EXHIBIT 10.22
SUBSIDIARY SECURITY AGREEMENT
THIS SUBSIDIARY SECURITY AGREEMENT, dated as of February 21, 1997, made
by each of the corporations that are signatories hereto (individually, a
"Subsidiary" and collectively, the "Subsidiaries") in favor of BANK OF BOSTON
CONNECTICUT, a bank organized under the laws of the State of Connecticut, as
agent (the "Agent") for the benefit of the Agent and the ratable benefit of the
banks and financial institutions (the "Banks") that from time to time are
parties to the Credit Agreement (as hereinafter defined).
1. DEFINITIONS
"ACCOUNT DEBTOR" means a Person who is obligated on a Receivable.
"ACCOUNTS RECEIVABLE COLLECTION ACCOUNT" means a commercial Deposit
Account maintained by any Subsidiary with the Agent, without liability by the
Agent to pay interest thereon, from which account the Agent shall have the
exclusive right to withdraw funds until all Obligations are paid, performed, and
observed in full.
"AFFILIATE" shall have the meaning ascribed to it in the Credit
Agreement.
"AGENT" shall have the meaning ascribed to it in the Credit Agreement.
"AGREEMENT" means this Agreement, including all Schedules hereto, and
all amendments, modifications and supplements hereto and thereto and
restatements hereof and thereof.
"AGREEMENT DATE" means the date on which this Agreement is dated.
"BENEFIT PLAN" means an employee benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which a Person or
any Commonly Controlled Entity is, or within the immediately preceding 6 years
was, an "employer" as defined in Section 3(5) of ERISA, including such plans as
may be established after the Agreement Date.
"CASH SECURITY" means all cash, Instruments, Deposit Accounts, and
other cash equivalents, whether matured or unmatured, whether collected or in
the process of collection, upon which each Subsidiary presently has or may
hereafter have any claim (other than items which are held in trust by each
Subsidiary for a third party), that are presently or may hereafter be existing
or maintained with, issued by, drawn upon, or in the possession of the Agent
and/or the Banks, or which the Agent and/or any Bank is entitled to retain or
otherwise possess as collateral pursuant to the provisions of this Agreement or
any of the Loan Documents.
"CHATTEL PAPER" shall mean, with respect to the Collateral, (a) any
chattel paper, and (b) any writing or writings which evidence both a monetary
obligation and a security interest in or a lease of specific Goods. If a
transaction relating to the Collateral is evidenced both by such an agreement
for security or a lease and by an Instrument or a series of Instruments, the
group of writings taken together constitutes Chattel Paper.
"CODE" shall have the meaning ascribed to it in the Credit Agreement.
"COLLATERAL" means and includes all of each Subsidiary's right, title
and interest in and to each of the following, wherever located and whether now
or hereafter existing or now owned or hereafter acquired or arising:
(a) all Receivables,
(b) all Inventory,
(c) all Equipment,
(d) all Contract Rights,
(e) all General Intangibles,
(f) all Deposit Accounts,
(g) all Cash Security,
(h) all mortgages, deeds to secure debt and deeds of trust on real or
personal property, guaranties, leases, security agreements and
other agreements and property which secure or relate to any
Receivable or other Collateral or are acquired for the purpose of
securing and enforcing any item thereof,
(i) all documents of title, policies and certificates of insurance,
securities, Chattel Paper and other Documents and Instruments
evidencing or pertaining to any and all items of Collateral,
(j) all files, correspondence, computer programs, tapes, disks and
related data processing software which contain information
identifying or pertaining to any of the Collateral or any Account
Debtor or showing the amounts thereof or payments thereon or
otherwise necessary or helpful in the realization thereon or the
collection thereof,
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(k) any and all products and cash and non-cash Proceeds of the
foregoing (including, but not limited to, any claims to any items
referred to in this definition and any claims against third parties
for loss of, damage to or destruction of any or all of the
Collateral or for Proceeds payable under or unearned premiums with
respect to policies of insurance) in whatever form, including, but
not limited to, cash, negotiable instruments and other Instruments
for the payment of money, Chattel Paper, security agreements and
other Documents.
"COMMONLY CONTROLLED ENTITY" shall have the meaning ascribed to it in
the Credit Agreement.
"CONTRACT RIGHTS" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising rights under
contracts not yet earned by performance and not evidenced by an instrument or
chattel paper, to the extent that the same may lawfully be assigned.
"CREDIT AGREEMENT" means the Credit Agreement dated of even date
herewith executed by and among OI, the Agent and the Banks, as the same may
hereafter be amended, modified, supplemented or restated from time to time.
"CSF" shall have the meaning ascribed to it in the Credit Agreement.
"DEFAULT" shall have the meaning ascribed to it in the Credit
Agreement.
"DEPOSIT ACCOUNT" means (a) any deposit account, (b) any demand, time,
savings, passbook, or a similar account maintained with a bank, savings and loan
association, credit union, or similar organization, other than an account
evidenced by a certificate of deposit that is an instrument under the UCC.
"DOCUMENT" shall mean, with respect to the Collateral, (a) any
document, (b) any document of title, including a bill of lading, dock warrant,
dock receipt, warehouse receipt, or order for the delivery of Goods, and any
other document which in the regular course of business or financing is treated
as adequately evidencing that the Person in possession of it is entitled to
receive, hold, and dispose of the document and the Goods it covers, and (c) any
receipt covering Goods stored under a statute requiring a bond against
withdrawal or requiring a license for the issuance of receipts in the nature of
warehouse receipts even though issued by a Person who is the owner of the Goods
and is not a warehouseman.
"ERISA" shall have the meaning ascribed to it in the Credit Agreement.
"EQUIPMENT" means and includes, as to any Person, all of such Person's
then owned or existing and future acquired or arising machinery, apparatus,
equipment, motor vehicles, tractors,
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trailers, rolling stock, fittings, fixtures and other tangible personal property
(other than Inventory) of every kind and description used in such Person's
business operations or owned by such Person or in which such Person has an
interest and all parts, accessories and special tools and all increases and
accessions thereto and substitutions and replacements therefor.
"EVENT OF DEFAULT" shall have the meaning ascribed to it in the Credit
Agreement.
"FINANCING STATEMENTS" means the Uniform Commercial Code financing
statements executed and delivered by the Subsidiaries to the Agent, naming the
Agent (for the benefit of the Agent and the ratable benefit of the Banks that
from time to time are parties to the Credit Agreement) as secured party and the
Subsidiaries as debtor, in connection with this Agreement.
"FRANCHISEE" means a Person providing temporary personnel and related
services under a LABOR WORLD(R) or OFFICE OURS(C) franchise from OutSource
Franchising, Inc.
"FRANCHISEE FUNDING RECEIVABLES" means and includes, as to any
Subsidiary, all of such Subsidiary's now owned or existing and future acquired
or arising rights to payment from Franchisees arising from such Subsidiary's
providing financing of Franchisees' payroll, payroll tax and other obligations
(whether classified under the UCC as accounts, contract rights, chattel paper,
general intangibles or otherwise), and all cash and non-cash Proceeds thereof.
"GENERAL INTANGIBLES" means, as to any Person, all of such Person's
then owned or existing and future acquired or arising general intangibles,
choses in action and causes of action and all other intangible personal property
of such Person of every kind and nature (other than Receivables), including,
without limitation, Intellectual Property, corporate or other business records,
inventions, designs, blueprints, plans, specifications, trade secrets, goodwill,
computer software, customer lists, registrations, licenses, franchises, tax
refund claims, reversions or any rights thereto and any other amounts payable to
such Person from any Benefit Plan, Multiemployer Plan or other employee benefit
plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and Proceeds thereof, property,
casualty or any similar type of insurance, including errors and omissions
insurance, and any Proceeds thereof, Proceeds of insurance covering the lives of
key employees on which said Person is beneficiary and any letter of credit,
guarantee, claims, security interest or other security held by or granted to
such Person to secure payment by an Account Debtor of any of the Receivables.
"GOODS" means (a) any goods, and (b) all things which are movable at
the time the security interest granted under this Agreement attaches or which
are fixtures but does not include money, Instruments, Documents, Receivables,
Chattel Paper and Contract Rights.
"INSTRUMENT" means:
(a) any instrument relating to or evidencing the Collateral,
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(b) any negotiable or nonnegotiable instrument (including, without
limitation, drafts, checks, acceptances, certificates of deposit,
and notes) relating to or evidencing the Collateral, and
(c) any other writing relating to or evidencing the Collateral which:
(1) evidences a right to the payment of money,
(2) is not itself a security agreement or lease, and
(3) is of a type which in the ordinary course of business is
transferred by delivery with any necessary endorsement or
assignment.
"INTELLECTUAL PROPERTY" means, as to any Person, all of such Person's
then owned existing and future acquired or arising patents, patent rights,
copyrights, works which are the subject of copyrights, trademarks, service
marks, trade names, trade styles, patent, trademark and service mark
applications, and all licenses and rights related to any of the foregoing and
all other rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations and continuations-in-part of any of the foregoing and
all rights to sue for past, present and future infringements of any of the
foregoing.
"INVENTORY" means and includes, as to any Person, all of such Person's
then owned or existing and future acquired or arising (a) Goods intended for
sale or lease or for display or demonstration or furnished or to be furnished
under contracts of service, (b) all Goods that are work in process, (c) all
Goods that are raw materials and other materials and supplies of every nature
and description used or which might be used in connection with the manufacture,
packing, shipping, advertising, selling, leasing or furnishing of goods or
otherwise used or consumed in the conduct of business, (d) documents evidencing
and general intangibles relating to any of the foregoing and (e) all substitutes
and replacements for, and parts, accessories, additions, attachments, or
accessions to (a) through (d) above.
"LIEN"shall have the meaning ascribed to it in the Credit Agreement.
"LOAN DOCUMENTS" shall have the meaning ascribed to it in the Credit
Agreement.
"LOCATION" means, for each Subsidiary, the location of:
(a) the Subsidiary's place of business, if there is only one such
place of business, or
(b) if there is more than one place of business, the place (1) from
which the Subsidiary manages the main part of its business
operations, and (2) where
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Persons dealing with the Subsidiary would normally
look for credit information.
"MATERIAL ADVERSE EFFECT" shall have the meaning ascribed to it in the
Credit Agreement.
"MULTIEMPLOYER PLAN" shall have the meaning ascribed to it in the
Credit Agreement.
"OBLIGATIONS" means, at any time, all obligations and undertakings of
each Subsidiary under and in respect of the Credit Agreement and the Subsidiary
Guarantee, including, without limitation, each Subsidiary's obligations and
undertakings with respect to the payment of the principal of, and interest on,
each Revolving Credit Note, all of each Subsidiary's Reimbursement Obligations,
all of each Subsidiary's payment obligations pursuant to the Subsidiary
Guarantee, any and all Related Expenses incurred by the Agent and all other
amounts payable, and all other indebtedness owed, by each Subsidiary under each
of the Loan Documents.
"OI" shall have the meaning ascribed to it in the Credit Agreement.
"PBGC" shall have the meaning ascribed to it in the Credit Agreement.
"PERSON" shall have the meaning ascribed to it in the Credit Agreement.
"PROCEEDS" means, with respect to the Collateral, (a) any proceeds of
the Collateral, and (b) whatever is received upon the sale, exchange,
collection, or other disposition of Collateral or Proceeds, whether cash or
non-cash. Cash Proceeds include, without limitation, moneys, checks, and Deposit
Accounts. Proceeds includes, without limitation, any insurance payable by reason
of loss or damage to the Collateral, and any return or unearned premium upon any
cancellation of insurance. Except as expressly authorized in this Agreement, the
Agent's and the Banks' right to Proceeds specifically set forth herein or
indicated in any financing statement shall never constitute an express or
implied authorization on the part of the Agent or the Banks to any Subsidiaries'
sale, exchange, collection, or other disposition of any or all of the
Collateral.
"RECEIVABLES" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising (a) rights to the
payment of money or other forms of consideration of any kind (whether classified
under the UCC as accounts, contract rights, chattel paper, general intangibles
or otherwise) including, but not limited to, accounts receivable, Royalty
Receivables, Franchisee Funding Receivables, letters of credit and the right to
receive payment thereunder, chattel paper, tax refunds, insurance Proceeds,
Contract Rights, notes, drafts, instruments, documents, acceptances and all
other debts, obligations and liabilities in whatever form from any Person and
guaranties, security and Liens securing payment thereof, (b) Goods and other
property, whether now owned or hereafter acquired, and whether sold, delivered,
undelivered, in transit or returned, which may be represented by, or the sale or
lease of which may have given rise
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to, any such right to payment or other debt, obligation or liability, and (c)
cash and non-cash Proceeds of any of the foregoing.
"RELATED EXPENSES" means any and all costs, liabilities, and expenses
(including, without limitation, losses, damages, penalties, claims, actions,
reasonable attorneys' fees, legal expenses, judgments, suits, and disbursements)
incurred by, imposed upon, or asserted against the Agent (other than costs,
liabilities and expenses incurred by the Agent as a result of gross negligence
or willful misconduct by the Agent) in any attempt by the Agent:
(a) to obtain, preserve, perfect, or enforce the security interest
evidenced by (i) this Agreement, or (ii) any other pledge
agreement, mortgage deed, hypothecation agreement, guaranty,
security agreement, assignment, or security instrument executed or
given by any Subsidiary to or in favor of the Agent and the Banks,
(b) to obtain payment, performance, and observance of any and all of
the Obligations,
(c) to maintain, insure, collect, preserve, or upon any Event of
Default, repossess and dispose of any of the Collateral, or
(d) incidental or related to (a) through (c) above, including, without
limitation, interest thereupon from the date incurred, imposed, or
asserted until paid at the rate payable upon each Revolving Credit
Note, but in no event greater than the highest rate permitted by
law.
"REVOLVING CREDIT NOTE" means the Revolving Credit Note as defined in
the Credit Agreement, including any partial or total amendment, renewal,
restatement, extension, or substitution of or for such Revolving Credit Note.
"ROYALTY RECEIVABLES" means and includes, as to any Subsidiary, any
indebtedness owed to such Subsidiary and any right of such Subsidiary to payment
or performance from any other Person (whether such indebtedness or right is now
existing or hereafter created and whether or not yet earned by any performance
by such Subsidiary and regardless of how such indebtedness or right might be
evidenced or documented), for or in connection with the granting or authorizing
by such Subsidiary of any right, permission or license to use or continue using
any franchise or any tradename, trademark, servicemark, copyrighted or otherwise
protected material, or other similar rights held wholly or partly by such
Subsidiary, including, without limitation, any right, permission or license to
use or continue using goods marked with any such name or mark or embodying any
such copyrighted or otherwise protected material, and including all "accounts,"
"general intangibles," "instruments," "security," "promissory notes,"
"documents," and "chattel paper" (as such terms are defined in the Connecticut
Uniform Commercial Code) evidencing, embodying, or derived from any of the
foregoing, and all cash or non-cash Proceeds thereof.
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"SUBSIDIARY GUARANTEE" shall mean the Subsidiary Guarantee dated of
even date herewith made by each of the corporations signatory thereto in favor
of Bank of Boston Connecticut, as Agent under the Credit Agreement for the
benefit of the Agent and the ratable benefit of the Banks that from time to time
are parties to the Credit Agreement, as the same may hereafter be amended,
modified, supplemented or restated from time to time.
"TRADEMARK ASSIGNMENT" means the Trademark Security Agreement dated of
even date herewith among OI, OutSource Franchising, Inc., and the Agent, with
respect to certain trademarks, trademark applications and related property owned
by OI and OutSource Franchising, Inc., as the same may hereafter be amended,
modified, supplemented or restated from time to time.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of Connecticut. The terms "accounts," "chattel paper," "documents,"
"equipment," "instruments," "general intangibles" and "inventory," as and when
used (without being capitalized) in this Agreement shall have the meanings given
those terms in the UCC.
2. SECURITY INTEREST IN COLLATERAL
In consideration of and as security for the full and complete payment,
performance, and observance of all Obligations, each Subsidiary hereby pledges
and assigns all of the collateral to the Agent (for the ratable benefit of the
Agent and the Banks) and grants to the Agent (for the ratable benefit of the
Agent and the Banks) a continuing security interest in, and continuing Lien
upon, all of the Collateral, and any and all property of the Subsidiary now or
hereafter in the possession of or pledged or assigned to the Agent, and all
products, replacements and Proceeds of, and accessions and additions to, any of
the foregoing.
3. WARRANTIES
Each Subsidiary represents and warrants to the Agent and the Banks
(which representations and warranties shall survive the execution of the Credit
Agreement, the delivery of each Revolving Credit Note, and the extension of
credit) that:
(a) Each Subsidiary is a corporation, duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, has the power and authority to own it properties and
to carry on its business as now being and hereafter proposed to be
conducted and is duly qualified and authorized to do business in
each jurisdiction in which failure to be so qualified and
authorized would have a Material Adverse Effect and is subject to
taxation as a C Corporation under the Code;
(b) The execution, delivery, and performance hereof are within each
Subsidiary's corporate powers, have been duly authorized, and are
not in contravention of law or the terms of such Subsidiary's
articles or certificate of incorporation, by-laws, or
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regulations, or of any indenture, agreement, or undertaking to
which such Subsidiary is party or by which it is or may be bound;
(c) Except for any security interest granted to or in favor of the
Agent and the Banks and except for any security interest permitted
by the terms of the Credit Agreement, each Subsidiary is, and as to
Collateral to be acquired after the date hereof will be, the owner
of the Collateral free from any claim, lien, encumbrance, or
security interest of any type, and each Subsidiary agrees that it
will defend, at its sole expense, the Collateral against all other
claims and demands of all Persons at any time claiming the same or
any interest therein;
(d) The office where each Subsidiary keeps all of its records
pertaining to its Receivables is located at 1144 East Newport
Center Drive, Deerfield Beach, Florida 33442;
(e) Subject to any limitation stated herein or in connection herewith,
all information furnished to the Agent concerning the Subsidiaries
or the Collateral, is or will be at the time such information is
furnished, accurate and correct in all material respects and
complete insofar as is necessary to give the Agent true and
accurate knowledge of the subject matter;
(f) Each Subsidiary is the lawful owner of and has full and unqualified
right to transfer a security interest in all of the Collateral to
the Agent. Such Collateral is not, and will not, so long as each
Subsidiary has any Obligations to the Agent, be subject to any
financing statement, encumbrance, claim, lien, or security interest
of any type except any granted to or in favor of the Agent and
except as permitted by the terms of the Credit Agreement;
(g) Each Benefit Plan is in substantial compliance with ERISA, and
neither any Subsidiary nor any Commonly Controlled Entity has
received any notice asserting that a Benefit Plan is not in
compliance with ERISA. No material liability to the PBGC or to a
Multiemployer Plan has been, or is expected by any Subsidiary to
be, incurred by any Subsidiary or any Commonly Controlled Entity;
(h) Each Subsidiary is solvent, having assets of a fair value which
exceed the amount required to pay its debts (including contingent,
subordinated, unmatured and unliquidated liabilities) as they
become absolute and matured, and each Subsidiary is able to and
anticipates that it will be able to meet its debts as they mature
and has adequate capital to conduct the business in which it is or
proposes to be engaged;
(i) During the one-year period preceding the Agreement Date, no
Subsidiary has been known as or used any corporate or fictitious
name other than the corporate name of
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such Subsidiary on the Agreement Date, except for those listed
in Schedule 3.1, attached hereto. All trade names or styles
under which the Subsidiaries create Receivables, or to which
instruments in payment of Receivables are made payable, are
listed in Schedule 3.2, attached hereto;
(j) Each Subsidiary's principal place of business, chief executive
office and other places of business are located at the addresses
set forth on Schedule 3.3, attached hereto. The location of each
Subsidiary's Equipment is also indicated on Schedule 3.3. The
Subsidiaries' chief executive offices, their other places of
business, and the location of their Inventory and Equipment will be
and remain located only at the foregoing location(s) unless
relocated in compliance with Section 4(c) below;
(k) At the present time, each Subsidiary maintains no Inventory at any
location;
(l) CSF has duly assigned of record to the Agent (for the benefit of
the Agent and the ratable benefit of the Banks that from time to
time are parties to the Credit Agreement), all financing statements
now or hereafter executed by any Franchisee in favor of CSF;
(m) OI and OutSource Franchising, Inc. have duly executed and delivered
the Trademark Assignment to the Agent; and
(n) Except for OutSource Franchising, Inc., no Subsidiary grants
franchises or has done so in the past. In the case of OutSource
Franchising, Inc., LABOR WORLD(R) and OFFICE OURS(C) are the only
trademarks that are or have been licensed for use by franchisees.
4. COVENANTS
Each Subsidiary undertakes, covenants, and agrees that, until the full
and complete payment, performance, and observance of all Obligations, each
Subsidiary:
(a) shall provide the Agent with at least thirty (30) days prior
written notification of:
(1) any change in any location where such Subsidiary's Inventory
and Equipment is maintained, and any new locations where such
Subsidiary's Inventory and Equipment is to be maintained,
(2) any change in the location of the office where such
Subsidiary's records pertaining to its Receivables are kept,
(3) the location of any new places of business and the changing or
closing of any of its existing places of business,
(4) any change in the location of such Subsidiary's chief executive
office,
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(5) any change in such Subsidiary's name, and
(6) any change in such Subsidiary's Location;
PROVIDED, HOWEVER, that anything herein to the contrary
notwithstanding, (A) with respect to location openings and
closings, such Subsidiary may satisfy the requirement of this
subsection with respect to such locations, by submitting to the
Agent, on a quarterly basis, a list of all locations opened and
closed, and (B) with respect to moving either Collateral or
Equipment from location to location, no notice need be provided
pursuant to this subsection so long as either (i) such Subsidiary
executes and delivers to the Agent a UCC financing statement
appropriate for filing to perfect the Agent's security interest in
the Collateral in its new location, or (ii) the Agent has
previously filed a UCC financing statement which perfects the
Agent's security interest in the Collateral in its new location.
(b) shall promptly pay and discharge before they become delinquent, all
taxes, assessments, and governmental charges of every kind and
nature that have been lawfully levied, assessed, or imposed upon
such Subsidiary or its properties including the use thereof, or any
of the Obligations, which, if unpaid, would become Liens against
its assets, including, without limitation, all sums due and owing
any taxing authority for income and other taxes withheld from the
wages and salaries of its employees, except to the extent such
Subsidiary is reasonably contesting in good faith any such tax,
assessment, or charge with an adequate reserve provided therefor;
(c) shall at all reasonable times allow the Agent by or through any of
its officers, agents, employees, attorneys, or accountants to:
(1) examine, inspect, and make extracts from such Subsidiary's
books and other records,
(2) examine and inspect such Subsidiary's Collateral wherever
located, and
(3) arrange for verification of such Subsidiary's Receivables,
under reasonable procedures;
(d) shall promptly deliver to the Agent upon reasonable request:
(1) additional information and statements with respect to the
Collateral,
(2) such Subsidiary's Instruments, Chattel Paper, Documents, and
any other writings relating to or evidencing any of such
Subsidiary's Receivables (including, without limitation,
computer printouts or typewritten reports listing the current
mailing address of all present Account Debtors), and
(3) any other writings and information the Agent may reasonably
request;
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(e) shall upon request of the Agent promptly take such action and
promptly make, execute, and deliver all such additional and further
items, deeds, assurances, and instruments as the Agent may
reasonably require, including, without limitation, Financing
Statements, so as to completely vest in, perfect and ensure to the
Agent its rights hereunder and in and to the Collateral, including,
without limitation, such actions or items that may be appropriate
due to changes in applicable laws after the date hereof, to
evidence or to perfect the security interests granted to the Agent
hereunder;
(f) hereby authorizes the Agent or the Agent's designated agent (but
without obligation by the Agent to do so) to incur Related Expenses
(whether prior to, upon, or subsequent to any Event of Default),
and such Subsidiary shall promptly repay, reimburse, and indemnify
the Agent for any and all Related Expenses. As long as no Default
or Event of Default exists, the Agent agrees to give OI periodic
reports of the Related Expenses subject to reimbursement under this
subsection;
(g) shall not, without the prior written consent of the Agent, pledge,
grant a security interest, or otherwise voluntarily place any Lien
upon any Collateral except any security interest granted to or in
favor of the Agent and the Banks and except as permitted by the
terms of the Credit Agreement; and
(h) shall not use any Collateral in violation of any applicable
statute, ordinance, or regulation.
5. COLLECTION AND RECEIPT OF PROCEEDS
(a) Upon the occurrence and continuance of any Event of Default and
after written notification thereof to any Subsidiary, the Agent or
the Agent's designated agent shall have the right and power (as
such Subsidiary's hereby constituted and appointed
attorney-in-fact), which, being coupled with an interest, shall
remain irrevocable until all Obligations are fully and completely
paid, performed, and observed, at any time to:
(1) notify the Account Debtors on any or all of such Subsidiary's
Receivables of the Agent's security interest in and assignment
of those Receivables upon which the respective Account Debtors
are liable, and to request from such Account Debtors, in the
Agent's name or in such Subsidiary's name, information
concerning the Receivables and amounts owing thereon,
(2) notify and require the Account Debtors on any or all of such
Subsidiary's Receivables to make payment upon such Receivables
directly to the Agent,
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(3) receive, retain, acquire, take, endorse, assign, deliver,
accept, and deposit, in the Agent's name or such Subsidiary's
name, any and all of such Subsidiary's cash, Instruments,
Chattel Paper, Documents, Proceeds, collections of Receivables,
and any other such writings relating to any of the Collateral
theretofore collected, received or retained by such Subsidiary
pursuant to Subsection 5(b) below or thereafter collected,
received, or retained by such Subsidiary,
(4) exercise any and all of the rights granted the Agent in
Subsections 5(c) and 5(d) below, and
(5) take such other action with respect to any or all of the
Collateral, in such manner and at such times, as the Agent may
deem advisable, including, without limitation, the following:
collection, legal proceedings, compromises, settlements,
adjustments, extensions, postponements, exchanges, releases,
and sales.
(b) Except as otherwise provided in Subsections 5(a), 5(c), or 5(d),
upon the occurrence and continuance of an Event of Default, each
Subsidiary is authorized (1) to collect and enforce, by all lawful
means, all of such Subsidiary's Receivables, and (2) to receive and
retain, by all lawful means, any and all Proceeds. Such Subsidiary
shall hold, as trustee upon an express trust for the Agent as
beneficiary thereof, all such lawful collections of Receivables and
Proceeds received by such Subsidiary. Any costs, liabilities, or
expenses incurred by such Subsidiary in the collection or
enforcement of such Receivables and in the receipt of Proceeds
shall be borne solely by such Subsidiary. Such Subsidiary as
trustee shall not commingle such collections of Receivables and
such Proceeds with any other property not held in trust for the
Agent; any property held or commingled with such collections of
Receivables such Proceeds is hereby conclusively established
between such Subsidiary and the Agent to be collections of
Receivables and Proceeds.
(c) With respect to each Subsidiary's Instruments, Documents, and
Chattel Paper:
(1) Upon the Agent's written request, such Subsidiary shall
immediately deliver or cause to be delivered to the Agent all
of such Subsidiary's Instruments, Chattel Paper, and Documents,
appropriately endorsed either, at the Agent's option, (i) to
the Agent's order, without limitation or qualification, or (ii)
for deposit in the Accounts Receivable Collection Account. The
Agent, or the Agent's designated agent, is hereby constituted
and appointed such Subsidiary's attorney-in-fact with authority
and power to so endorse any and all Instruments, Documents, and
Chattel Paper upon such Subsidiary's failure to do so. Such
authority and power, being coupled with an interest, shall be
13
(i) irrevocable until all Obligations are paid, performed, and
observed in full, (ii) exercisable by the Agent at any time and
without any request upon such Subsidiary by the Agent to so
endorse, and (iii) exercisable in the Agent's name or such
Subsidiary's name;
(2) Each Subsidiary hereby waives presentment, demand, notice of
dishonor, protest, notice of protest, and any and all other
similar notices with respect thereto, regardless of the form of
any endorsement thereof;
(3) The Agent shall not be bound or obligated to take any action to
preserve any rights therein against any prior parties thereto.
(d) Upon the occurrence and continuance of any Event of Default and
after the Agent's written notification thereof to any Subsidiary:
(i) the lawful collection and enforcement of all of such
Subsidiary's Receivables and the lawful receipt and retention by
such Subsidiary of all Proceeds shall be as agent for the Agent and
the Banks; (ii) all such collections and Proceeds shall be remitted
daily by such Subsidiary to the Agent in the form in which they are
received by such Subsidiary, either by mailing or by delivering
such collections and Proceeds to the Agent, appropriately endorsed
for deposit in the Accounts Receivable Collections Account. The
Agent may, in its sole discretion, at any time and from time to
time, apply all or any portion of the collected balance in the
Accounts Receivable Collections Account allowing three (3) days for
collection and clearance of remittances as a credit against such
Subsidiary's outstanding Obligations. If any remittance shall be
dishonored, or if, upon final payment, any claim with respect
thereto shall be made against the Agent on its warranties of
collection, the Agent may charge the amount of such item against
the Accounts Receivable Collections Account or any other Deposit
Account maintained by such Subsidiary with the Agent, and, in any
event, retain same and such Subsidiary's interest therein as
additional security for the Obligations. The Agent may, in its sole
discretion, at any time and from time to time, release funds from
the Accounts Receivable Collections Account to such Subsidiary for
use in such Subsidiary's business. The balance in the Accounts
Receivable Collections Account may be withdrawn by such Subsidiary
upon termination of this Agreement in accordance with Subsection
9(d). Upon the occurrence and continuance of any Event of Default
and after the Agent's written request, such Subsidiary will cause
all remittances representing all collections and all Proceeds to be
mailed to a lock box in Hartford, Connecticut (or other locations
designated by the Agent) to which the Agent shall have access for
the processing of such items in accordance with the provisions,
terms, and conditions of the Agent's customary lock box agreement.
14
6. INSURANCE
Each Subsidiary shall at all times maintain insurance upon its
Collateral through insurance policies in such form, written by such
companies, in such amounts, for such period, and against such risks as
may be acceptable to the Agent, with provisions satisfactory to the
Agent for payment of all losses thereunder to the Agent and such
Subsidiary as their interests may appear (including a loss payable
endorsement in favor of the Agent), and, if required by the Agent, such
Subsidiary will deposit the policies with the Agent. Any such policies
of insurance shall provide for no less than ten (10) days prior written
cancellation notice to the Agent. Any sums exceeding $100,000.00
received by the Agent, and, during the existence of a Default or Event
of Default, all sums, in payment of insurance losses, returns, or
unearned premiums under the policies may, at the option of the Agent,
be applied upon any Obligation whether or not the same is then due and
payable, or may be delivered to such Subsidiary for the purpose of
replacing, repairing, or restoring its Inventory. Such Subsidiary
hereby assigns to the Agent any return of unearned premiums which may
be due upon cancellation of any such policies for any reason and
directs the insurers to pay the Agent any amount so due. The Agent, or
the Agent's designated agent, is hereby constituted and appointed such
Subsidiary's attorney-in-fact (either in the name of such Subsidiary or
in the name of the Agent) to make adjustments of all insurance losses,
sign all applications, receipts, releases, and other papers necessary
for the collection of any such loss, and any return of unearned
premium, execute proof of loss, make settlements, and endorse and
collect all Instruments payable to such Subsidiary or issued in
connection therewith. Notwithstanding any action by the Agent
hereunder, any and all risk of loss or damage to such Subsidiary's
Collateral to the extent of any and all deficiencies in the effective
insurance coverage thereof is hereby expressly assumed by such
Subsidiary.
7. EVENT OF DEFAULT
Upon the occurrence of any Event of Default as such term is defined in
the Credit Agreement, any and all Obligations shall, at the option of the Agent
and notwithstanding any period of time permitted or allowed by any writing
evidencing an Obligation, become immediately due and payable without notice,
demand, protest, or presentment, all of which are hereby expressly waived by
each Subsidiary.
8. RIGHTS AND REMEDIES UPON EVENT OF DEFAULT
Upon the occurrence of any Event of Default and at all times
thereafter, the Agent shall have the rights and remedies of a secured party
under the Connecticut Uniform Commercial Code in addition to the rights and
remedies provided elsewhere within this Agreement or in any other writing
executed by each Subsidiary. The Agent may require any Subsidiary to assemble
the Collateral and make it available to the Agent at a reasonably convenient
place to be designated by the Agent. Unless the Collateral is perishable,
threatens to decline speedily in value, or is of a type customarily
15
sold on a recognized market, the Agent will give such Subsidiary reasonable
notice of the time and place of any public sale of the Collateral or of the time
after which any private sale or other intended disposition thereof is to be
made. The requirement of reasonable notice shall be met if such notice is mailed
(deposited for delivery, postage prepaid, by U.S. mail) to either, at the
Agent's option, (1) such Subsidiary's Location (as modified by any change
therein which such Subsidiary has supplied in writing to the Agent) or (2) such
Subsidiary's address at which the Agent customarily communicates with such
Subsidiary, at least ten (10) days before the time of the public sale or the
time after which any private sale or other intended disposition thereof is to be
made. At any such public or private sale, the Agent may purchase the Collateral.
After deduction for the Agent's Related Expenses, the residue of any such sale
shall be applied in satisfaction of the Obligations in such order of preference
as the Agent may determine. Any excess, to the extent permitted by law, shall be
paid to such Subsidiary, and such Subsidiary shall remain liable for any
deficiency.
9. GENERAL
(a) If any provision, term, or portion, of this Agreement, (including,
without limitation, (1) any indebtedness, obligation, liability,
contract, agreement, indenture, warranty, covenant, guaranty,
representation, or condition of this Agreement made, assumed, or
entered into, (2) any act or action taken under this Agreement, or
(3) any application of this Agreement) is for any reason held to be
illegal or invalid, such illegality or invalidity shall not affect
any other such provision, term, or portion of this Agreement, each
of which shall be construed and enforced as if such illegal or
invalid provision, term, or portion were not contained in this
Agreement. Any illegality or invalidity of any application of this
Agreement shall not affect any legal and valid application of this
Agreement, and each provision, term, and portion of this Agreement
shall be deemed to be effective, operative, made, entered into, or
taken in the manner and to the full extent permitted by law.
(b) The Agent shall not be deemed to have waived any of the Agent's
rights hereunder or under any other writing executed by all the
Subsidiaries unless such waiver be in writing and signed by the
Agent. No delay or omission on the part of the Agent in exercising
any right shall operate as a waiver of such right or any other
right. A waiver on any one occasion shall not be construed as a bar
to or waiver of any right or remedy on any future occasion. All of
the Agent's rights and remedies, whether evidenced hereby or by any
other writing shall be cumulative and may be exercised singularly
or concurrently. Any written demands, written requests, or written
notices to any Subsidiary that the Agent may elect to give shall be
effective when deposited for delivery, postage prepaid, by U.S.
mail, and addressed either, at the Agent's option, to (l) such
Subsidiary's Location (as modified by any change therein which such
Subsidiary has supplied in writing to the Agent) or (2) such
Subsidiary's address at which the Agent customarily communicates
with such Subsidiary. If at any time or times, by assignment or
otherwise, the Agent transfers any of the
16
Obligations or any part of the Collateral to another Person, such
transfer shall carry with it the Agent's powers and rights under
this Agreement with respect to the Obligation or Collateral so
transferred and the transferee shall have said powers and rights,
whether or not they are specifically referred to in the transfer.
To the extent that the Agent retains any of the Obligations or any
part of the Collateral, the Agent will continue to have the rights
and powers herein set forth with respect thereto.
(c) The laws of the State of Connecticut, without regard to principles
of conflict of laws, shall govern the construction of this
Agreement and the rights and duties of the parties hereto. This
Agreement contains the entire agreement between the parties hereto
and no oral agreement shall be binding. Each Subsidiary agrees that
the Agent may make a photocopy of this Agreement in the ordinary
course of business and such photocopy may be used in place of the
original of this Agreement. A carbon, photographic or other
reproduction of this Agreement may be used as a financing
statement. This Agreement shall be binding upon and inure to the
benefit of each Subsidiary and the Agent and their respective
successors and assigns. The rights and powers herein given to the
Agent are in addition to those otherwise created or existing in the
same Collateral by virtue of other agreements or writings.
(d) Each Subsidiary hereby releases the Agent from and agrees to
indemnify and hold harmless the Agent, and its officers, agents,
and employees from any and all claims of such Subsidiary or any
other Person for damage or loss caused by any act or acts hereunder
or in furtherance hereof whether by omission or commission, and
whether based upon any error of judgment or mistake of law or fact
(except gross negligence or willful misconduct) on the part of the
Agent, or its officers, agents, and employees.
(e) The Agent has the right, in addition to all other rights and
remedies available to it, to set off at any time the unpaid balance
of each Revolving Credit Note and any other Obligations against any
indebtedness owing to any Subsidiary by the Agent, including,
without limitation, all Cash Security.
(f) Each Subsidiary will cooperate with the Agent in order to fill in
all blank spaces herein, to correct patent errors herein, to
complete or correct the description of the Collateral, and to fill
in any missing date on this Agreement.
10. SUBMISSION TO JURISDICTION; WAIVERS. Each Subsidiary hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Security Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the nonexclusive general jurisdiction of the
17
Courts of the State of Connecticut, the courts of the United States of America
for the District of Connecticut, and appellate courts from any thereof; and
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead the
same.
EACH SUBSIDIARY, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE, BETWEEN THE AGENT AND SUBSIDIARY ARISING OUT OF, IN
CONNECTION WITH, RELATING TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE, GUARANTEE OR OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH
OR THE TRANSACTIONS RELATED THERETO.
18
IN WITNESS WHEREOF, the undersigned have caused this Subsidiary
Security Agreement to be duly executed and delivered in Hartford, Connecticut as
of the date first above written.
SUBSIDIARIES: CAPITAL STAFFING FUND, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: President
OUTSOURCE FRANCHISING, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Assistant Secretary
SYNADYNE I, INC., F/K/A LABOR WORLD OF
HOUSTON, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Vice President
SYNADYNE II, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Vice President
S-1
SYNADYNE III, INC., F/K/A LABOR WORLD OF
AMERICA, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Vice President
SYNADYNE IV, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Vice President
SYNADYNE V, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Vice President
EMPLOYEES INSURANCE SERVICES, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: President
OUTSOURCE INTERNATIONAL OF
AMERICA, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: President
S-2
AGENT: BANK OF BOSTON CONNECTICUT
By: /s/ ROGER J. RODE, JR.
-------------------------------------
Name: Roger J. Rode, Jr.
Title: Director
S-3
SCHEDULE 3.1
During the one-year period proceeding the Agreement Date, no subsidiary has been
known as or used any corporate or fictitious name other than the corporate name
of such subsidiary on the Agreement Date, except as follows:
Labor World
Office Ours
Payroll Partners
SCHEDULE 3.2
All trade names or styles under which the Subsidiaries create Receivables, or to
which instruments in payment of Receivables are made payable
Labor World
Office Ours
SCHEDULE 3.3
PRINCIPAL PLACE OF BUSINESS OF EACH SUBSIDIARY:
1144 East Newport Center Drive
Deerfield Beach, FL 33487
LOCATION OF CHIEF EXECUTIVE OFFICE OF EACH SUBSIDIARY:
1144 East Newport Center Drive
Deerfield Beach, FL 33487
LOCATION(S) OF OTHER PLACES OF BUSINESS OF EACH SUBSIDIARY:
See attached summary of leased locations on Attachment "A".
LOCATION(S) OF EACH SUBSIDIARY'S INVENTORY: None
LOCATION(S) OF EACH SUBSIDIARY'S EQUIPMENT:
Miscellaneous owned equipment, approximately 250,000, at leased
locations in Attachment "A".