Subsidiaries or as brought on to such properties in the
ordinary course of the Borrower's or any Subsidiary's
business, which Hazardous Material shall be used in material
compliance with all applicable Environmental Laws, the
Borrower covenants that it shall, and shall cause each
Subsidiary to, not permit any Hazardous Materials to be
brought on to the real property owned or operated by the
Borrower and its Subsidiaries, or if so brought or found
located thereon, shall be immediately removed, with proper
disposal, and all environmental cleanup requirements shall
be diligently undertaken pursuant to all Environmental Laws.
VII.19. Employment Matters.
(a) None of the employees of the Borrower or any
Subsidiary is subject to any collective bargaining agreement
and there are no strikes, work stoppages, election or
decertification petitions or proceedings, unfair labor
charges, equal opportunity proceedings, or other material
labor/employee related controversies or proceedings pending
or, to the best knowledge of the Borrower, threatened
against the Borrower or any Subsidiary or between the
Borrower or any Subsidiary and any of its employees, other
than employee grievances arising in the ordinary course of
business which could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse
Effect; and
(b) Except to the extent a failure to maintain
compliance would not have a Material Adverse Effect, the
Borrower and each Subsidiary is in compliance in all
respects with all applicable laws, rules and regulations
pertaining to labor or employment matters, including without
limitation those pertaining to wages, hours, occupational
safety and taxation and there is no pending or threatened
any litigation, administrative proceeding or, to the
knowledge of the Borrower, any investigation, in respect of
such matters which, if decided adversely, could reasonably
be likely, individually or in the aggregate, to have a
Material Adverse Effect.
VII.20. RICO. To the best knowledge of the Borrower or
any Subsidiary, neither the Borrower nor any Subsidiary is
engaged in or has engaged in any course of conduct that could
subject any of their respective properties to any Liens, seizure
or other forfeiture under any criminal law, racketeer influenced
and corrupt organizations law, civil or criminal, or other
similar laws.
ARTICLE VIII
Affirmative Covenants
Until the Revolving Credit Termination Date, unless the
Required Lenders shall otherwise consent in writing, the Borrower
shall, and where applicable will cause each Guarantor to:
VIII.1. Financial Reports, Etc.
(a) As soon as practical and in any event within 90
days after the end of each Fiscal Year of the Borrower,
deliver or cause to be delivered to the Agent and each
Lender (i) audited consolidated and unaudited, Borrower-
prepared consolidating balance sheets of the Borrower and
its Subsidiaries as at the end of such Fiscal Year, and the
notes thereto (with respect to audited statements only), and
the related audited consolidated and unaudited, Borrower-
prepared consolidating statements of income and
stockholders' equity and related consolidated statements of
cash flows, and the respective notes thereto (with respect
to audited statements only), for such Fiscal Year, setting
forth (other than for consolidating statements) comparative
financial statements for the preceding Fiscal Year, all
prepared in accordance with GAAP with such changes from
prior periods as required by GAAP and noted in the auditor's
opinion delivered therewith and containing, with respect to
the consolidated financial statements, opinions of Ernst &
Young, or other such "Big 6" independent certified public
accountants, which are unqualified as to the scope of the
audit performed and as to the "going concern" status of the
Borrower and without any exception not acceptable to the
Lenders, (ii) a certificate of an Authorized Representative,
which shall be in the form of Exhibit H, demonstrating
compliance with Section 9.1;
(b) as soon as practical and in any event within 45
days after the end of each Fiscal Quarter (except the last
Fiscal Quarter of the Fiscal Year) deliver to the Agent and
each Lender (i) consolidated and consolidating balance
sheets of the Borrower and its Subsidiaries as at the end of
such Fiscal Quarter, and the related consolidated and
consolidating statements of income and stockholders' equity
and related consolidated statement of cash flows for such
Fiscal Quarter in each case setting forth in comparative
form consolidated figures for the corresponding period of
the preceding Fiscal Year and accompanied by a certificate
of an Authorized Representative to the effect that such
financial statements present fairly the financial position
of the Borrower and its Subsidiaries as of the end of such
fiscal period and the results of their operations and the
changes in their financial position for such fiscal period,
in conformity with the standards set forth in GAAP with
respect to interim financial statements, and (ii) a
certificate of an Authorized Representative containing
computations for such Fiscal Quarter comparable to that
required pursuant to Section 8.1(a)(ii);
(c) together with each delivery of the financial
statements required by Section 8.1(a)(i), deliver to the
Agent and each Lender a letter from the Borrower's
accountants specified in Section 8.1(a)(i) stating that in
performing the audit necessary to render an opinion on the
financial statements delivered under Section 8.1(a)(i), they
obtained no knowledge of any Default or Event of Default by
the Borrower in the fulfillment of the terms and provisions
of this Agreement insofar as they relate to financial
matters (which at the date of such statement remains
uncured); or if the accountants have obtained knowledge of
such Default or Event of Default, a statement specifying the
nature and period of existence thereof;
(d) promptly upon their becoming available to the
Borrower, the Borrower shall deliver to the Agent and each
Lender a copy of (i) all regular or special reports or
effective registration statements which the Borrower or any
Subsidiary shall file with the Securities and Exchange
Commission (or any successor thereto) or any securities
exchange, (ii) any proxy statement distributed by the
Borrower or any Subsidiary to its shareholders, bondholders
or the financial community in general, and (iii) any
management letter or other report submitted to the Borrower
or any Subsidiary by independent accountants in connection
with any annual, interim or special audit of the Borrower or
any Subsidiary except for agreed upon procedures reports for
compliance under third-party agreements, reports on employee
benefit plan financial statements and reports with respect
to tax advisory matters;
(e) not later than the last Business Day of each
Fiscal Year, deliver to the Administrative Agent and each
Lender a capital and operating expense budget and
consolidated financial projections prepared by management
for the Borrower and its Subsidiaries for the next Fiscal
Year, prepared in accordance with GAAP applied on a
Consistent Basis including balance sheets, income statements
and statements of cash flows (to include separate forecasts
for Capital Expenditures by the Borrower and EBITDA by each
direct Subsidiary of the Borrower) and a reasonably detailed
explanation of any underlying assumptions with respect
thereto, on a quarterly basis for the current Fiscal Year
and on an annual basis for the next succeeding two years;
provided, however, that if at any time during such next
Fiscal Year, management of the Borrower determines that the
financial projections no longer accurately reflect the
projected financial results for such Fiscal Year, as soon as
practicable, provide to the Agent and each Lender revised
consolidated forecasts for such Fiscal Year;
(f) as soon as practicable and in any event within
twenty (20) days following the end of each Fiscal Month,
deliver to the Agent and each Lender an accounts receivable
aging report in form and detail substantially similar to
that furnished to the Agent prior to the Closing Date; and
(g) promptly, from time to time, deliver or cause to
be delivered to the Administrative Agent and each Lender
such other information regarding the Borrower's and any
Subsidiary's operations, business affairs and financial
condition as the Agent or such Lender may reasonably
request.
The Agent and the Lenders are hereby authorized to deliver a
copy of any such financial or other information delivered
hereunder to the Lenders (or any affiliate of any Lender) or to
the Agent, to any Governmental Authority having jurisdiction over
the Agent or any of the Lenders pursuant to any written request
therefor or in the ordinary course of examination of loan files,
to any other Person who shall acquire or consider the assignment
of, or acquisition of any participation interest in, any
Obligation permitted by this Agreement.
VIII.2. Maintain Properties. Maintain all properties
necessary to its operations in good working order and condition,
make all needed repairs, replacements and renewals to such
properties, and maintain free from Liens all trademarks, trade
names, patents, copyrights, trade secrets, know-how, and other
intellectual property and proprietary information (or adequate
licenses thereto), in each case as are reasonably necessary to
conduct its business as currently conducted or as contemplated
hereby, all in accordance with customary and prudent business
practices.
VIII.3. Existence, Qualification, Etc. Except as
otherwise expressly permitted under Section 9.8, do or cause to
be done all things necessary to preserve and keep in full force
and effect its existence and all material rights and franchises,
and maintain its license or qualification to do business as a
foreign corporation and good standing in each jurisdiction where
the failure to be so licensed or qualified would have a Material
Adverse Effect and in which its ownership or lease of property or
the nature of its business makes such license or qualification
necessary.
VIII.4. Regulations and Taxes. Comply in all material
respects with or contest in good faith by appropriate proceedings
diligently conducted all statutes and governmental regulations,
and pay all taxes, assessments, governmental charges, claims for
labor, supplies, rent and any other obligation which, if unpaid,
would become a Lien against any of its properties except
liabilities being contested in good faith by appropriate
proceedings diligently conducted and against which adequate
reserves required by GAAP have been established unless and until
any Lien resulting therefrom attaches to any of its property and
becomes enforceable against its creditors.
VIII.5. Insurance. Comply in all respects with the
requirements for insurance coverage set forth in each of the
Security Instruments and, without any limitation thereof, (a)
keep all of its insurable properties adequately insured at all
times with responsible insurance carriers against loss or damage
by fire and other hazards to the extent and in the manner as are
customarily insured against by similar businesses owning such
properties similarly situated and otherwise as required by the
Security Instruments, (b) maintain general public liability
insurance at all times with responsible insurance carriers
against liability on account of damage to persons and property
and (c) maintain insurance under all applicable workers'
compensation laws (or in the alternative, maintain required
reserves if self-insured for workers' compensation purposes) and
against loss by reason by business interruption. Each of such
policies of insurance shall have such limits, deductibles,
exclusions, co-insurance and other provisions providing no less
coverages than, to the best of the Borrower's knowledge, are
maintained by similar businesses that are similarly situated and
shall be in form reasonably satisfactory to the Agent. Each of
the policies of insurance described in this Section 8.5 shall
provide that the insurer shall give the Agent not less than 30
days' prior written notice before any such policy shall be
terminated, lapse or be altered in any manner.
VIII.6. True Books. Keep true books of record and account
in which full, true and correct entries will be made of all of
its dealings and transactions, and set up on its books such
reserves as may be required by GAAP with respect to doubtful
accounts and all taxes, assessments, charges, levies and claims
and with respect to its business in general, and include such
reserves in interim as well as year-end financial statements.
VIII.7. Right of Inspection. Permit, up to twice
annually, any Person designated by any Lender or the Agent to
visit and inspect any of the properties, corporate books and
financial reports of the Borrower or any Subsidiary and to
discuss its affairs, finances and accounts with its principal
officers and independent certified public accountants, all at
reasonable times, at reasonable intervals and with reasonable
prior notice to the Borrower and at the expense of the Borrower;
provided however, following the occurrence and during the
continuation of any Default or Event of Default, such visits or
inspections at the expense of the Borrower shall be unlimited.
VIII.8. Observe all Laws. Conform to and duly observe in
all material respects all laws, rules and regulations and all
other valid requirements of any Governmental Authority with
respect to the conduct of its business.
VIII.9. Governmental Licenses. Obtain and maintain all
licenses, permits, certifications and approvals of all applicable
Governmental Authorities as are required for the conduct of its
business as currently conducted and as contemplated by the Loan
Documents except where the failure to so obtain or maintain any
of the foregoing would not reasonably be expected to result in a
Material Adverse Effect.
VIII.10. Covenants Extending to Other Persons. Cause each
of its Guarantors (and its Subsidiaries with respect to Section
8.19) to do with respect to itself, its business and its assets,
each of the things required of the Borrower in Sections 8.2
through 8.9 and 8.19 inclusive.
VIII.11. Officer's Knowledge of Default. Upon any
Executive Officer of the Borrower obtaining knowledge of the
occurrence of any Default or Event of Default hereunder or under
any other obligation of the Borrower or any Subsidiary or other
Credit Party to any Lender, cause an Authorized Representative
promptly to notify the Agent of the nature thereof, the period of
existence thereof, and what action the Borrower or such
Subsidiary or other Credit Party proposes to take with respect
thereto.
VIII.12. Suits or Other Proceedings. Upon any Executive
Officer of the Borrower obtaining knowledge of any litigation or
other proceedings being instituted against the Borrower or any
Subsidiary or other Credit Party, or any attachment, levy,
execution or other process being instituted against any assets of
the Borrower or any Subsidiary or other Credit Party, any or all
of which make a claim or claims in an aggregate amount greater
than $500,000 not otherwise covered by insurance, cause an
Authorized Representative promptly to deliver to the Agent
written notice thereof stating the nature and status of such
litigation, dispute, proceeding, levy, execution or other
process.
VIII.13. Notice of Environmental Complaint or Condition.
Promptly provide to the Agent notice of, including true, accurate
and complete copies of, any and all notices, complaints, orders,
directives, claims, or citations received by the Borrower or any
Subsidiary relating to, any (i) violation or alleged violation by
the Borrower or any Subsidiary of any applicable Environmental
Law, (ii) release or threatened release by the Borrower or any
Subsidiary, or any Person handling, transporting, or disposing of
any Hazardous Material on behalf of the Borrower or any
Subsidiary, or at any facility or property owned or leased or
operated by the Borrower or any Subsidiary, of any Hazardous
Material, except where occurring legally, or (iii) liability or
alleged liability of the Borrower or any Subsidiary for the costs
of cleaning up, removing, remediating or responding to a release
of Hazardous Materials.
VIII.14. Environmental Compliance. If the Borrower or any
Subsidiary shall receive in writing any letter, notice,
complaint, order, directive, claim or citation alleging that the
Borrower or any Subsidiary (i) has violated any Environmental
Law, (ii) has released or is about to release any Hazardous
Material other than in compliance with all Environmental Laws (or
suffered or permitted such action by any other Person on or in
respect of property owned or operated by the Borrower or any
Subsidiary), or (iii) is liable for the costs of cleaning up,
removing, remediating or responding to a release or threatened
release of Hazardous Materials, the Borrower and any Subsidiary
shall (a) provide prompt written notice thereof to the Agent
describing in reasonable detail the nature of the matter and what
action the Borrower or the applicable Subsidiary proposes to take
with respect thereto, and (b) within the time period permitted by
the applicable Environmental Law or the Governmental Authority
responsible for enforcing such Environmental Law, remove or
remedy, or cause the applicable Subsidiary to remove or remedy,
such violation or release or satisfy such liability, unless and
only during the period that the applicability of the
Environmental Law, the fact of such violation or liability or the
action required to remove or remedy such violation is being
contested by the Borrower or the applicable Subsidiary by
appropriate proceedings diligently conducted and all reserves
with respect thereto as may be required under Generally Accepted
Accounting Principles, if any, have been made, and no Lien in
connection therewith shall have attached to any property of the
Borrower or the applicable Subsidiary which shall have become
enforceable against creditors of such Person.
VIII.15. Indemnification. Without limiting the generality
of Section 12.9, the Borrower hereby agrees to indemnify and hold
the Agent and the Lenders, and their respective officers,
directors, employees and agents, harmless from and against any
and all claims, losses, penalties, liabilities, damages and
expenses (including assessment and cleanup costs and reasonable
attorneys', consultants' and other experts' fees and
disbursements) arising directly or indirectly from, out of or by
reason of (a) the violation or alleged violation of any
Environmental Law by the Borrower or any Subsidiary or with
respect to any property owned, operated or leased by the Borrower
or any Subsidiary or (b) the use, generation, handling, storage,
transportation, treatment, emission, release, disclaim or
disposal of any Hazardous Materials by or on behalf of the
Borrower or any Subsidiary or on or with respect to property
owned or leased or operated by the Borrower or any Subsidiary.
The provisions of this Section 8.15 shall survive repayment of
the Obligations or the Facility Revolving Credit Termination Date
and expiration of termination of this Agreement.
VIII.16. Further Assurances. At the Borrower's cost and
expense, upon request of the Agent, duly execute and deliver or
cause to be duly executed and delivered, to the Agent such
further instruments, documents, certificates, financing and
continuation statements, and do and cause to be done such further
acts that may be reasonably necessary or advisable in the
reasonable opinion of the Agent to carry out more effectively the
provisions and purposes of this Agreement and the other Loan
Documents.
VIII.17. Employee Benefit Plans.
(a) With reasonable promptness, and in any event
within 30 days thereof, give notice to the Agent of (a) the
establishment of any new Employee Benefit Plan (which notice
shall include a copy of such plan), (b) the commencement of
contributions to any Employee Benefit Plan to which the
Borrower or any of its ERISA Affiliates was not previously
contributing, (c) any material increase in the benefits of
any existing Employee Benefit Plan, (d) each funding waiver
request filed with respect to any Employee Benefit Plan and
all communications received or sent by the Borrower or any
ERISA Affiliate with respect to such request and (e) the
failure of the Borrower or any ERISA Affiliate to make a
required installment or payment under Section 302 of ERISA
or Section 412 of the Code by the due date;
(b) Promptly and in any event within 15 days of
becoming aware of the occurrence or forthcoming occurrence
of any (a) Termination Event or (b) nonexempt "prohibited
transaction," as such term is defined in Section 406 of
ERISA or Section 4975 of the Code, in connection with any
Pension Plan or any trust created thereunder, deliver to the
Agent a notice specifying the nature thereof, what action
the Borrower or any ERISA Affiliate has taken, is taking or
proposes to take with respect thereto and, when known, any
action taken or threatened by the Internal Revenue Service,
the Department of Labor or the PBGC with respect thereto;
and
(c) With reasonable promptness but in any event within
15 days for purposes of clauses (a), (b) and (c), deliver to
the Agent copies of (a) any unfavorable determination letter
from the Internal Revenue Service regarding the
qualification of an Employee Benefit Plan under Section
401(a) of the Code, (b) all notices received by the Borrower
or any ERISA Affiliate of the PBGC's intent to terminate any
Pension Plan or to have a trustee appointed to administer
any Pension Plan, (c) each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) filed
by the Borrower or any ERISA Affiliate with the Internal
Revenue Service with respect to each Pension Plan and (d)
all notices received by the Borrower or any ERISA Affiliate
from a Multiemployer Plan sponsor concerning the imposition
or amount of withdrawal liability pursuant to Section 4202
of ERISA. The Borrower will notify the Agent in writing
within five Business Days of the Borrower or any ERISA
Affiliate obtaining knowledge or reason to know that the
Borrower or any ERISA Affiliate has filed or intends to file
a notice of intent to terminate any Pension Plan under a
distress termination within the meaning of Section 4041(c)
of ERISA.
VIII.18. Continued Operations. Continue at all times to
conduct its business and engage principally in the same line or
lines of business substantially as heretofore conducted.
VIII.19. New Subsidiaries. (a) Promptly, and in any event
within 15 Business Days, after the acquisition or creation of any
Domestic Subsidiary, cause to be delivered to the Agent for the
benefit of the Lenders each of the following:
(i) a Guaranty executed by such Domestic
Subsidiary substantially in the form of Exhibit I;
(ii) a Security Agreement executed by such
Domestic Subsidiary substantially in the form of
Exhibit J, together with such Uniform Commercial Code
financing statements on Form UCC-1 or otherwise duly
executed by such Subsidiary as "Debtor" and naming the
Agent for the benefit of the Lenders as "Secured
Party", in form, substance and number sufficient in the
reasonable opinion of the Agent and its special counsel
to be filed in all Uniform Commercial Code filing
offices in all jurisdictions in which filing is
necessary or advisable to perfect in favor of the Agent
for the benefit of the Lenders the Lien on Collateral
conferred by such Domestic Subsidiary under such
Security Agreement to the extent such Lien may be
perfected by Uniform Commercial Code filing;
(iii) the Pledged Interests of such Domestic
Subsidiary, which is issued or existing and
outstanding, together with duly executed stock powers
or powers of assignment in blank affixed thereto or
registrar's pledge certificate and control agreement,
as applicable, and an executed Pledge Agreement
Supplement pledging 100% of the capital stock or equity
or other ownership interest of such newly acquired or
created Domestic Subsidiary;
(iv) a supplement to the appropriate schedule
attached to the appropriate Security Instruments
listing the additional Collateral, certified as true,
correct and complete by the Authorized Representative
(provided that the failure to deliver such supplement
shall not impair the rights conferred under the
Security Instruments in after acquired Collateral);
(v) an Intercompany Note Pledge Agreement and a
Subordination Agreement executed by such Domestic
Subsidiary;
(vi) if applicable, an IPSA Supplement and an
Intellectual Property Assignment;
(vii) if requested by the Agent or the
Required Lenders, an opinion of counsel to such
Domestic Subsidiary and the Subsidiary executing the
Pledge Agreement Supplement referred to in (iii) above
dated as of the date of delivery of the Guaranty
referred to in (i) above, the Subordination Agreement
referred in (v) above, and other Loan Documents
provided for in this Section 8.19 and addressed to the
Agent and the Lenders, in form and substance reasonably
acceptable to the Agent and substantively similar to
the opinions of counsel delivered pursuant to Section
6.1(a), rendered with respect to the Subsidiaries as of
the Closing Date and the Collateral in which they grant
the Agent a Lien for the benefit of itself and the
Lenders; and
(viii) current copies of the Organizational
Documents of such Domestic Subsidiary, minutes of duly
called and conducted meetings (or duly effected consent
actions) of the Board of Directors, partners, or
appropriate committees thereof (and, if required by
such Organizational Documents or by applicable law, of
the shareholders) of such Domestic Subsidiary
authorizing the actions and the execution and delivery
of documents described in this Section 8.19;
(b) Promptly, and in any event within 30 Business
Days, after the acquisition or creation of any Foreign
Subsidiary, cause to be delivered to the Agent for the
benefit of the Lenders each of the following:
(i) the Pledged Interests of such Foreign
Subsidiary, which is issued or existing and
outstanding, together with duly executed stock powers
or powers of assignment in blank affixed thereto or
registrar's pledge certificate and control agreement,
as applicable, and an executed Pledge Agreement
Supplement pledging 66% of the voting share capital
and 100% of the nonvoting share capital or equity or
other ownership interest of such Foreign Subsidiary
substantially similar in form and content to that
executed and delivered as of the Closing Date, with
appropriate revisions as to the identity of the pledgor
and securing the obligations of such pledgor under its
Guaranty; and
(ii) if requested by the Agent or the Required
Lenders, an opinion of counsel to the Subsidiary
executing the Pledge Agreement Supplement referred to
in (i) above, dated as of the date of delivery of such
Pledge Agreement Supplement and addressed to the Agent
and the Lenders, in form and substance reasonably
acceptable to the Agent, and, if requested by the Agent
or the Required Lenders, an opinion of counsel in the
jurisdiction of incorporation of the Foreign
Subsidiary, in form and substance reasonably acceptable
to the Agent, in each case and substantively similar to
the opinions of counsel delivered pursuant to Section
6.1(a), rendered with respect to the Subsidiaries as of
the Closing Date and the Collateral in which they grant
the Agent a Lien for the benefit of itself and the
Lenders.
ARTICLE IX
Negative Covenants
Until the Revolving Credit Termination Date, unless the
Required Lenders shall otherwise consent in writing, the Borrower
will not, nor will it permit any Subsidiary to:
IX.1. Financial Covenants.
(a) Consolidated Net Worth. Permit Consolidated Net
Worth to be less than (i) 90% of Consolidated Net Worth as
of the Closing Date plus $20,000,000 and (ii) as at the last
day of each succeeding Fiscal Quarter of the Borrower and
until (but excluding) the last day of the next following
Fiscal Quarter of the Borrower, the sum of (A) the amount of
Consolidated Net Worth required to be maintained pursuant to
this Section 9.1(a) as at the end of the immediately
preceding Fiscal Quarter, plus (B) 75% of Consolidated Net
Income (with no reduction for net losses during any period)
for the Fiscal Quarter of the Borrower ending on such day
(including within "Consolidated Net Income" certain items
otherwise excluded as provided for in the definition of
"Consolidated Net Income") less dividends paid with respect
to the Preferred Stock as permitted hereunder, plus (C) 100%
of the aggregate amount of all increases in the stated
capital and additional paid-in capital accounts of the
Borrower resulting from the issuance of equity securities or
other capital investments; provided, however, in the event
all the outstanding Warrants are redeemed, purchased, put,
called, exercised or otherwise no longer outstanding as of
March 31, 1999, then in such event the minimum Consolidated
Net Worth permitted at the Closing Date under (i) above
shall be recalculated to be an amount equal to 85% of the
Consolidated Net Worth as of the Closing Date and
corresponding adjustments under (ii)(A) above shall be made
accordingly.
(b) Consolidated Leverage Ratio. Permit the
Consolidated Leverage Ratio as of the end of each Four-
Quarter Period ending during the applicable period set forth
below to be greater than that ratio set forth opposite each
such period:
Consolidated Leverage
Ratio
Period Must Not Be
Greater Than
Closing Date through and 3.25 to 1.00
including September 30,
1999
October 1, 1999 through 3.00 to 1.00
and including September
30, 2001
October 1, 2001 and 2.50 to 1.00
thereafter
(c) Consolidated Fixed Charge Ratio. Permit at any
time the Consolidated Fixed Charge Ratio to be less than
1.50 to 1.00.
(d) Consolidated Interest Coverage Ratio. Permit at
any time the Consolidated Interest Coverage Ratio to be less
than 3.50 to 1.00.
(e) First Quarter Consolidated EBITDA. Permit
Consolidated EBITDA for the Fiscal Quarter ending March 31,
1998 to be less than $2,750,000.
IX.2. Acquisitions. Enter into any agreement, contract,
binding commitment or other arrangement providing for any
Acquisition, or take any action to solicit the tender of
securities or proxies in respect thereof in order to effect any
Acquisition, other than (i) Permitted Acquisitions, (ii) that
certain acquisition pursuant to, and in accordance with the terms
of, the Asset Purchase Agreement, to be dated on or about March
23, 1998, among the Borrower, Headway Corporate Staffing Services
of North Carolina, Inc., Select Staffing Services, Inc. and Jack
Powell, (iii) that certain acquisition pursuant to, and in
accordance with the terms of, the Asset Purchase Agreement, to be
dated on or about March 23, 1998, among the Borrower, Cheney
Associates, L.L.C. and Timothy Cheney, an individual doing
business under the name Cheney Associates, Inc. and Cheney
Consulting Group, and (iv) that certain acquisition pursuant to,
and in accordance with the terms of the Stock Purchase Agreement
to be dated on or about March 23, 1998, among the Borrower, L&M
Shore Family Holdings Limited Partnership, Elder Investments
Limited Partnership Mark Shore and Linda Elder.
IX.3. Liens. Incur, create or permit to exist any Lien,
charge or other encumbrance of any nature whatsoever with respect
to any property or assets now owned or hereafter acquired by the
Borrower or any Subsidiary, other than
(a) Liens created under the Security Instruments in
favor of the Agent and the Lenders, and otherwise existing
as of the date hereof and set forth in Schedule 7.7;
(b) Liens imposed by law for taxes, assessments or
charges of any Governmental Authority for claims not yet due
or which are being contested in good faith by appropriate
proceedings diligently conducted, and with respect to which
adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP and which Liens are not
yet enforceable against other creditors;
(c) statutory or contractual Liens of landlords and
Liens of carriers, warehousemen, mechanics, materialmen and
other Liens imposed by law or created in the ordinary course
of business and in existence less than 90 days from the date
of creation thereof for amounts not yet due or which are
being contested in good faith by appropriate proceedings
diligently conducted, and with respect to which adequate
reserves or other appropriate provisions are being
maintained in accordance with GAAP and which Liens are not
yet enforceable against other creditors;
(d) Liens incurred or deposits made (a) in the
ordinary course of business (including, without limitation,
performance and surety bonds) in connection with workers'
compensation, unemployment insurance and other types of
social security benefits or (b) to secure the performance of
tenders, bids, leases, contracts (other than for the
repayment of Indebtedness), statutory obligations and other
similar obligations or arising as a result of progress
payments under government contracts;
(e) easements (including reciprocal easement
agreements and utility agreements), rights-of-way,
covenants, consents, reservations, encroachments or title
defects, variations and zoning and other restrictions,
charges or encumbrances (whether or not recorded), which do
not interfere materially with the ordinary conduct of the
business of the Borrower or any Subsidiary and which do not
materially detract from the value of the property to which
they attach or materially impair the use thereof to the
Borrower or any Subsidiary;
(f) purchase money Liens to secure Indebtedness
permitted under Section 9.4(d) (as extended or renewed as
permitted under Section 9.4(h) and incurred to purchase
fixed assets, provided such Indebtedness represents not
less than 75% and not more than 100% of the purchase price
of such assets as of the date of purchase thereof and no
property other than the assets so purchased secures such
Indebtedness;
(g) Liens arising in connection with Capital Leases
(as extended or renewed as permitted under Section 9.4(h))
provided that no such Lien shall extend to or cover any
Collateral or any property or assets other than assets
subject to the Capital Leases;
(h) judgment and other similar non-consensual Liens
arising in connection with court proceedings, provided that,
and only for so long as, the execution or other enforcement
of such Liens is effectively stayed and the claims secured
thereby are being actively contested in good faith and by
appropriate proceedings and all reserves as may be required
by GAAP, if any, have been made, and in any case only if the
amounts secured thereby, if paid or payable, could not,
individually or in the aggregate, have a Material Adverse
Effect.
IX.4. Indebtedness. Incur, create, assume or permit to
exist any Indebtedness, howsoever evidenced, except:
(a) Indebtedness existing as of the Closing Date as
set forth in Schedule 1.2; provided, none of the instruments
and agreements evidencing or governing such Indebtedness,
including without limitation the Subordinated Debt, shall be
amended, modified or supplemented after the Closing Date to
change any terms of subordination, payment of principal,
interest, fees or other amounts due, or rights of
conversion, put, exchange or other similar rights or any
other covenants, terms or conditions thereof to be less
favorable to the Agent and the Lenders than such terms,
rights and conditions as in effect on the Closing Date;
(b) Indebtedness owing to the Agent or any Lender in
connection with this Agreement, any Note or other Loan
Document;
(c) the endorsement of negotiable instruments for
deposit or collection or similar transactions in the
ordinary course of business;
(d) purchase money Indebtedness described in Section
9.3(f) not to exceed an aggregate outstanding amount at any
time of $3,000,000;
(e) Indebtedness arising from Hedging Obligations
permitted under Section 9.14;
(f) Intercompany Advances;
(g) additional unsecured Indebtedness for Money
Borrowed not otherwise covered by clauses (a) through (f)
above, provided that the aggregate outstanding principal
amount of all such other Indebtedness permitted under this
clause (g) shall in no event exceed $3,000,000 at any time;
and
(h) Indebtedness extending the maturity of, or
renewing, refunding or refinancing, in whole or in part,
Indebtedness incurred under clauses (a), (d), (f) and (g)
of this Section 9.4, including without limitation the
Subordinated Debt; provided that the covenants, terms and
conditions of any such extension, renewal, refunding or
refinancing Indebtedness (and of any agreement or instrument
entered into in connection therewith) are no less favorable
to the Agent and the Lenders than the terms of the
Indebtedness as in effect prior to such action, and provided
further that (1) the aggregate principal amount of or
interest rate or rates and fees payable on such extended,
renewed, refunded or refinanced Indebtedness shall not be
increased by such action, (2) the group of direct or
contingent obligors on such Indebtedness shall not be
expanded as a result of any such action, (3) immediately
prior to and immediately after giving effect to any such
extension, renewal, refunding or refinancing, no Default or
Event of Default shall have occurred and be continuing and
(4) no such action shall serve to prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity
previously existing of such Indebtedness.
IX.5. Transfer of Assets. Sell, lease, transfer or
otherwise dispose of any assets of the Borrower or any
Subsidiary other than
(a) dispositions of equipment which, in the aggregate
during any Fiscal Year, has a fair market value or book
value, whichever is less, of $500,000 or less and is
replaced by equipment having at least equivalent value;
(b) disposition of property that is substantially
worn, damaged, obsolete or, in the judgment of the Borrower,
no longer best used or useful in its business or that of any
Subsidiary;
(c) transfers of assets necessary to give effect to
merger or consolidation transactions permitted by Section
9.7; and
(d) the disposition of Eligible Securities in the
ordinary course of management of the investment portfolio of
the Borrower and its Subsidiaries and up to 7,072,307
ordinary shares of the common stock of INCEPTA Group, plc.
IX.6. Investments. Purchase, own, invest in or
otherwise acquire, directly or indirectly, any stock or other
securities, or make or permit to exist any interest whatsoever in
any other Person or permit to exist any loans or advances to any
Person, except that Borrower may maintain investments or invest
in:
(a) securities of any Person acquired in an
Acquisition permitted hereunder;
(b) Eligible Securities;
(c) investments existing as of the date hereof and as
set forth in Schedule 7.4;
(d) accounts receivable arising and trade credit
granted in the ordinary course of business and any
securities received in satisfaction or partial satisfaction
thereof in connection with accounts of financially troubled
Persons to the extent reasonably necessary in order to
prevent or limit loss;
(e) Intercompany Advances;
(f) loans from the Borrower or any Guarantor to any
Guarantor as described in Section 9.4(f);
(g) investments in Hedging Obligations permitted under
Section 9.15;
(h) loans and advances to Subsidiaries who are not
Guarantors provided (i) the aggregate outstanding principal
amount of such loans and advances shall not at any time
exceed $1,000,000 and (ii) all evidence of such
Indebtedness, excluding any promissory notes, shall be
pledged to the Agent for the benefit of the Lenders; and
(i) loans and advances to executive officers of the
Borrower for the purpose of, and the proceeds of which are
exclusively used to, finance the acquisition of shares of
the Borrower's common stock, provided the aggregate
outstanding principal amount of such loans and advances
shall not at any time exceed $285,000.
IX.7. Merger or Consolidation. (a) Consolidate with or
merge into any other Person, or (b) permit any other Person to
merge into it, provided, however, (i) any Subsidiary may merge
into or consolidate with the Borrower and any Subsidiary may
merge into or consolidate with any other wholly owned Guarantor,
and (ii) any other Person may merge into or consolidate with the
Borrower or any wholly owned Guarantor may merge into or
consolidate with any other Person in order to consummate an
Acquisition permitted by Section 9.2, provided further, that any
resulting or surviving entity of a permitted Acquisition shall
execute and deliver such agreements and other documents,
including a Guaranty, and take such other action as the Agent may
require to evidence or confirm its express assumption of the
obligations and liabilities of its predecessor entities under the
Loan Documents.
IX.8. Restricted Payments. Make any Restricted Payment
or apply or set apart any of their assets therefor or agree to do
any of the foregoing; provided, however, the Borrower may,
if immediately prior and immediately after giving effect to any
of the following payments no Default or Event of Default shall
exist or occur and be continuing, (a) pay the dividend payable on
the Series F Preferred Stock as set forth in the Certificate of
Designation for such series; and (b) make purchases in open
market transactions of its common stock in connection with the
exercise of any warrants or options, provided the payments made
in connection with such purchases do not exceed $500,000 in the
aggregate in any Fiscal Year or $2,000,000 in the aggregate
during the term of this Agreement.
IX.9. Transactions with Affiliates. Other than
transactions permitted under Sections 9.4, 9.6 and 9.7(b)(i) or
otherwise set forth on Schedule 9.9, enter into any transaction
after the Closing Date, including, without limitation, the
purchase, sale, lease or exchange of property, real or personal,
or the rendering of any service, with any Affiliate of the
Borrower, except (a) that such Persons may render services to the
Borrower or its Subsidiaries for compensation at the same rates
generally paid by Persons engaged in the same or similar
businesses for the same or similar services, (b) that the
Borrower or any Subsidiary may render services to such Persons
for compensation at the same rates generally charged by the
Borrower or such Subsidiary, (c) in the case of either (a) or
(b), in the ordinary course of business and pursuant to the
reasonable requirements of the Borrower's (or any Subsidiary's)
business and consistent with past practice of the Borrower and
its Subsidiaries and upon fair and reasonable terms no less
favorable to the Borrower (or any Subsidiary) than would be
obtained in a comparable arm'slength transaction with a Person
not an Affiliate, and (d) that the Borrower or any Guarantor may
enter into any transaction with any other Guarantor pursuant to
the reasonable requirements of the Borrower's or Guarantor's
business and consistent with past practice of the Borrower or
Guarantor, except as may be otherwise limited or prohibited by
any provision of this Agreement.
IX.10. Compliance with ERISA. With respect to any
Pension Plan, Employee Benefit Plan or Multiemployer Plan and
except as otherwise disclosed in this Agreement:
(a) permit the occurrence of any Termination Event
which would result in a material liability on the part of
the Borrower or any ERISA Affiliate to the PBGC; or
(b) permit the present value of all benefit
liabilities under all Pension Plans to exceed the current
value of the assets of such Pension Plans allocable to such
benefit liabilities; or
(c) permit any accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code)
with respect to any Pension Plan, whether or not waived; or
(d) fail to make any contribution or payment to any
Multiemployer Plan which the Borrower or any ERISA
Affiliate may be required to make under any agreement
relating to such Multiemployer Plan, or any law pertaining
thereto; or
(e) engage, or permit any Borrower or any ERISA
Affiliate to engage, in any prohibited transaction under
Section 406 of ERISA or Sections 4975 of the Code for which
a civil penalty pursuant to Section 502(I) of ERISA or a tax
pursuant to Section 4975 of the Code may be imposed; or
(f) permit the establishment of any additional
Employee Benefit Plan providing post-retirement welfare
benefits or establish or amend any Employee Benefit Plan
which establishment or amendment could result in liability
to the Borrower or any ERISA Affiliate or increase the
obligation of the Borrower or any ERISA Affiliate to a
Multiemployer Plan, which liability or increase,
individually or together with all similar liabilities and
increases, is in excess of $1,000,000; or
(g) fail, or permit the Borrower or any ERISA
Affiliate to fail, to establish, maintain and operate each
Employee Benefit Plan in compliance in all material respects
with the provisions of ERISA, the Code, all applicable
Foreign Benefit Laws and all other applicable laws and the
regulations and interpretations thereof.
IX.11. Fiscal Year. Change its Fiscal Year.
IX.12. Dissolution, Etc. Wind up, liquidate or dissolve
(voluntarily or involuntarily) or commence or suffer any
proceedings seeking any such winding up, liquidation or
dissolution, except in connection with a merger or consolidation
permitted pursuant to Section 9.7.
IX.13. Change of Control. Cause, suffer or permit to
exist or occur any Change of Control.
IX.14. Hedging Obligations. Incur any Hedging Obligations
or enter into any agreements, arrangements, devices or
instruments relating to Hedging Obligations, except pursuant to
Swap Agreements in an aggregate notional amount not to exceed at
any time 60% the Total Revolving Credit Commitment.
IX.15. Negative Pledge Clauses. Enter into or cause,
suffer or permit to exist any agreement with any Person other
than the Agent and the Lenders pursuant to this Agreement or any
other Loan Documents which prohibits or limits the ability of any
Borrower or any Subsidiary to create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, provided that the
Borrower and any Guarantor may enter into such an agreement in
connection with property subject to any Lien permitted by this
Agreement and not released after the date hereof, when such
prohibition or limitation is by its terms effective only against
the assets subject to such Lien.
IX.16. Restrict Payment of Dividends. Enter into any
agreement or covenant prohibiting or limiting in any way the
Borrower's or any Subsidiary's right or power to pay any dividend
or make any other distribution, direct or indirect, on account of
any shares of any class of stock of the Borrower or any
Subsidiary, now or hereafter outstanding, to the Borrower or any
Guarantor.
IX.17. Subordinated Debt and Preferred Stock. (a) Except
as otherwise permitted in Section 9.4(h), prepay, redeem,
purchase, defease or otherwise satisfy prior to the scheduled
maturity thereof in any manner (regardless of whether such
prepayment, redemption, purchase, defeasance or satisfaction is
mandatory or optional), or make any payment in violation of any
subordination terms of, any Indebtedness, including without
limitation the Subordinated Debt, or redeem or purchase
(regardless of whether such redemption or purchase is mandatory
or optional) any of the Preferred Stock; or
(b) Amend, modify or change in any manner any term or
condition of any Subordinated Debt (including without limitation
any of the Subordinated Debt Documents) or any Preferred Stock so
that the terms and conditions thereof are less favorable to the
Agent and the Lenders than the terms thereof as of the Closing
Date.
ARTICLE X
Events of Default and Acceleration
X.1. Events of Default. If any one or more of the following
events (herein called "Events of Default") shall occur for any
reason whatsoever (and whether such occurrence shall be voluntary
or involuntary or come about or be effected by operation of law
or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any
Governmental Authority), that is to say:
(a) if default shall be made in the due and punctual
payment of the principal of any Loan or Reimbursement
Obligation, when and as the same shall be due and payable
whether pursuant to any provision of Article II or Article
III, at maturity, by acceleration or otherwise; or
(b) if default shall be made in the due and punctual
payment of any amount of interest on any Loan or
Reimbursement Obligation or in the due and punctual payment
of any other Obligation or of any fees or other amounts
payable to any of the Lenders or the Agent on the date on
which the same shall be due and payable and such default
shall continue for two (2) Business Days; or
(c) if default shall be made in the performance or
observance of any covenant set forth in Section 2.12,, 8.7,
8.11, 8.12, 8.19 or Article IX; or
(d) if a default shall be made in the performance or
observance of, or shall occur under, any covenant, agreement
or provision contained in this Agreement (other than as
described in clauses (a), (b) or (c) above) and such default
shall continue for 30 or more days after the earlier of
receipt of notice of such default by the Authorized
Representative from the Agent or an Executive Officer of the
Borrower becomes aware of such default; or if a default
shall be made in the performance or observance of, or shall
occur under, any covenant, agreement or provision contained
in any of the other Loan Documents (beyond any applicable
grace period, if any, contained therein) or in any
instrument or document evidencing or creating any
obligation, guaranty, or Lien in favor of the Agent or any
of the Lenders or delivered to the Agent or any of the
Lenders in connection with or pursuant to this Agreement or
any of the Obligations; or if any Loan Document ceases to be
in full force and effect (other than by reason of any action
by the Agent); or if without the written consent of the
Lenders, this Agreement or any other Loan Document shall be
disaffirmed or shall terminate, be terminable or be
terminated or become void or unenforceable for any reason
whatsoever (other than in accordance with its terms in the
absence of default or by reason of any action by the Lenders
or the Agent); or
(e) if there shall occur (i) a default, which is not
waived, in the payment of any principal, interest, premium
or other amount with respect to the Subordinated Debt or any
other Indebtedness (other than the Loans and other
Obligations) of the Borrower or any Subsidiary and the
amount of such Indebtedness is not less than $1,000,000 in
the aggregate outstanding, or (ii) a default, which is not
waived, in the performance, observance or fulfillment of any
term or covenant (other than as described in clause (i)
above) contained in any agreement or instrument under or
pursuant to which the Subordinated Debt or any such
Indebtedness may have been issued, created, assumed,
guaranteed or secured by the Borrower or any Subsidiary, or
any other event of default as specified in any agreement or
instrument under or pursuant to which the Subordinated Debt
or any such Indebtedness may have been issued, created,
assumed, guaranteed or secured by the Borrower or any
Subsidiary, and such default or event of default shall
continue for more than the period of grace, if any, therein
specified, or such default or event of default shall permit
(or, with the giving of notice or lapse of time or both,
would permit) the holder of the Subordinated Debt or any
such Indebtedness (or any Agent or trustee acting on behalf
of one or more holders) to accelerate the maturity thereof;
or
(f) if any representation, warranty or other statement
of fact contained in any Loan Document or in any writing,
certificate, report or statement at any time furnished to
the Agent or any Lender by or on behalf of the Borrower or
any other Credit Party pursuant to or in connection with any
Loan Document (which shall not include marketing materials
prepared and distributed in connection with syndication of
the Revolving Credit Facility), shall be false or misleading
in any material respect when given; or
(g) if the Borrower or any Subsidiary or other Credit
Party shall be unable to pay its debts generally as they
become due, admit in writing its inability to pay its debts
generally as they become due, file a petition to take
advantage of any insolvency statute, make an assignment for
the benefit of its creditors, commence a proceeding for the
appointment of a receiver, trustee, liquidator or
conservator of itself or of the whole or any substantial
part of its property, or file a petition or answer seeking
liquidation, reorganization or arrangement or similar relief
under the federal bankruptcy laws or any other applicable
law or statute; or
(h) if a court of competent jurisdiction shall enter
an order, judgment or decree appointing a custodian,
receiver, trustee, liquidator or conservator of the Borrower
or any Subsidiary or other Credit Party or of the whole or
any substantial part of its properties and such order,
judgment or decree continues unstayed and in effect for a
period of sixty (60) days, or approve a petition filed
against the Borrower or any Subsidiary or any other Credit
Party seeking liquidation, reorganization or arrangement or
similar relief under the federal bankruptcy laws or any
other applicable law or statute of the United States of
America or any state, which petition is not dismissed within
sixty (60) days; or if, under the provisions of any other
law for the relief or aid of debtors, a court of competent
jurisdiction shall assume custody or control of the Borrower
or any Subsidiary or other Credit Party or of the whole or
any substantial part of its properties, which control is not
relinquished within sixty (60) days; or if there is
commenced against the Borrower or any Subsidiary or other
Credit Party any proceeding or petition seeking
reorganization, arrangement or similar relief under the
federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state which
proceeding or petition remains undismissed for a period of
sixty (60) days; or if the Borrower or any Subsidiary or
other Credit Party takes any action to indicate its consent
to or approval of any such proceeding or petition; or
(i) if (i) one or more judgments or orders where the
amount not covered by insurance (or the amount as to which
the insurer denies liability) is in an aggregate amount in
excess of $1,000,000 is rendered against the Borrower or any
Subsidiary, or (ii) there is any attachment, injunction or
execution against any of the Borrower's or Subsidiaries'
properties for any amount in excess of $1,000,000 in the
aggregate; and such judgment, attachment, injunction or
execution remains unpaid, unstayed, undischarged, unbonded
or undismissed for a period of thirty (30) days; or
(j) if the Borrower or any Subsidiary shall, other
than in the ordinary course of business (as determined by
past practices), suspend all or any part of its operations
material to the conduct of the business of the Borrower and
its Subsidiaries, on a consolidated basis, for a period of
more than sixty (60) days; or
(k) if the Borrower or any Subsidiary shall breach any
of the material terms or conditions of any agreement under
which any Hedging Obligations permitted hereby is created
and such breach shall continue beyond any grace period, if
any, relating thereto pursuant to the terms of such
agreement, or if the Borrower or any Subsidiary shall
disaffirm or seek to disaffirm any such agreement or any of
its obligations thereunder; or
(l) if there shall occur and be continuing an Event of
Default as defined in any of the other Loan Documents; or
(m) if there shall occur and be continuing an Event of
Default as defined in the Indenture referred to in the
definition of "Subordinated Debt Documents" or a Series F
Stock Event of Default as defined in the Certificate of
Designation referred to in subpart (b) of the definition of
"Preferred Stock";
then, and in any such event and at any time thereafter, if such
Event of Default or any other Event of Default shall have not
been waived,
(A) either or both of the following actions
may be taken: (i) the Agent, with the consent of the
Required Lenders, may, and at the direction of the
Required Lenders shall, declare any obligation of the
Lenders and the Issuing Bank to make further Loans or
to issue additional Letters of Credit terminated,
whereupon the obligation of each Lender to make further
Revolving Loans, and of the Issuing Bank to issue
additional Letters of Credit, hereunder shall terminate
immediately, and (ii) the Agent shall at the direction
of the Required Lenders, at their option, declare by
notice to the Borrower any or all of the Obligations to
be immediately due and payable, and the same, including
all interest accrued thereon and all other obligations
of the Borrower to the Agent and the Lenders, shall
forthwith become immediately due and payable without
presentment, demand, protest, notice or other formality
of any kind, all of which are hereby expressly waived,
anything contained herein or in any instrument
evidencing the Obligations to the contrary
notwithstanding; provided, however, that
notwithstanding the above, if there shall occur an
Event of Default under clause (g) or (h) above, then
the obligation of the Lenders to make Revolving Loans,
and of the Issuing Bank to issue Letters of Credit
hereunder shall automatically terminate and any and all
of the Obligations shall be immediately due and payable
without the necessity of any action by the Agent or the
Required Lenders or notice to the Agent or the Lenders;
(B) The Borrower shall, upon demand of the
Agent, the Issuing Bank or the Required Lenders,
deposit cash with the Agent in an amount equal to the
amount of any Letter of Credit Outstandings, as
collateral security for the repayment of any future
drawings or payments under such Letters of Credit, and
such amounts shall be held by the Agent pursuant to the
terms of the LC Account Agreement; and
(C) The Agent and each of the Lenders shall
have all of the rights and remedies available under the
Loan Documents or under any applicable law.
X.2. Agent to Act. In case any one or more Events of
Default shall occur and not have been waived, the Agent may, and
at the direction of the Required Lenders shall, proceed to
protect and enforce their rights or remedies either by suit in
equity or by action at law, or both, whether for the specific
performance of any covenant, agreement or other provision
contained herein or in any other Loan Document, or to enforce the
payment of the Obligations or any other legal or equitable right
or remedy.
X.3. Cumulative Rights. No right or remedy herein conferred
upon the Lenders or the Agent is intended to be exclusive of any
other rights or remedies contained herein or in any other Loan
Document, and every such right or remedy shall be cumulative and
shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law
or in equity or by statute, or otherwise.
X.4. No Waiver. No course of dealing between the Borrower
and any Lender, the Issuing Bank or the Agent or any failure or
delay on the part of any Lender, the Issuing Bank or the Agent
in exercising any rights or remedies under any Loan Document or
otherwise available to it shall operate as a waiver of any rights
or remedies and no single or partial exercise of any rights or
remedies shall operate as a waiver or preclude the exercise of
any other rights or remedies hereunder or of the same right or
remedy on a future occasion.
X.5. Allocation of Proceeds. If an Event of Default has
occurred and not been waived, and the maturity of the Notes has
been accelerated pursuant to Article X hereof, all payments
received by the Agent hereunder, in respect of any principal of
or interest on the Obligations or any other amounts payable by
the Borrower hereunder, shall be applied by the Agent in the
following order:
(a) amounts due to the Lenders pursuant to Sections
2.10, 3.3, 3.4 and 12.5;
(b) amounts due to the Agent pursuant to Section
11.11;
(c) payments of interest on Loans and Reimbursement
Obligations, to be applied for the ratable benefit of the
Lenders;
(d) payments of principal of Loans and Reimbursement
Obligations, to be applied for the ratable benefit of the
Lenders;
(e) payments of cash amounts to the Agent in respect
of outstanding Letters of Credit pursuant to Section
10.1(B);
(f) amounts due to the Lenders pursuant to Sections
3.2(h), 8.15 and 12.9;
(g) payments of all other amounts due under any of the
Loan Documents, if any, to be applied for the ratable
benefit of the Lenders;
(h) amounts due to any of the Lenders in respect of
Obligations consisting of liabilities under any Swap
Agreement with any of the Lenders on a pro rata basis
according to the amounts owed; and
(i) any surplus remaining after application as
provided for herein, to the Borrower or otherwise as may be
required by applicable law.
ARTICLE XI
The Agent
XI.1. Appointment. Each Lender and the Issuing Bank
hereby irrevocably designates and appoints NationsBank as the
Agent therefor under this Agreement, and each of the Lenders and
the Issuing Bank hereby irrevocably authorizes NationsBank as the
Agent, therefor, to take such action on its behalf under the
provisions of this Agreement and the other Loan Documents and to
exercise such powers as are expressly delegated to the Agent by
the terms of this Agreement and such other Loan Documents,
together with such other powers as are reasonably incidental
thereto. The Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any of the Lenders or the Issuing
Bank, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against
the Agent.
XI.2. Attorneys-in-fact. The Agent may execute any of
its duties under the Loan Documents by or through agents or
attorneysinfact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence, gross negligence or
willful misconduct of any agents or attorneysinfact selected by
it with reasonable care.
XI.3. Limitation on Liability. Neither the Agent nor
any of its officers, directors, employees, agents or attorneys-
in-fact shall be liable to the Lenders for any action lawfully
taken or omitted to be taken by it or them under or in connection
with the Loan Documents except for its or their own gross
negligence or willful misconduct. Neither the Agent nor any of
its affiliates shall be responsible in any manner to any of the
Lenders for any recitals, statements, representations or
warranties made by the Borrower, any other Credit Party or any
officer or representative thereof contained in any Loan Document,
or in any certificate, report, statement or other document
referred to or provided for in or received by the Agent under or
in connection with any Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of any
Loan Document, or for any failure of the Borrower or any other
Credit Party to perform its obligations under any Loan Document,
or for any recitals, statements, representations or warranties
made, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of any collateral. The Agent shall
not be under any obligation to any of the Lenders to ascertain or
to inquire as to the observance or performance of any of the
terms, covenants or conditions of any Loan Document on the part
of the Borrower or any other Credit Party or to inspect the
properties, books or records of the Borrower or any other Credit
Party.
XI.4. Reliance. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any Note, writing,
resolution, notice, consent certificate, affidavit, letter,
cablegram, telegram, telefacsimile or telex message, statement,
order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal
counsel (including, without limitation, counsel to any Credit
Party), independent accountants and other experts selected by the
Agent. The Agent may deem and treat the payee of any Note as the
owner thereof for all purposes unless an Assignment shall have
been filed with and accepted by the Agent. The Agent shall be
fully justified in failing or refusing to take any action under
the Loan Documents unless it shall first receive advice or
concurrence of the Lenders or the Required Lenders as provided in
this Agreement or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, under
the Loan Documents in accordance with a request of the Required
Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all
present and future holders of the Notes.
XI.5. Notice of Default. The Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or
Event of Default hereunder unless the Agent has received notice
from a Lender, the Authorized Representative or the Borrower
referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default".
In the event that the Agent receives such a notice, the Agent
shall promptly give notice thereof to the Lenders. The Agent
shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Lenders;
provided that, unless and until the Agent shall have received
such directions, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with
respect to such Event of Default as it shall deem advisable in
the best interests of the Lenders.
XI.6. No Representations. Each Lender expressly
acknowledges that neither the Agent nor any of its affiliates has
made any representations or warranties to it and that no act by
the Agent hereafter taken, including any review of the affairs of
the Borrower or its Subsidiaries, shall be deemed to constitute
any representation or warranty by the Agent or NMS to any Lender.
Each Lender represents to the Agent that it has, independently
and without reliance upon the Agent, NMS or any other Lender, and
based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the
financial condition, creditworthiness, affairs, status and nature
of the Borrower and each other Credit Party and made its own
decision to enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon
the Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking
or not taking action under the Loan Documents and to make such
investigation as it deems necessary to inform itself as to the
status and affairs, financial or otherwise, of the Borrower and
any other Credit Party. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by
the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or
business of the Borrower, its Subsidiaries and any other Credit
Party which may come into the possession of the Agent or any of
its affiliates.
XI.7. Indemnification. Each of the Lenders agrees to
indemnify the Agent in its capacity as such (to the extent not
reimbursed by the Borrower or any other Credit Party and without
limiting any obligations of the Borrower or any other Credit
Party to do so), ratably according to the respective principal
amount of the Notes held by them (or, if no Notes are
outstanding, ratably in accordance with their respective
Applicable Commitment Percentages as then in effect) from and
against any and all liabilities, obligations, losses (excluding
any losses suffered by the Agent as a result of the Borrower's
failure to pay any fee owing to the Agent), damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever which may at any time (including
without limitation at any time following the payment of the
Notes) be imposed on, incurred by or asserted against the Agent
in any way relating to or arising out of any Loan Document or any
other document contemplated by or referred to therein or the
transactions contemplated thereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or
willful misconduct. The agreements in this subsection shall
survive the Revolving Credit Termination Date and the termination
of this Agreement.
XI.8. Lender. The Agent and their affiliates may make
loans to, accept deposits from and generally engage in any kind
of business with the Borrower and any other Credit Party as
though it were not the Agent hereunder. With respect to its
Loans made or renewed by it and any Note issued to it, the Agent
shall have the same rights and powers under this Agreement as any
Lender and may exercise the same as though it were not the Agent,
and the terms "Lender" and "Lenders" shall, unless the context
otherwise indicates, include the Agent in its individual
capacity.
XI.9. Resignation. If the Agent shall resign as Agent
under this Agreement, then the Required Lenders may appoint, with
the consent, so long as there shall not have occurred and be
continuing a Default or Event of Default, of the Borrower, which
consent shall not be unreasonably withheld, a successor Agent for
the Lenders, which successor Agent shall be a commercial bank
organized under the laws of the United States or any state
thereof, having a combined surplus and capital of not less than
$500,000,000, whereupon such successor Agent shall succeed to the
rights, powers and duties of the former Agent and the obligations
of the former Agent shall be terminated and canceled, without any
other or further act or deed on the part of such former Agent or
any of the parties to this Agreement; provided, however, that the
former Agent's resignation shall not become effective until such
successor Agent has been appointed and has succeeded of record to
all right, title and interest in any collateral held by the
Agent; provided, further, that if the Required Lenders and, if
applicable, the Borrower cannot agree as to a successor Agent
within 90 days after such resignation, the Agent shall appoint a
successor Agent which satisfies the criteria set forth above in
this Section 11.9 for a successor Agent and the parties hereto
agree to execute whatever documents are necessary to effect such
action under this Agreement or any other document executed
pursuant to this Agreement; provided, however that in such event
all provisions of the Loan Documents, shall remain in full force
and effect. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article XI shall inure to its
benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
XI.10. Sharing of Payments, etc. Each Lender agrees that
if it shall, through the exercise of a right of banker's lien,
setoff, counterclaim or otherwise, obtain payment with respect to
its Obligations (other than pursuant to Article V) which results
in its receiving more than its pro rata share of the aggregate
payments with respect to all of the Obligations (other than any
payment expressly provided hereunder to be distributed on other
than a pro rata basis and payments pursuant to Article V), then
(a) such Lender shall be deemed to have simultaneously purchased
from the other Lenders a share in their Obligations so that the
amount of the Obligations held by each of the Lenders shall be
pro rata and (b) such other adjustments shall be made from time
to time as shall be equitable to insure that the Lenders share
such payments ratably; provided, however, that for purposes of
this Section 11.10 the term "pro rata" shall be determined with
respect to the Revolving Credit Commitment of each Lender and to
the Total Revolving Credit Commitments after subtraction of
amounts, if any, by which any such Lender has not funded its
share of the outstanding Loans and Obligations. If all or any
portion of any such excess payment is thereafter recovered from
the Lender which received the same, the purchase provided in this
Section 11.10 shall be rescinded to the extent of such recovery,
without interest. The Borrower expressly consents to the
foregoing arrangements and agrees that each Lender so purchasing
a portion of the other Lenders' Obligations may exercise all
rights of payment (including, without limitation, all rights of
setoff, banker's lien or counterclaim) with respect to such
portion as fully as if such Lender were the direct holder of such
portion.
XI.11. Fees. The Borrower agrees to pay to the Agent,
for its individual account, an annual Agent's fee as from time to
time agreed to by the Borrower and Agent in writing.
ARTICLE XII
Miscellaneous
XII.1. Assignments and Participations. (a) Each Lender
may assign to one or more Eligible Assignees all or a portion of
its rights, obligations or rights and obligations under this
Agreement (including, without limitation, all or a portion of its
Loans, its Note, and its Revolving Credit Commitment; provided,
however, that
(i) each such assignment shall be to an Eligible
Assignee;
(ii) except in the case of an assignment to another
Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, any such partial
assignment shall be in an amount at least equal to
$5,000,000 or an integral multiple of $1,000,000 in excess
thereof;
(iii) each such assignment by a Lender shall be of
a constant, and not varying, percentage of all of its rights
and obligations under this Agreement and the Note; and
(iv) the parties to such assignment shall execute and
deliver to the Agent for its acceptance an Assignment and
Acceptance in the form of Exhibit B hereto, together with
any Note subject to such assignment and a processing fee of
$3,500.
Upon execution, delivery, and acceptance of such Assignment and
Acceptance, the assignee thereunder shall be a party hereto and,
to the extent of such assignment, have the obligations, rights,
and benefits of a Lender hereunder and the assigning Lender
shall, to the extent of such assignment, relinquish its rights
and be released from its obligations under this Agreement. Upon
the consummation of any assignment pursuant to this Section, the
assignor, the Agent and the Borrower shall make appropriate
arrangements so that, if required, new Notes are issued to the
assignor and the assignee. If the assignee is not incorporated
under the laws of the United States of America or a state
thereof, it shall deliver to the Borrower and the Agent
certification as to exemption from deduction or withholding of
Taxes in accordance with Section 5.6.
(b) The Agent shall maintain at its address referred to in
Section 13.2 a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recordation of the
names and addresses of the Lenders and the Revolving Credit
Commitment of, and principal amount of the Loans owing to, each
Lender from time to time (the "Register"). The entries in the
Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Agent and the Lenders may
treat each Person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon
reasonable prior notice.
(c) Upon its receipt of an Assignment and Acceptance
executed by the parties thereto, together with any Note subject
to such assignment and payment of the processing fee, the Agent
shall, if such Assignment and Acceptance has been completed and
is in substantially the form of Exhibit B hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to
the parties thereto.
(d) Each Lender may sell participations to one or more
Persons in all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Revolving
Credit Commitment and its Loans); provided, however, that (i)
such Lender*s obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to
the other parties hereto for the performance of such obligations,
(iii) the participant shall be entitled to the benefit of the
yield protection provisions contained in Article V and the right
of set-off contained in Section 12.3, and (iv) the Borrower shall
continue to deal solely and directly with such Lender in
connection with such Lender*s rights and obligations under this
Agreement, and such Lender shall retain the sole right to enforce
the obligations of the Borrower relating to its Loans and its
Note and to approve any amendment, modification, or waiver of any
provision of this Agreement (other than amendments,
modifications, or waivers decreasing the amount of principal of
or the rate at which interest is payable on such Loans or Note,
extending any scheduled principal payment date or date fixed for
the payment of interest on such Loans or Note, or extending its
Revolving Credit Commitment).
(e) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time assign and pledge all or
any portion of its Loans and its Note to any Federal Reserve Bank
as collateral security pursuant to Regulation A and any Operating
Circular issued by such Federal Reserve Bank. No such assignment
shall release the assigning Lender from its obligations
hereunder.
(f) Any Lender may furnish any information concerning the
Borrower or any of its Subsidiaries in the possession of such
Lender from time to time to assignees and participants (including
prospective assignees and participants), subject, however, to
the provisions of Section 12.14 hereof .
(g) The Borrower may not assign, nor shall it cause, suffer
or permit any other Credit Party to assign any rights, powers,
duties or obligations under this Agreement or the other Loan
Documents without the prior written consent of all the Lenders.
XII.2. Notices. Any notice shall be conclusively deemed
to have been received by any party hereto and be effective (i) on
the day on which delivered (including hand delivery by commercial
courier service) to such party (against receipt therefor), (ii)
on the date of delivery to such telefacsimile number for such
party, and the receipt of such message is verified by the
sender's telefacsimile machine, or (iii) on the fifth Business
Day after the day on which mailed, if sent prepaid by certified
or registered mail, return receipt requested, in each case
delivered, transmitted or mailed, as the case may be, to the
address or telefacsimile number, as appropriate, set forth below
or such other address or number as such party shall specify by
notice hereunder:
(a) if to the Borrower:
Headway Corporate Resources, Inc.
850 Third Avenue
New York, New York 10022
Attention: Ms. Philicia G. Levinson, Senior Vice
President and Director of Corporate Development
Telephone: (212) 508-3487
Telefacsimile: (212) 508-3507
with a copy to:
Christy & Viener
Rockefeller Center
620 Fifth Avenue
New York, New York 10020-2457
Attention: Richard B. Salomon, Esq.
Telephone: (212) 632-5500
Telefacsimile: (212) 632-5555
(b) if to the Agent or the Issuing Bank:
NationsBank, National Association
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Dana Johnson, Agency Services
Telephone: (704) 388-3917
Telefacsimile: (704) 386-9923
with a copy to:
NationsBank, National Association
767 Fifth Avenue, Fifth Floor
New York, New York 10153-0083
Attention: Susan Timmerman, Corporate Finance
Telephone: (212) 407-5387
Telefacsimile: (212) 751-6909
(c) if to the Lenders:
At the addresses set forth on the signature pages
hereof and on the signature page of each Assignment and
Acceptance;
(d) if to any other Credit Party:
At the address set forth on the signature page of
the Guaranty or Security Instrument executed by such
Credit Party, as the case may be.
XII.3. Setoff. The Borrower agrees that the Agent and
each Lender shall have a lien for all the Obligations of the
Borrower upon all deposits or deposit accounts, of any kind, or
any interest in any deposits or deposit accounts thereof, now or
hereafter pledged, mortgaged, transferred or assigned to the
Agent or such Lender or otherwise in the possession or control of
the Agent or such Lender (other than for safekeeping) for any
purpose for the account or benefit of the Borrower and including
any balance of any deposit account or of any credit of the
Borrower with the Agent or such Lender, whether now existing or
hereafter established. The Borrower hereby authorizes the Agent
and each Lender from and after the occurrence of an Event of
Default at any time or times with or without prior notice to
apply such balances or any part thereof to such of the
Obligations of the Borrower to the Lenders then past due and in
such amounts as they may elect, and whether or not the collateral
or the responsibility of other Persons primarily, secondarily or
otherwise liable may be deemed adequate. For the purposes of
this paragraph, all remittances and property shall be deemed to
be in the possession of the Agent or such Lender as soon as the
same may be put in transit to it by mail or carrier or by other
bailee.
XII.4. Survival. All covenants, agreements,
representations and warranties made herein shall survive the
making by the Lenders of the Loans and the issuance of the
Letters of Credit and the execution and delivery to the Lenders
of this Agreement and the Notes and shall continue in full force
and effect so long as any of Obligations remain outstanding or
any Lender has any commitment hereunder or the Borrower has
continuing obligations hereunder unless otherwise provided
herein. The obligations of the Borrower under Sections 3.2(g),
8.15, 12.5 and 12.9 shall survive repayment of all Obligations,
occurrence of the Revolving Credit Termination Date and
expiration or termination of this Agreement. Whenever in this
Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and permitted
assigns of such party and all covenants, provisions and
agreements by or on behalf of the Borrower which are contained in
the Loan Documents shall inure to the benefit of the successors
and permitted assigns of the Lenders or any of them.
XII.5. Expenses. The Borrower agrees (a) to pay or
reimburse the Agent for all its reasonable out-of-pocket costs
and expenses incurred in connection with the preparation,
negotiation and execution of, and any amendment, supplement or
modification to, any of the Loan Documents (including due
diligence expenses and travel expenses relating to closing), and
the consummation of the transactions contemplated thereby,
including the reasonable fees and disbursements of counsel to the
Agent, (b) to pay or reimburse the Agent and each of the Lenders
for all their costs and expenses incurred in connection with the
enforcement, workout or preservation of any rights under the Loan
Documents, including the reasonable fees and disbursements of
their separate counsel and any payments in indemnification or
otherwise payable by the Lenders to the Agent pursuant to the
Loan Documents, and (c) to pay, indemnify and hold the Agent and
the Lenders harmless from any and all recording and filing fees
and any and all liabilities with respect to, or resulting from
any failure to pay or delay in paying, documentary, stamp, excise
and other similar taxes, if any, which may be payable or
determined to be payable in connection with the execution and
delivery of any of the Loan Documents, or consummation of any
amendment, supplement or modification of, or any waiver or
consent under or in respect of, any Loan Document.
XII.6. Amendments. No amendment, modification or waiver
of any provision of any Loan Document and no consent by the
Lenders to any departure therefrom by the Borrower or any other
Credit Party shall be effective unless such amendment,
modification or waiver shall be in writing and signed by the
Agent, shall have been approved by the Required Lenders through
their written consent, and the same shall then be effective only
for the period and on the conditions and for the specific
instances and purposes specified in such writing; provided,
however, that, no such amendment, modification or waiver
(a) which changes, extends or waives any provision of
Section 2.6, Section 11.9 or this Section 12.6 or the due
date of any scheduled payment of interest, fees or
principal, which reduces the rate of interest or amount of
fees or principal payable on any Obligation, which changes
the definition of "Required Lenders", which permits an
assignment by any Credit Party of its Obligations under any
Loan Document, which reduces the required consent of Lenders
provided hereunder, which increases or extends the
Revolving Credit Commitment or Letter of Credit Commitment
of any Lender, or which waives any condition to the making
of any Loan, shall be effective unless in writing and signed
by each of the Lenders;
(b) which releases any material amount of Collateral
or the guaranty obligation of any Guarantor under any
Guaranty (other than pursuant to the express terms hereof or
thereof) shall be effective unless with the written consent
of each of the Lenders;
No notice to or demand on the Borrower in any case shall entitle
the Borrower to any other or further notice or demand in similar
or other circumstances, except as otherwise expressly provided
herein. No delay or omission on any Lender's or the Agent's part
in exercising any right, remedy or option shall operate as a
waiver of such or any other right, remedy or option or of any
Default or Event of Default.
XII.7. Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed and
delivered shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account
for more than one such fully-executed counterpart.
XII.8. Termination. The termination of this Agreement
shall not affect any rights of the Borrower, the Lenders, the
Agent, NMS or any obligation of the Borrower, the Lenders or the
Agent, arising prior to the effective date of such termination,
and the provisions hereof shall continue to be fully operative
until all transactions entered into or rights created or
obligations incurred prior to such termination have been fully
disposed of, concluded or liquidated and the Obligations arising
prior to or after such termination have been irrevocably paid in
full. The rights granted to the Agent for the benefit of the
Lenders under the Loan Documents shall continue in full force and
effect, notwithstanding the termination of this Agreement, until
all of the Obligations have been paid in full after the
termination hereof (other than Obligations in the nature of
continuing indemnities or expense reimbursement obligations not
yet due and payable, which shall continue and expressly survive
the termination hereof). All representations, warranties,
covenants, waivers and agreements contained herein shall survive
termination hereof until payment in full of the Obligations
unless otherwise provided herein. Notwithstanding the foregoing,
if after receipt of any payment of all or any part of the
Obligations, any Lender is for any reason compelled to surrender
such payment to any Person because such payment is determined to
be void or voidable as a preference, impermissible setoff, a
diversion of trust funds or for any other reason, this Agreement
shall continue in full force and the Borrower shall be liable to,
and shall indemnify and hold the Agent or such Lender harmless
for, the amount of such payment surrendered until the Agent or
such Lender shall have been finally and irrevocably paid in full.
The provisions of the foregoing sentence shall be and remain
effective notwithstanding any contrary action which may have been
taken by the Agent or the Lenders in reliance upon such payment,
and any such contrary action so taken shall be without prejudice
to the Agent or the Lenders' rights under this Agreement and
shall be deemed to have been conditioned upon such payment having
become final and irrevocable.
XII.9. Indemnification; Limitation of Liability. In
consideration of the execution and delivery of this Agreement by
the Agent and each Lender and the extension of credit under the
Loans, the Borrower hereby indemnifies, exonerates and holds the
Agent, NMS and each Lender and each of their respective
affiliates, officers, directors, employees, agents and advisors
(collectively, the "Indemnified Parties") free and harmless from
and against any and all claims, actions, causes of action, suits,
losses, costs, liabilities and damages, and expenses incurred in
connection therewith (irrespective of whether any such
Indemnified Party is a party to the action for which
indemnification hereunder is sought), including reasonable
attorneys' fees and disbursements (collectively, the "Indemnified
Liabilities") that may be incurred by or asserted or awarded
against any Indemnified Party, in each case arising out of or in
connection with or by reason of, or in connection with, the
execution, delivery, enforcement, performance or administration
of this Agreement and the other Loan Documents, or any
transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Loan or Letter
of Credit, whether or not such action is brought against the
Agent or any Lender, the shareholders or creditors of the Agent
or any Lender or an Indemnified Party or an Indemnified Party is
otherwise a party thereto and whether or not the transactions
contemplated herein are consummated, except to the extent such
claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to
have resulted from such Indemnified Party's gross negligence or
willful misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower
hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The Borrower agrees that no
Indemnified Party shall have any liability (whether direct or
indirect, in contract or tort or otherwise) to it, any of its
Subsidiaries, any Credit Party, or any security holders or
creditors thereof arising out of, related to or in connection
with the transactions contemplated herein, except to the extent
that such liability is found in a final non-appealable judgment
by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct or
failure to make an Advance in accordance with Article II hereof
following the Borrower's complete satisfaction of all applicable
conditions precedent under Article VI and compliance with all
applicable terms of Article II; provided, however, in no event
shall any Indemnified Party be liable for consequential, indirect
or special, as opposed to direct, damages.
XII.10. Severability. If any provision of this Agreement
or the other Loan Documents shall be determined to be illegal or
invalid as to one or more of the parties hereto, then such
provision shall remain in effect with respect to all parties, if
any, as to whom such provision is neither illegal nor invalid,
and in any event all other provisions hereof shall remain
effective and binding on the parties hereto.
XII.11. Entire Agreement. This Agreement, together with
the other Loan Documents, constitutes the entire agreement among
the parties with respect to the subject matter hereof and
supersedes all previous proposals, negotiations, representations,
commitments and other communications between or among the
parties, both oral and written, with respect thereto.
XII.12. Agreement Controls. In the event that any term of
any of the Loan Documents other than this Agreement conflicts
with any express term of this Agreement, the terms and provisions
of this Agreement shall control to the extent of such conflict.
XII.13. Usury Savings Clause. Notwithstanding any other
provision herein, the aggregate interest rate charged under any
of the Notes, including all charges or fees in connection
therewith deemed in the nature of interest under applicable law
shall not exceed the Highest Lawful Rate (as such term is defined
below). If the rate of interest (determined without regard to
the preceding sentence) under this Agreement at any time exceeds
the Highest Lawful Rate (as defined below), the outstanding
amount of the Loans made hereunder shall bear interest at the
Highest Lawful Rate until the total amount of interest due
hereunder equals the amount of interest which would have been due
hereunder if the stated rates of interest set forth in this
Agreement had at all times been in effect. In addition, if when
the Loans made hereunder are repaid in full the total interest
due hereunder (taking into account the increase provided for
above) is less than the total amount of interest which would have
been due hereunder if the stated rates of interest set forth in
this Agreement had at all times been in effect, then to the
extent permitted by law, the Borrower shall pay to the Agent an
amount equal to the difference between the amount of interest
paid and the amount of interest which would have been paid if the
Highest Lawful Rate had at all times been in effect.
Notwithstanding the foregoing, it is the intention of the Lenders
and the Borrower to conform strictly to any applicable usury
laws. Accordingly, if any Lender contracts for, charges, or
receives any consideration which constitutes interest in excess
of the Highest Lawful Rate, then any such excess shall be
canceled automatically and, if previously paid, shall at such
Lender's option be applied to the outstanding amount of the Loans
made hereunder or be refunded to the Borrower. As used in this
paragraph, the term "Highest Lawful Rate" means the maximum
lawful interest rate, if any, that at any time or from time to
time may be contracted for, charged, or received under the laws
applicable to such Lender which are presently in effect or, to
the extent allowed by law, under such applicable laws which may
hereafter be in effect and which allow a higher maximum
nonusurious interest rate than applicable laws now allow.
XII.14. Confidentiality. The Agent and each Lender (each,
a "Lending Party") agrees to keep confidential any information
furnished or made available to it by the Borrower pursuant to
this Agreement that is marked confidential; provided that nothing
herein shall prevent any Lending Party from disclosing such
information (a) to any other Lending Party or any Affiliate of
any Lending Party, or any officer, director, employee, agent, or
advisor of any Lending Party or Affiliate of any Lending Party,
(b) to any other Person if reasonably incidental to the
administration of the Revolving Credit Facility or Letter of
Credit Facility provided herein, (c) as required by any law,
rule, or regulation, (d) upon the order of any court or
administrative agency, (e) upon the request or demand of any
regulatory agency or authority, (f) that is or becomes available
to the public or that is or becomes available to any Lending
Party other than as a result of a disclosure by any Lending Party
prohibited by this Agreement, (g) in connection with any
litigation to which such Lending Party or any of its Affiliates
may be a party, (h) to the extent necessary in connection with
the exercise of any remedy under this Agreement or any other Loan
Document, and (i) subject to provisions substantially similar to
those contained in this Section, to any actual or proposed
participant or assignee.
XII.15. Termination of Prior Credit Facilities. The
parties hereto which are also parties to any Existing Debt
acknowledge and agree that as of the Closing Date such Existing
Debt and all commitments and obligations of each of such Lenders
party thereto and the Borrower and its Subsidiaries thereunder
are terminated, except for such terms and provisions thereof
which by their terms survive any such termination.
XII.16. Acknowlegements. The Borrower hereby
acknowledges that:
(a) it has been advised by counsel in the
negotiation, execution and delivery of this Agreement
and the other Loan Documents;
(b) neither the Agent nor any Lender has any
fiduciary relationship with or fiduciary duty to the
Borrower arising out of or in connection with this
Agreement or any of the other Loan Documents, and the
relationship between the Agent and the Lenders, on the
one hand, and the Borrower, on the other hand, in
connection herewith or therewith is solely that of
debtor and creditor; and
(c) no joint venture is created hereby or by the
other Loan Documents or otherwise exists by virtue of
the transactions contemplated hereby among the Lenders
or among the Borrower and the Lenders or among the
Borrower and the Agent.
XII.17. Governing Law; Waiver of Jury Trial.
(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER
THAN THOSE SECURITY INSTRUMENTS WHICH EXPRESSLY PROVIDE THAT
THEY SHALL BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION)
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE
NOTWITHSTANDING ITS EXECUTION AND DELIVERY OUTSIDE SUCH
STATE.
(b) THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY
STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK,
STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER
EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF
JURISDICTION OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN
ANY SUCH SUIT, ACTION OR PROCEEDING, AND HEREBY IRREVOCABLY
SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF
ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING.
(c) THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE
MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND
COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR
PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE
PREPAID) TO THE ADDRESS OF THE BORROWER PROVIDED IN SECTION
12.2 HEREIN, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR
UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW
YORK.
(d) NOTHING CONTAINED IN SUBSECTIONS (a) OR (b) HEREOF
SHALL PRECLUDE THE AGENT OR ANY LENDER FROM BRINGING ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY
LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION WHERE THE
BORROWER OR ANY OF THE BORROWER'S PROPERTY OR ASSETS MAY BE
FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE
LAWS OF ANY SUCH JURISDICTION, THE BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT
AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR
PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER
IT AND ITS PROPERTY BY ANY SUCH OTHER COURT OR COURTS WHICH
NOW OR HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS OR REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT
OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION WITH THE FOREGOING, THE BORROWER, THE AGENT AND
THE LENDERS HEREBY AGREE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY WAIVE,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH
PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION OR
PROCEEDING.
N WITNESS WHEREOF, the parties hereto have caused this
instrument to be made, executed and delivered by their duly
authorized officers as of the day and year first above written.
HEADWAY CORPORATE RESOURCES, INC.
By: (Signature)
NATIONSBANK, NATIONAL ASSOCIATION
By: (Signature)
Lending Office:
NationsBank, National Association
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Dana Johnson
Telephone: (704) 388-3917
Telefacsimile: (704) 386-9923
FLEET BANK, N.A.
By: (Signature)
Lending Office:
Fleet Bank, N.A.
1185 Avenue of the Americas, 3rd
Floor
New York, New York 10036
Attention: Maria Casullo
Telephone: 212/819-5744
Telefacsimile: 212/819-4141
BANKBOSTON, N.A.
By: (Signature)
Lending Office:
BankBoston, N.A.
100 Rustcraft Road
Dedham, Massachusetts 02026
Attention: Joan LaFleur
Telephone: (781) 467-2275
Telefacsimile: (781) 467-2167
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: (Signature)
Lending Office:
Transamerica Business Credit
Corporation
8750 W. Bryn Mawr, Suite 720
Chicago, Illinois 60631
Attention: Maria Copot
Telephone: (773) 864-3988
Telefacsimile: (773) 380-6169
NATIONSBANK, NATIONAL ASSOCIATION
as Agent for the Lenders
By: (Signature)
EXHIBIT A
Applicable Commitment Percentages
Lender Revolving Applicable
Credit Commitment
Commitment Percentage
NationsBank, National
Association $30,000,000 40.0000000000%
Fleet Bank, N.A. $15,000,000 20.0000000000%
BankBoston, N.A. $15,000,000 20.0000000000%
Transamerica Business $15,000,000
20.0000000000%
Credit Corporation
EXHIBIT F
Form of Revolving Note
Promissory Note
$______________ New York, New York
______ __, 199_
FOR VALUE RECEIVED, HEADWAY CORPORATE RESOURCES, INC., a
Delaware corporation having its principal place of business
located in New York, New York (the "Borrower"), hereby promises
to pay to the order of
_______________________________________________ (the "Lender"),
in its individual capacity, at the office of NATIONSBANK,
NATIONAL ASSOCIATION, as agent for the Lenders (the "Agent"),
located at One Independence Center, 101 North Tryon Street, NC1-
001-15-04, Charlotte, North Carolina 28255 (or at such other
place or places as the Agent may designate in writing) at the
times set forth in the Credit Agreement dated as of March 19,
1998 among the Borrower, the financial institutions party thereto
(collectively, the "Lenders") and the Agent, as amended,
supplemented or replaced from time to time, (the "Agreement" --
all capitalized terms not otherwise defined herein shall have the
respective meanings set forth in the Agreement), in lawful money
of the United States of America, in immediately available funds,
the principal amount of ___________ DOLLARS ($__________) or, if
less than such principal amount, the aggregate unpaid principal
amount of all Loans made by the Lender to the Borrower pursuant
to the Agreement on the Revolving Credit Termination Date or such
earlier date as may be required pursuant to the terms of the
Agreement, and to pay interest from the date hereof on the unpaid
principal amount hereof, in like money, at said office, on the
dates and at the rates provided in Article II of the Agreement.
All or any portion of the principal amount of Loans may be
prepaid or required to be prepaid as provided in the Agreement.
If payment of all sums due hereunder is accelerated under
the terms of the Agreement or under the terms of the other Loan
Documents executed in connection with the Agreement, the then
remaining principal amount and accrued but unpaid interest shall
bear interest which shall be payable on demand at the rates per
annum set forth in the proviso to Section 2.2 (a) of the
Agreement. Further, in the event of such acceleration, this
Revolving Note shall become immediately due and payable, without
presentation, demand, protest or notice of any kind, all of which
are hereby waived by the Borrower.
In the event any amount evidenced by this Revolving Note is
not paid when due at any stated or accelerated maturity, the
Borrower agrees to pay, in addition to the principal and
interest, all costs of collection, including reasonable
attorneys' fees, and interest due hereunder thereon at the rates
set forth above.
Interest hereunder shall be computed as provided in the
Agreement.
This Revolving Note is one of the Notes in the aggregate
principal amount of $75,000,000 referred to in the Agreement and
is issued pursuant to and entitled to the benefits and security
of the Agreement to which reference is hereby made for a more
complete statement of the terms and conditions upon which the
Revolving Loans evidenced hereby were or are made and are to be
repaid. This Revolving Note is subject to certain restrictions
on transfer or assignment as provided in the Agreement.
All Persons bound on this obligation, whether primarily or
secondarily liable as principals, sureties, guarantors, endorsers
or otherwise, hereby waive to the full extent permitted by law
the benefits of all provisions of law for stay or delay of
execution or sale of property or other satisfaction of judgment
against any of them on account of liability hereon until judgment
be obtained and execution issued against any other of them and is
returned satisfied or until it can be shown that the maker or any
other party hereto had no property available for the satisfaction
of the debt evidenced by this instrument, or until any other
proceedings can be had against any of them, also their right, if
any, to require the holder hereof to hold as security for this
Revolving Note any collateral deposited by any of said Persons as
security. Protest, notice of protest, notice of dishonor,
diligence or any other formality are hereby waived by all parties
bound hereon.
This Revolving Note shall be governed by, and construed in
accordance with, the law of the State of New York.
IN WITNESS WHEREOF, the Borrower has caused this Revolving
Note to be made, executed and delivered by its duly authorized
representative as of the date and year first above written, all
pursuant to authority duly granted.
HEADWAY CORPORATE RESOURCES, INC.
WITNESS:
By:
Name:
Title:
E-393
Exhibit No. 12
Form 8-K
Headway Corporate Resources, Inc.
SEC File No. 0-23170
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "Guaranty Agreement" or this
"Guaranty"), dated as of March 19, 1998, is made by EACH OF THE
UNDERSIGNED (each a "Guarantor" and collectively the
"Guarantors") to NATIONSBANK, NATIONAL ASSOCIATION, a national
banking association organized and existing under the laws of the
United States, as agent (the "Agent") for each of the lenders
(the "Lenders" and collectively with the Agent, the "Secured
Parties") now or hereafter party to the Credit Agreement (as
defined below). All capitalized terms used but not otherwise
defined herein shall have the respective meanings assigned
thereto in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Secured Parties have agreed to provide to
Headway Corporate Resources, Inc., a Delaware corporation (the
"Borrower"), a certain revolving credit facility with a letter of
credit sublimit pursuant to the Credit Agreement dated as of
March 19, 1998 among the Borrower, the Agent and the Lenders (as
from time to time amended, revised, modified, supplemented or
amended and restated, the "Credit Agreement"); and
WHEREAS, each Guarantor is a Subsidiary of the Borrower and
will materially benefit from the Loans and Advances to be made,
and the Letters of Credit to be issued, under the Credit
Agreement, and each Guarantor is willing to enter into this
Guaranty Agreement to provide an inducement for the Secured
Parties to make such Loans and Advances and issue such Letters of
Credit thereunder;
NOW, THEREFORE, in order to induce the Secured Parties to
enter into the Credit Agreement and the other Loan Documents and
in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. Guaranty. Each Guarantor hereby jointly and severally,
unconditionally, absolutely, continually and irrevocably
guarantees to the Secured Parties the payment and performance in
full of the Borrower's Liabilities (as defined below). For all
purposes of this Guaranty Agreement, "Borrower's Liabilities"
means: (a) the Borrower's prompt payment in full, when due or
declared due and at all such times, of all Obligations and all
other amounts pursuant to the terms of the Credit Agreement, the
Notes, and all other Loan Documents executed in connection with
the Credit Agreement heretofore, now or at any time or times
hereafter owing, arising, due or payable from the Borrower to any
one or more of the Secured Parties, including without limitation
principal, interest, premium or fee (including, but not limited
to, loan fees and attorneys' fees and expenses); (b) the
Borrower's prompt, full and faithful performance, observance and
discharge of each and every agreement, undertaking, covenant and
provision to be performed, observed or discharged by the Borrower
under the Credit Agreement and all other Loan Documents executed
in connection therewith; and (c) the Borrower's prompt payment in
full, when due or declared due and at all such times, of all
Hedging Obligations arising under Swap Agreements to which any
Lender or its affiliates are a party. Each Guarantor's
obligations to the Agent and the Lenders under this Guaranty
Agreement are hereinafter collectively referred to as the
"Guarantors' Obligations"; provided, however, that the liability
of each Guarantor individually with respect to the Guarantors'
Obligations shall be limited to an aggregate amount equal to the
largest amount that would not render its obligations hereunder
subject to avoidance under Section 548 of the United States
Bankruptcy Code or any comparable provisions of any applicable
state law.
Each Guarantor agrees that it is jointly and severally,
directly and primarily liable for the Borrower's Liabilities.
2. Payment. If the Borrower shall default in payment or
performance of any Borrower's Liabilities when and as the same
shall become due, whether according to the terms of the Credit
Agreement, by acceleration, or otherwise, or upon the occurrence
of any other Event of Default under the Credit Agreement that has
not been cured or waived, then each Guarantor, upon demand
thereof by the Agent or its successors or assigns, will, as of
the date of the Agent's demand, fully pay to the Agent, for the
benefit of the Secured Parties, subject to any restriction set
forth in Section 1 hereof, an amount equal to all Guarantor's
Obligations then due and owing.
3. Unconditional Obligations. This is a guaranty of
payment and not of collection. The Guarantors' Obligations under
this Guaranty Agreement shall be joint and several, absolute and
unconditional irrespective of the validity, legality or
enforceability of the Credit Agreement, the Notes or any other
Loan Document or any other guaranty of the Borrower's
Liabilities, and shall not be affected by any action taken under
the Credit Agreement, the Notes or any other Loan Document, any
other guaranty of the Borrower's Liabilities, or any other
agreement between any Secured Party and the Borrower or any other
person, in the exercise of any right or power therein conferred,
or by any failure or omission to enforce any right conferred
thereby, or by any waiver of any covenant or condition therein
provided, or by any acceleration of the maturity of any of the
Borrower's Liabilities, or by the release or other disposal of
any Collateral or other security for any of the Borrower's
Liabilities, or by the dissolution of the Borrower or the
combination or consolidation of the Borrower into or with another
entity or any transfer or disposition of any assets of the
Borrower or by any extension or renewal of the Credit Agreement,
any of the Notes or any other Loan Document, in whole or in part,
or by any modification, alteration, amendment or addition of or
to the Credit Agreement, any of the Notes or any other Loan
Document, any other guaranty of the Borrower's Liabilities, or
any other agreement between any Secured Party and the Borrower or
any other Person, or by any other circumstance whatsoever (with
or without notice to or knowledge of any Guarantor) which may or
might in any manner or to any extent vary the risks of any
Guarantor, or might otherwise constitute a legal or equitable
discharge of a surety or guarantor; it being the purpose and
intent of the parties hereto that this Guaranty Agreement and the
Guarantors' Obligations hereunder shall be absolute and
unconditional under any and all circumstances and shall not be
discharged except by payment as herein provided.
4. Currency and Funds of Payment. Each Guarantor hereby
guarantees that the Guarantors' Obligations will be paid in
lawful currency of the United States of America and in
immediately available funds, regardless of any law, regulation or
decree now or hereafter in effect that might in any manner affect
the Borrower's Liabilities, or the rights of any Secured Party
with respect thereto as against the Borrower, or cause or permit
to be invoked any alteration in the time, amount or manner of
payment by the Borrower of any or all of the Borrower's
Liabilities.
5. Events of Default. In the event that (a) any Guarantor
shall file a petition to take advantage of any insolvency
statute; (b) any Guarantor shall commence or suffer to exist a
proceeding for the appointment of a receiver, trustee, liquidator
or conservator of itself or of the whole or substantially all of
its property; (c) any Guarantor shall file a petition or answer
seeking reorganization or arrangement or similar relief under the
Federal bankruptcy laws or any other applicable law or statute of
the United States of America or any state or similar law of any
other country; (d) a court of competent jurisdiction shall enter
an order, judgment or decree appointing a custodian, receiver,
trustee, liquidator or conservator of any Guarantor or of the
whole or substantially all of its properties, or approve a
petition filed against any Guarantor seeking reorganization or
arrangement or similar relief under the Federal bankruptcy laws
or any other applicable law or statute of the United States of
America or any state or similar law of any other country, or if,
under the provisions of any other law for the relief or aid of
debtors, a court of competent jurisdiction shall assume custody
or control of any Guarantor or of the whole or substantially all
of its properties and such order, judgment, decree, approval or
assumption remains unstayed or undismissed for a period of sixty
(60) consecutive days; (e) there is commenced against any
Guarantor any proceeding or petition seeking reorganization,
arrangement or similar relief under the Federal bankruptcy laws
or any other applicable law or statute of the United States of
America or any state, which proceeding or petition remains
unstayed or undismissed for a period of sixty (60) consecutive
days; (f) there shall occur and be continuing an Event of Default
under the Credit Agreement; (g) any default shall occur in the
payment of amounts due hereunder; or (h) any other default in
compliance with the terms hereof shall occur which remains
uncured or unwaived for a period of thirty (30) days after the
earlier of the date notice of such default is received by an
officer of such Guarantor or the date an officer of such
Guarantor otherwise has knowledge of such default (each of the
foregoing an "Event of Default" hereunder), then notwithstanding
any Collateral or other security that any Secured Party may
possess from Borrower or any Guarantor or any other guarantor of
the Borrower's Liabilities, or any other party, at the Agent's
election and without notice thereof or demand therefor, so long
as such Event of Default shall be continuing, the Guarantors'
Obligations shall immediately become due and payable.
6. Suits. Each Guarantor from time to time shall pay to
the Agent for the benefit of the Secured Parties, on demand, at
the Agent's place of business set forth in the Credit Agreement,
the Guarantors' Obligations as they become or are declared due,
and in the event such payment is not made forthwith, the Agent or
the Lenders or any of them may proceed to suit against any one or
more or all of the Guarantors. At the Agent's election, one or
more and successive or concurrent suits may be brought hereon by
the Agent against any one or more or all of the Guarantors,
whether or not suit has been commenced against the Borrower, any
other guarantor of the Borrower's Liabilities, or any other
Person and whether or not the Agent or any Lender has taken or
failed to take any other action to collect all or any portion of
the Borrower's Liabilities.
7. Set-Off and Waiver. Each Guarantor waives any right to
assert against the Agent or any Lender as a defense,
counterclaim, set-off or cross claim, any defense (legal or
equitable) or other claim which such Guarantor may now or at any
time hereafter have against the Borrower, the Agent or the
Lenders, without waiving any additional defenses, set-offs,
counterclaims or other claims otherwise available to such
Guarantor. If at any time hereafter the Agent or any Lender
employs counsel for advice or other representation to enforce the
Guarantors' Obligations that arise out of an Event of Default,
then, in any of the foregoing events, all of the reasonable
attorneys' fees arising from such services and all expenses,
costs and charges in any way or respect arising in connection
therewith or relating thereto shall be jointly and severally paid
by the Guarantors to the Agent, for the benefit of the Secured
Parties, on demand. Each Guarantor agrees that the Agent and
each Lender shall have a lien for all the Guarantors' Obligations
upon all deposits or deposit accounts, of any kind, or any
interest in any deposits or deposit accounts thereof, now or
hereafter pledged, mortgaged, transferred or assigned to the
Agent or such Lender or otherwise in the possession or control of
the Agent or such Lender (other than for safekeeping) for any
purpose for the account or benefit of such Guarantor and
including any balance of any deposit account or of any credit of
such Guarantor with the Agent or such Lender, whether now
existing or hereafter established, hereby authorizing the Agent
and each Lender from and after the occurrence of an Event of
Default giving rise to the Guarantors' Obligations at any time or
times with or without prior notice to apply such balances or any
part thereof to such of the Guarantors' Obligations to the
Lenders then past due and in such amounts as they may elect, and
whether or not the collateral or the responsibility of other
Persons primarily, secondarily or otherwise liable may be deemed
adequate. For the purposes of this paragraph, all remittances
and property shall be deemed to be in the possession of the Agent
or such Lender as soon as the same may be put in transit to it by
mail or carrier or by other bailee.
8. Waiver; Subrogation.
(a) Each Guarantor hereby waives notice of the following
events or occurrences: (i) the Agent's acceptance of this
Guaranty Agreement; (ii) the Lenders' heretofore, now or from
time to time hereafter loaning monies or giving or extending
credit to or for the benefit of the Borrower, whether pursuant to
the Credit Agreement or the Notes or any amendments,
modifications, or supplements thereto, or replacements or
extensions thereof; (iii) the Agent, the Lenders or the Borrower
heretofore, now or at any time hereafter, obtaining, amending,
substituting for, releasing, waiving or modifying the Credit
Agreement, the Notes or any other Loan Documents; (iv)
presentment, demand, notices of default, non-payment, partial
payment and protest; (v) the Agent or the Lenders heretofore, now
or at any time hereafter granting to the Borrower (or any other
party liable to the Lenders on account of the Borrower's
Liabilities) any indulgence or extensions of time of payment of
the Borrower's Liabilities; and (vi) the Agent or the Lenders
heretofore, now or at any time hereafter accepting from the
Borrower or any other person, any partial payment or payments on
account of the Borrower's Liabilities or any collateral securing
the payment thereof or the Agent settling, subordinating,
compromising, discharging or releasing the same. Each Guarantor
agrees that the Agent and each Lender may heretofore, now or at
any time hereafter do any or all of the foregoing in such manner,
upon such terms and at such times as the Agent or any Lender, in
its sole and absolute discretion, deems advisable, without in any
way or respect impairing, affecting, reducing or releasing such
Guarantor from the Guarantors' Obligations, and each Guarantor
hereby consents to each and all of the foregoing events or
occurrences.
(b) Each Guarantor hereby agrees that payment or
performance by such Guarantor of the Guarantors' Obligations
under this Guaranty Agreement may be enforced by the Agent on
behalf of the Secured Parties upon demand by the Agent to such
Guarantor without the Agent being required, each Guarantor
expressly waiving any right it may have to require the Agent, to
(i) prosecute collection or seek to enforce or resort to any
remedies against the Borrower or any other Guarantor or any other
guarantor of the Borrower's Liabilities, it being expressly
understood, acknowledged and agreed to by each Guarantor that
demand under this Guaranty Agreement may be made by the Agent,
and the provisions hereof enforced by the Agent, effective as of
the first date any Event of Default occurs and is continuing
under the Credit Agreement, or (ii) seek to enforce or resort to
any remedies with respect to any security interests, Liens or
encumbrances granted to the Agent by the Borrower or any other
Guarantor or other Person on account of the Borrower's
Liabilities or any guaranty thereof. Neither the Agent nor any
Lender shall have any obligation to protect, secure or insure any
of the foregoing security interests, Liens or encumbrances on the
properties or interests in properties subject thereto. The
Guarantors' Obligations shall in no way be impaired, affected,
reduced, or released by reason of the Agent's or any Lender's
failure or delay to do or take any of the acts, actions or things
described in this Guaranty Agreement including, without limiting
the generality of the foregoing, those acts, actions and things
described in this Section 8.
(c) Each Guarantor further agrees with respect to this
Guaranty Agreement that it shall have no right of subrogation,
reimbursement or indemnity, nor any right of recourse to security
for the Borrower's Liabilities. This waiver is expressly
intended to prevent the existence of any claim in respect to such
reimbursement by the Guarantor against the estate of Borrower
within the meaning of Section 101 of the Bankruptcy Code, and to
prevent the Guarantor from constituting a creditor of Borrower in
respect of such reimbursement within the meaning of Section
547(b) of the Bankruptcy Code in the event of a subsequent case
involving the Borrower.
9. Effectiveness; Enforceability. This Guaranty Agreement
shall be effective as of the date of the initial Advance under
the Credit Agreement and shall continue in full force and effect
until terminated in accordance with Section 16 hereof. The Agent
shall give each Guarantor written notice of such termination at
each Guarantor's address set forth in the Credit Agreement. This
Guaranty Agreement shall be binding upon and inure to the benefit
of each Guarantor, the Agent and the Lenders and their respective
successors and assigns. Notwithstanding the foregoing, no
Guarantor may, without the prior written consent of the Agent,
assign any rights, powers, duties or obligations hereunder except
as permitted under Section 9.7 of the Credit Agreement. Any
claim or claims that the Agent and the Lenders may at any time
hereafter have against any Guarantor under this Guaranty
Agreement may be asserted by the Agent or any Lender by written
notice directed to any one or more or all of the Guarantors at
the address specified in the Credit Agreement.
10. Representations and Warranties. Each Guarantor
represents and warrants to the Agent for the benefit of the
Secured Parties that it is duly authorized to execute, deliver
and perform this Guaranty Agreement, that this Guaranty Agreement
is legal, valid, binding and enforceable against such Guarantor
in accordance with its terms except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles; and that such
Guarantor's execution, delivery and performance of this Guaranty
Agreement do not violate or constitute a breach of its
certificate of incorporation or other documents of corporate
governance or any agreement to which such Guarantor is a party,
or any applicable laws, in each case, which violation or breach
could reasonably be expected to have a Material Adverse Effect
with respect to such Guarantor.
11. Expenses. Each Guarantor agrees to be jointly and
severally liable for the payment of all reasonable fees and
expenses, including attorney's fees, incurred by the Agent in
connection with the enforcement of this Guaranty Agreement.
12. Reinstatement. Each Guarantor agrees that this
Guaranty Agreement shall continue to be effective or be
reinstated, as the case may be, at any time payment received by
the Agent under the Credit Agreement or this Guaranty Agreement
is rescinded or must be restored for any reason.
13. Counterparts. This Guaranty Agreement may be executed
in any number of counterparts, each of which shall be deemed to
be an original as against any party whose signature appears
thereon, and all of which shall constitute one and the same
instrument.
14. Reliance. Each Guarantor represents and warrants to
the Agent, for the benefit of the Agent and the Lenders, that:
(a) such Guarantor has adequate means to obtain from Borrower, on
a continuing basis, information concerning Borrower and
Borrower's financial condition and affairs and has full and
complete access to Borrower's books and records; (b) such
Guarantor is not relying on the Agent or any Lender, its or their
employees, agents or other representatives, to provide such
information, now or in the future; (c) such Guarantor is
executing this Guaranty Agreement freely and deliberately, and
understands the obligations and financial risk undertaken by
providing this Guaranty; (d) such Guarantor has relied solely on
the Guarantor's own independent investigation, appraisal and
analysis of Borrower and Borrower's financial condition and
affairs in deciding to provide this Guaranty and is fully aware
of the same; and (e) such Guarantor has not depended or relied on
the Agent or any Lender, its or their employees, agents or
representatives, for any information whatsoever concerning
Borrower or Borrower's financial condition and affairs or other
matters material to such Guarantor's decision to provide this
Guaranty or for any counseling, guidance, or special
consideration or any promise therefor with respect to such
decision. Each Guarantor agrees that neither the Agent nor any
Lender has any duty or responsibility whatsoever, now or in the
future, to provide to any Guarantor any information concerning
Borrower or Borrower's financial condition and affairs, other
than as expressly provided herein, and that, if such Guarantor
receives any such information from the Agent or any Lender, its
or their employees, agents or other representatives, such
Guarantor will independently verify the information and will not
rely on the Agent or any Lender, its or their employees, agents
or other representatives, with respect to such information.
15. Notices. Any notice shall be conclusively deemed to
have been received by any party hereto and be effective (i) on
the day on which delivered (including hand delivery by commercial
courier service) to such party (against receipt therefor), (ii)
on the date of receipt at such address or telefacsimile number
as may from time to time be specified by such party in written
notice to the other parties hereto or otherwise received), in the
case of notice by telegram or telefacsimile, respectively (where
the receipt of such message is verified by return), or (iii) on
the fifth Business Day after the day on which mailed, if sent
prepaid by certified or registered mail, return receipt
requested, in each case delivered, transmitted or mailed, as the
case may be, to the address or telefacsimile number, as
appropriate, set forth below or such other address or number as
such party shall specify by notice hereunder:
(a) if to any Guarantor:
Headway Corporate Resources, Inc.
850 Third Avenue
New York, New York 10022
Attention: Ms. Philicia G. Levinson, Senior Vice
President and Director of Corporate
Development
Telephone: (212) 508-3487
Telefacsimile: (212) 508-3507
with a copy to:
Christy & Viener
Rockefeller Center
620 Fifth Avenue
New York, New York 10020-2457
Attention: Richard B. Salomon, Esq.
Telephone: (212) 632-5500
Telefacsimile: (212) 632-5555
(b) if to the Agent:
NationsBank, National Association
767 Fifth Avenue
New York, New York 10153-0083
Attention: Susan Timmerman, Corporate Finance
Telephone: (212) 407-5387
Telefacsimile: (212) 407-751-6909
with a copy to:
NationsBank, National Association
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Dana Johnson, Agency Services
Telephone: (704) 388-3917
Telefacsimile: (704) 386-9923
16. Termination. This Guaranty Agreement and all
obligations of the Guarantors hereunder shall terminate without
delivery of any instrument or performance of any act by any party
on the Collateral Termination Date.
18. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the heirs, legal
representatives, successors and assigns of the respective parties
hereto; provided, however, no Guarantor shall make any assignment
hereof without the prior written consent of the Agent.
19. Governing Law; Waivers of Trial by Jury, Etc.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED,
IN SUCH STATE NOTWITHSTANDING ITS EXECUTION AND DELIVERY
OUTSIDE SUCH STATE.
(b) EACH GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY
AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY
STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK,
STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY WAIVES
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE IN, OR TO THE EXERCISE OF JURISDICTION
OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH
SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS
GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY
SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING.
(c) EACH GUARANTOR AGREES THAT SERVICE OF PROCESS MAY
BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND
COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR
PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE
PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED IN SECTION 15
HEREOF OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER
THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF
SHALL PRECLUDE ANY SECURED PARTY FROM BRINGING ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT IN THE COURTS OF ANY
JURISDICTION WHERE ANY GUARANTOR OR ANY OF SUCH PARTY'S
PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT
PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION,
EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN
RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING OBJECTION TO
THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY
OTHER COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE
AVAILABLE UNDER APPLICABLE LAW.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED
OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH
THE FOREGOING, EACH GUARANTOR AND THE AGENT ON BEHALF OF THE
SECURED PARTIES HEREBY AGREE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY
WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT
ANY SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION
OR PROCEEDING.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement on the day and year first written above.
GUARANTORS:
WHITNEY PARTNERS, L.L.C.
HEADWAY CORPORATE STAFFINGSERVICES,INC.
CERTIFIED TECHNICAL STAFFING, INC.
CORPORATE STAFFING ALTERNATIVES, INC.
HEADWAY CORPORATE STAFFING SERVICES
OF NEW YORK, INC.
HEADWAY PERSONNEL, INC.
HEADWAY CORPORATE STAFFING
SERVICES OF NORTH CAROLINA, INC.
HEADWAY CORPORATE STAFFING
SERVICES OF CONNECTICUT, INC.
ASA PERSONNEL SERVICES, L.L.C.
E.D.R. ASSOCIATES, INC.
HCSS WEST, INC.
HCSS HOLDINGS, INC.
HCSS EAST, INC.
CHENEY ASSOCIATES, L.L.C.
By: (Signature)
AGENT:
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
By: (Signature)
E-402
Exhibit No. 13
Form 8-K
Headway Corporate Resources, Inc.
SEC File No. 0-23170
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") dated as of March
19, 1998 is made between HEADWAY CORPORATE RESOURCES, INC., a
Delaware corporation (the "Borrower"), and EACH OF THE
UNDERSIGNED SUBSIDIARIES OF THE BORROWER (each a "Guarantor", and
collectively with the Borrower, the "Grantors"), and NATIONSBANK,
NATIONAL ASSOCIATION, a national banking association organized
and existing under the laws of the United States, as agent (the
"Agent") for each of the lenders (the "Lenders" and collectively
with the Agent, the "Secured Parties") now or hereafter party to
the Credit Agreement (as defined below). All capitalized terms
used but not otherwise defined herein shall have the respective
meanings assigned thereto in the Credit Agreement (as defined
below);
W I T N E S S E T H:
WHEREAS, the Secured Parties have agreed to provide to the
Borrower a certain revolving credit facility with a letter of
credit sublimit pursuant to the Credit Agreement dated as of
March 19, 1998 among the Borrower, the Agent and the Lenders (as
from time to time amended, revised, modified, supplemented or
amended and restated, the "Credit Agreement"); and
WHEREAS, as collateral security for payment and performance
of its Obligations, the Borrower is willing to grant to the Agent
for the benefit of the Secured Parties a security interest in all
of its personal property and assets pursuant to the terms of this
Agreement; and
WHEREAS, each Guarantor will materially benefit from the
Loans and Advances to be made, and the Letters of Credit to be
issued, under the Credit Agreement and each Guarantor is a party
to that certain Guaranty Agreement (the "Guaranty") dated as of
the date hereof pursuant to which each Guarantor guaranteed the
Obligations of the Borrower; and
WHEREAS, as collateral security for payment and performance
of its Guarantors' Obligations, as defined in the Guaranty, each
Guarantor is willing to grant to the Agent for the benefit of the
Secured Parties a security interest in all of its personal
property and assets; and
WHEREAS, the Secured Parties are unwilling to enter into the
Loan Documents unless the Borrower and the Guarantors enter into
this Agreement;
NOW, THEREFORE, in order to induce the Secured Parties to
enter into the Loan Documents and to make Loans and Advances and
issue Letters of Credit and in consideration of the premises and
the mutual covenants contained herein, the parties hereto agree
as follows:
1. Grant of Security Interest. As collateral security for
the payment, performance, and satisfaction of all Guarantors'
Obligations of the Guarantors under the Guaranty Agreement and
all of the Borrower's Obligations (collectively, the "Secured
Obligations"), each Grantor hereby grants to the Agent for the
benefit of the Secured Parties a continuing first priority
security interest in and to, and collectively assigns to the
Agent for the benefit of the Secured Parties all of the property
of such Grantor, whether now owned or existing or hereafter
acquired or arising and wheresoever located, including without
limitation the following:
(a) All accounts, accounts receivable, contracts,
notes, bills, acceptances, choses in action, chattel paper,
instruments, documents and other forms of obligations at any
time owing to each Grantor arising out of goods sold or
leased or for services rendered by such Grantor, the
proceeds thereof and all of such Grantor's rights with
respect to any goods represented thereby, whether or not
delivered, goods returned by customers and all rights as an
unpaid vendor or lienor, including rights of stoppage in
transit and of recovering possession by proceedings
including replevin and reclamation, together with all
customer lists, books and records, ledger and account cards,
computer tapes, software, disks, printouts and records,
whether now in existence or hereafter created, relating
thereto (collectively referred to hereinafter as
"Accounts");
(b) All inventory of each Grantor wherever located in
the United States of America and any state, district,
territory or other political subdivision thereof, including
without limitation, all goods manufactured or acquired for
sale or lease, and any piece goods, raw materials, work in
process and finished merchandise, findings or component
materials, and all supplies, goods, incidentals, office
supplies, packaging materials and any and all items used or
consumed in the operation of the business of such Grantor or
which may contribute to the finished product or to the sale,
promotion and shipment thereof, in which such Grantor now or
at any time hereafter may have an interest, whether or not
the same is in transit or in the constructive, actual or
exclusive occupancy or possession of such Grantor or is held
by such Grantor or by others for such Grantor's account
(collectively referred to hereinafter as "Inventory");
(c) All goods of each Grantor, including without
limitation, all machinery, equipment, motor vehicles, parts,
supplies, apparatus, appliances, tools, patterns, molds,
dies, blueprints, fittings, furniture, furnishings and
articles of tangible personal property of every description
now or hereafter owned by such Grantor or in which such
Grantor may have or may hereafter acquire any interest, at
any location (collectively referred to hereinafter as
"Equipment");
(d) All general intangibles of each Grantor in which a
Grantor now has or hereafter acquires any rights, including
but not limited to, causes of action, corporate or business
records, inventions, designs, goodwill, trade names, trade
secrets, trade processes, licenses, permits, franchises,
customer lists, computer programs, all claims under
guaranties, tax refund claims, rights and claims against
carriers and shippers, leases, claims under insurance
policies, all rights to indemnification and all other
intangible personal property and intellectual property of
every kind and nature (collectively referred to hereinafter
as "General Intangibles");
(e) All rights now or hereafter accruing to each
Grantor under contracts, leases, agreements or other
instruments to perform services, to hold and use land and
facilities, and to enforce all rights thereunder
(collectively referred to hereinafter as "Contract Rights");
(f) All books and records relating to any of the
Collateral (as hereinafter defined) (including without
limitation, customer data, credit files, computer programs,
printouts, and other computer materials and records of each
Grantor pertaining to any of the foregoing); and
(g) All accessions to, substitutions for and all
replacements, products and proceeds of the foregoing,
including without limitation proceeds of insurance policies
insuring the Collateral (as hereinafter defined).
All of the property and interests in property described in
subsections (a) through (g) and all other property and interests
in personal property which shall, from time to time, secure the
Secured Obligations are herein collectively referred to as the
"Collateral."
2. Financing Statements. At the time of execution of this
Agreement, each Grantor shall have furnished the Agent with
properly executed financing statements, registrar's certificates,
amendments and assignments as prescribed by the Uniform
Commercial Code as presently in effect in the states where the
Collateral is located, prepared and approved by the Agent in form
and number sufficient for filing wherever required with respect
to the Collateral, in order that the Agent, for the benefit of
the Secured Parties, shall have a duly perfected security
interest of record in the Collateral, to the extent a security
interest in such Collateral can be perfected by filing a
financing statement, following the filing of such financing
statements with the appropriate local and state governmental
authorities, subject only to Permitted Liens. Each Grantor shall
execute as reasonably required by the Agent any additional
financing statements or other documents to effect the same,
together with any necessary continuation statements so long as
this Agreement remains in effect.
3. Maintenance of Security Interest. Each Grantor will,
from time to time, upon the request of the Agent, deliver
specific assignments of Collateral, together with such other
instruments and documents, financing statements, amendments
thereto, assignments or other writings as the Agent may request
to carry out the terms of this Agreement or to protect or enforce
the Agent's security interest in the Collateral.
With respect to any and all Collateral to be secured and
conveyed under this Agreement, each Grantor agrees to do and
cause to be done, upon the Agent's request, all things
determined by the Agent to be necessary to perfect and keep in
full force the security interest granted in favor of the Agent
for the benefit of the Secured Parties, including, but not
limited to, the prompt payment of all fees and expenses incurred
in connection with any filings made to perfect or continue a
security interest in the Collateral in favor of the Agent for the
benefit of the Secured Parties.
Each Grantor agrees to make appropriate entries upon its
financial statements and books and records disclosing the
security interest granted hereunder to the Agent for the benefit
of the Secured Parties.
4. Receipt of Payment. In the event an Event of Default
shall occur and be continuing and a Grantor (or any of its
affiliates, subsidiaries, stockholders, directors, officers,
employees or agents) shall receive any proceeds of Collateral,
including without limitation monies, checks, notes, drafts or any
other items of payment, each Grantor shall hold all such items of
payment in trust for the Agent, for the benefit of the Secured
Parties, and as the property of the Agent, for the benefit of the
Secured Parties, separate from the funds of such Grantor, and no
later than the first Business Day following the receipt thereof,
at the election of the Agent, such Grantor shall cause the same
to be forwarded to the Agent for its custody and possession on
behalf of the Lenders as additional Collateral.
5. Covenants. Each Grantor covenants with the Agent that
from and after the date of this Agreement until termination
hereof in accordance with Section 27 hereof:
(a) Inspection. The Agent (by any of its officers,
employees and agents), on behalf of the Lenders, shall have
the right upon prior notice to an executive officer of the
Borrower, and at any reasonable times during such Grantor's
usual business hours, to inspect the Collateral, all records
related thereto (and to make extracts or copies from such
records), and the premises upon which any of the Collateral
is located, to discuss such Grantor's affairs and finances
with any Person (other than Persons obligated on Accounts
(hereinafter referred to as "Account Debtors")) and to
verify with any Person other than Account Debtors the
amount, quality, quantity, value and condition of, or any
other matter relating to, the Collateral and, if an Event of
Default has occurred and is continuing, to discuss such
Grantor's affairs and finances with such Grantor's Account
Debtors and to verify the amount, quality, value and
condition of, or any other matter relating to, the
Collateral and such Account Debtors. Upon or after the
occurrence and during the continuation of an Event of
Default, the Agent may at any time and from time to time
employ and maintain on such Grantor's premises a custodian
selected by the Agent who shall have full authority to do
all acts necessary to protect the Agent's (for the benefit
of the Secured Parties) interest. All expenses incurred by
the Agent, on behalf of the Secured Parties, by reason of
the employment of such custodian shall be paid by such
Grantor, added to the Secured Obligations and secured by the
Collateral. The right of the Agent under this subsection
(a) to inspect the Collateral and all records related
thereto and the premises upon which any Collateral shall be
located (A) prior to the occurrence and continuation of an
Event of Default, shall be limited to two inspections per
year at the respective Grantor's expense, and (B) after the
occurrence and during the continuation of an Event of
Default, shall be unlimited at the respective Grantor's
expense.
(b) Assignments, Records and Schedules of Accounts.
Each Grantor shall keep accurate and complete records of its
Accounts ("Account Records") and from time to time at
intervals designated by the Agent (but not more frequently
than monthly) such Grantor shall provide the Agent with a
schedule of Accounts in form and substance acceptable to the
Agent describing all Accounts created or acquired by such
Grantor ("Schedule of Accounts"); provided, however, that
such Grantor's failure to execute and deliver any such
Schedule of Accounts shall not affect or limit the Agent's
security interest or other rights in and to any Accounts for
the benefit of the Secured Parties. If requested by the
Agent, each Grantor shall furnish the Agent with copies of
proof of delivery and other documents relating to the
Accounts so scheduled, including without limitation
repayment histories and present status reports
(collectively, "Account Documents") and such other matter
and information relating to the status of then existing
Accounts as the Agent shall request. No Grantor shall
remove any Account Records or Account Documents or change
its chief executive offices from the locations set forth in
Exhibit A hereto without 30 days prior written notice to the
Agent as provided in Section 28 hereof and delivery to the
Agent by the applicable Grantor prior to such removal of
executed financing statements, amendments and other
documents necessary in the determination of the Agent to
maintain the security interests granted hereunder.
(c) Notice Regarding Disputed Accounts. In the event
any amounts due and owing in excess of $500,000
individually, or $1,200,000 in the aggregate amount, are in
dispute between any Account Debtor and a Grantor (which
shall include without limitation any dispute in which an
offset claim or counterclaim may result), such Grantor shall
provide the Agent with written notice thereof as soon as
practicable, explaining in detail the reason for the
dispute, all claims related thereto and the amount in
controversy.
(d) Change of Trade Styles. No Grantor shall change,
amend, alter, terminate, or cease using its material trade
names or styles under which it sells Inventory as of the
date of this Agreement ("Trade Styles"), or use additional
Trade Styles, without giving the Agent at least 30 days'
prior written notice and delivery to the Agent by the
applicable Grantor prior to such removal, change, amendment,
alteration, or use, of executed financing statements,
amendments and other documents necessary in the
determination of the Agent to maintain the security
interests granted hereunder.
(e) Safekeeping of Inventory. Each Grantor shall be
responsible for the safekeeping of its Inventory, and in no
event shall the Agent have any responsibility for:
(i) Any loss or damage to Inventory or
destruction thereof occurring or arising in any manner
or fashion from any cause;
(ii) Any diminution in the value of Inventory; or
(iii) Any act or default of any carrier,
warehouseman, bailee or forwarding agency thereof or
other Person in any way dealing with or handling
Inventory.
(f) Location, Records and Schedules of Inventory.
Each Grantor shall keep correct and accurate records
itemizing and describing the kind, type, location and
quantity of Inventory, its cost therefor and the selling
price of Inventory held for sale, and the daily withdrawals
therefrom and additions thereto, and shall furnish to the
Agent from time to time at reasonable intervals designated
by the Agent, a current schedule of Inventory ("Schedule of
Inventory") based upon its most recent physical inventory
and its daily inventory records. Each Grantor shall conduct
a physical inventory, no less than annually, and shall
furnish to the Agent such other documents and reports
thereof as the Agent shall reasonably request with respect
to the Inventory. Subject to compliance at all times with
Sections 8(c), (d) and (e), no Grantor shall, other than in
the ordinary course of business in connection with its sale,
remove any material amount of Inventory from the locations
set forth on Exhibit B hereto to a location not also set
forth on Exhibit B hereto, each of such locations being
owned by a Grantor unless otherwise indicated, without 30
days prior written notice to the Agent as provided in
Section 28 hereof and delivery to the Agent by the
applicable Grantor prior to such removal of executed
financing statements, amendments and other documents
necessary in the determination of the Agent to maintain the
security interests granted hereunder.
(g) Returns of Inventory. If any Account Debtor
returns any Inventory to a Grantor after shipment thereof,
and such return generates a credit in excess of $500,000 on
any individual Account or $1,200,000 in the aggregate on any
Accounts of such Account Debtor, such Grantor shall notify
the Agent in writing of the same as soon as practicable.
(h) Evidence of Ownership of Equipment. The Grantors,
as soon as practicable following a request therefor by the
Agent, shall deliver to the Agent any and all evidence of
ownership of any of the Equipment (including without
limitation certificates of title and applications for
title).
(i) Location, Records and Schedules of Equipment. The
Grantors shall maintain accurate, itemized records itemizing
and describing the kind, type, quality, quantity and value
of its Equipment and shall furnish the Agent upon request
with a current schedule containing the foregoing
information, but, other than during the continuance of an
Event of Default, not more often than once per fiscal year.
No Grantor shall remove any material portion of the
Equipment from the locations set forth in Exhibit C hereto
to a location not also set forth on Exhibit C hereto without
at least 30 days' prior written notice to the Agent as
provided in Section 28 hereof and delivery to the Agent by
the applicable Grantor prior to such removal of executed
financing statements, amendments and other documents
necessary to maintain the security interests granted
hereunder.
(j) Sale or Mortgage of Equipment. Except as
permitted by the Credit Agreement prior to the occurrence
and continuance of an Event of Default, no Grantor shall
sell, exchange, lease, mortgage, encumber, pledge or
otherwise dispose of or transfer any of the Equipment or any
part thereof without the prior written consent of the Agent.
(k) Maintenance of Equipment. Each Grantor shall keep
and maintain its Equipment in good operating condition and
repair, ordinary wear and tear excepted. No Grantor shall
permit any such items to become a fixture to real property
(unless such Grantor has granted the Agent for the benefit
of the Secured Parties a lien on such real property) or
accessions to other personal property.
(l) Transfers and Other Liens. Each Grantor shall not
(i) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of, or grant any option with
respect to, the Collateral, except for dispositions
permitted under the Credit Agreement and Section 5(j)
hereof, (ii) create or suffer to exist any Lien, security
interest or other charge or encumbrance upon or with respect
to any of the Collateral except for the security interests
created by this Agreement or other Permitted Liens; or (iii)
take any other action in connection with any of the
Collateral that would materially impair the value of the
interest or rights of such Grantor in the Collateral taken
as a whole or that would materially impair the interest or
rights of the Agent for the benefit of the Secured Parties.
6. Warranties and Representations Regarding Collateral
Generally. Each Grantor warrants and represents that:
(a) It is and, except as permitted by the Credit
Agreement and Section 5(m) hereof, will continue to be the
owner of the Collateral hereunder, now owned and upon the
acquisition of the same, free and clear of all Liens,
claims, encumbrances and security interests other than the
security interest in favor of the Agent for the benefit of
the Secured Parties hereunder and Permitted Liens, and that
it will defend such Collateral and any products and proceeds
thereof against all claims and demands of all Persons (other
than holders of Permitted Liens) at any time claiming the
same or any interest therein adverse to the Secured Parties.
(b) It has the unqualified right to enter into this
Agreement and to perform its terms.
(c) No authorization, consent, approval or other
action by, and no notice to or filing with, any governmental
authority or regulatory body or any other Person is required
either (i) for the grant by such Grantor of the security
interests granted hereby or for the execution, delivery or
performance of this Agreement by such Grantor, or (ii) for
the perfection of or the exercise by the Agent, on behalf of
the Secured Parties, of its rights and remedies hereunder,
except for the filings required by the Uniform Commercial
Code of the State in which such Grantor maintains its chief
executive office.
(d) No effective financing statement or other
instrument similar in effect covering all or any part of the
Collateral purported to be granted by such Grantor hereunder
is on file in any recording office, except such as may have
been filed in favor of the Agent, for the benefit of the
Secured Parties, other than lease financing statements or
other instruments relating to that certain $50,000,000
Senior Credit Facilities dated as of September 15, 1997
between the Borrower, ING (U.S.) Capital Corporation and
various lenders party thereto (the "ING Facility"), which
such financing statements and instruments are being
terminated on the date hereof.
7. Account Warranties and Representations. With respect
to its Accounts, each Grantor warrants and represents to the
Agent for the benefit of the Secured Parties, that the Agent and
each Lender may rely, on the Closing Date and thereafter until
this Agreement is terminated pursuant to Section 8 hereof, on
all statements or representations made by such Grantor on or with
respect to any Schedule of Accounts prepared and delivered by it
and, with respect to all Accounts, now or hereafter existing,
that:
(a) All Account Records and Account Documents are
located only at such Grantor's locations as set forth on
Exhibit A attached hereto and incorporated herein by
reference or at such other locations as to which the Grantor
has complied with Section 5(b) hereof;
(b) The Accounts are genuine, are in all respects what
they purport to be, are not evidenced by an instrument or
document or, if evidenced by an instrument or document, are
only evidenced by one original instrument or document;
(c) The Accounts cover the rendition by such Grantor
of services to an Account Debtor in the ordinary course of
business;
(d) The amounts of the face value shown on any
Schedule of Accounts or invoice statement delivered to the
Agent with respect to any Account, are actually owing to
such Grantor and are not contingent for any reason; and
there are no setoffs, discounts, allowances, claims,
counterclaims or disputes of any kind or description in an
amount greater than $1,200,000 in the aggregate, or greater
than $500,000 individually, existing or asserted with
respect thereto and such Grantor has not made any agreement
with any Account Debtor thereunder for any deduction
therefrom, except as may be stated in the Schedule of
Accounts and reflected in the calculation of the face value
of each respective invoice related thereto;
(e) Except for conditions generally applicable to such
Grantor's industry and markets, there are no facts, events,
or occurrences known to such Grantor pertaining particularly
to any Accounts which are reasonably expected to materially
impair in any way the validity, collectibility or
enforcement of Accounts that would reasonably be likely, in
the aggregate, to be of material economic value;
(f) The goods or services giving rise thereto are not,
and were not at the time of the sale or performance thereof,
subject to any Lien, claim, encumbrance or security
interest, except those of the Agent for the benefit of
Secured Parties and Permitted Liens and except for those
Liens arising in connection with the ING Facility, which
such Liens are being terminated on the date hereof;
(g) The Accounts have not been pledged to any Person
other than to the Agent for the benefit of the Secured
Parties under this Agreement and will be owned by such
Grantor free and clear of any Liens, claims, encumbrances or
security interests except Permitted Liens except for those
Liens arising in connection with the ING Facility, which
such Liens are being terminated on the date hereof.;
(h) The Agent's and the Lenders' security interest
therein will not be subject to any offset, deduction,
counterclaim, Lien or other adverse condition, other than
Permitted Liens; and
(i) The location of its chief executive office and any
state in which it (i) has a place of business in only one
county of such state or (ii) resides (within the meaning of
the applicable Uniform Commercial Code) but does not have
any place of business, is set forth on Exhibit A attached
hereto and incorporated herein by reference and each Grantor
shall deliver to the Agent not less than 30 days written
notice prior to any change of such location or status of
places of business or residency.
8. Inventory Warranties and Representations. With respect
to its Inventory, each Grantor warrants and represents to the
Agent for the benefit of the Secured Parties that the Secured
Parties may rely on the Closing Date and thereafter until this
Agreement is terminated pursuant to Section 27 hereof, on all
statements or representations made by such Grantor with respect
to any Inventory and that:
(a) All Inventory, other than Inventory having a value
of less than $1,200,000 in the aggregate for all locations,
is or will be located only at such Grantor's locations as
set forth on Exhibit B attached hereto and incorporated
herein by reference;
(b) None of its Inventory is or will be subject to any
Lien, claim, encumbrance or security interest whatsoever,
except for the security interest of the Agent for the
benefit of the Secured Parties hereunder and Permitted
Liens;
(c) No Inventory of such Grantor that would reasonably
be likely, in the aggregate with the Inventory of all
Grantors, to be of value in excess of $1,200,000 is, and
shall not at any time or times hereafter be, stored with a
bailee, warehouseman, or similar party without the Agent's
prior written consent and, if the Agent gives such consent,
such Grantor will concurrently therewith cause any such
bailee, warehouseman, or similar party to consent to the
security interest granted in such Inventory for the benefit
of the Secured Parties and waive its statutory and
consensual liens and rights in such Inventory in form and
substance acceptable to the Agent and, upon request
therefor, issue and deliver to the Agent, in form and
substance reasonably acceptable to the Agent, warehouse
receipts therefor in the Agent's name and take such other
action and be party to such document as deemed necessary or
prudent by the Agent to maintain the security interest of
the Secured Parties in such Inventory;
(d) No Inventory is, and shall not at any time or
times hereafter be, under consignment to any Person, the
value of which, when aggregated with all other Inventory
under consignment of such Grantor and all other Material
Subsidiaries, would exceed $1,200,000; and
(e) No Inventory is at or shall be kept at any
location that is leased by such Grantor from any other
Person, the value of which, when aggregated with all other
Inventory kept at any location which is leased by all
Grantors, would exceed $1,200,000, unless such location and
lessee is set forth on Exhibit B hereto and such lessee
waives its statutory and consensual liens and rights with
respect to such Inventory in form and substance acceptable
to the Agent and delivered in writing to the Agent prior to
such amount of Inventory being at such one or more
locations.
9. Equipment Representations and Warranties. With respect
to its Equipment, each Grantor warrants and represents to the
Agent for the benefit of the Secured Parties that the Secured
Parties may rely, on the Closing Date and thereafter until this
Agreement is terminated pursuant to Section 27 hereof, on all
statements or representations made by such Grantor with respect
to any Equipment and that:
(a) All Equipment is or will be located only at such
Grantor's locations set forth in Exhibit C hereto or at such
other locations as to which such Grantor has complied with
Section 5(j) hereof prior to such relocation and has
provided to the Agent executed financing statements for such
location satisfying the requirements of Section 2 hereof;
(b) None of its Equipment is or will be subject to any
Lien, claim, encumbrance or security interest whatsoever,
except for the security interest of the Agent, for the
benefit of the Secured Parties, hereunder and Permitted
Liens.
10. Casualty and Liability Insurance Required.
(a) Each Grantor will keep the Collateral continuously
insured against such risks as are customarily insured
against by businesses of like size and type engaged in the
same or similar operations including, without limiting the
generality of any other covenant herein contained:
(i) casualty insurance on the Inventory and the
Equipment in an amount not less than the full insurable
value thereof, against loss or damage by theft, fire
and lightning and other hazards ordinarily included
under uniform broad form standard extended coverage
policies, limited only as may be provided in the
standard broad form of extended coverage endorsement at
the time in use in the states in which the Collateral
is located;
(ii) comprehensive general liability insurance
against claims for bodily injury, death or property
damage occurring with or about such Collateral (such
coverage to include provisions waiving subrogation
against the Secured Parties), with Agent and Lenders as
additional insured parties, in amounts as shall be
reasonably satisfactory to Agent;
(iii) employer's liability and workers'
compensation insurance in required statutory amounts of
the states in which such Collateral is located; and
(iv) business interruption insurance.
(b) Each insurance policy obtained in satisfaction of
the requirements of Section 10(a) hereof:
(i) may be provided by blanket policies now or
hereafter maintained by each Grantor or the Borrower;
(ii) shall be issued by such insurer (or insurers)
as shall be financially responsible, of recognized
standing and reasonably acceptable to the Agent;
(iii) shall be in such form and have such
provisions (including without limitation the loss
payable clause, the waiver of subrogation clause, the
deductible amount, if any, and the standard mortgagee
endorsement clause), as are generally considered
standard provisions for the type of insurance involved
and are reasonably acceptable in all respects to the
Agent;
(iv) shall prohibit cancellation or substantial
modification, termination or lapse in coverage by the
insurer without at least 30 days' prior written notice
to the Agent, except for non-payment of premium, in
which case such policies shall provide ten (10) days'
prior written notice;
(v) without limiting the generality of the
foregoing, all insurance policies where applicable
under Section 10(a)(i) carried on the Collateral shall
name the Agent, for the benefit of the Secured Parties,
as loss payee and the Agent and Lenders as parties
insured thereunder in respect of any claim for payment.
(c) Prior to expiration of any such policy, such
Grantor shall furnish the Agent with evidence satisfactory
to the Agent that the policy or certificate has been renewed
or replaced or is no longer required by this Agreement.
(d) Each Grantor hereby irrevocably makes, constitutes
and appoints the Agent (and all officers, employees or
agents designated by the Agent), for the benefit of the
Secured Parties, effective upon the occurrence and during
the continuance of an Event of Default, as such Grantor's
true and lawful attorney (and agentinfact) for the purpose
of making, settling and adjusting claims under such policies
of insurance, endorsing the name of such Grantor on any
check, draft, instrument or other item or payment for the
proceeds of such policies of insurance and for making all
determinations and decisions with respect to such policies
of insurance.
(e) In the event such Grantor shall fail to maintain,
or fail to cause to be maintained, the full insurance
coverage required hereunder or shall fail to keep any of its
Collateral in good repair and good operating condition, the
Agent may (but shall be under no obligation to), without
waiving or releasing any Secured Obligation or Event of
Default by such Grantor hereunder, contract for the required
policies of insurance and pay the premiums on the same or
make any required repairs, renewals and replacements; and
all sums so disbursed by Agent, including reasonable
attorneys' fees, court costs, expenses and other charges
related thereto, shall be payable on demand by such Grantor
to the Agent and shall be additional Secured Obligations
secured by the Collateral.
(f) Each Grantor agrees that to the extent that it
shall fail to maintain, or fail to cause to be maintained,
the full insurance coverage required by Section 10(a)
hereof, it shall in the event of any loss or casualty pay
promptly to the Agent, for the benefit of the Secured
Parties, to be held in a separate account for application in
accordance with the provisions of Section 10(h) hereof, such
amount as would have been received as Net Proceeds (as
hereinafter defined) by the Agent, for the benefit of the
Secured Parties, under the provisions of Section 10(h)
hereof had such insurance been carried to the extent
required.
(g) The Net Proceeds of the insurance carried pursuant
to the provisions of Sections 10(a)(ii) and 10(a)(iii)
hereof shall be applied by such Grantor toward
extinguishment of the defect or claim or satisfaction of the
liability with respect to which such insurance proceeds may
be paid.
(h) The Net Proceeds of the insurance carried with
respect to the Collateral pursuant to the provisions of
Section 10(a)(i) hereof shall be paid to such Grantor and
held by such Grantor in a separate account and applied as
follows: (i) as long as no Event of Default shall have
occurred and be continuing, after any loss under any such
insurance and payment of the proceeds of such insurance,
each Grantor shall have a period of 30 days after payment of
the insurance proceeds with respect to such loss to elect to
either (x) repair or replace the Collateral so damaged, (y)
deliver such Net Proceeds to the Agent, for the benefit of
the Secured Parties, as additional Collateral or (z) apply
such Net Proceeds to the acquisition of tangible assets used
or useful in the conduct of the business of such Grantor,
subject to the provisions of this Agreement. If such
Grantor elects to repair or replace the Collateral so
damaged, such Grantor agrees the Collateral shall be
repaired to a condition substantially similar to its
condition prior to damage or replaced with Collateral in a
condition substantially similar to the condition of the
Collateral so replaced prior to damage; and (ii) at all
times during which an Event of Default shall have occurred
and be continuing, after any loss under such insurance and
payment of the proceeds of such insurance, such Grantor
shall immediately deliver such Net Proceeds to such Agent,
for the benefit of the Secured Parties, as additional
Collateral.
(i) "Net Proceeds" when used with respect to any
insurance proceeds shall mean the gross proceeds from such
proceeds, award or other amount, less all taxes, fees and
expenses (including attorneys' fees) incurred in the
realization thereof.
(j) In case of any material damage to or destruction
of all or any part of the Collateral pledged hereunder by a
Grantor, such Grantor shall give prompt notice thereof to
the Agent. Each such notice shall describe generally the
nature and extent of such damage, destruction, taking, loss,
proceeding or negotiations. Each Grantor is hereby
authorized and empowered to adjust or compromise any loss
under any such insurance.
11. Rights and Remedies Upon Event of Default. Upon and
after an Event of Default, the Agent shall have the following
rights and remedies on behalf of the Lenders in addition to any
rights and remedies set forth elsewhere in this Agreement, all of
which may be exercised with or, if allowed by law, without notice
to a Grantor:
(a) All of the rights and remedies of a secured party
under the Uniform Commercial Code of the state where such
rights and remedies are asserted, or under other applicable
law, all of which rights and remedies shall be cumulative,
and none of which shall be exclusive, to the extent
permitted by law, in addition to any other rights and
remedies contained in this Agreement, the Guaranty or any
other Loan Document;
(b) The right to foreclose the Liens and security
interests created under this Agreement by any available
judicial procedure or without judicial process;
(c) The right to (i) enter upon the premises of a
Grantor through selfhelp and without judicial process,
without first obtaining a final judgment or giving such
Grantor notice and opportunity for a hearing on the validity
of the Agent's claim and without any obligation to pay rent
to such Grantor, or any other place or places where any
Collateral is located and kept, and remove the Collateral
therefrom to the premises of the Agent or any agent of the
Agent, for such time as the Agent may desire, in order
effectively to collect or liquidate the Collateral, and (ii)
require such Grantor to assemble the Collateral and make it
available to the Agent at a place to be designated by the
Agent that is reasonably convenient to both parties;
(d) The right to (i) demand payment of the Accounts;
(ii) enforce payment of the Accounts, by legal proceedings
or otherwise; (iii) exercise all of a Grantor's rights and
remedies with respect to the collection of the Accounts and
General Intangibles; (iv) settle, adjust, compromise, extend
or renew the Accounts, General Intangibles and Contract
Rights; (v) settle, adjust or compromise any legal
proceedings brought to collect the Accounts; (vi) if
permitted by applicable law, sell or assign the Accounts,
General Intangibles and Contract Rights upon such terms, for
such amounts and at such time or times as the Agent deems
advisable; (vii) discharge and release the Accounts; (viii)
take control, in any manner, of any item of payment or
proceeds referred to in Section 4 above; (ix) prepare, file
and sign a Grantor's name on a Proof of Claim in bankruptcy
or similar document against any Account Debtor; (x) prepare,
file and sign a Grantor's name on any notice of Lien,
assignment or satisfaction of Lien or similar document in
connection with the Accounts; (xi) endorse the name of a
Grantor upon any chattel paper, document, instrument,
invoice, freight bill, bill of lading or similar document or
agreement relating to the Accounts, Inventory or Equipment;
(xii) use the information recorded on or contained in any
data processing equipment and computer hardware and software
relating to any Collateral to which a Grantor has access;
(xiii) to open such Grantor's mail and collect any and all
amounts due to such Grantor from Account Debtors; (xiv) to
take over such Grantor's post office boxes or make other
arrangements as the Agent, on behalf of the Secured Parties,
deems necessary to receive such Grantor's mail, including
notifying the post office authorities to change the address
for delivery of such Grantor's mail to such address as the
Agent, on behalf of the Secured Parties, may designate; and
(xv) to notify any or all Account Debtors that the Accounts
have been assigned to the Agent for the benefit of the
Secured Parties and that Agent has a security interest
therein for the benefit of the Secured Parties (provided
that the Agent may at any time give such notice to an
Account Debtor that is a department, agency or authority of
the United States government); each Grantor hereby agrees
that any such notice, in the Agent's sole discretion, may be
sent on such Grantor's stationery, in which event such
Grantor shall cosign such notice with the Agent; and (xvi)
do all acts and things and execute all documents necessary,
in Agent's sole discretion, to collect the Accounts and
General Intangibles; and
(e) The right to sell, assign, lease or to otherwise
dispose of all or any Collateral in its then existing
condition, or after any further manufacturing or processing
thereof, at public or private sale or sales, with such
notice as may be required by law, in lots or in bulk, for
cash or on credit, with or without representations and
warranties, all as the Agent, in its sole discretion, may
deem advisable. The Agent shall have the right to conduct
such sales on a Grantor's premises or elsewhere and shall
have the right to use a Grantor's premises without charge
for such sales for such time or times as the Agent may see
fit. The Agent may, if it deems it reasonable, postpone or
adjourn any sale of the Collateral from time to time by an
announcement at the time and place of such postponed or
adjourned sale, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
Each Grantor agrees that the Agent has no obligation to
preserve rights to the Collateral against prior parties or
to marshall any Collateral for the benefit of any Person.
The Agent is hereby granted a license or other right to use,
without charge, each Grantor's labels, patents, copyrights,
rights of use of any name, trade secrets, trade names,
trademarks and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in
completing production of, advertising for sale and selling
any Collateral and a Grantor's rights under any license and
any franchise agreement shall inure to the Agent's benefit.
If any of the Collateral shall require repairs, maintenance,
preparation or the like, or is in process or other
unfinished state, the Agent shall have the right, but shall
not be obligated, to perform such repairs, maintenance,
preparation, processing or completion of manufacturing for
the purpose of putting the same in such saleable form as the
Agent shall deem appropriate, but the Agent shall have the
right to sell or dispose of the Collateral without such
processing and no Guarantor shall have any claim against the
Agent for the value that may have been added to such
Collateral with such processing. In addition, each Grantor
agrees that in the event notice is necessary under
applicable law, written notice mailed to such Grantor in the
manner specified herein seven (7) days prior to the date of
public sale of any of the Collateral or prior to the date
after which any private sale or other disposition of the
Collateral will be made shall constitute commercially
reasonable notice to such Grantor. All notice is hereby
waived with respect to any of the Collateral which threatens
to decline speedily in value or is of a type customarily
sold on a recognized market. The Agent may purchase all or
any part of the Collateral at public or, if permitted by
law, private sale, free from any right of redemption which
is hereby expressly waived by such Grantor and, in lieu of
actual payment of such purchase price, may set off the
amount of such price against the Secured Obligations. The
net cash proceeds resulting from the collection,
liquidation, sale, lease or other disposition of the
Collateral shall be applied first to the expenses (including
all attorneys' fees) of retaking, holding, storing,
processing and preparing for sale, selling, collecting,
liquidating and the like, and then to the satisfaction of
all Secured Obligations in accordance with the terms of
Section 10.5 of the Credit Agreement. Any sale or other
disposition of the Collateral and the possession thereof by
the Agent shall be in compliance with all provisions of
applicable law (including applicable provisions of the
Uniform Commercial Code). Each Grantor shall be liable to
the Agent, for the benefit of the Secured Parties, and shall
pay to the Agent, for the benefit of the Secured Parties, on
demand any deficiency which may remain after such sale,
disposition, collection or liquidation of the Collateral.
12. AntiMarshalling Provisions. The right is hereby given
by each Grantor to the Agent, for the benefit of the Secured
Parties, to make releases (whether in whole or in part) of all or
any part of the Collateral agreeable to the Agent without notice
to, or the consent, approval or agreement of other parties and
interests, including junior lienors, which releases shall not
impair in any manner the validity of or priority of the Liens and
security interests in the remaining Collateral conferred under
such documents, nor release such Grantor from personal liability
for the Secured Obligations hereby secured. Notwithstanding the
existence of any other security interest in the Collateral held
by the Agent, for the benefit of the Secured Parties, the Agent
shall have the right to determine the order in which any or all
of the Collateral shall be subjected to the remedies provided in
this Agreement. The proceeds realized upon the exercise of the
remedies provided herein shall be applied by the Agent, for the
benefit of the Secured Parties, in the manner provided in Section
10.5 of the Credit Agreement. Each Grantor hereby waives any and
all right to require the marshalling of assets in connection with
the exercise of any of the remedies permitted by applicable law
or provided herein.
13. Indemnity and Expenses.
(a) Each Grantor agrees to indemnify the Agent, for
the benefit of the Secured Parties, from and against any and
all claims, losses and liabilities growing out of or
resulting from this Agreement that are incurred by the Agent
(including without limitation enforcement of this
Agreement), except claims, losses or liabilities directly
resulting from the Agent's gross negligence or willful
misconduct.
(b) Each Grantor will upon demand pay to the Agent,
for the benefit of the Secured Parties, the amount of any
and all reasonable expenses, including the reasonable fees
and disbursements of its counsel and of any experts and
agents, that the Agent, for the benefit of the Secured
Parties, may incur in connection with (i) the administration
of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from or other
realization upon, any of the Collateral, (iii) the exercise
or enforcement of any of the rights of the Secured Parties,
or (iv) the failure by such Grantor to perform or observe
any of the provisions hereof.
14. Appointment of Agent as Grantor's Lawful Attorney.
Without limitation of any other provision of this Agreement, each
Grantor irrevocably designates, makes, constitutes and appoints
the Agent (and all Persons designated by the Agent), for the
benefit of the Secured Parties, as the Grantor's true and lawful
attorney (and agent-in-fact) at all times on and after the
occurrence and during the continuation of an Event of Default, to
take all actions and to do all things required to be taken or
done by the Grantor under this Agreement, including without
limitation:
(a) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for
moneys due and to become due under or in respect of any of
the Collateral;
(b) to receive, endorse and collect any drafts or
other instruments, documents and chattel paper in connection
with clause (a) above;
(c) to endorse such Grantor's name on any checks,
notes, drafts or any other payment relating to or
constituting proceeds of the Collateral which comes into the
Agent's possession or Agent's control, and deposit the same
to the account of the Agent, for the benefit of the Secured
Parties, on account and for payment of the Secured
Obligations.
(d) to file any claims or take any action or institute
any proceedings that the Agent may deem necessary or
desirable for the collection of any of the Collateral or
otherwise to enforce the rights of the Agent, for the
benefit of the Secured Parties, with respect to any of the
Collateral; and
(e) to execute, in connection with the sale provided
for in Section 11, any endorsement, assignments, or other
instruments of conveyance or transfer with respect to the
Collateral.
All acts of the Agent or its designee taken pursuant to this
Section 14 are hereby ratified and confirmed by each Grantor and
the Agent or its designee shall not be liable for any acts of
omission or commission nor for any error of judgment or mistake
of fact or law, other than as a result of its gross negligence or
willful misconduct. This power, being coupled with an interest,
is irrevocable by such Grantor until this Agreement has been
terminated in accordance with Section 27 hereof.
15. Waivers. In addition to the other waivers contained
herein, each Grantor hereby expressly waives, to the extent
permitted by law: presentment for payment, demand, protest,
notice of demand, notice of protest, notice of default or
dishonor, notice of payments and nonpayments and all other
notices and consents to any action taken by the Agent unless
expressly required by this Agreement.
16. Trade Names. Each Grantor represents that the only
trade name(s) or style(s) used by such Grantor are as set forth
on Exhibit D, next to the name of such Grantor.
17. Absolute Rights and Obligations. All rights of the
Secured Parties in the Security Interests granted hereunder, and
each of the Secured Obligations, shall be absolute and
unconditional irrespective of:
(a) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Secured
Obligations, or any other amendment or waiver of or any
consent to departure from, the Credit Agreement or any other
Loan Document, including, but not limited to, (i) an
increase or decrease in the Secured Obligations and (ii) an
amendment of any Loan Document to permit the Agent or the
Lenders or any one or more of them to extend further or
additional credit to the Borrower in any form including
credit by way of loan, purchase of assets, guarantee or
otherwise, which credit shall thereupon be and become
subject to the Credit Agreement and the other Loan Documents
as a Secured Obligation;
(b) any taking and holding of collateral or guarantees
(including without limitation any collateral pledged as
security for the Secured Obligations under the other
Security Instruments) for all or any of the Secured
Obligations; or any amendment, alteration, exchange,
substitution, transfer, enforcement, waiver, subordination,
termination or release of any such collateral or guarantees,
or any nonperfection of any such collateral, or any consent
to departure from any such guaranty;
(c) any manner of application of collateral, or
proceeds thereof, securing payment or enforcement of all or
any of the Secured Obligations, or the manner of sale of any
such collateral;
(d) any consent by the Secured Parties to the change,
restructure or termination of the corporate structure or
existence of the Borrower or any Grantor and any
corresponding restructure of the Secured Obligations, or any
other restructure or refinancing of the Secured Obligations
or any portion thereof;
(e) any modification, compromise, settlement or
release by the Secured Parties, by operation of law or
otherwise, collection or other liquidation of the Secured
Obligations or the liability of the Borrower, any Grantor or
any Guarantor, or of any collateral for the Secured
Obligation (including without limitation any collateral
pledged as security for the Secured Obligations under the
other Security Instruments), in whole or in part, and any
refusal of payment by the Agent or any Lender in whole or in
part, from any obligor or Guarantor in connection with any
of the Secured Obligations, whether or not with notice to,
or further assent by, or any reservation of rights against,
any Grantor; or
(f) any other circumstance (including without
limitation any statute of limitations) that might otherwise
constitute a defense available to, or a discharge of, the
Borrower, any Guarantor or a Grantor.
The granting of a Security Interest in the Collateral shall
continue to be effective or be reinstated, as the case may be, if
at any time any payment of any of the Secured Obligations is
rescinded or must otherwise be returned by any Secured Party,
upon the insolvency, bankruptcy or reorganization of the Borrower
or any Grantor or otherwise, all as though such payment had not
been made.
18. Definitions. All terms used herein shall be defined in
accordance with the appropriate definitions appearing in the
Uniform Commercial Code as in effect in New York, and such
definitions are hereby incorporated herein by reference and made
a part hereof.
19. Entire Agreement. This Agreement, together with the
Credit Agreement, the Guaranty Agreement and other Loan
Documents, constitutes and expresses the entire understanding
between the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings,
inducements, commitments or conditions, express or implied, oral
or written, except as herein contained. The express terms hereof
control and supersede any course of performance or usage of the
trade inconsistent with any of the terms hereof. Neither this
Agreement nor any portion or provision hereof may be changed,
altered, modified, supplemented, discharged, canceled,
terminated, or amended orally or in any manner other than by an
agreement, in writing signed by the parties hereto.
20. Further Assurances. Each Grantor agrees at its own
expense to do such further acts and things, and to execute and
deliver such additional conveyances, assignments, financing
statements, agreements and instruments, as the Agent may at any
time reasonably request in connection with the administration or
enforcement of this Agreement or related to the Collateral or any
part thereof or in order better to assure and confirm unto the
Agent its rights, powers and remedies for the benefit of the
Secured Parties hereunder. Each Grantor hereby consents and
agrees that the issuers of or obligors in respect of the
Collateral shall be entitled to accept the provisions hereof as
conclusive evidence of the right of the Agent, on behalf of the
Secured Parties, to exercise its rights hereunder with respect to
the Collateral, notwithstanding any other notice or direction to
the contrary heretofore or hereafter given by any Grantor or any
other Person to any of such issuers or obligors. Each Grantor
agrees that a carbon, photographic, photostatic, or other
reproduction of this Agreement or a financing statement is
sufficient as a financing statement and may be filed by the Agent
in any filing office.
21. Binding Agreement; Assignment. This Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and
inure to the benefit of the parties hereto, and to their
respective successors and assigns, except that, subject to the
provisions of Section 9.7 of the Credit Agreement, no Grantor
shall be permitted to assign this Agreement or any interest
herein or in the Collateral, or any part thereof, or otherwise
pledge, encumber or grant any option with respect to the
Collateral, or any part thereof, or any cash or property held by
the Agent as Collateral under this Agreement. All references
herein to the Agent shall include any successor thereof, each
Lender and any other obligees from time to time of the
Obligations.
22. Swap Agreements. All obligations of the Borrower under
Swap Agreements to which any Lender or its affiliates are a party
shall be deemed to be Secured Obligations secured hereby, and
each Lender or affiliate of a Lender party to any such Swap
Agreement shall be deemed to be a Secured Party hereunder.
23. Severability. The provisions of this Agreement are
independent of and separable from each other. If any provision
hereof shall for any reason be held invalid or unenforceable,
such invalidity or unenforceability shall not affect the validity
or enforceability of any other provision hereof, but this
Agreement shall be construed as if such invalid or unenforceable
provision had never been contained herein.
24. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of each Grantor, and the
right, remedies, powers, and privileges of the Agent hereunder
shall inure to the benefit of the successors and assigns of the
Agent; provided, however, subject to the provisions of Section
9.7 of the Credit Agreement, that no Grantor shall make any
assignment hereof without the prior written consent of the Agent.
25. Counterparts. This Agreement may be executed in any
number of counterparts and all the counterparts taken together
shall be deemed to constitute one and the same instrument.
26. Remedies Cumulative. All remedies hereunder are
cumulative and are not exclusive of any other rights and remedies
of the Agent provided by law or under the Credit Agreement, the
other Loan Documents, or other applicable agreements or
instruments. The making of the Loans to, and issuing of Letters
of Credit for the benefit of, the Borrower pursuant to the Credit
Agreement and the extension of the Revolving Credit Facility to
the Borrower pursuant to the Credit Agreement shall be
conclusively presumed to have been made or extended,
respectively, in reliance upon each Grantor's grant of the
security interests created under this Agreement.
27. Termination. This Agreement and all obligations of
each Grantor hereunder shall terminate on the Collateral
Termination Date, at which time the Liens and rights granted to
the Agent for the benefit of the Secured Parties hereunder shall
automatically terminate and no longer be in effect, and the
Collateral shall automatically be released from the Liens created
hereby. Upon such termination of this Agreement, the Agent
shall, at the sole expense of the Grantors, reassign and
redeliver to each applicable Grantor such Collateral then held by
or for the Agent and execute and deliver to such Grantor such
documents as such Grantor shall reasonably request and take such
further actions as may be necessary to effect the same and as
shall be reasonably acceptable to the Agent.
28. Notices. Any notice required or permitted hereunder
shall be given, (a) with respect to the Borrower or any Grantor,
at the Borrower's address indicated in Section 12.2 of the Credit
Agreement and (b) with respect to the Agent or a Lender, at the
Agent's address indicated in Section 12.2 of the Credit
Agreement. All such notices shall be given and shall be
effective as provided in Section 12.2 of the Credit Agreement.
29. Governing Law; Venue; Waiver of Trial by Jury.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED,
IN SUCH STATE NOTWITHSTANDING ITS EXECUTION AND DELIVERY
OUTSIDE SUCH STATE.
(b) EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY
AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY
STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK,
STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY WAIVES
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE IN, OR TO THE EXERCISE OF JURISDICTION
OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH
SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS
GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY
SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING.
(c) EACH GRANTOR AGREES THAT SERVICE OF PROCESS MAY BE
MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND
COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR
PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE
PREPAID) TO THE ADDRESS OF THE BORROWER PROVIDED BY SECTION
12.2 OF THE CREDIT AGREEMENT, OR BY ANY OTHER METHOD OF
SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN
THE STATE OF NEW YORK.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF
SHALL PRECLUDE ANY SECURED PARTY FROM BRINGING ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT IN THE COURTS OF ANY
JURISDICTION WHERE ANY GRANTOR OR ANY OF SUCH GRANTOR'S
PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT
PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION,
EACH GRANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION
OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY
SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE
OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY OTHER COURT
OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER
APPLICABLE LAW.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED
OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH
THE FOREGOING, EACH GRANTOR AND THE AGENT ON BEHALF OF THE
SECURED PARTIES HEREBY AGREE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY WAIVE,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH
PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION OR
PROCEEDING.
IN WITNESS WHEREOF, the parties have duly executed this
Security Agreement on the day and year first written above.
GRANTORS:
HEADWAY CORPORATE RESOURCES, INC.
By: (Signature)
WHITNEY PARTNERS, L.L.C.
HEADWAY CORPORATE STAFFING SERVICES,
INC.
CERTIFIED TECHNICAL STAFFING, INC.
CORPORATE STAFFING ALTERNATIVES, INC.
HEADWAY CORPORATE STAFFING SERVICES
OF NEW YORK, INC.
HEADWAY PERSONNEL, INC.
HEADWAY CORPORATE STAFFING SERVICES
OF NORTH CAROLINA, INC.
HEADWAY CORPORATE STAFFING SERVICES
OF CONNECTICUT, INC.
ASA PERSONNEL SERVICES, L.L.C.
E.D.R. ASSOCIATES, INC.
HCSS WEST, INC.
HCSS HOLDINGS, INC.
HCSS EAST, INC.
CHENEY ASSOCIATES, L.L.C.
By: (signature)
AGENT:
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
By: (Signature)
E-423
Exhibit No. 14
Form 8-K
Headway Corporate Resources, Inc.
SEC File No. 0-23170
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the "Agreement") dated as of March
19, 1998 is made between HEADWAY CORPORATE RESOURCES, INC., a
Delaware corporation (the "Borrower"), EACH OF THE UNDERSIGNED
SUBSIDIARIES OF THE BORROWER (the "Subsidiary Pledgors", and
together with the Borrower, the "Pledgors", and each individually
a "Pledgor"), and NATIONSBANK, NATIONAL ASSOCIATION, a national
banking association organized and existing under the laws of the
United States, as agent (the "Agent") for each of the lenders
(the "Lenders" and collectively with the Agent, the "Secured
Parties") now or hereafter party to the Credit Agreement (as
defined below). All capitalized terms used but not otherwise
defined herein shall have the respective meanings assigned
thereto in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Secured Parties have agreed to provide to the
Borrower a certain revolving credit facility with a letter of
credit sublimit pursuant to the Credit Agreement dated as of
March 19, 1998 among the Borrower, the Agent and the Lenders (as
from time to time amended, revised, modified, supplemented or
amended and restated, the "Credit Agreement"); and
WHEREAS, each of the Subsidiary Pledgors has entered into
that certain Guaranty Agreement of even date herewith (the
"Guaranty"); and
WHEREAS, as collateral security for the payment and
performance of the Borrower's Obligations and the Subsidiary
Pledgors' obligations under the Guaranty, each Pledgor is willing
to pledge and grant to the Agent for the benefit of the Lenders a
security interest in all of the issued and outstanding shares of
capital stock, whether now in existence or hereafter issued, of
ownership or other equity interest, whether now owned or
hereafter acquired, of each of its subsidiaries which are
Domestic Subsidiaries, and 66% of the issued and outstanding
shares of voting capital stock and 100% of the issued and
outstanding shares of non-voting capital stock whether now in
existence or hereafter issued, or ownership or other equity
interest, whether now or hereafter existing, of each of its
subsidiaries which are Direct Foreign Subsidiaries all of which
are required to be subject to a Pledge Agreement pursuant to the
Credit Agreement (such shares of capital stock being referred to
herein as the "Pledged Stock", and all such other ownership or
equity interests being collectively referred to herein, together
with the Pledged Stock, as the "Pledged Interests"), including
without limitation the Pledged Interests in such Subsidiaries
more particularly described on Schedule I hereto (such
Subsidiaries, together with all other Subsidiaries whose capital
stock, ownership or other equity interest may be required to be
subject to a Pledge Agreement from time to time, are hereinafter
referred to collectively as the "Pledged Subsidiaries"); and
WHEREAS, the Lenders are unwilling to enter into the Loan
Documents unless each Pledgor enters into this Agreement;
NOW, THEREFORE, in order to induce the Secured Parties to
enter into the Loan Documents and to make Loans and issue Letters
of Credit and in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
1. Pledge of Stock; Other Collateral.
(a) As collateral security for the payment and performance
by the Borrower of its now or hereafter existing Obligations and
by the Subsidiary Pledgors of their now or hereafter existing
liabilities and obligations under the Guaranty (collectively with
the Obligations, the "Secured Obligations"), each Pledgor hereby
pledges and collaterally assigns to the Agent for the benefit of
the Secured Parties, and grants to the Agent for the benefit of
the Secured Parties a first priority lien and security interest
in, the Pledged Interests and all of the following:
(i) all cash, securities, dividends, rights, and
other property at any time and from time to time declared or
distributed in respect of or in exchange for any or all of
the Pledged Interests, other than cash dividends permitted
to be retained by the Pledgors under Section 9 hereof;
(ii) all other property hereafter delivered to the
Agent in substitution for or in addition to any of the
foregoing, all certificates and instruments representing or
evidencing such property and all cash, securities, interest,
dividends, rights, and other property at any time and from
time to time declared or distributed in respect of or in
exchange for any or all of the Pledged Interests; and
(iii) all proceeds of any of the foregoing.
All such Pledged Interests, certificates, instruments, cash,
securities, interest, dividends, rights and other property
referred to in this Section 1, other than cash dividends issued
in respect of such Pledged Stock that are permitted to be
retained by the Pledgors under Section 9 hereof, are herein
collectively referred to as the "Collateral." All of the Pledged
Interests described on Schedule I in effect from time to time is
currently owned by the respective Pledgors and, with respect to
the Pledged Stock only, represented by the stock certificates
listed on Schedule I hereto. There have been delivered to the
Agent (A) with respect to all the Pledged Stock existing on the
Closing Date, certificates evidencing such Pledged Stock,
together with stock powers duly executed in blank by the
Pledgors, and (B) with respect to all other Pledged Interests
existing on the Closing Date, registrar's pledge certificates in
the form of Exhibit B hereto.
(b) Each Pledgor agrees to deliver all the Collateral to
the Agent at such location or locations as the Agent shall from
time to time designate by written notice pursuant to Section 18
hereof for its custody at all times until termination of this
Agreement, together with such instruments of assignment and
transfer as requested by the Agent.
(c) Each Pledgor agrees to deliver all share certificates,
documents, agreements, financing statements, amendments thereto,
assignments or other writings as the Agent may request to carry
out the terms of this Agreement or to protect or enforce the lien
and security interest in the Collateral hereunder granted thereby
to the Agent for the benefit of the Lenders and further agrees to
do and cause to be done, upon the Agent's request, all things
determined by the Agent to be necessary to perfect and keep in
full force the Lien in the Collateral hereunder granted thereby
in favor of the Agent for the benefit of the Lenders, including,
but not limited to, the prompt payment of all documented out-of-
pocket fees and expenses incurred in connection with any filings
made to perfect or continue the Lien and security interest in the
Collateral hereunder granted thereby in favor of the Agent for
the benefit of the Lenders. Each Pledgor agrees to make
appropriate entries upon its books and records (including without
limitation its stock record and transfer books) disclosing the
Lien against the Collateral hereunder granted thereby to the
Agent for the benefit of the Lenders hereunder.
(d) All advances, charges, costs and expenses, including
reasonable attorneys' fees, incurred or paid by any Secured Party
in exercising any right, power or remedy conferred by this
Agreement, or in the enforcement thereof, shall become a part of
the Secured Obligations and shall be paid to the Agent for the
benefit of the Lenders by the Pledgors immediately upon demand
therefor, with interest thereon until paid in full at the Default
Rate for Base Rate Loans.
(e) Each Pledgor agrees to register the Pledged Interests
of the Agent on the registration books of each of its Pledged
Subsidiaries. Each Pledgor agrees, except with respect to the
Pledged Stock, that (i) it shall not issue certificates
representing the Pledged Interests without the Agent's written
consent and (ii) it shall issue certificates with respect to any
Pledged Interests at the Agent's request.
2. Status of Pledged Stock. Each Pledgor hereby represents
and warrants to the Agent for the benefit of the Lenders that (i)
with respect to its Subsidiaries that are corporations, all of
the shares of Pledged Stock are validly issued and outstanding,
fully paid and nonassessable and constitute all the authorized,
issued and outstanding shares of capital stock of each of such
Subsidiaries which are Domestic Subsidiaries and 66% of the
authorized, issued and outstanding shares of voting capital stock
and 100% of the authorized, issued and outstanding shares of non-
voting capital stock of each of such Subsidiaries which are
Direct Foreign Subsidiaries, (ii) with respect to such
Subsidiaries that are not corporations, the Pledged Interests of
such Subsidiaries constitute all of the equity or other ownership
interest in each of such Subsidiaries which are Domestic
Subsidiaries and 66% of the equity or other ownership interest of
each of such Subsidiaries which are Direct Foreign
Subsidiaries, (iii) such Pledgor is the registered and record and
beneficial owner of such Pledged Interests, free and clear of all
Liens, charges, equities, encumbrances and restrictions on pledge
or transfer (other than the pledge hereunder and restrictions
imposed by applicable law), (iv) such Pledgor has full corporate
power, legal right and lawful authority to execute this Agreement
and to pledge, assign and transfer such Pledged Interests in the
manner and form hereof, and (v) the pledge, assignment and
delivery of such Pledged Interests by the Pledgors to the Agent
for the benefit of the Lenders pursuant to this Agreement
creates, together with the delivery of certificates evidencing
the Pledged Stock and the delivery of registrar's pledge
certificates with respect to all other Pledged Interests, which
delivery has heretofore been accomplished, and the filing of UCC-
1 financing statements in the appropriate jurisdictions, a valid
and perfected first priority security interest in such Pledged
Interests in favor of the Agent for the benefit of the Lenders,
securing the payment of the Secured Obligations. Except as
permitted under Sections 9.5 or 9.7 of the Credit Agreement,
none of the Pledged Stock (nor any interest therein or thereto)
shall be sold, transferred or assigned, nor any Lien created
therein, without the Agent's prior written consent, which may be
withheld for any reason. Each Pledgor covenants with the Agent
for the benefit of the Lenders that it shall at all times cause
the Pledged Interests to be represented by the certificates now
and hereafter delivered to the Agent in accordance with Section 1
hereof and that it shall not cause, suffer or permit any of the
Pledged Subsidiaries to issue any capital stock, or securities
convertible into, or exercisable or exchangeable for, capital
stock, at any time during the term of this Agreement other than
to the Pledgors and subject to this Agreement pursuant to Section
23 hereof.
3. Preservation and Protection of Collateral.
(a) The Agent shall be under no duty or liability with
respect to the collection, protection or preservation of the
Collateral, or otherwise, other than the obligation to deal with
the Collateral while in its possession in the same manner as the
Agent deals with similar securities or property for its own
account.
(b) Each Pledgor agrees to pay when due all taxes, charges,
Liens and assessments against the Collateral in which it has an
interest, unless being contested in good faith by appropriate
proceedings diligently conducted and against which adequate
reserves have been established in accordance with GAAP and
evidenced to the satisfaction of the Agent and provided further
that all enforcement proceedings in the nature of levy or
foreclosure are effectively stayed. Upon the failure of the
Pledgors to so pay or contest such taxes, charges, Liens or
assessments, the Agent at its option may pay or contest any of
them (the Agent having the sole right to determine the legality
or validity and the amount necessary to discharge such taxes,
charges, Liens or assessments).
4. Default. Upon the occurrence and during the
continuance of any Event of Default, the Agent is given full
power and authority, then or at any time thereafter, to sell,
assign and deliver or collect the whole or any part of the
Collateral, or any substitute therefor or any addition thereto,
in one or more sales, with or without any previous demands or
demand of performance or, to the extent permitted by law, notice
or advertisement, in such order as the Agent may elect; and any
such sale may be made either at public or private sale at the
Agent's place of business or elsewhere, either for cash or upon
credit or for future delivery, at such price as the Agent may
reasonably deem fair; and the Agent may be the purchaser of any
or all Collateral so sold and hold the same thereafter in its own
right free from any claim of the Pledgors or right of redemption.
Demands of performance, advertisements and presence of property
and sale and notice of sale are hereby waived to the extent
permissible by law and the Pledgors acknowledge that the
Collateral is of a type customarily sold on a recognized market.
Any sale hereunder may be conducted by an auctioneer or any
officer or agent of the Agent. Each Pledgor recognizes that the
Agent may be unable to effect a public sale of the Collateral by
reason of certain prohibitions contained in the Securities Act of
1933, as amended (the "Securities Act"), and applicable law, and
may be otherwise delayed or adversely affected in effecting any
sale by reason of present or future restrictions thereon imposed
by governmental authorities, and that as a consequence of such
prohibitions and restrictions the Agent may be compelled (i) to
resort to one or more private sales to a restricted group of
purchasers who will be obliged to agree, among other things, to
acquire the stock for their own account, for investment and not
with a view to the distribution or resale thereof, or (ii) to
seek regulatory approval of any proposed sale or sales, or (iii)
to limit the amount of Collateral sold to any Person or group.
Each Pledgor agrees and acknowledges that private sales so made
may be at prices and upon terms less favorable to the Pledgors
than if such Collateral was sold either at public sales or at
private sales not subject to other regulatory restrictions, and
that the Agent has no obligation to delay the sale of any of the
Collateral for the period of time necessary to permit the issuer
of such Collateral to register or otherwise qualify the Pledged
Interests, even if such issuer would agree to register or
otherwise qualify for public sale under the Securities Act or
applicable state law. Each Pledgor further agrees, to the extent
permitted by applicable law, that the use of private sales made
under the foregoing circumstances to dispose of the Collateral
shall be deemed to be dispositions in a commercially reasonable
manner. Each Pledgor hereby acknowledges that a ready market may
not exist for the Pledged Stock since it is not traded on a
national securities exchange or quoted on an automated quotation
system and agrees and acknowledges that in such event the Pledged
Stock may be sold for an amount less than a pro rata share of the
fair market value of the issuer's assets minus its liabilities.
In addition to the foregoing, the Lenders may exercise such other
rights and remedies as may be available under the Loan Documents,
at law or in equity.
5. Proceeds of Sale. The proceeds of the sale of any of
the Collateral and all sums received or collected from or on
account of such Collateral shall be applied to the payment of
expenses incurred or paid by the Agent in connection with any
holding, sale, transfer or delivery of the Collateral, to the
payment of any other reasonable costs, charges, reasonable
attorneys' fees or expenses mentioned herein, and to the payment
of the Secured Obligations or any part thereof, all in such order
and manner as is provided in Section 10.5 of the Credit Agreement
and otherwise as the Agent may determine and as permitted by
applicable law.
6. Presentments, Demands and Notices. The Agent shall not
be under any duty or obligation whatsoever to make or give any
presentments, demands for performances, notices of
nonperformance, protests, notice of protest or notice of dishonor
in connection with any obligations or evidences of indebtedness
held thereby as collateral, or in connection with any obligations
or evidences of indebtedness which constitute in whole or in part
the Secured Obligations secured hereunder.
7. Attorney-in-Fact. Each Pledgor hereby appoints the
Agent as such Pledgor's attorney-in-fact for the purposes of
carrying out the provisions of this Agreement and taking any
action and executing any instrument which the Agent may deem
necessary or advisable to accomplish the purposes hereof, which
appointment is coupled with an interest and is irrevocable;
provided, that the Agent shall have and may exercise rights under
this power of attorney only upon the occurrence and during the
continuance of an Event of Default. Without limiting the
generality of the foregoing, upon the occurrence and during the
continuance of an Event of Default, the Agent shall have the
right and power to receive, endorse and collect all checks and
other orders for the payment of money made payable to such
Pledgor representing any dividend, interest payment, principal
payment or other distribution payable or distributable in respect
of, or otherwise constituting, the Collateral or any part thereof
and to give full discharge for the same.
8. Waiver by Pledgors. Each Pledgor waives (to the extent
permitted by applicable law) any right to require the Agent or
any Lender or any other obligee of the Secured Obligations to (a)
proceed against any other Pledgor or any Person, including
without limitation any Guarantor, (b) proceed against or exhaust
any Collateral or other collateral for the Secured Obligations,
or (c) pursue any other remedy in its power; and waives (to the
extent permitted by applicable law) any defense arising by reason
of any disability or other defense of any other Pledgor or any
other Person, including without limitation any Guarantor, or by
reason of the cessation from any cause whatsoever of the
liability of any other Pledgor or any other Person, including
without limitation, any Guarantor. The Agent may at any time
deliver (without representation, recourse or warranty) the
Collateral or any part thereof to any Pledgor who has an interest
therein and the receipt thereof by such Pledgor shall be deemed a
complete and full acquittance for the Collateral so delivered,
and the Agent shall thereafter be discharged from any liability
or responsibility therefor.
9. Dividends and Voting Rights.
(a) All dividends and other distributions with respect to
the Pledged Stock shall be subject to the pledge hereunder,
provided, however, that so long as no Event of Default shall have
occurred and be continuing, any cash dividends that are permitted
to be made under the Credit Agreement may be retained by the
Pledgors free from any Lien hereunder. Upon the occurrence and
during the continuance of any Event of Default, any cash
dividends and other distributions with respect to the Pledged
Interests shall be promptly delivered to the Agent (together, if
the Agent shall request, with stock powers or instruments of
assignment duly executed in blank affixed to any stock
certificate or other negotiable document or instrument so
distributed) to be held, released or disposed of by it hereunder
or, at the option of the Agent, to be applied to the Secured
Obligations as they become due.
(b) So long as no Event of Default shall have occurred and
be continuing, the registration of the Collateral in the name of
any Pledgor shall not be changed and the Pledgors shall be
entitled to exercise all voting and other rights and powers
pertaining to the Collateral for all purposes not inconsistent
with the terms hereof.
(c) Upon the occurrence and during the continuance of any
Event of Default, at the option of the Agent, all rights of the
Pledgors to receive and retain cash dividends or other
distributions upon the Collateral pursuant to subsection (a)
above shall cease and shall thereupon be vested in the Agent for
the benefit of the Lenders.
(d) Upon the occurrence and during the continuance of any
Event of Default, at the option of the Agent, all rights of the
Pledgors to exercise the voting or consensual rights and powers
which they are authorized to exercise with respect to the
Collateral pursuant to subsection (b) above shall cease and the
Agent may thereupon (but shall not be obligated to), at its
request, cause such Collateral to be registered in the name of
the Agent or its nominee or agent for the benefit of the Lenders
and exercise such voting or consensual rights and powers as
appertain to ownership of such Collateral, and to that end each
Pledgor hereby appoints the Agent as its proxy, with full power
of substitution, to vote and exercise all other rights as a
shareholder or other owner or equity holder with respect to the
Pledged Interests hereunder upon the occurrence and during the
continuance of any Event of Default, which proxy is coupled with
an interest and is irrevocable prior to the earlier of a cure or
waiver of such Event of Default or the termination of this
Agreement as set forth in Section 22 hereof, and each Pledgor
hereby agrees to provide such further proxies as the Agent may
reasonably request consistent with this subsection (d); provided,
however, that the Agent in its discretion may from time to time
refrain from exercising, and shall not be obligated to exercise,
any such voting or consensual rights or such proxy.
10. Power of Sale. Until the occurrence of the Collateral
Termination Date, the power of sale and other rights, powers and
remedies granted to the Agent for the benefit of the Lenders
hereunder shall continue to exist and may be exercised by the
Agent at any time and from time to time irrespective of the fact
that any Secured Obligations or any part thereof may have become
barred by any statute of limitations or that the liability of any
Pledgor may have ceased.
11. Other Rights. The rights, powers and remedies given to
the Agent for the benefit of the Lenders by this Agreement shall
be in addition to all rights, powers and remedies given to any
Lenders by virtue of any statute or rule of law. Any forbearance
or failure or delay by the Agent in exercising any right, power
or remedy hereunder shall not be deemed to be a waiver of such
right, power or remedy, and any single or partial exercise of any
right, power or remedy hereunder shall not preclude the further
exercise thereof. Every right, power and remedy of the Lenders
shall continue in full force and effect until such right, power
or remedy is specifically waived by the Required Lenders by an
instrument in writing.
12. AntiMarshalling Provisions. The right is hereby given
by each Pledgor to the Agent, for the benefit of the Secured
Parties, to make releases (whether in whole or in part) of all or
any part of the Collateral agreeable to the Agent without notice
to, or the consent, approval or agreement of other parties and
interests, including junior lienors, which releases shall not
impair in any manner the validity of or priority of the Liens and
security interests in the remaining Collateral conferred under
such documents, nor release such Pledgor from personal liability
for the Secured Obligations hereby secured. Notwithstanding the
existence of any other security interest in the Collateral held
by the Agent, for the benefit of the Secured Parties, the Agent
shall have the right to determine the order in which any or all
of the Collateral shall be subjected to the remedies provided in
this Agreement. The proceeds realized upon the exercise of the
remedies provided herein shall be applied by the Agent, for the
benefit of the Secured Parties, in the manner provided in Section
10.5 of the Credit Agreement. Each Pledgor hereby waives any and
all right to require the marshalling of assets in connection with
the exercise of any of the remedies permitted by applicable law
or provided herein.
13. Absolute Rights and Obligations. All rights of the
Secured Parties, and all obligations of the Pledgors hereunder,
shall be absolute and unconditional irrespective of:
(a) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Secured
Obligations, or any other amendment or waiver of or any
consent to departure from, the Credit Agreement or any other
Loan Document, including, but not limited to, (i) an
increase or decrease in the Secured Obligations and (ii) an
amendment of any Loan Document to permit the Agent or the
Lenders or any one or more of them to extend further or
additional credit to the Borrower in any form including
credit by way of loan, purchase of assets, guarantee or
otherwise, which credit shall thereupon be and become
subject to the Credit Agreement and the other Loan Documents
as a Secured Obligation;
(b) any taking and holding of collateral or guarantees
(including without limitation any collateral pledged as
security for the Secured Obligations under the other
Security Instruments) for all or any of the Secured
Obligations; or any amendment, alteration, exchange,
substitution, transfer, enforcement, waiver, subordination,
termination or release of any such collateral or guarantees,
or any nonperfection of any such collateral, or any consent
to departure from any such guaranty;
(c) any manner of application of collateral, or
proceeds thereof, securing payment or enforcement of all or
any of the Secured Obligations, or the manner of sale of any
such collateral;
(d) any consent by the Secured Parties to the change,
restructure or termination of the corporate structure or
existence of the Borrower or any Pledgor and any
corresponding restructure of the Secured Obligations, or any
other restructure or refinancing of the Secured Obligations
or any portion thereof;
(e) any modification, compromise, settlement or
release by the Secured Parties, by operation of law or
otherwise, collection or other liquidation of the Secured
Obligations or the liability of the Borrower, any Pledgor or
any Guarantor or of any collateral for the Secured
Obligation (including without limitation any collateral
pledged as security for the Secured Obligations under the
other Security Instruments), in whole or in part, and any
refusal of payment by the Agent or any Lender in whole or in
part, from any obligor or Guarantor in connection with any
of the Secured Obligations, whether or not with notice to,
or further assent by, or any reservation of rights against,
any Pledgor; or
(f) any other circumstance (including without
limitation any statute of limitations) that might otherwise
constitute a defense available to, or a discharge of, the
Borrower, any Guarantor or a Pledgor.
The granting of a Security Interest in the Collateral shall
continue to be effective or be reinstated, as the case may be, if
at any time any payment of any of the Secured Obligations is
rescinded or must otherwise be returned by any Secured Party,
upon the insolvency, bankruptcy or reorganization of the Borrower
or any Pledgor or otherwise, all as though such payment had not
been made.
14. Definitions. All terms used herein shall be defined in
accordance with the appropriate definitions appearing in the
Uniform Commercial Code as in effect in New York, and such
definitions are hereby incorporated herein by reference and made
a part hereof.
15. Entire Agreement. This Agreement, together with the
Credit Agreement, the Guaranty Agreement and other Loan
Documents, constitutes and expresses the entire understanding
between the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings,
inducements, commitments or conditions, express or implied, oral
or written, except as herein contained. The express terms hereof
control and supersede any course of performance or usage of the
trade inconsistent with any of the terms hereof. Neither this
Agreement nor any portion or provision hereof may be changed,
altered, modified, supplemented, discharged, canceled,
terminated, or amended orally or in any manner other than by an
agreement, in writing signed by the parties hereto.
16. Further Assurances. Each Pledgor agrees at its own
expense to do such further acts and things, and to execute and
deliver such additional conveyances, assignments, financing
statements, agreements and instruments, as the Agent may at any
time reasonably request in connection with the administration or
enforcement of this Agreement or related to the Collateral or any
part thereof or in order better to assure and confirm unto the
Agent its rights, powers and remedies for the benefit of the
Lenders hereunder. Each Pledgor hereby consents and agrees that
the issuers of or obligors in respect of the Collateral shall be
entitled to accept the provisions hereof as conclusive evidence
of the right of the Agent, on behalf of the Lenders, to exercise
its rights hereunder with respect to the Collateral,
notwithstanding any other notice or direction to the contrary
heretofore or hereafter given by the Pledgors or any other Person
to any of such issuers or obligors.
17. Binding Agreement; Assignment. This Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and
inure to the benefit of the parties hereto, and to their
respective successors and assigns, except that no Pledgor shall
assign this Agreement or any interest herein or in the
Collateral, or any part thereof, or otherwise pledge, encumber or
grant any option with respect to the Collateral, or any part
thereof, or any cash or property held by the Agent as Collateral
under this Agreement. All references herein to the Agent shall
include any successor thereof, each Lender and any other obligees
from time to time of the Secured Obligations.
18. Swap Agreements. All obligations of the Borrower under
Swap Agreements to which any Lender or its affiliates are a party
shall be deemed to be Secured Obligations secured hereby, and
each Lender or affiliate of a Lender party to any such Swap
Agreement shall be deemed to be a Secured Party hereunder.
19. Severability. In case any Lien, security interest or
other right of any Secured Party or any provision hereof shall be
held to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect any other Lien,
security interest or other right granted hereby or provision
hereof.
20. Counterparts. This Agreement may be executed in any
number of counterparts and all the counterparts taken together
shall be deemed to constitute one and the same instrument.
21. Indemnification. Without limitation of Section 12.9 of
the Credit Agreement or any other indemnification provision in
any Loan Document, each Pledgor hereby covenants and agrees to
pay, indemnify, and hold the Secured Parties harmless from and
against any and all other out-of-pocket liabilities, costs,
expenses or disbursements of any kind or nature whatsoever
arising in connection with any claim or litigation by any Person
resulting from the execution, delivery, enforcement, performance
and administration of this Agreement, including without
limitation expenses incurred pursuant to Section 3(b) hereof, or
the Loan Documents, or the transactions contemplated hereby or
thereby, or in any respect relating to the Collateral or any
transaction pursuant to which the Assignor has incurred any
Obligation (all the foregoing, collectively, the "indemnified
liabilities"); provided, however, that the Assignor shall have no
obligation hereunder with respect to indemnified liabilities
directly or primarily arising from the willful misconduct or
gross negligence of the Agent or any Lender. The agreements in
this Section 21 shall survive repayment of all Secured
Obligations, termination or expiration of this Agreement and
occurrence of the Collateral Termination Date.
22. Termination. This Agreement and all obligations of the
Pledgors hereunder shall terminate on the Collateral Termination
Date, at which time the Liens and rights granted to the Agent for
the benefit of the Lenders hereunder shall automatically
terminate and no longer be in effect, and the Collateral shall
automatically be released from the Liens created hereby. Upon
such termination of this Agreement, the Agent shall, at the sole
expense of the Pledgors, deliver to the Pledgors the certificates
evidencing the Pledged Stock or terminated registrar's
certificates with respect to all other Pledged Interests (and any
other property received as a dividend or distribution or
otherwise in respect of the Pledged Interests then in its
custody), together with any cash then constituting the
Collateral, not then sold or otherwise disposed of in accordance
with the provisions hereof and take such further actions as may
be necessary to effect the same and as shall be reasonably
acceptable to the Agent.
23. Additional Shares. If any Pledgor shall acquire or
hold (a) any additional shares of capital stock of any Pledged
Subsidiary or (b) any shares of capital stock or any other equity
of ownership interest of any Subsidiary not listed on Schedule I
hereto which are required to be subject to a Pledge Agreement
pursuant to the terms of Article IV, Section 8.19 or any other
provision of the Credit Agreement (any such shares described in
clauses (a) or (b) above being referred to herein as the
"Additional Interests"), such Pledgor shall deliver to the Agent
for the benefit of the Lenders (i) a revised Schedule I hereto
reflecting the ownership and pledge of such and (ii) a Pledge
Agreement Supplement in the form of Exhibit A hereto with respect
to such Additional Interests duly completed and signed by such
Pledgor. Each Pledgor shall comply with the requirements of this
Section 23 concurrently with the acquisition of any such
Additional Interests in the case of shares described in clause
(a) above, and within the time period specified in Article IV or
elsewhere in the Credit Agreement with respect to shares
described in clause (b) above.
24. Remedies Cumulative. All remedies hereunder are
cumulative and are not exclusive of any other rights and remedies
of the Agent provided by law or under the Credit Agreement, the
other Loan Documents, or other applicable agreements or
instruments. The making of the Loans to the Borrower pursuant to
the Credit Agreement, and the issuing of Letters of Credit for
the benefit of, shall be conclusively presumed to have been made
or extended, respectively, in reliance upon each Assignor's
assignment of the Assigned Interests pursuant to the terms
hereof.
25. Notices. Any notice required or permitted hereunder
shall be given, (a) with respect to any Pledgor, care of the
Borrower at its address indicated in Section 12.2 of the Credit
Agreement and (b) with respect to the Agent or a Lender, at the
Agent's address indicated in Section 12.2 of the Credit
Agreement. All such notices shall be given and shall be
effective as provided in Section 12.2 of the Credit Agreement.
26. Governing Law; Venue; Waiver of Jury Trial.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED,
IN SUCH STATE NOTWITHSTANDING ITS EXECUTION AND DELIVERY
OUTSIDE SUCH STATE.
(b) EACH PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY
AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY
STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK,
STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY WAIVES
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER
IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY
SUCH SUIT, ACTION OR PROCEEDING.
(c) EACH PLEDGOR AGREES THAT SERVICE OF PROCESS MAY BE
MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND
COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR
PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE
PREPAID) TO THE ADDRESS OF THE BORROWER PROVIDED IN SECTION
12.2 OF THE CREDIT AGREEMENT, OR BY ANY OTHER METHOD OF
SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN
THE STATE OF NEW YORK.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) or (c) HEREOF
SHALL PRECLUDE ANY SECURED PARTY FROM BRINGING ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT IN THE COURTS OF ANY
JURISDICTION WHERE ANY PLEDGOR OR ANY OF SUCH PLEDGOR'S
PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT
PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION,
EACH PLEDGOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION
OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY
SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE
OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER
COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE
UNDER APPLICABLE LAW.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED
OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION
THEREWITH, EACH PLEDGOR AND THE AGENT ON BEHALF OF THE
SECURED PARTIES HEREBY AGREE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY
IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY
SUCH ACTION OR PROCEEDING.
IN WITNESS WHEREOF, the parties have duly executed this
Pledge Agreement on the day and year first written above.
PLEDGORS:
HEADWAY CORPORATE RESOURCES, INC.
By: (Signature)
WHITNEY PARTNERS, L.L.C.
By: (Signature)
HEADWAY CORPORATE STAFFING
SERVICES, INC.
HEADWAY CORPORATE STAFFING SERVICES
OF CONNECTICUT, INC.
HCSS EAST, INC.
HCSS HOLDINGS, INC.
By: (Signature)
AGENT:
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
By: (Signature)
E-435
Exhibit No. 15
Form 8-K
Headway Corporate Resources, Inc.
SEC File No. 0-23170
LC ACCOUNT AGREEMENT
THIS LC ACCOUNT AGREEMENT (the "Agreement"), dated as of
March 19, 1998, is made between HEADWAY CORPORATE RESOURCES
INC., a Delaware corporation ("Pledgor"), and NATIONSBANK,
NATIONAL ASSOCIATION, a national banking association organized
and existing under the laws of the United States, as agent (the
"Agent") for each of the lenders (the "Lenders" and collectively
with the Agent, the "Secured Parties") now or hereafter party to
the Credit Agreement (as defined below). All capitalized terms
used but not otherwise defined herein shall have the respective
meanings assigned thereto in the Credit Agreement.
WITNESSETH:
WHEREAS, Secured Parties have agreed to provide to the
Pledgor a certain revolving credit facility with a letter of
credit sublimit pursuant to the Credit Agreement dated as of
March 19, 1998 among the Pledgor, the Agent and the Lenders (as
from time to time amended, revised, modified, supplemented or
amended and restated, the "Credit Agreement"); and
WHEREAS, as a condition precedent to the Lenders'
obligations to make the Loans or to issue Letters of Credit,
Pledgor is required to execute and deliver to the Agent a copy of
this Agreement on or before the Effective Time (as defined
herein);
WHEREAS, the Secured Parties are unwilling to enter into the
Loan Documents unless the Pledgor enters into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
agreements, provisions and covenants contained herein, Pledgor
and the Agent hereby agree as follows:
1. Definitions. Capitalized terms used in this Agreement
shall have the following meanings:
"Collateral" means (a) all funds from time to time on
deposit in the LC Account; (b) all Investments and all
certificates and instruments from time to time representing or
evidencing such Investments; (c) all notes, certificates of
deposit, checks and other instruments from time to time hereafter
delivered to or otherwise possessed by the Agent for or on behalf
of Pledgor in substitution for or in addition to any or all of
the Collateral described in clause (a) or (b) above; (d) all
interest, dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Collateral
described in clause (a), (b) or (c) above; and (e) to the extent
not covered by clauses (a) through (d) above, all proceeds of any
or all of the foregoing Collateral.
"Effective Time" means the Closing Date as defined in the
Credit Agreement.
"Investments" means those investments, if any, made by the
Agent pursuant to Section 5 hereof.
"LC Account" means the cash collateral account established
and maintained pursuant to Section 2 hereof.
"Secured Obligations" means (i) all Obligations of Pledgor
now existing or hereafter arising under or in respect of the
Credit Agreement or the Notes (including, without limitation,
Pledgor's obligations to pay principal and interest and all other
charges, fees, expenses, commissions, reimbursements, indemnities
and other payments related to or in respect of the obligations
contained in the Credit Agreement or the Notes) or any documents
or agreement related to the Credit Agreement or the Notes; and
(ii) without duplication, all obligations of Pledgor now or
hereafter existing under or in respect of this Agreement,
including, without limitation, with respect to all charges, fees,
expenses, commissions, reimbursements, indemnities and other
payments related to or in respect of the obligations contained in
this Agreement.
2. LC Account; Cash Collateralization of Letters of Credit.
(i) At any time, in the Agent's sole discretion, the
Agent shall establish and maintain at its offices at 100
North Tryon Street, Charlotte, North Carolina, in the name
of the Agent and under the sole dominion and control of the
Agent, a cash collateral account designated as
NationsBank/Headway Corporate Resources Inc. Cash LC
Account (the "LC Account").
(ii) (A) In accordance with Article X of the Credit
Agreement, in the event that an Event of Default has
occurred and is continuing and Pledgor is required to
deposit with the Agent an amount equal to the maximum amount
remaining undrawn or unpaid under the Letters of Credit, or
(B) as otherwise agreed by the parties hereto to provide
cash collateral for the undrawn amount of any Letter of
Credit other than after the occurrence and during the
continuation of an Event of Default, the Agent shall, upon
receipt of any such amounts, deposit such amounts into the
LC Account to be held pursuant to the terms of this
Agreement. Upon a drawing under the Letters of Credit in
respect of which any amounts described above have been
deposited in the LC Account, the Agent shall apply such
amounts to reimburse the Issuing Bank for the amount of such
drawing. In the event the Letters of Credit are canceled or
expire or in the event of any reduction in the maximum
amount available at any time for drawing under such Letters
of Credit (the "Maximum Available Amount"), the Agent shall
apply the amount then in the LC Account less the Maximum
Available Amount immediately after such cancellation,
expiration or reduction, first, to the cash
collateralization of the Letters of Credit if Pledgor has
failed to pay all or a portion of the maximum amounts
described in the first sentence of this clause (ii) and,
second, to the payment in full of the outstanding Secured
Obligations. In the event that the Event of Default
described above has been cured or has been waived in
accordance with Article X of the Credit Agreement, the Agent
shall apply the amount then in the LC Account to the payment
of any charges, fees, expenses, commissions, reimbursements,
indemnities and other payments then due and payable and
related to or in respect of the obligations contained in
this Agreement or withdrawal of such amount from the LC
Account or termination or liquidation of any investment of
such amount and deliver any remaining amounts to the
Pledgor.
(iii) The Agent is hereby authorized to sell, and
shall sell, all or any designated part of the Collateral (A)
so long as no Default or Event of Default shall have
occurred and be continuing, upon the receipt of appropriate
written instructions from Pledgor or (B) in any event if
such sale is necessary to permit the Agent to perform its
duties hereunder or under the Credit Agreement. The Agent
shall have no responsibility and the Pledgor hereby agrees
to hold the Agent and the Lenders harmless for any loss in
the value of the Collateral resulting from a fluctuation in
interest rates or otherwise. The net proceeds of the sale
or payment of any such investment shall constitute part of
the Collateral and be held in the LC Account by the Agent.
3. Pledge; Security for Secured Obligations. Pledgor
hereby grants and pledges to the Agent, for itself and on behalf
of the Secured Parties, a first priority lien and security
interest in, the Collateral now existing or hereafter arising or
acquired, as collateral security for the prompt payment in full
when due, whether at stated maturity, by acceleration or
otherwise (including, without limitation, the payment of interest
and other amounts which would accrue and become due but for the
filing of a petition in bankruptcy or the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code), of
all Secured Obligations.
4. Delivery of Collateral. All certificates or
instruments, if any, representing or evidencing the Collateral
shall be delivered to the Agent for the benefit of the Secured
Parties in the form of immediately available funds.
5. Investing of Amounts in the LC Account; Amounts Held by
the Agent. Cash held by the Agent in the LC Account shall not be
invested or reinvested except as provided in this Section 5.
(i) Except as otherwise provided in Section 12 hereof
and provided that the lien and security interest in favor of
the Agent for the benefit of the Secured Parties remains
perfected, any funds on deposit in the LC Account shall be
invested by the Agent in cash equivalents so long as no
Default or Event of Default shall have occurred and be
continuing, and if a Default or Event of Default shall have
occurred and be continuing, shall be held by the Agent in
cash or invested in cash equivalents as determined by the
Agent in its sole discretion.
(ii) Interest received in respect of Investments of any
amounts on deposit in the LC Account shall be delivered by
Agent to Pledgor on the last Business Day of each fiscal
quarter of the Pledgor or, if earlier, upon cancellation or
expiration of or reduction (by drawing or otherwise) of the
Maximum Available Amount for drawing under the Letters of
Credit, as the case may be, in respect of which such amounts
were so deposited; provided, however, that the Agent shall
not deliver to Pledgor any such interest received in respect
of Investments of any amounts on deposit in the LC Account
if an Event of Default has occurred and is continuing unless
all outstanding Secured Obligations have been indefeasibly
paid in full in cash.
6. Representations and Warranties. In addition to its
representations and warranties made pursuant to Article VII of
the Credit Agreement, Pledgor represents and warrants to the
Agent (for itself and as agent on behalf of the Secured Parties),
that at the time the Pledgor delivers the Collateral (or any
portion thereof) to the Agent, the Pledgor will be the legal and
beneficial owner of the Collateral free and clear of any Lien
except for the lien and security interest created by this
Agreement.
7. Transfers and Other Liens. Pledgor agrees that it will
not (a) sell or otherwise dispose of any of the Collateral, or
(b) create or permit to exist any Lien upon or with respect to
any of the Collateral, except for the lien and security interest
created by this Agreement and the Credit Agreement.
8. The Agent Appointed Attorney-in Fact. Pledgor hereby
appoints the Agent as its attorney-in-fact for the purposes of
carrying out the provisions of this Agreement and taking any
action and executing any instrument which the Agent may
reasonably deem necessary or advisable to accomplish the purposes
hereof, which appointment is coupled with an interest and is
irrevocable; provided, that the Agent shall have and may exercise
rights under this power of attorney only upon the occurrence and
during the continuance of an Event of Default. Without limiting
the generality of the foregoing, upon the occurrence and during
the continuation of an Event of Default, the Agent shall have the
power to receive, endorse and collect all instruments made
payable to Pledgor representing any payment, dividend, or other
distribution in respect of the Collateral or any part thereof and
to give full discharge for the same. In performing its functions
and duties under this Agreement, the Agent shall act solely for
itself and as the agent of the Lenders and the Agent has not
assumed nor shall be deemed to have assumed any obligation
towards or relationship of agency or trust with or for Pledgor.
9. The Agent May Perform. If Pledgor fails to perform any
agreement contained herein, after notice to Pledgor, the Agent
may itself perform, or cause performance of, such agreement, and
the expenses of the Agent incurred in connection therewith shall
be payable by Pledgor under Section 13 hereof.
10. Standard of Care; No Responsibility For Certain
Matters. In dealing with the Collateral in its possession, the
Agent shall exercise the same care which it would exercise in
dealing with similar collateral property pledged by others in
transactions of a similar nature, but it shall not be responsible
for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters
relative to any Collateral, whether or not the Agent has or is
deemed to have knowledge of such matters, (b) taking any steps to
preserve rights against any parties with respect to any
Collateral (other than steps taken in accordance with the
standard of care set forth above to maintain possession of the
Collateral), (c) the collection of any proceeds, (d) any loss
resulting from Investments made pursuant to Section 5 hereof, or
(e) determining (x) the correctness of any statement or
calculation made by Pledgor in any written instructions, or (y)
whether any deposit in the LC Account is proper.
11. Remedies upon Acceleration; Application of Proceeds.
If the Borrower shall fail to perform any action required
hereunder or shall otherwise breach any term or provision hereof
(a "Default" hereunder) which Default shall not have been waived
in accordance with Section 12.6 of the Credit Agreement:
(i) The Agent may and shall at the request of the
Required Lenders exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein
otherwise available to it, all the rights and remedies of a
secured party on default under the Uniform Commercial Code
(the "Code") as in effect in the State of New York at that
time, and the Agent may, without notice except as specified
below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any exchange or
broker's board or at any of the Agent's offices or
elsewhere, for cash, on credit or for future delivery, and
at such price or prices, and upon such other terms as the
Agent may deem commercially reasonable. Pledgor agrees
that, to the extent notice of sale shall be required by law,
at least ten (10) days' notice to Pledgor of the time and
place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification.
The Agent shall not be obligated to make any sale of the
Collateral regardless of notice of sale having been given.
The Agent may adjourn any public or private sale from time
to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made
at the time and place to which it was so adjourned.
(ii) In addition to the remedies set forth in part (i)
above and subject to the provisions of Section 2(ii) hereof,
any cash held by the Agent as Collateral and all cash
proceeds received by the Agent in respect of any sale of,
collection from, or other realization upon all or part of
the Collateral shall be applied (after payment of any
amounts payable to the Agent pursuant to Section 13 hereof)
by the Agent to pay the Secured Obligations pursuant to
Section 10.5 of the Credit Agreement.
12. Expenses. In addition to any payments of expenses of
Agent pursuant to the Credit Agreement or the other Loan
Documents, Pledgor agrees to pay promptly to the Agent all the
reasonable costs and expenses, including reasonable attorneys
fees and expenses, which the Agent may incur in connection with
(a) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (b) the
exercise or enforcement of any of the rights of the Agent
hereunder, or (c) the failure by Pledgor to perform or observe
any of the provisions hereof.
13. No Delays Waiver, Etc. No delay or failure on the part
of the Agent in exercising, and no course of dealing with respect
to, any power or right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Agent of
any power or right hereunder preclude other or further exercise
thereof or the exercise of any other power or right. The
remedies herein provided are to the fullest extent permitted by
law cumulative and are not exclusive of any remedies provided by
law.
14. Amendments, Etc. No amendment, modification,
termination or waiver of any provision of this Agreement, or
consent to any departure by Pledgor therefrom, shall in any event
be effective without the written concurrence of the Agent.
15. Continuing Security Interest; Termination. This
Agreement shall create a continuing security interest in the
Collateral, as it may exist from time to time, and shall (a)
remain in full force and effect until the occurrence of the
Collateral Termination Date, (b) be binding upon Pledgor, its
successors and assigns, and (c) inure to the benefit of the
Agent, the Secured Parties and their respective successors,
transferees and assigns. Without limiting the generality of the
foregoing clause (c) and subject to the provisions of the Credit
Agreement, any Lender may assign or otherwise transfer any Note
held by it to any other person or entity, and such other person
or entity shall thereupon become vested with all the benefits in
respect thereof granted to such Lender herein or otherwise. Upon
the occurrence of the Collateral Termination Date, the Pledgor
shall be entitled to the return, upon its request and at its
expense, of such of the Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof.
16. Successors and Assigns. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be
deemed to include the and assigns of such party and all
covenants, promises, and agreements by or on behalf of the
Pledgor or by and on behalf of the Agent shall bind and inure to
the benefit of the and assigns of the Pledgor, the Agent and the
Lenders.
17. AntiMarshalling Provisions. The right is hereby given
by the Pledgor to the Agent, for the benefit of the Secured
Parties, to make releases (whether in whole or in part) of all or
any part of the Collateral agreeable to the Agent without notice
to, or the consent, approval or agreement of other parties and
interests, including junior lienors, which releases shall not
impair in any manner the validity of or priority of the Liens and
security interests in the remaining Collateral conferred under
such documents, nor release the Pledgor from personal liability
for the Secured Obligations hereby secured. Notwithstanding the
existence of any other security interest in the Collateral held
by the Agent, for the benefit of the Secured Parties, the Agent
shall have the right to determine the order in which any or all
of the Collateral shall be subjected to the remedies provided in
this Agreement. The proceeds realized upon the exercise of the
remedies provided herein shall be applied by the Agent, for the
benefit of the Secured Parties, in the manner provided in Section
10.5 of the Credit Agreement. The Pledgor hereby waives any and
all right to require the marshalling of assets in connection with
the exercise of any of the remedies permitted by applicable law
or provided herein.
18. Absolute Rights and Obligations. All rights of the
Secured Parties, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of:
1. any change in the time, manner or place of payment
of, or in any other term of, all or any of the Secured
Obligations, or any other amendment or waiver of or any
consent to departure from, the Credit Agreement or any other
Loan Document, including, but not limited to, (i) an
increase or decrease in the Secured Obligations and (ii) an
amendment of any Loan Document to permit the Agent or the
Lenders or any one or more of them to extend further or
additional credit to the Pledgor in any form including
credit by way of loan, purchase of assets, guarantee or
otherwise, which credit shall thereupon be and become
subject to the Credit Agreement and the other Loan Documents
as a Secured Obligation;
2. any taking and holding of collateral or guarantees
(including without limitation any collateral pledged as
security for the Secured Obligations under the other
Security Instruments) for all or any of the Secured
Obligations; or any amendment, alteration, exchange,
substitution, transfer, enforcement, waiver, subordination,
termination or release of any such collateral or guarantees,
or any nonperfection of any such collateral, or any consent
to departure from any such guaranty;
3. any manner of application of collateral, or
proceeds thereof, securing payment or enforcement of all or
any of the Secured Obligations, or the manner of sale of any
such collateral;
4. any consent by the Secured Parties to the change,
restructure or termination of the corporate structure or
existence of the Pledgor and any corresponding restructure
of the Secured Obligations, or any other restructure or
refinancing of the Secured Obligations or any portion
thereof;
5. any modification, compromise, settlement or
release by the Secured Parties, by operation of law or
otherwise, collection or other liquidation of the Secured
Obligations or the liability of the Pledgor or any Guarantor
or of any collateral for the Secured Obligation (including
without limitation any collateral pledged as security for
the Secured Obligations under the other Security
Instruments), in whole or in part, and any refusal of
payment by the Agent or any Lender in whole or in part, from
any obligor or Guarantor in connection with any of the
Secured Obligations, whether or not with notice to, or
further assent by, or any reservation of rights against, the
Pledgor; or
6. any other circumstance (including without
limitation any statute of limitations) that might otherwise
constitute a defense available to, or a discharge of, the
Pledgor or any Guarantor.
The granting of a Security Interest in the Collateral shall
continue to be effective or be reinstated, as the case may be, if
at any time any payment of any of the Secured Obligations is
rescinded or must otherwise be returned by any Secured Party,
upon the insolvency, bankruptcy or reorganization of the Pledgor
or otherwise, all as though such payment had not been made.
19. Entire Agreement. This Agreement, together with the
Credit Agreement, the Guaranty and other Loan Documents,
constitutes and expresses the entire understanding between the
parties hereto with respect to the subject matter hereof, and
supersedes all prior agreements and understandings, inducements,
commitments or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and
supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof. Neither this
Agreement nor any portion or provision hereof may be changed,
altered, modified, supplemented, discharged, canceled,
terminated, or amended orally or in any manner other than by an
agreement, in writing signed by the parties hereto.
20. Further Assurances. The Pledgor agrees at its own
expense to do such further acts and things, and to execute and
deliver such additional conveyances, assignments, financing
statements, agreements and instruments, as the Agent may at any
time reasonably request in connection with the administration or
enforcement of this Agreement or related to the Collateral or any
part thereof or in order better to assure and confirm unto the
Agent its rights, powers and remedies for the benefit of the
Secured Parties hereunder. The Pledgor hereby consents and
agrees that the issuers of or obligors in respect of the
Collateral shall be entitled to accept the provisions hereof as
conclusive evidence of the right of the Agent, on behalf of the
Secured Parties, to exercise its rights hereunder with respect to
the Collateral, notwithstanding any other notice or direction to
the contrary heretofore or hereafter given by any Pledgor or any
other Person to any of such issuers or obligors.
21. Binding Agreement; Assignment. This Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and
inure to the benefit of the parties hereto, and to their
respective and assigns, except that the Pledgor shall not be
permitted to assign this Agreement or any interest herein or in
the Collateral, or any part thereof, or otherwise pledge,
encumber or grant any option with respect to the Collateral, or
any part thereof, or any cash or property held by the Agent as
Collateral under this Agreement. All references herein to the
Agent shall include any successor thereof, each Lender and any
other obligees from time to time of the Obligations.
22. Swap Agreements. All obligations of the Borrower under
Swap Agreements to which any Lender or its affiliates are a party
shall be deemed to be Secured Obligations secured hereby, and
each Lender or affiliate of a Lender party to any such Swap
Agreement shall be deemed to be a Secured Party hereunder.
23. Severability. In case any Lien, security interest or
other right of any Secured Party or any provision hereof shall be
held to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect any other Lien,
security interest or other right granted hereby or provision
hereof.
24. Counterparts. This Agreement may be executed in any
number of counterparts and all the counterparts taken together
shall be deemed to constitute one and the same instrument.
25. Indemnification. Without limitation of Section 12.9 of
the Credit Agreement or any other indemnification provision in
any Loan Document, the Pledgor hereby covenants and agrees to
pay, indemnify, and hold the Secured Parties harmless from and
against any and all other out-of-pocket liabilities, costs,
expenses or disbursements of any kind or nature whatsoever
arising in connection with any claim or litigation by any Person
resulting from the execution, delivery, enforcement, performance
and administration of this Agreement or the Loan Documents, or
the transactions contemplated hereby or thereby, or in any
respect relating to the Collateral or any transaction pursuant to
which the Pledgor has incurred any Obligation (all the foregoing,
collectively, the "indemnified liabilities"); provided, however,
that the Pledgor shall have no obligation hereunder with respect
to indemnified liabilities directly or primarily arising from
the willful misconduct or gross negligence of the Agent or any
Lender. The agreements in this subsection shall survive
repayment of all Secured Obligations, termination or expiration
of this Agreement and occurrence of the Collateral Termination
Date.
26. Remedies Cumulative. All remedies hereunder are
cumulative and are not exclusive of any other rights and remedies
of the Agent provided by law or under the Credit Agreement, the
other Loan Documents, or other applicable agreements or
instruments. The making of the Loans to the Borrower pursuant to
the Credit Agreement and the extension of the Revolving Credit
Facility and the Term Loan Facility to the Borrower pursuant to
the Credit Agreement shall be conclusively presumed to have been
made or extended, respectively, in reliance upon the Pledgor's
pledge of the Collateral pursuant to the terms hereof.
27. Notices. Any notice required or permitted hereunder
shall be given, (a) with respect to the Pledgor, at the address
of the Borrower indicated in Section 12.2 of the Credit Agreement
and (b) with respect to the Agent or a Lender, at the Agent's
address indicated in Section 12.2 of the Credit Agreement. All
such notices shall be given and shall be effective as provided in
Section 12.2 of the Credit Agreement.
29. Governing Law; Waiver of Jury Trial, Etc.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED,
IN SUCH STATE NOTWITHSTANDING ITS EXECUTION AND DELIVERY
OUTSIDE SUCH STATE.
(b) THE PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY
AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY
STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK,
STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY WAIVES
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE IN, OR TO THE EXERCISE OF JURISDICTION
OVER IT AND ITS PROPERTY BY ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY
SUCH SUIT, ACTION OR PROCEEDING.
(c) THE PLEDGOR AGREES THAT SERVICE OF PROCESS MAY BE
MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND
COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR
PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE
PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED IN SECTION
12.2 OF THE CREDIT AGREEMENT OR BY ANY OTHER METHOD OF
SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN
THE STATE OF NEW YORK.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF
SHALL PRECLUDE ANY SECURED PARTY FROM BRINGING ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT IN THE COURTS OF ANY
JURISDICTION WHERE THE PLEDGOR OR ANY OF ITS PROPERTY OR
ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY
THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, THE PLEDGOR
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH
COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT,
ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF
JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER
COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE
UNDER APPLICABLE LAW.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED
OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH
THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY AND HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT THAT SUCH PERSON MAY HAVE TO
TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING.
IN WITNESS WHEREOF, Pledgor and the Agent have caused this
Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized as of the date first above
written.
HEADWAY CORPORATE RESOURCES, INC.
By: (Signature)
NATIONSBANK, NATIONAL ASSOCIATION, as
Agent
By: (Signature)
E-445
Exhibit No. 16
Form 8-K
Headway Corporate Resources, Inc.
SEC File No. 0-23170
INTELLECTUAL PROPERTY SECURITY AGREEMENT
THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT (this
"Agreement") dated as of March 19, 1998 is made between HEADWAY
CORPORATE RESOURCES, INC.
a Delaware corporation (the "Borrower"), EACH OF THE UNDERSIGNED
SUBSIDIARIES OF THE BORROWER (each a "Grantor" and together with
the Borrower, the "Grantors") in favor of NATIONSBANK, NATIONAL
ASSOCIATION, a national banking association organized and
existing under the laws of the United States, as agent (the
"Agent") for each of the lenders (the "Lenders" and collectively
with the Agent, the "Secured Parties") now or hereafter party to
the Credit Agreement (as defined below). All capitalized terms
used but not otherwise defined herein shall have the respective
meanings assigned thereto in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Secured Parties have agreed to provide to the
Borrower a certain revolving credit facility with a letter of
credit sublimit pursuant to the Credit Agreement dated as of
March 19, 1998 among the Borrower, the Agent and the Lenders (as
from time to time amended, revised, modified, supplemented, or
amended and restated the "Credit Agreement"); and
WHEREAS, each of the Grantors other than the Borrower is,
directly or indirectly, a wholly-owned Subsidiary of the
Borrower; and
WHEREAS, each Grantor other than the Borrower has entered
into that certain Guaranty Agreement dated as of the date hereof
(the "Guaranty") pursuant to which it has jointly and severally
guaranteed payment and performance of the Borrower's Obligations
under the Credit Agreement; and
WHEREAS, each Grantor will materially benefit from the
Loans and Advances to be made, and the Letter of Credit to be
issued, under the Credit Agreement; and
WHEREAS, as collateral security for payment and performance
of the Borrower's Obligations under the Credit Agreement and each
other Grantor's Guarantors' Obligations, as defined in the
Guaranty, each Grantor is willing to grant to the Agent for the
benefit of the Secured Parties a security interest in the assets
described herein; and
WHEREAS, the Secured Parties are unwilling to enter into
the Loan Documents unless the Grantors enter into this Agreement;
NOW, THEREFORE, in order to induce the Secured Parties to
enter into the Loan Documents and to make Loans and Advances and
issue Letters of Credit and in consideration of the premises and
the mutual covenants contained herein, the parties hereto agree
as follows:
1. Grant of Security Interest. Each Grantor hereby grants
a security interest in and collaterally assigns to the Agent, for
the benefit of the Secured Parties, all of the following
(collectively, the "Collateral"):
(a) all of such Grantor's right, title and interest,
whether now owned or hereafter acquired, in and to all
United States and foreign trademarks, trade names, trade
dress, service marks, trademark and service mark
registrations, and applications for trademark or service
mark registration and any renewals thereof (including
without limitation each trademark, trade name, trade dress,
registration and application identified in Schedule I
attached hereto and incorporated herein by reference) and
including all income, royalties, damages and payments now
and hereafter due and/or payable with respect thereto
(including without limitation damages for past or future
infringements thereof), the right to sue or otherwise
recover for all past, present and future infringements
thereof, all rights corresponding thereto throughout the
world (but only such rights as now exist or may come to
exist under applicable local law) and all other rights of
any kind whatsoever of each Grantor accruing thereunder or
pertaining thereto, together in each case with the goodwill
of the business connected with the use of, and symbolized
by, each such trademark and service mark, excluding,
however, the trademarks "Viva," "On-Line" and "Delinko"
(collectively, the "Trademarks"); and
(b) all license agreements regarding Trademarks with
any other party, whether such Grantor is a licensor or
licensee under any such license agreement (including without
limitation the licenses listed on Schedule II attached
hereto and incorporated herein by reference), and the right
to prepare for sale, sell and advertise for sale, all
Inventory (as defined in the Security Agreement) now or
hereafter owned by such Grantor and now or hereafter covered
by such licenses (collectively, the "Licenses")); and
(c) all proceeds of any of the foregoing.
In addition, each Grantor has executed in blank and
delivered to the Agent an assignment of licenses and federally
registered trademarks (the "IP Assignment") owned by it in the
form of Exhibit A hereto. Each Grantor hereby authorizes the
Agent to complete as Assignee and record with the United States
Patent and Trademark Office (the "Patent and Trademark Office")
each IP Assignment upon the occurrence of an Event of Default
that is continuing at the time of filing.
2. Security for Obligations. The security interests
granted under this Agreement (the "Security Interests") by each
Grantor secure the payment of all obligations of such Grantor
under, in respect of or in connection with this Agreement, the
Credit Agreement (including without limitation the Borrower's
Obligations thereunder) or the Guaranty (including without
limitation its joint and several "Guarantors' Obligations"
thereunder), respectively, and each other Loan Document to which
such Grantor is or becomes a party (all such obligations being
the "Secured Obligations").
The Security Interests granted by this Agreement are granted
in conjunction with the security interests granted to the Agent,
for the benefit of the Secured Parties, in other assets of each
Grantor pursuant to the other Loan Documents.
3. Collateral Assignment. In addition to, and not in
limitation of, the grant of the Security Interests in the
Trademarks and Licenses in Section 1 above, each Grantor hereby
grants, assigns, transfers, conveys and sets over to the Agent,
for the benefit of the Lenders, the Assignor's entire right,
title and interest in and to the Trademarks and Licenses;
provided, that such grant, assignment, transfer and conveyance
shall become effective only at the election of the Agent after
the occurrence of an Event of Default that is continuing at the
time of such election. The Grantor hereby agrees that after the
effectiveness of such grant, assignment, transfer and conveyance
of any of the Trademarks and Licenses, the use by the Agent of
any of such Trademarks and Licenses shall be without any
liability for royalties or other related charges from the Agent
to any Grantor.
4. Further Assurances.
(a) Each Grantor agrees that from time to time, at the
expense of such Grantor, such Grantor will promptly execute
and deliver all further instruments and documents and take
all further action that may be necessary or desirable in the
Agent's determination, or that the Agent may reasonably
request, in order to (i) continue, perfect and protect any
Security Interest granted or purported to be granted hereby,
(ii) upon the Agent's request, perfect the Agent's (for the
benefit of the Secured Parties) Security Interest in and
assign to the Agent, for the benefit of the Secured Parties,
as security for the repayment and satisfaction of the
Secured Obligations, all Collateral located in any foreign
jurisdiction, and (iii) enable the Agent, for the benefit of
the Lenders, to exercise and enforce its rights and remedies
hereunder with respect to any part of the Collateral.
Without limiting the generality of the foregoing, each
Grantor will execute and file (with the appropriate
governmental offices, authorities, agencies and regulatory
bodies in the United States and, upon the Agent's request,
any applicable foreign jurisdiction) such supplements to
this Agreement and such financing or continuation
statements, or amendments thereto, and such other
instruments or notices, including executed IP Assignments,
with the Patent and Trademark Office, as may be necessary or
desirable, or as the Agent, on behalf of the Secured
Parties, may reasonably request, in order to perfect and
preserve the Security Interests granted hereby.
(b) Each Grantor hereby authorizes the Agent, on
behalf of the Secured Parties, upon the occurrence and
during the continuation of an Event of Default, to file,
where permitted by law, one or more financing or
continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of
such Grantor. A carbon, photographic or other reproduction
of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.
(c) Each Grantor will furnish to the Agent, on behalf
of the Secured Parties, from time to time statements and
schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as
the Agent, on behalf of the Secured Parties, may reasonably
request, all in reasonable detail.
(d) Each Grantor agrees that, should it have or obtain
an ownership interest in any trademark or trademark
application that is not now identified on Schedule I or any
license agreement in respect of any trademark that is not
now identified on Schedule II: (i) the provisions of this
Agreement shall automatically apply to such item, and such
item shall automatically become part of the Collateral; and
(ii) such Grantor shall, within three months after acquiring
or becoming aware of such ownership interest, (A) give
written notice thereof to the Agent and, (B) with respect to
Trademarks cause the ownership of such Collateral with
respect to Trademarks and Licenses, prepare, execute and
file in the Patent and Trademark Office or, upon the Agent's
request, in the equivalent agencies in any foreign
jurisdiction, within the requisite time period, all
documents that are known by such Grantor to be necessary or
that the Agent, on behalf of the Secured Parties, reasonably
requests in order to perfect the Security Interest of the
Agent, on behalf of the Secured Parties, therein. Each
Grantor authorizes the Agent, on behalf of the Secured
Parties, to execute and file such a document in the name of
such Grantor if such Grantor fails to do so.
(e) Each Grantor agrees that should any of its
Subsidiaries (other than a corporation which is a party
hereto and whether now or hereafter existing) obtain any
ownership interest in any United States or foreign
intellectual property of a nature that would be Collateral
hereunder if owned by such Grantor, such Grantor shall
either cause such corporation, but with respect to foreign
intellectual property only upon the Agent's request, (i) to
become a party to the Guaranty and a party hereto, or (ii)
to transfer and assign all such corporation's ownership
interests therein to such Grantor, whereupon the provisions
of subsection (d) of this Section 4 shall be applicable
thereto.
(f) Each Grantor agrees: (i) to take all necessary
steps in any proceeding before the Patent and Trademark
Office or any similar office or agency in any other country
or any political subdivision thereof or in any court, to
maintain each trademark now or hereafter included in the
Collateral, including the filing of divisional,
continuation, continuation-inpart and substitute
applications, the filing of applications for reissue,
renewal or extensions, the payment of maintenance fees, and
the participation in interference, reexamination, opposition
and infringement proceedings; (ii) to bear any expenses
incurred in connection with such activities; and (iii) not
to abandon any material pending application with respect to
any of the Collateral, without the prior written consent of
the Agent.
(g) Notwithstanding subsection (f) above, Grantor
shall do any act or omit to do any act whereby any of the
Collateral may become dedicated or abandoned, except where
such dedication or abandonment (i) will not materially
adversely affect the business, condition (financial or
otherwise), operations, performance, or properties of such
Grantor individually or of such Grantor and its Subsidiaries
taken as a whole, and (ii) is in the ordinary course of such
Grantor's business. Each Grantor agrees to notify the Agent
promptly and in writing if it learns that any of the
Collateral may become abandoned or dedicated or of any
adverse determination or any development (including without
limitation the institution of any proceeding in the Patent
and Trademark Office or in the equivalent agencies in any
foreign jurisdiction, or any court) regarding any part of
the Collateral.
(h) In the event that any of the Collateral as to
which it has granted the Security Interests is infringed or
misappropriated by a third party, such Grantor shall
promptly notify the Agent and shall take all reasonable
steps to terminate the infringement or misappropriation, and
take such other actions as such Grantor shall deem
appropriate under the circumstances to protect such
Collateral. Any expense incurred in connection with such
activities shall be borne by such Grantor.
(i) Each Grantor agrees (i) to maintain the quality of
any and all products in connection with which the Collateral
is used, consistent with the quality standards established
by such Grantor for said products as of the date of
determination, and (ii) to provide the Agent, on behalf of
the Secured Parties, at least quarterly, with a certificate
of an officer of such Grantor certifying such Grantor's
compliance with the foregoing subsections (a) through (h).
(j) Each Grantor shall protect its products with
markings or such other measures as are required by statute.
5. General Representations and Warranties. Each Grantor
represents and warrants as follows:
(a) It has the unqualified right to enter into this
Agreement and to perform its terms.
(b) No authorization, consent, approval or other
action by, and no notice to or filing with, any governmental
authority or regulatory body or any other Person is required
either (i) for the grant by such Grantor of the Security
Interests granted hereby (excluding such licenses which, by
their terms, require the consent of the licensor to assign
the license but as to which such Grantor represents and
warrants such consent has been made in writing, copies of
which have been delivered to the Secured Parties) or for the
execution, delivery or performance of this Agreement by such
Grantor, or (ii) for the perfection of or the exercise by
the Agent, on behalf of the Secured Parties, of its rights
and remedies hereunder, except for the filing of this
Agreement with the Patent and Trademark Office and with the
equivalent offices in any foreign jurisdiction with respect
to each Trademark, and the filings required by the Uniform
Commercial Code of the State in which such Grantor maintains
its chief executive office, and except to the extent that
the exercise of rights and remedies may be limited by any
applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors rights
generally or by general principles of equity.
(c) Set forth on Schedule II is a list, which is
complete and accurate in all material respects as of the
date hereof, of Licenses of such Grantor necessary for the
conduct of its business as currently conducted or utilized
and material in such Grantor's commercial operations or
materially used in the performance of executive search,
temporary staffing, pay-rolling and strategic advisory
services, including the expiration date of such Licenses.
(d) Each License of such Grantor identified on
Schedule II is validly subsisting and has not been adjudged
invalid or unenforceable, in whole or in part, and is, to
such Grantor's knowledge, valid and enforceable. No action
or proceeding is pending or threatened seeking to limit,
cancel or question the validity of Collateral.
(e) It has notified the Agent in writing of all uses
of any Trademark prior to such Grantor's use, of which
such Grantor is aware, which would in the reasonable
judgment of such Grantor lead to such item becoming invalid
or unenforceable, including prior unauthorized uses by third
parties and uses that were not supported by the goodwill of
the business connected with such item.
(f) It has not granted any release, covenant not to
sue, or nonassertion assurance to any third person, nor
allowed any shop right to arise with respect to any third
person, with respect to any part of the Collateral.
(g) It has protected its Collateral with markings or
as otherwise required by statute.
(h) The actions contemplated under or in connection
with the Loan Documents will not impair the legal right of
such Grantor to use any of the Collateral.
(i) Except as disclosed to the Lenders in writing
prior to the date of this Agreement, such Grantor has no
knowledge of the existence of any right under any patent,
trademark, license agreement, trade name, trade secret,
knowhow, confidential research, development and commercial
information, or other proprietary information held by any
other Person that would preclude such Grantor from providing
executive search, temporary staffing, pay-rolling and
strategic advisory services (except, in each case, to the
extent that such Grantor has granted an exclusive license to
another Person), or materially interfere with the ability of
such Grantor to carry on its business as currently carried
on, and such Grantor has no knowledge of any claim to the
contrary that is likely to be made.
(j) Such Grantor has used consistent standards of
quality in the provision of each service provided under any
Collateral, and has taken all steps necessary to ensure that
all licensed users of any Collateral use such consistent
standards of quality.
(k) None of such Grantor's Subsidiaries (except to the
extent that such Subsidiaries are also Grantors hereunder)
has an ownership interest in any trademark, trade name,
trade dress, service marks, trademark or service mark
registrations or any applications for trademark or service
mark registration or any other intellectual property of a
nature that would be Collateral hereunder if owned by such
Grantor.
(l) No claim has been made (and, as to Collateral with
respect to which such Grantor is a licensor, to the
knowledge of such Grantor, no claim has been made against
the third party licensee), and such Grantor has no knowledge
of any claim that is likely to be made, that the use by such
Grantor of any Collateral may be reasonably likely to
violate the rights of any Person.
6. Trademark Representations and Warranties. Each Grantor
represents and warrants as follows:
(a) It is the sole, legal and beneficial owner of the
entire right, title and interest in and to the Trademarks
purported to be granted by it hereunder, free and clear of
any Lien, security interest, option, charge, pledge,
registered user agreement, assignment (whether conditional
or not), or covenant, or any other encumbrance, except for
the Security Interests created or permitted by this
Agreement or the Credit Agreement and certain Licenses and
registered user agreements described on Schedule II and any
liens relating to that certain $50,000,000 Senior Credit
Facilities dated September 15, 1997 between the Borrower,
ING (U.S.) Capital Corporation and the various lenders named
therein, which liens are being terminated on the date
hereof. No financing statement or other instrument similar
in effect covering all or any part of the Trademarks
purported to be granted by such Grantor hereunder is on file
in any recording office, including, without limitation, the
Patent and Trademark Office and the equivalent offices in
any foreign jurisdiction, except such as may have been filed
in favor of the Agent, for the benefit of the Lenders.
(b) Set forth on Schedule I is a list of all of the
Trademarks owned by such Grantor necessary for the conduct
of its business as currently conducted or utilized in such
Grantor's commercial manufacturing operations or used in the
selling or marketing of such Grantor's products.
(c) Each Trademark of such Grantor identified on
Schedule I is validly subsisting and has not been abandoned
or adjudged invalid, unregistrable or unenforceable, in
whole or in part, and is, to such Grantor's knowledge,
valid, registrable and enforceable.
7. Transfers and Other Liens. No Grantor shall:
(a) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of, or grant any option with
respect to, the Collateral, except as permitted by the
Credit Agreement, except that any Grantor may license the
Collateral (i) in the ordinary course of such Grantor's
business, provided that such license is necessary or
desirable in the conduct of such Grantor's business, or (ii)
in connection with a sale of assets in compliance with the
Credit Agreement, provided that such license shall be on
terms reasonably expected to maximize the gain to such
Grantor resulting from the granting of such license. The
Agent, for the benefit of the Lenders, shall execute any
documents that such Grantor may reasonably request in order
to permit the Grantor to exercise its right hereunder to
license the Collateral, provided that the Agent shall not be
required to do anything that may, in the sole judgment of
the Agent, adversely affect the validity of the Security
Interests or the assignment of the Collateral located in any
foreign jurisdiction;
(b) create or suffer to exist any Lien, security
interest or other charge or encumbrance upon or with respect
to any of the Collateral except for the Security Interests
created by this Agreement; or
(c) take any other action in connection with any of
the Collateral that would impair the value of the interest
or rights of such Grantor in the Collateral taken as a whole
or that would impair the interest or rights of the Agent for
the benefit of the Secured Parties.
8. Agent Appointed AttorneyinFact. Without limiting any
other provision of this Agreement, upon the occurrence and during
the continuance of an Event of Default, each Grantor hereby
irrevocably appoints the Agent, for the benefit of the Lenders,
as such Grantor's attorneyinfact, with full authority in the
place and stead of such Grantor and in the name of such Grantor
or otherwise, from time to time in the Agent's discretion, to
take any action and to execute any instrument that the Agent may
deem necessary or advisable to accomplish the purposes of this
Agreement, including without limitation:
(a) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for
moneys due and to become due under or in respect of any of
the Collateral;
(b) to receive, endorse and collect any drafts or
other instruments, documents and chattel paper in connection
with clause (a) above;
(c) to file any claims or take any action or institute
any proceedings that the Agent may deem necessary or
desirable for the collection of any of the Collateral or
otherwise to enforce the rights of the Agent, for the
benefit of the Secured Parties, with respect to any of the
Collateral; and
(d) to execute, in connection with the sale provided
for in Section 11 hereof, any endorsement, assignments, or
other instruments of conveyance or transfer with respect to
the Collateral.
9. Agent May Perform.
(a) If any Grantor fails to perform any agreement
contained herein, the Agent may itself perform, or cause
performance of, such agreement, and the expenses of the
Agent incurred in connection therewith shall be payable by
such Grantor under Section 12(b) hereof to the fullest
extent permitted by applicable law.
(b) The Agent or its designated representatives shall
have the right to the extent reasonably requested and upon
reasonable prior notice, at any reasonable time during
normal business hours of such Grantors and from time to
time, to inspect the Grantors' premises and to examine the
Grantors' books, records and operations relating to the
Collateral; provided, however, that prior to the occurrence
and continuation of an Event of Default, such right to make
such inspections shall be limited to twice annually.
10. The Agent's Duties. The powers conferred on the Agent,
for the benefit of the Secured Parties, hereunder are solely to
protect the interest of the Secured Parties in the Collateral and
shall not impose any duty upon it to exercise any such powers.
Except for the safe custody of any Collateral in its possession
and the accounting for moneys actually received by it hereunder,
neither the Agent nor any Lender shall have any duty as to any
Collateral or as to the taking of any necessary steps to preserve
rights against other parties or any other rights pertaining to
any Collateral. Each Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of the
Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which such party accords
its own similar property.
11. Remedies Upon Acceleration Event. If an Event of
Default shall have occurred and be continuing:
(a) The Agent, for the benefit of the Lenders, may
exercise in respect of the Collateral of any defaulting
Grantor, in addition to other rights and remedies provided
for herein or otherwise available to it, all the rights and
remedies of a secured party upon default under the Uniform
Commercial Code as in effect in the State of New York (the
"UCC") and also may (i) exercise any and all rights and
remedies of such Grantor under, in connection with, or
otherwise in respect of, such Collateral, including the
completion and filing of the IP Assignment, (ii) require
such Grantor to, and each Grantor hereby agrees that it will
at its expense and upon request of the Agent forthwith,
assemble all or part of the documents embodying such
Collateral as directed by the Agent and make it available to
the Agent, for the benefit of the Lenders, at a place to be
designated by the Agent that is reasonably convenient to
both the Agent and such Grantor, (iii) occupy any premises
owned or leased by such Grantor where documents embodying
such Collateral or any part thereof are assembled for a
reasonable period in order to effectuate the Agent's rights
and remedies hereunder or under applicable law, without
obligation to such Grantor in respect of such occupation,
(iv) license such Collateral or any part thereof, and (v)
without notice except as specified below, sell such
Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Agent's offices or
elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Agent may deem commercially
reasonable. Each Grantor agrees that at least ten days'
notice to such Grantor of the time and place of any public
sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Agent shall
not be obligated to make any sale of the Collateral
regardless of notice of sale having been given. The Agent
may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and
place to which it was so adjourned.
(b) All payments received by any defaulting Grantor
under or in connection with any of such Collateral shall be
received in trust for the benefit of the Secured Parties,
shall be segregated from other funds of such Grantor and
shall be immediately paid over to the Agent, for the benefit
of the Secured Parties, in the same form as so received
(with any necessary endorsement).
(c) All payments made under or in connection with or
otherwise in respect of the Collateral of any defaulting
Grantor, and all cash proceeds received by the Agent in
respect of any sale of, collection from, or other
realization upon all or any part of such Collateral may, in
the discretion of the Agent, be held by the Agent, for the
benefit of the Lenders, as collateral for, and then or at
any time thereafter applied (after payment of any amounts
payable to the Agent pursuant to Section 12 hereof) for the
ratable benefit of the Secured Parties against all or any
part of the Secured Obligations, in such order set forth in
Section 10.5 of the Credit Agreement. Any sale or other
disposition of the Collateral and the possession thereof by
the Agent shall be in compliance with all provisions of
applicable law (including applicable provisions of the UCC).
12. Indemnity and Expenses.
(a) Each Grantor agrees to indemnify each of the
Secured Parties from and against any and all claims, losses
and liabilities growing out of or resulting from this
Agreement that are incurred thereby (including without
limitation enforcement of this Agreement), except claims,
losses or liabilities directly resulting from such Secured
Party's gross negligence or willful misconduct.
(b) Each Grantor will upon demand pay to the Agent the
amount of any and all reasonable expenses, including the
reasonable fees and disbursements of its counsel and of any
experts and agents, that the Agent, for the benefit of the
Secured Parties, may incur in connection with (i) the
administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of,
collection from or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the
rights of the Secured Parties, or (iv) the failure by any
Grantor to perform or observe any of the provisions hereof.
13. Absolute Rights and Obligations. All rights of the
Secured Parties in the Security Interests granted hereunder, and
each of the Secured Obligations, shall be absolute and
unconditional irrespective of:
(a) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Secured
Obligations, or any other amendment or waiver of or any
consent to departure from, the Credit Agreement or any other
Loan Document, including, but not limited to, (i) an
increase or decrease in the Secured Obligations and (ii) an
amendment of any Loan Document to permit the Agent or the
Lenders or any one or more of them to extend further or
additional credit to the Borrower in any form including
credit by way of loan, purchase of assets, guarantee or
otherwise, which credit shall thereupon be and become
subject to the Credit Agreement and the other Loan Documents
as a Secured Obligation;
(b) any taking and holding of collateral or guarantees
(including without limitation any collateral pledged as
security for the Secured Obligations under the other
Security Instruments) for all or any of the Secured
Obligations; or any amendment, alteration, exchange,
substitution, transfer, enforcement, waiver, subordination,
termination or release of any such collateral or guarantees,
or any nonperfection of any such collateral, or any consent
to departure from any such guaranty;
(c) any manner of application of collateral, or
proceeds thereof, securing payment or enforcement of all or
any of the Secured Obligations, or the manner of sale of any
such collateral;
(d) any consent by the Secured Parties to the change,
restructure or termination of the corporate structure or
existence of the Borrower or any Grantor and any
corresponding restructure of the Secured Obligations, or any
other restructure or refinancing of the Secured Obligations
or any portion thereof;
(e) any modification, compromise, settlement or
release by the Secured Parties, by operation of law or
otherwise, collection or other liquidation of the Secured
Obligations or the liability of the Borrower, any Grantor or
any Guarantor or of any collateral for the Secured
Obligation (including without limitation any collateral
pledged as security for the Secured Obligations under the
other Security Instruments), in whole or in part, and any
refusal of payment by the Agent or any Lender in whole or in
part, from any obligor or Guarantor in connection with any
of the Secured Obligations, whether or not with notice to,
or further assent by, or any reservation of rights against,
any Grantor; or
(f) any other circumstance (including without
limitation any statute of limitations) that might otherwise
constitute a defense available to, or a discharge of, the
Borrower, any Guarantor or a Grantor.
The granting of a Security Interest in the Collateral shall
continue to be effective or be reinstated, as the case may be, if
at any time any payment of any of the Secured Obligations is
rescinded or must otherwise be returned by any Secured Party,
upon the insolvency, bankruptcy or reorganization of the Borrower
or any Grantor or otherwise, all as though such payment had not
been made.
14. Waiver. Each Grantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect
to any of the Secured Obligations and this Agreement and any
requirement that the Secured Parties protect, secure, perfect or
insure any Security Interest or any Collateral subject thereto or
exhaust any right or take any action against any Grantor or any
other Person (including without limitation any Guarantor) or any
collateral securing payment of the Secured Obligations (including
without limitation any collateral pledged as security for the
Secured Obligations under the other Security Instruments).
15. Subrogation. Prior to termination of this Agreement in
accordance with the provisions of Section 17(c) hereof, no
Grantor will exercise any rights that it may acquire by way of
subrogation under this Agreement. If an amount shall be paid to
such Grantor on account of such subrogation rights at any time
prior to termination of this Agreement in accordance with the
provisions of Section 17(c) hereof, such amount shall be held in
trust for the benefit of the Secured Parties and shall forthwith
be paid to the Agent, for the benefit of the Secured Parties, to
be credited and applied upon the Secured Obligations, whether
matured or unmatured, in accordance with the terms of the Credit
Agreement and the Guaranty.
16. Amendments, Etc.
(a) Except as provided in subsection (b) of this
Section 16 no amendment or waiver of any provision of this
Agreement nor consent to any departure by any Grantor
therefrom shall in any event be effective unless the same
shall be in writing and signed by the Agent, and then such
waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
(b) Upon the execution and delivery by any Person of a
supplement to this Agreement, which such supplement shall be
in the form of Exhibit B hereto, pursuant to which such
Person agrees to become a party hereto (each an
"Intellectual Property Security Agreement Supplement"), (i)
such Person or entity shall be referred to as an "Additional
Grantor" and shall be and become a Grantor and each
reference in this Agreement to "Grantor" shall also mean and
be a reference to such Additional Grantor, and (ii) the
schedules attached to each Intellectual Property Security
Agreement Supplement shall be incorporated into and become a
part of and supplement Schedules I and II hereto, and the
Agent may attach such supplements to such Schedules, and
each reference to such Schedules shall mean and be a
reference to such Schedules as supplemented pursuant hereto.
(c) Any person that executes an Intellectual Property
Security Agreement Supplement shall also execute and deliver
such financing statements and all further instruments and
documents and take all further action that may be necessary
or desirable or that the Agent may reasonably request in
order to perfect and protect any Security Interest purported
to be granted thereby.
17. Continuing Security Interest; Assignments Under the
Credit Agreement; Release of Collateral.
(a) This Agreement shall create a continuing Security
Interest in the Collateral and shall (i) remain in full
force and effect until terminated in accordance with the
provisions of Section 17(c) hereof, (ii) be binding upon
each Grantor, its successors and assigns, provided, however,
subject to Section 9.7 of the Credit Agreement, no Grantor
shall make any assignment hereof without the prior consent
of the Agent, and (iii) inure, together with the rights and
remedies of the Secured Parties hereunder, to the benefit of
the Secured Parties and their respective successors,
transferees and assigns. Without limiting the generality of
the foregoing clause (iii), any Lender may assign to one or
more Persons, or grant to one or more Persons participations
in or to, all or any part of its rights and obligations
under the Credit Agreement (to the extent permitted by the
Credit Agreement); and to the extent of any such assignment
or participation such other Person shall, to the fullest
extent permitted by law, thereupon become vested with all
the benefits in respect thereof granted to such Lender
herein or otherwise, subject however, to the provisions of
the Credit Agreement, including Article XI thereof
(concerning the Agent) and Section 12.1 thereof concerning
assignments and participations.
(b) Except as permitted by the Credit Agreement, no
Grantor shall sell, lease, transfer or otherwise dispose of
any item of Collateral during the term of this Agreement
without the prior written consent of the Agent to such sale,
lease, transfer or other disposition.
(c) On the Collateral Termination Date, the Collateral
shall be automatically released from the Liens created
hereby, all rights to the Collateral shall automatically
revert to the Grantors, and this Agreement and all
obligations of the Grantors hereunder shall terminate
without delivery of any instrument or performance of any act
by any party. Upon such termination of this Agreement, the
Agent shall reassign and redeliver such Collateral then held
by or for the Agent and the Lenders and execute and deliver
to each Grantor such documents as it shall reasonably
request to evidence such termination.
18. Additional Collateral. If any Grantor shall acquire or
hold any additional Trademarks not listed on Schedules I or II
hereto which are required to be subject to an Intellectual
Property Security Agreement pursuant to the terms of Article IV,
Section 8.19 or any other provision of the Credit Agreement (any
such Trademarks being referred to herein as the "Additional
Collateral"), such Grantor shall deliver to the Agent for the
benefit of the Lenders (i) a revised Schedule I or II hereto, as
applicable, reflecting the ownership and pledge of such
Additional Collateral and (ii) an Intellectual Property Security
Agreement Supplement in the form of Exhibit B hereto with respect
to such Additional Collateral duly completed and signed by such
Grantor. Each Grantor shall comply with the requirements of this
Section 18 concurrently with the acquisition of any such
Additional Collateral within the time period specified in Article
IV of the Credit Agreement.
19. Definitions. All terms used herein shall be defined in
accordance with the appropriate definitions appearing in the
Uniform Commercial Code as in effect in New York, and such
definitions are hereby incorporated herein by reference and made
a part hereof.
20. Entire Agreement. This Agreement, together with the
Credit Agreement, the Guaranty Agreement and other Loan
Documents, constitutes and expresses the entire understanding
between the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings,
inducements, commitments or conditions, express or implied, oral
or written, except as herein contained. The express terms hereof
control and supersede any course of performance or usage of the
trade inconsistent with any of the terms hereof. Neither this
Agreement nor any portion or provision hereof may be changed,
altered, modified, supplemented, discharged, canceled,
terminated, or amended orally or in any manner other than by an
agreement, in writing signed by the parties hereto.
21. Further Assurances. Each Grantor agrees at its own
expense to do such further acts and things, and to execute and
deliver such additional conveyances, assignments, financing
statements, agreements and instruments, as the Agent may at any
time reasonably request in connection with the administration or
enforcement of this Agreement or related to the Collateral or any
part thereof or in order better to assure and confirm unto the
Agent its rights, powers and remedies for the benefit of the
Secured Parties hereunder. Each Grantor hereby consents and
agrees that the issuers of or obligors in respect of the
Collateral shall be entitled to accept the provisions hereof as
conclusive evidence of the right of the Agent, on behalf of the
Secured Parties, to exercise its rights hereunder with respect to
the Collateral, notwithstanding any other notice or direction to
the contrary heretofore or hereafter given by any Grantor or any
other Person to any of such issuers or obligors.
22. Binding Agreement; Assignment. This Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and
inure to the benefit of the parties hereto, and to their
respective successors and assigns, except that no Grantor shall
be permitted to assign this Agreement or any interest herein or
in the Collateral, or any part thereof, or otherwise pledge,
encumber or grant any option with respect to the Collateral, or
any part thereof, or any cash or property held by the Agent as
Collateral under this Agreement. All references herein to the
Agent shall include any successor thereof, each Lender and any
other obligees from time to time of the Obligations.
23. Swap Agreements. All obligations of the Borrower under
Swap Agreements to which any Lender or its affiliates are a party
shall be deemed to be Secured Obligations secured hereby, and
each Lender or affiliate of a Lender party to any such Swap
Agreement shall be deemed to be a Secured Party hereunder.
24. Severability. If any term or provision of this
Agreement is or shall become illegal, invalid or unenforceable in
any jurisdiction, all other terms and provisions of this
Agreement shall remain legal, valid and enforceable in such
jurisdiction and such illegal, invalid or unenforceable provision
shall be legal, valid and enforceable in any other jurisdiction.
25. Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together
shall constitute one and the same agreement.
26. Termination. This Agreement and all obligations of
each Grantor hereunder shall terminate on the Collateral
Termination Date, at which time the Liens and rights granted to
the Agent for the benefit of the Secured Parties hereunder shall
automatically terminate and no longer be in effect, and the
Collateral shall automatically be released from the Liens created
hereby. Upon such termination of this Agreement, the Agent
shall, at the sole expense of the Grantors, reassign and
redeliver to each applicable Grantor such Collateral then held by
or for the Agent and execute and deliver to such Grantor such
documents as such Grantor shall reasonably request and take such
further actions as may be necessary to effect the same and as
shall be reasonably acceptable to the Agent.
27. Remedies Cumulative. All remedies hereunder are
cumulative and are not exclusive of any other rights and remedies
of the Agent provided by law or under the Credit Agreement, the
other Loan Documents, or other applicable agreements or
instruments. The making of the Loans to, and issuing of Letters
of Credits for the benefit of, the Borrower pursuant to the
Credit Agreement shall be conclusively presumed to have been made
or extended, respectively, in reliance upon the each Grantor's
grant of a Security Interest in the Collateral pursuant to the
terms hereof.
28. Notices. Any notice required or permitted hereunder
shall be given, (a) with respect to each Pledgor, at the address
of the Borrower indicated in Section 12.2 of the Credit Agreement
and (b) with respect to the Agent or a Lender, at the Agent's
address indicated in Section 12.2 of the Credit Agreement. All
such notices shall be given and shall be effective as provided in
Section 12.2 of the Credit Agreement.
29. Governing Law; Venue; Waiver of Jury Trial.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED,
IN SUCH STATE NOTWITHSTANDING ITS EXECUTION AND DELIVERY
OUTSIDE SUCH STATE.
(b) EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY
AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY
STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK,
STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY WAIVES
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE IN, OR TO THE EXERCISE OF JURISDICTION
OVER IT AND ITS PROPERTY BY ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY
SUCH SUIT, ACTION OR PROCEEDING.
(c) EACH GRANTOR AGREES THAT SERVICE OF PROCESS MAY BE
MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND
COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR
PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE
PREPAID) TO THE ADDRESS OF THE BORROWER PROVIDED BY SECTION
12.2 OF THE CREDIT AGREEMENT, OR BY ANY OTHER METHOD OF
SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN
THE STATE OF NEW YORK.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF
SHALL PRECLUDE ANY SECURED PARTY FROM BRINGING ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT IN THE COURTS OF ANY
PLACE WHERE ANY GRANTOR OR ANY OF SUCH GRANTOR'S PROPERTY OR
ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY
THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH GRANTOR
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH
COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT,
ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF
JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER
COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE
UNDER APPLICABLE LAW.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED
OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH
THE FOREGOING, EACH GRANTOR AND THE AGENT ON BEHALF OF THE
SECURED PARTIES HEREBY AGREE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY WAIVE,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH
PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION OR
PROCEEDING.
IN WITNESS WHEREOF, the parties have duly executed this
Intellectual Property Security Agreement on the day and year
first written above.
GRANTORS:
HEADWAY CORPORATE RESOURCES, INC.
By: (Signature)
WHITNEY PARTNERS, L.L.C.
HEADWAY CORPORATE STAFFING SERVICES,
INC.
CERTIFIED TECHNICAL STAFFING, INC.
CORPORATE STAFFING ALTERNATIVES, INC.
HEADWAY CORPORATE STAFFING SERVICES
OF NEW YORK, INC.
HEADWAY PERSONNEL, INC.
HEADWAY CORPORATE STAFFING SERVICES
OF NORTH CAROLINA, INC.
HEADWAY CORPORATE STAFFING SERVICES
OF CONNECTICUT, INC.
ASA PERSONNEL SERVICES, L.L.C.
E.D.R. ASSOCIATES, INC.
HCSS WEST, INC.
HCSS HOLDINGS, INC.
HCSS EAST, INC.
CHENEY ASSOCIATES, L.L.C.
By: (Signature)
AGENT:
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
By: (Signature)
