OUTSOURCE INTERNATIONAL OF AMERICA, INC.
JUNIOR SUBORDINATED NOTE
$1,700,000.00 St. Charles, Illinois
February 16, 1998
FOR VALUE RECEIVED, OutSource International of America, Inc., a
corporation organized and existing under the laws of the state of Florida (the
"Company"), hereby promises to pay L.M. Investors, Inc., an Illinois corporation
(together with any subsequent holder of this Note, the "Noteholder") the
principal sum of ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS and 00/100
($1,700,000.00), with interest in arrears on the unpaid principal balance from
time to time outstanding from the date hereof until due and payable at the rate
provided in section 1(a) hereof. Each holder of this Note, by acceptance hereof,
agrees to and shall be bound by the provisions of this Note. This Note is issued
to the Noteholder pursuant to the terms of that certain Asset Purchase Agreement
by and among the Company, the Noteholder, Louis J. Morelli, and Matthew Schubert
of even date herewith (the "Asset Purchase Agreement"). Capitalized terms used
herein and not otherwise defined shall have the meaning ascribed to such terms
in the Asset Purchase Agreement.
1. TERMS OF NOTE.
(a) INTEREST AND PRINCIPAL. This Note shall bear interest on the
outstanding principal balance hereof at the rate of seven and a quarter percent
(7 1/4%) per annum (computed on the basis of a 365 day year). Except as
otherwise provided herein, the Company shall make twelve (12) equal quarterly
payments of principal and interest in the amount of ONE HUNDRED FIFTY EIGHT
THOUSAND NINE HUNDRED FIVE and 97/100 ($158,905.97) commencing on May 1, 1998
and ending on April 30, 2001. All payments of principal and interest hereunder
shall be made by the Company in lawful money of the United States of America in
immediately available funds on the date such payment is due at the address of
the Noteholder set forth below or such other place as the holder hereof shall
designate to the Company in writing.
(b) NO PREPAYMENT. This Note shall not be prepaid until the Senior
Indebtedness (as defined below) shall have been paid in full in cash and the
Credit Agreement (as defined below) shall have been irrevocably terminated.
2. SUBORDINATION IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS.
(a) SUBORDINATION. The Company agrees, and each holder of this Note
agrees, that the principal and interest on this Note is and shall be
subordinated in right of payment, to the extent and in the manner hereinafter
set forth, to the prior payment in full in cash of all Senior Indebtedness and
that the
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subordination of this Note pursuant to this Section 2 is for the benefit of all
holders of the Senior Indebtedness.
(b) SENIOR INDEBTEDNESS. "Senior Indebtedness" means all obligations
and undertakings of any kind owed by the Company or any Subsidiary of the
Company to the holders of the Senior Indebtedness from time to time under or
pursuant to any of the Senior Lending Agreements including, without limitation,
whether direct or indirect, absolute or contingent, secured or unsecured, now
existing or hereafter arising, all loans, advances, liabilities and debt
balances, all principal and interest (including all interest accruing after
commencement of any case, Proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Company) accruing thereon, all charges,
expenses, fees and other sums chargeable to the Company or any Subsidiary of the
Company by the holders of the Senior Indebtedness, all reimbursement, indemnity
or other obligations due and payable to the holders of the Senior Indebtedness
and all covenants and duties at any time owed by the Company or any Subsidiary
of the Company to the holders of the Senior Indebtedness. Senior Indebtedness
shall include any debt, liability or obligation owing from the Company or any
Subsidiary of the Company to others which the holders of the Senior Indebtedness
may have obtained by assignment, pledge, purchase or otherwise. Senior
Indebtedness shall continue to constitute Senior Indebtedness notwithstanding
the fact that such Senior Indebtedness or any claim for such Senior Indebtedness
is subordinated, avoided or disallowed under the federal Bankruptcy Code or
other applicable law. Senior Indebtedness shall also include any indebtedness of
the Company or any Subsidiary of the Company incurred in connection with a
refinancing of the Senior Indebtedness under the Senior Lending Agreements.
(c) LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment or
distribution of assets of the Company of any kind or character (whether in cash,
securities or other property) to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar Proceeding relating to the Company or its property:
(i) The holders of Senior Indebtedness shall be
entitled to receive payment in full in cash of all
Senior Indebtedness or such payment shall first be
duly provided for in cash or in a manner
satisfactory to the holders of Senior Indebtedness
before Noteholder shall be entitled to receive any
payment on this Note; and
(ii) Until the Senior Indebtedness is paid in full in
cash or provided for in a manner satisfactory to
the holders of Senior Indebtedness, any payment or
distribution to which the Noteholder would be
entitled but for this Section shall be made to the
Agent (as defined below) for application to the
payment of the Senior Indebtedness.
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(iii) Notwithstanding the foregoing provisions of this
Section, if the Company shall make any payment or
distribution to the Noteholder on account of this
Note at a time when such payment is prohibited by
this Section, such payment or distribution shall be
held by the Noteholder in trust for the ratable
benefit of, and shall be paid forthwith over and
delivered to, the Agent for application to the
payment of all Senior Indebtedness remaining unpaid
to the extent necessary to pay all Senior
Indebtedness in full in accordance with its terms,
after giving effect to any concurrent payment or
distribution to or for the holders of Senior
Indebtedness, and the Noteholder irrevocably
authorizes, empowers and directs all receivers,
trustees, liquidators, custodians, conservators and
others having authority in the premises to effect all
such payments and distributions, and the Noteholder
also irrevocably authorizes, empowers and directs the
Agent to demand, sue for, collect and receive every
such payment or distribution.
(iv) The Noteholder agrees to execute, verify, deliver and
file any proofs of claim in respect of the
indebtedness evidenced by this Note requested by the
Agent in connection with any such Proceeding and
hereby irrevocably authorizes, empowers and appoints
the Agent as the Company's agent and attorney-in-fact
to (A) execute, verify, deliver and file such proofs
of claim and (B) vote such claim in any such
Proceeding; provided that the Agency shall have no
obligation to execute, verify, deliver, file and/or
vote any such proof of claim.
(d) DEFAULT ON SENIOR INDEBTEDNESS.
(i) Upon the maturity of the Senior Indebtedness by lapse
of time, acceleration (unless waived in writing by
the holders of Senior Indebtedness) or otherwise, all
of the Senior Indebtedness shall first be paid in
full, or such payment duly provided for, in cash or
in a manner satisfactory to the holders of the Senior
Indebtedness, before any payment is made by the
Company on account of this Note and, until all of the
Senior Indebtedness is paid in full, any payment or
other distribution to which the Noteholder would be
entitled but for the provisions of this Section shall
(unless otherwise required by this Section 2) be made
to the Agent, for application to the payment of the
Senior Indebtedness.
(ii) During the continuance of any default in the payment
of any of the Senior Indebtedness, the Company shall
not make any payment of interest or other amounts
owing on this Note until such payment default has
been cured by the Company or waived in writing by the
holders of the Senior Indebtedness. Upon any such
cure or waiver, payments may resume. Interest on this
Note shall continue to accrue during any period for
which there is a payment default on the Senior
Indebtedness and, upon such cure or waiver, the
amount of any such accrued interest shall be paid in
equal installments in each subsequent payment
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due pursuant to the provisions of Section 1.
(iii) During the continuance of any other event of default
with respect to the Senior Indebtedness pursuant to
which the maturity thereof may be accelerated,
commencing upon receipt by the Company of written
notice from the Agent specifying that such notice is
a payment blockage notice delivered pursuant to this
Section, the Company may not make any payment of
principal, interest or other amounts owing on this
Note for a period ("Payment Blockage Period")
commencing on the date of receipt of such notice and
ending one hundred and eighty (180) days thereafter
(unless such Payment Blockage Period shall be
terminated by written notice to the Company from the
Agent). The aggregate duration of all Payment
Blockage Periods for such nonpayment defaults shall
not exceed one hundred eighty (180) days during any
period of three hundred sixty (360) consecutive days.
During any Payment Blockage Period, interest shall
continue to accrue as otherwise provided herein. Upon
the termination of any Payment Blockage Period,
payments of interest and/or principal shall resume as
provided in Section 1; provided that the outstanding
principal balance of this Note shall be increased by
the amount of interest that accrued during such
Payment Blockage Period and paid in equal
installments as provided in Section 1. No principal
or interest shall be paid with respect to said
Payment Blockage Period until the Senior Indebtedness
is paid in full in cash and the Credit Agreement
shall have been irrevocably terminated.
(iv) Notwithstanding the foregoing provisions of this
Section, if at any time after the Agent has provided
written notice to the Noteholder that the Company is
in default in the payment of any Senior Indebtedness,
the Company shall make any payment or distribution to
the Noteholder on account of this Note at a time when
such payment is prohibited by this Section, unless
otherwise required by this Section, such payment or
distribution shall be held by Noteholder in trust for
the ratable benefit of, and shall be paid forthwith
over and delivered to, the Agent for application to
the payment of all of the Senior Indebtedness
remaining unpaid to the extent necessary to pay all
of the Senior Indebtedness in full in accordance with
its terms, after giving effect to any concurrent
payment or distribution to or for the holders of the
Senior Indebtedness.
(e) SUBROGATION. After all Senior Indebtedness is paid in full and
until this Note is paid in full (but not prior to such time), the Noteholder
shall be subrogated to the rights of the holders of Senior Indebtedness to
receive payments and distributions applicable to the Senior Indebtedness to the
extent that payments and distributions otherwise payable to the Noteholder have
been applied to the payment of the Senior Indebtedness. A payment or
distribution made under this Section to holders of Senior Indebtedness which
otherwise would have been made to the Noteholder is not, as between the Company
and the Noteholder, a payment by the Company on Senior Indebtedness, but until
such payment is made to
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Noteholder
it is not a payment by the Company to the Noteholder.
(f) DEFERRAL OF COLLECTION ACTION. In the event of a default in the
payment of any amounts due hereunder, the Noteholder agrees to promptly notify
the Agent of such default. The Noteholder shall not take any collection action
with respect to the indebtedness evidenced by this Note for a period
("Collection Deferral Period") commencing on the date of receipt of such notice
by the Agent and ending one hundred eighty days (180) thereafter (unless such
Collection Deferral Period shall be terminated by written notice to the
Noteholder from the Agent).
(g) RETURN OF PAYMENTS. After all Senior Indebtedness is paid in full,
the provisions of this Section 2 shall be reinstated if at any time any payment
of any of the Senior Indebtedness is rescinded or must otherwise be returned by
any holder of the Senior Indebtedness or any representative of such holder.
(h) NO CHALLENGE TO SENIOR INDEBTEDNESS. The Noteholder agrees not to
initiate or prosecute any claim, action or other Proceeding challenging the
enforceability of the Senior Indebtedness or any liens and security interests
securing the Senior Indebtedness, nor will the Noteholder file or join in the
filing of an involuntary bankruptcy petition against the Company. The right of
the holders of the Senior Indebtedness to enforce the provisions of this Section
2 shall not be prejudiced or impaired by any act or omitted act of the holders
of the Senior Indebtedness or the Company, including without limitation
forbearance, waiver, compromise, amendment, extension, renewal or taking or
release of security in respect of any Senior Indebtedness or noncompliance by
the Company with such provisions, regardless of the actual or imputed knowledge
of the holders of the Senior Indebtedness. In the event that the Senior
Indebtedness is refinanced in full, Noteholder agrees at the request of such
refinancing party to enter into a subordination agreement on terms substantially
similar to this Section 2.
(i) MODIFICATIONS TO SENIOR INDEBTEDNESS. The holders of the Senior
Indebtedness may at any time and from time to time without the consent of or
notice to the Noteholder, without incurring liability to the Noteholder and
without impairing or releasing the obligations of the Noteholder under this
Section 2, change the manner or place of payment or extend the time of payment
of or renew or alter any Senior Indebtedness, or amend in any manner any
agreement, note, guaranty, security agreement or other instrument evidencing or
securing or otherwise relating to the Senior Indebtedness.
(j) NO SECURITY FOR NOTE. The Noteholder represents that it does not
have, and agrees that it shall not require or obtain, any security interest in
the assets of the Company or any Subsidiary or parent of the Company as security
for the indebtedness evidenced hereby. The Noteholder acknowledges that the
holders of the Senior Indebtedness do have a security interest in the assets of
the Company.
(k) NO MODIFICATIONS OF NOTE. Except as provided in Section 1(b)
hereof, until all of the Senior Indebtedness is paid in full and all loan
commitments under the Credit Agreement have terminated, without the prior
written consent of the Agent, the Noteholder shall not agree to any amendment,
modification or supplement to this Note or the indebtedness evidenced by this
Note, including without limitation, any amendment, modification or supplement
the effect of which is to (i) increase the principal
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amount hereof or the rate of interest herein, (ii) change the dates upon which
payments of principal or interest hereon are due, (iii) change or add any event
of default, (iv) change the prepayment provisions hereof or (v) alter the
subordination provisions hereof, including without limitation, subordinating
this Note or the indebtedness evidenced hereby to any other debt.
(l) ASSIGNMENT. Until all of the Senior Indebtedness is paid in full
and all loan commitments under the Credit Agreement have terminated, the
Noteholder shall not sell, assign, pledge, dispose of or otherwise transfer all
or any portion of this Note or the indebtedness evidenced hereby unless prior to
the consummation of any such action, the transferee thereof shall execute and
deliver to the Agent an agreement providing the continued subordination of this
Note and the indebtedness evidenced hereby as provided herein. Notwithstanding
the failure to execute or deliver any such agreement, the subordination effected
hereby shall survive any sale, assignment, pledge, disposition or other transfer
of all or any portion of this Note or the indebtedness evidenced hereby, and the
subordination terms of this Note shall be binding upon the successors and
assigns of the Noteholder.
(m) SCOPE OF SUBORDINATION. The provisions in this Section 2 are solely
to define the relative rights of the Noteholder and the holders of the Senior
Indebtedness. Nothing in this Section 2 shall impair, as between the Company and
the Noteholder, the unconditional and absolute obligation of the Company to
punctually pay the principal, interest, and any other amounts and obligations
owing to Noteholder under the terms of this Note, subject to the rights of the
holders of the Senior Indebtedness under this Note and the terms of this Note.
(n) CERTAIN DEFINED TERMS. As used herein,
(i) "Agent" means BankBoston, N.A., successor by merger
to Bank of Boston Connecticut, in its capacity as
agent for the holders of the Senior Indebtedness, or
any successor agent appointed pursuant to the terms
of the Credit Agreement, provided that the Noteholder
may rely on a certificate from any such successor
agent to the effect that such successor is acting as
a successor agent under the Credit Agreement.
(ii) "Collection Action" means (A) to demand, sue for,
take or receive from or on behalf of the Company, by
set-off or in any other manner, the whole or any part
of any moneys which may now or hereafter be owing by
the Company under this Note, (B) to initiate or
participate with others in any lawsuit, action, or
Proceeding against the Company to (1) enforce payment
of or to collect the whole or any part of the
indebtedness evidenced by this Note, or (2) commence
judicial enforcement of any of the rights and
remedies under this Note or under applicable law with
respect to this Note, or (C) to accelerate any
indebtedness evidenced by this Note.
(iii) "Credit Agreement" means the Credit Agreement dated
as of February 21, 1997,
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among the Company, the Banks from time to time
parties thereto and Bank of Boston Connecticut, as
Agent, as the same has been amended and restated
prior to the date hereof and as the same hereafter
may be amended, modified, supplemented, restated or
extended from time to time.
(iv) "Proceeding" means any voluntary or involuntary
insolvency, bankruptcy, receivership, custodianship,
liquidation, dissolution, reorganization, assignment
for the benefit of creditors, appointment of a
custodian, receiver, trustee or other officer with
similar powers or any other proceeding for the
liquidation, dissolution or other winding up of the
Company.
(v) "Senior Lending Agreements" means collectively the
Credit Agreement and the other related loan documents
between the Company or any Subsidiaries of the
Company and the holders of Senior Indebtedness,
including without limitation all notes, pledge
agreements, security agreements and guarantees,
together with any and all other instruments,
documents and agreements executed and delivered by
the Company or any Subsidiary of the Company from
time to time in connection with the Senior
Indebtedness evidenced by the Credit Agreement and
such notes, as the same has been amended and restated
prior to the date hereof and as the same may
hereafter be amended, modified, supplemented,
restated or extended from time to time.
(vi) "Subsidiary" shall mean, as to any Person, a
corporation, partnership, limited liability company
or other entity of which shares of stock or other
ownership interests having ordinary voting power
(other than stock or such other ownership interests
having such power only by reason of the happening of
a contingency) to elect a majority of the board of
directors or other managers of such corporation,
partnership, limited liability company or other
entity are at the time owned, or the management of
which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such
Person.
3. EVENTS OF DEFAULTS AND ACCELERATION.
If any of the following events shall occur and be continuing for any
reason whatsoever (and whether such occurrence shall be voluntary or involuntary
or come about to be effected by operation of law or otherwise):
(a) the Company defaults in the payment of the principal of or any
interest on this Note and such default continues for a period of thirty (30)
business days after the date such payment was due; or
(b) the Company shall:
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(i) have commenced a voluntary case under Title 11 of
the United States Code as from time to time in
effect, or have authorized, by appropriate
proceedings of its board of directors or other
governing body, the commencement of such a
voluntary case;
(ii) have filed an answer or other pleading admitting or
failing to deny the material allegations of a
petition filed against it commencing an involuntary
case under said Title 11, or seeking, consenting to
or acquiescing in the relief therein provided, or
have failed to controvert timely the material
allegations of any such petition;
(iii) be subject to the entry of an order for relief
against it in any involuntary case commenced under
said Title 11 which remains undischarged or
unstayed for more than sixty (60) days;
(iv) have sought relief as a debtor under any applicable
law, other than said Title 11, of any jurisdiction
relating to the insolvency, liquidation or
reorganization of debtors or to the modification or
alteration of the rights of creditors, or have
consented to or acquiesced in such relief;
(v) be subject to the entry of an order by a court of
competent jurisdiction (A) finding it to be
bankruptcy or insolvent or (B) ordering or
approving its liquidation, reorganization or any
modification or alteration of the rights of its
creditors which remains undischarged or unstayed
for more than sixty (60) days;
(vi) be subject to the entry of an order by a court of
competent jurisdiction assuming custody of, or
appointing a receiver or other custodian for, all
or a substantial part of its property which remains
undischarged or unstayed for more than sixty (60)
days; or
(vii) have entered into a composition with its creditors
or have appointed or consented to the appointment
of a receiver of other custodian for all or a
substantial part of its property.
then the Noteholder may, subject to the provisions of Section 2, by providing
(10) days written notice to the Company, declare the Company to be in default
hereunder (an "Event of Default") and may exercise any right, power or remedy
permitted to such holder or holders by law, including, without limitation:
(x) If any amount of principal and interest hereunder
is not paid within twenty (20) days of its due
date, such amounts will bear interest at 18% per
annum until paid (the "Late Payment Interest Rate")
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(y) the right to declare the entire principal amount of
this Note and accrued interest thereon, if any, due
and payable; and upon acceleration the Late Payment
Interest Rate will apply to the accelerated
principal
(z) the right to commence any proceeding against the
Company in furtherance of the foregoing.
3. COMPLIANCE WITH USURY LAWS.
All agreements between the Company and the Noteholder are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the Indebtedness evidenced hereby or
otherwise, shall the amount paid or agreed to be paid to the Noteholder for the
use, forbearance or detention of the Indebtedness evidenced hereby exceed the
maximum permissible under the applicable law. As used herein, the term
"applicable law" shall mean the law in effect as of the date hereof, provided,
however, that in the event there is a change in the law which results in a
higher permissible rate of interest, then this Note shall be governed by such
new law as of its effective date. If, from any circumstances whatsoever,
fulfillment of any provision hereof at the time performance of such provision
shall be due, shall involve transcending the limit of validity prescribed by
law, then the obligation to be fulfilled shall automatically be reduced to the
limit of such validity, and if from any circumstances the Noteholder should ever
receive as interest an amount which would exceed the highest lawful rate, such
amount which would be excessive interest shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest. This
provision shall control every other provision of all agreements between the
Company and the Noteholder.
4. NOTICES.
All notices, requests, demands and other communications hereunder shall
be in writing, shall be deemed to have been duly given when delivered at or
telecopied to the address specified below and shall be delivered by overnight
delivery service or hand delivered, addressed or telecopied as follows:
If to Noteholder:
Matthew Schubert
1529 Windy Hill Road
Northbrook, Illinois 60062
If to Company:
OutSource International of America, Inc.
Attn: Brian Nugent, General Counsel
1144 E. Newport Center Drive
Deerfield Beach, Florida 33442
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Phone No.: (954) 418-6580
Telecopier No.: (954) 418-3365
5. GOVERNING LAW.
This Note shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the State
of Illinois. The sole venue for any action arising hereunder shall be Kane
County, Illinois.
6. WAIVER OF TRIAL BY JURY.
THE COMPANY AND NOTEHOLDER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
NOTE OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF THE COMPANY OR NOTEHOLDER.
IN WITNESS WHEREOF, the Company has caused this Note to be executed
under seal by its duly authorized officer as of the date set forth above.
OUTSOURCE INTERNATIONAL OF
AMERICA, INC.
/s/ David Sparkman
By:-------------------------------
Name: David Sparkman
Title: Zone Vice President
AGREED AND ACCEPTED:
NOTEHOLDER
L.M. INVESTORS, INC.
/s/ Matthew Schubert
By:--------------------------------
Name: Matthew Schubert
Title: Vice President
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