Exhibit 4.1
Form 10-Q
Headway Corporate Resources, Inc.
File No. 1-16025
HEADWAY CORPORATE RESOURCES, INC.
SEVENTH AMENDMENT AND LIMITED WAIVER TO CREDIT AGREEMENT
This SEVENTH AMENDMENT AND LIMITED WAIVERTO CREDIT
AGREEMENT (this "Amendment") is dated as of August 24, 2001 and
entered into by and among HEADWAY CORPORATE RESOURCES, INC., a
Delaware corporation (the "Borrower"), the other Credit Parties
listed on the signature pages hereof, the financial institutions
listed on the signature pages hereof (the "Lenders") and BANK OF
AMERICA, N.A., as agent for itself and for the other Lenders (the
"Agent"), and is made with reference to that certain Credit
Agreement dated as of March 19, 1998, as amended to the date
hereof (the "Credit Agreement"), by and among the Borrower, the
Lenders and the Agent. Capitalized terms used herein without
definition shall have the same meanings herein as set forth in
the Credit Agreement.
RECITALS
WHEREAS, at the Borrower's request the Lenders have
from time to time made Loans to the Borrower under the Credit
Agreement and have issued Letters of Credit thereunder for the
account of the Borrower;
WHEREAS, to induce the Lenders to enter into the Credit
Agreement and in consideration of the Lenders' Commitments
thereunder and the Loans made and Letters of Credit issued from
time to time thereunder, the Guarantors have jointly and
severally, absolutely, unconditionally and irrevocably guarantied
the payment and performance of the Obligations under the Loan
Documents pursuant to, and in accordance with the terms of, the
Guaranties and the other Loan Documents;
WHEREAS, to secure the payment and performance of the
Borrower's and each other Credit Party's Obligations under the
Loan Documents, the Borrower and the other Credit Parties have
entered into the Security Instruments which grant the Agent, for
the benefit of the Lenders, valid, enforceable, perfected and
first priority security interests in the Collateral, subject only
to valid, enforceable and duly perfected Liens permitted under
Section 9.3(b)-(h) of the Credit Agreement;
WHEREAS, the Credit Parties have notified the Agent and
the Lenders that one or more Events of Default have or are
expected to occur as a result of the Borrower's failure to comply
with the provisions of the Credit Agreement more particularly
described in Section 1(a) hereof. Such Events of Default of the
Borrower and the other Credit Parties are referred to herein as
the "Designated Defaults".
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WHEREAS, the Borrower and each of the other Credit
Parties acknowledge and agree that as a result of the Designated
Defaults, the Agent (on behalf of the Lenders) is entitled to
exercise any or all of its rights, remedies and privileges under
the Credit Agreement, the other Loan Documents and applicable
law, including, without limitation by taking the following
actions (collectively, the "Enforcement Actions"): (i)
terminating all Commitments, (ii) declaring the unpaid principal
amount of all Advances and all accrued interest thereon and all
other Obligations under the Credit Agreement and the other Loan
Documents to be immediately due and payable and (iii) commencing
immediate enforcement and collection actions (including, without
limitation, foreclosing upon the Liens granted to the Agent); and
WHEREAS, the Credit Parties have requested that the
Lenders waive compliance with the provisions set forth in Section
1(a) hereof for the periods described therein and amend the
Credit Agreement as more particularly described herein and the
Lenders have agreed to do so but only on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the premises and
the agreements, provisions and covenants herein contained, the
parties hereto agree as follows:
Section 1. LIMITED WAIVER
(A) Subject to the terms and conditions set forth in this
Amendment and in reliance on the representations, warranties and
covenants of the Credit Parties herein contained, from and after
the Seventh Amendment Effective Date (as defined in Section 3),
the Agent and the Lenders hereby waive compliance with:
(i) Section 9.1(a) of the Credit Agreement
(Consolidated Net Worth) for the period from April 1,
2001 through and including April 18, 2002;
(ii) Section 9.1(b) of the Credit Agreement
(Consolidated Leverage Ratio) for the period from April
1, 2001 through and including April 18, 2002;
(iii) Section 9.1(c) of the Credit Agreement
(Consolidated Fixed Charge Ratio) for the period from
April 1, 2001 through and including April 18, 2002; and
(iv) Section 9.1(d) of the Credit Agreement
(Consolidated Interest Coverage Ratio) for the period
from April 1, 2001 through and including April 18,
2002.
provided, that upon the occurrence of any other Event of
Default (including, without limitation, the failure of the
Credit Parties to comply with the provisions of Section 6
hereof) or at any time the Agent or the Lenders may
hereafter become aware of any other Event of Default
(whether heretofore or hereafter arising), the limited
waiver set forth in Section 1(a) above shall be deemed null
and void as of the date hereof and of no further force and
effect (as if such limited waiver had never been given
effect), without any necessity of demand or notice to any
Credit Party or other Person, and the Agent and the Lenders
may thereafter in their sole and absolute discretion and
notwithstanding any grace or cure periods or other
provisions to the contrary in the Loan Documents, take any
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Enforcement Action and exercise any or all of their other
rights, remedies and privileges under any one or more of the
Loan Documents, any other instrument or agreement referred
to therein, under applicable law or otherwise, with respect
to any Designated Defaults or any other Event of Default.
(b) Without limiting the generality of the provisions of Section
12.6 of the Credit Agreement, the limited waiver set forth in
Section 1(a) above shall be limited precisely as written and
shall relate solely to the non-compliance by the Borrower with
the provisions of the Credit Agreement specifically set forth in
clauses (i), (ii), (iii) and (iv) of Section 1(a) hereof for the
periods specifically referenced therein and nothing in this
Amendment shall be deemed to:
(i) constitute a waiver by the Agent and the Lenders with
respect to Section 9.1(a), (b), (c) and (d) of the Credit
Agreement in any other instance or any other term, provision or
condition of the Credit Agreement or the other Loan Documents or
any other Defaults or Events of Default not constituting
Designated Defaults; or
(ii) prejudice any right or remedy that the Agent or any Lender
may now have or may have in the future under or in connection
with the Credit Agreement, the other Loan Documents, any other
instrument or agreement referred to therein or under applicable
law.
Section 2. AMENDMENTS TO THE CREDIT AGREEMENT
(A) Amendments to Section 1.1 of the Credit Agreement:
Provisions Relating to Defined Terms
(i) Section 1.1 of the Credit Agreement is hereby amended by
adding thereto the following definitions, which shall be inserted
in proper alphabetical order:
"`Accounts' has the meaning set forth in Section 4(i)
of the Seventh Amendment.
`Average Balance' means the average aggregate balance
in the Accounts during any Half-Month Period.
`Budget' means the cash budget delivered by the
Borrower to the Agent pursuant to Section 3(b) of the
Seventh Amendment, as the same may be amended,
supplemented or otherwise modified from time to time in
accordance with the Seventh Amendment.
`Half-Month Period' means, as applicable, each period
in any month beginning on (i) the first day of any
month and ending on the fifteenth day of such month and
(ii) the sixteenth day of any month and ending on the
last day of such month; provided, however, that for the
month of February 2002, "Half Month Period" means, each
period in such month beginning on (i) the first day of
such month and
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ending on the fourteenth day of such
month and (ii) the fifteenth day of such month and
ending on the last day of such month.
`Maturity Date' means the earlier of (x) April 18,
2002, (y) the maturity of the Loans whether by
acceleration or otherwise and (z) the date on which all
Loans and other Obligations shall have been permanently
repaid and all issued and outstanding Letters of Credit
shall have been permanently cancelled, fully cash
collateralized or otherwise supported in a manner
satisfactory to the Lenders.
`Maximum Allowable Amount' means the sum of (v)
$8,000,000, (w) an amount equal to the aggregate
accrued and unpaid payroll taxes owed by the Borrower
and its Subsidiaries, (x) an amount equal to the
aggregate accrued and unpaid workers compensation
insurance premiums owed by the Borrower and its
Subsidiaries, (y) an amount equal to the aggregate
accrued and unpaid commissions associated with the
placement of temporary and permanent personnel owed by
the Borrower an its Subsidiaries and (z) an amount
equal to then current bi-weekly payroll for the
Borrower's offices located in Windsor, Connecticut and
Dallas, Texas.
`Seventh Amendment' means that certain Seventh
Amendment and Limited Waiver to the Credit Agreement
dated as of August 24, 2001 by and among the Borrower,
the other Credit Parties, the Lenders and the Agent, as
the same may be amended, supplemented or otherwise
modified from time to time.
`Seventh Amendment Effective Date' has the meaning set
forth in Section 3 of the Seventh Amendment.
`Subordinated Limited Waiver' has the meaning set forth
in Section 3 of the Seventh Amendment."
(ii) Section 1.1 of the Credit Agreement is hereby further
amended by:
1. deleting the last proviso contained in the
definition of "Applicable Margin" in its entirety and
substituting the following proviso therefor:
"provided that at all times from and after July 2,
2001, the Applicable Margin for: (i) Base Rate Loans
shall be 3.000%; and (ii) the Letter of Credit Fee
shall be 3.750%.
2. deleting the definition of "Borrowing Base" in
its entirety and substituting therefor the following
definition:
"`Borrowing Base' means, as of the date of
determination thereof, the sum of (i) the book value of
Eligible Receivables multiplied by 85%, plus (ii)
$45,000,000";
3. deleting clause (iii) and the proviso
contained in the definition of "Change of Control" in
their entirety and substituting the following proviso
therefor:
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"(iii) the occurrence of a "Change of Control", as
defined or described in the Indenture referred to in
the definition of "Subordinated Debt", in the
Certificate of Designation with respect to the Series F
Convertible Preferred Stock referred to in the
definition of "Preferred Stock" or any certificate of
designation for any series of preferred stock of the
Borrower that the Series F Convertible Preferred Stock
is exchanged for pursuant to the terms of the
Subordinated Limited Waiver;
provided, however, that in calculating the percentage
of Voting Stock held by any "beneficial owner" under
clause (i) above (x) the Series F Convertible Preferred
Stock referred to in the definition of "Preferred
Stock", (y) any other series of preferred stock of the
Borrower that the Series F Convertible Preferred Stock
is exchanged for pursuant to the terms of the
Subordinated Limited Waiver and (z) the warrants
delivered from time to time by the Borrower to the
holders of the Subordinated Debt and the Series F
Convertible Preferred Stock in connection with the
Subordinated Limited Waiver, shall not be included in
such calculation until the conversion rights or
warrants are exercised or such preferred stock or
warrants are otherwise exchanged for Voting Stock
(whether through redemption or any other manner)."
4. (i) deleting the word "and" at the end of
clause (e) in the definition of `Eligible Receivables';
(ii) deleting the "." at the end of clause (f) of such
definition and substituting a ";" therefor; and (iii)
adding the following new clauses to such definition:
"(g) Accounts receivable with respect to which
the account debtor is the government of the
United States or any department, agency or
instrumentality thereof;
(h) Accounts receivable which are subject to
any Lien except for the Agent's Liens under the
Security Instruments;
(i) Accounts receivable with respect to which
the Agent, for the ratable benefit of the
Lenders, does not have a first priority
perfected Lien; and
(j) Accounts receivable that are subject to
terms or conditions that prohibit or restrict
assignment or collection rights."
5. deleting the definition of "Preferred
Stock" and substituting therefor the following
definition:
"`Preferred Stock' means, collectively, (a) the
Borrower'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; (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
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$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; and (c) any
series of preferred stock of the Borrower that the
Series F Convertible Preferred Stock is exchanged for
pursuant to the terms of the Subordinated Limited
Waiver."
6. deleting the definition of "Restricted
Payment" and substituting therefor the following
definition:
"`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, 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 (other than payments not
exceeding $300,000 paid during the first three Fiscal
Quarters of the Fiscal Year ending December 31, 1999
made in connection with the buy out by the Borrower of
certain stock options of Ron Wendlinger in the stock of
the Borrower; (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, except for (i) the sale
of the capital stock of WGEL to THL in connection with
the THL Stock Purchase; (ii) the issuance of capital
stock of TPL to THL in connection with the THL/TPL
Stock Exchange; and (iii) the sale of the capital stock
of WGEL by THL to TPL in connection with the THL/TPL
Stock Exchange; and (e) any payment or prepayment of
principal of, premium, if any, or interest on, or
redemption, purchase, retirement, defeasance (including
in-substance or legal defeasance), sinking fund or
similar payment with respect to, any Subordinated
Debt."
7. deleting the definition of "Stated Termination
Date" and substituting therefor the following
definition:
"`Stated Termination Date' means August 24, 2001."
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(b) Amendment to Section 2.1: Revolving Loans
Section 2.1 of the Credit Agreement is hereby amended by
deleting the phrase "Stated Termination Date" contained in clause
(c)(iv) of such Section and substituting therefor "Maturity
Date".
(c) Amendments to Section 2.2: Payment of Interest
Section 2.2 of the Credit Agreement is hereby amended by
deleting clauses (a) and (b) of Section 2.2 in their entirety and
substituting therefor the following:
"(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 (if
any), as designated by the Authorized Representative
pursuant to Section 2.1 and subject to the last paragraph of
Section 2.8; provided, however, that upon the occurrence and
during the continuation of any Event of Default, the
outstanding principal amount of all Loans and, to the extent
permitted by applicable law, any interest payments thereon
not paid when due and any fees and other amounts then due
and payable hereunder, shall thereafter bear interest
payable upon demand at the Default Rate (or, in the case of
any such fees and other amounts, at a rate equal to the
Default Rate for Base Rate Loans).
(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) monthly in arrears on the last Business
Day of each month for each Base Rate Loan, (ii) on the last
day of the applicable Interest Period for each Eurodollar
Rate Loan (if any) and, if such Interest Period extends for
more than one month, on each monthly interval after the
first day of such Interest Period, and (iii) upon the
payment of any principal amount of any Loan, including,
without limitation, upon payment in full of the principal
amount of such Loan and termination of this Agreement."
(d) Amendments to Section 2.3: Payment of Principal
Section 2.3 of the Credit Agreement is hereby amended
by deleting it in its entirety and substituting the
following therefor:
"(i) Mandatory Payments. Notwithstanding anything
herein to the contrary, the Loans shall be prepaid or
repaid (as the case may be) in the amounts and under
the circumstances set forth below:
(a) Prepayments From Net Proceeds. No later
than the first Business Day following the date of
receipt by any Credit Party or any other Subsidiary of
the Borrower (or the receipt by the Agent, in the case
of insurance proceeds) of any Net Proceeds, the
Borrower shall prepay the Loans in an aggregate amount
equal to such Net Proceeds.
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(b) Prepayments from Excess Amounts in
Accounts. In the event and to the extent the Average
Balance exceeds the Maximum Allowable Amount in any
Half Month Period, the Borrower shall promptly (and in
any event within one Business Day of the end of such
Half Month Period) prepay the Loans in an aggregate
amount equal to such excess amount.
(c) Prepayments as a Result of Borrowing
Base. In the event and to the extent the aggregate
principal amount of the Outstandings shall exceed the
Borrowing Base, the Borrower shall promptly (and in any
event within one Business Day) prepay the Loans in an
aggregate principal amount equal to such excess amount;
provided that so long as no Event of Default shall have
occurred and is continuing the prepayment shall be
limited such that after giving effect to any such
prepayment the aggregate balance in the Accounts shall
not be less than the Maximum Allowable Amount.
(d) Repayment on Maturity Date. The entire
outstanding principal amount of the Loans, together
with all accrued and unpaid interest thereon and any
and all other Obligations shall be due and payable on
the Maturity Date or at such earlier time as
specifically provided herein.
(ii) Calculations of Net Proceeds; Additional
Prepayments Based on Subsequent Calculations.
Concurrently with any prepayment of the Loans pursuant
to Section 2.3(i)(a)-(c), the Borrower shall deliver to
the Agent a certificate duly executed by its chief
financial officer demonstrating the calculation of the
applicable Net Proceeds that gave rise to such
prepayment. In the event that the Borrower shall
subsequently determine that the actual Net Proceeds was
greater than the amount set forth in such chief
financial officer's certificate, the Borrower shall
promptly make an additional prepayment of the Loans in
an amount equal to the amount of such excess, and the
Borrower shall concurrently therewith deliver to the
Agent a certificate of its chief financial officer
demonstrating the derivation of the additional Net
Proceeds resulting in such excess.
(iii) Voluntary Payments. 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 (if any) 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 voluntary prepayments of Loans made by the
Borrower shall be in the amount of (i) $1,500,000 with
respect to Eurodollar Rate Loans (if any) 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 (if any) and $100,000
with respect to Base Rate Loans.
(iv) Letters of Credit. On or before the Maturity
Date, the Borrower shall permanently cancel, fully cash
collateralize or otherwise support in a manner
satisfactory to the Lenders all issued and outstanding
Letters of Credit."
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(e) Amendment to Section 2.4: Manner of Payment
Section 2.6 of the Credit Agreement is hereby amended by
deleting the term "Revolving Credit Termination Date" contained
in clause (c) of such Section and substituting therefor the term
"Maturity Date".
(f) Amendment to Section 2.6: Pro Rata Payments
Section 2.6 of the Credit Agreement is hereby amended by
deleting the words "Except as otherwise provided herein,"
immediately preceding clause (a) thereof.
(g) Amendment to Section 2.8: Conversions and Election of
Subsequent Interest Periods
Section 2.8 of the Credit Agreement is hereby amended by
adding the following sentence to the end of the last paragraph
thereof:
"Notwithstanding anything herein to the contrary, each
Loan outstanding on the Seventh Amendment Effective Date or
at any time thereafter shall be maintained as a Base Rate
Loan and the Borrower shall not be permitted to convert any
such Loans to Eurodollar Rate Loans until the repayment in
full in cash of all Obligations."
(h) Amendment to Section 3.1: Letters of Credit
Section 3.1 of the Credit Agreement is hereby amended by
deleting the last sentence of such Section and substituting
therefor the following:
"Except as otherwise provided in Section 5(c) of the
Seventh Amendment, no Letter of Credit shall have an expiry
date 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 April 18, 2002."
(i) Amendment to Section 3.2: Reimbursement of Letters of Credit
Clause (iii) of Section 3.2(i) of the Credit Agreement is
hereby amended by deleting the parenthetical "(other than the
defense of payment in accordance with the terms of this
Agreement)".
(j) Amendment to Section 3.3: Letter of Credit Facility Fees
Section 3.3 of the Credit Agreement is hereby amended by
deleting the second sentence thereof and substituting the
following therefor:
"Such fees shall be due and payable with respect to each
Letter of Credit in arrears on the last Business Day of each
month."
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(k) Amendment to Article 8: Affirmative Covenants
Article 8 of the Credit Agreement is hereby amended by
deleting the term "Revolving Credit Termination Date" set forth
in the introduction to such Article and substituting therefor the
following:
"payment in full in cash of all Obligations and the
permanent termination or cancellation of, full cash
collateralization of or the delivery of other credit support
acceptable to the Agent, Issuing Bank and the Required Lenders in
their sole and absolute discretion for all Letters of Credit."
(l) Amendment to Section 8.1: Financial Reports, Etc.
Section 8.1 of the Credit Agreement is hereby amended by
deleting Section 8.1(h) in its entirety and substituting therefor
the following:
"(h) as soon as practicable and in any event by the
last Business Day of any week, deliver to the Agent and each
Lender a Borrowing Base Certificate prepared as of the last
day of the preceding week in the form of Exhibit R hereto
and certified to be true, correct and complete by an
Authorized Representative."
(m) Amendment to Section 8.7: Right of Inspection
Section 8.7 of the Credit Agreement is hereby amended by
adding the following to the end of such section:
"The Borrower shall, and shall cause its Subsidiaries
to, cooperate with and give full and complete access and
make available to the Agent and its representatives retained
from time to time by the Agent for the benefit of the
Lenders (including, without limitation, FTI/Policano &
Manzo), on a daily basis, the books and records of the
Borrower and its Subsidiaries and other information relating
to the business or financial affairs of the Borrower and its
Subsidiaries (including, without limitation, agreements and
documents pertaining to any receivables or payables), and
the operating management of the Borrower and its
Subsidiaries shall meet, upon request, with the Agent and
the representatives of the Agent to discuss, among other
things, the financial and operating performance and business
plans of the Borrower and its Subsidiaries. The Borrower
shall, and shall cause its Subsidiaries to, give full and
complete access to such other information as the Agent or
its representatives may reasonably request from time to
time, and shall cooperate and consult with, and provide to
the Agent and such representatives all such information.
Without limiting the generality of the foregoing, the
Borrower shall, and shall cause its Subsidiaries to, permit
the Agent and any of its auditors, examiners, consultants or
other representatives from time to time, in the sole
discretion of the Agent or as the Agent may be requested by
the Required Lenders (which, in any event, may be at least
once every 60 days or less), to conduct Collateral audits
and reviews, including, without limitation, verification,
inspection and examination of the Collateral, accounts
payable, controls and systems of the Borrower and its
Subsidiaries, at the sole cost and expense of the Borrower
and which costs and expenses shall be
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deemed "Obligations"
hereunder and shall be reimbursable on demand (provided that
after the Seventh Amendment Effective Date any such audit
and review will not be conducted any earlier than October
31, 2001 unless an Event of Default shall have occurred
prior thereto)."
(n) Amendments to Article 9: Negative Covenants
(a) Article 9 of the Credit Agreement is hereby amended by
deleting the term "Revolving Credit Termination Date" set forth
in the introduction to such Article and substituting therefor the
following:
"payment in full in cash of all Obligations and the
permanent termination or cancellation of, full cash
collateralization of or the delivery of other credit support
acceptable to the Agent, Issuing Bank and the Required
Lenders in their sole and absolute discretion for all
Letters of Credit."
(b) Section 9 of the Credit Agreement is hereby further amended
by adding the following new Section at the end thereof:
"9.18. Cash Usage On and after the Seventh
Amendment Effective Date:
(a) all cash expenditures shall be made in
accordance with and for the purposes set forth in
the Budget; provided, that nothing in the Budget
shall be deemed to limit or otherwise modify the
Credit Parties' obligation to repay when payable
any and all Obligations under the Loan Documents;
(b) the Borrower shall not, and shall not
permit its Subsidiaries to make aggregate cash
expenditures in any four-week period if such cash
expenditures would cause cash usage by the
Borrower and its Subsidiaries for each of the
"Internal Weekly Payroll", "Weekly Accounts
Payable" and "Earnouts" line items set forth in
the Budget to exceed by more than 15% the amount
set forth in the Budget for each such line item
during such four-week period;
(c) (i) in any week the aggregate amount of
cash expenditures for "Payroll-Temps" (as such
term is used in the Budget) shall be at least 85%
of the amount set forth in the Budget for Payroll-
Temps for such week and (ii) the compensation paid
to temporary personnel shall not be increased at
any time in any manner solely or primarily to meet
the requirements set forth in the foregoing clause
(i); and
(d) the actual cash receipts for the thirteen
(13) week Budget period shall be 85% of the amount
set forth in the "Total Cash Receipts" line item
set forth in the Budget;
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(o) Amendments to Section 9.8: Restricted Payments
Section 9.8 of the Credit Agreement is hereby amended by
deleting such Section in its entirety and substituting the
following therefor:
"Notwithstanding anything herein to the contrary, make
any Restricted Payment or apply or set apart any of their
assets therefor or agree to do any of the foregoing until
the Maturity Date or with respect to any Restricted Payment
other than as described in clause (e) of the definition
thereof, if an Event of Default or Default has occurred and
is continuing; provided, that the Borrower shall not make
any Restricted Payment at any time that is in violation of
the subordination terms of the Subordinated Debt Documents."
(p) Amendment to Section 10.1: Events of Default
(i) Section 10.1 of the Credit Agreement is hereby
amended by deleting Sections 10.1(l) and 10.1(m) in their
entirety and substituting therefor the following:
"(l) if there shall occur and be continuing an
Event of Default as defined in any of the other Loan
Documents (including, without limitation, the Seventh
Amendment); 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",
a Series F Stock Event of Default as defined in the
Certificate of Designation for the Series F Preferred
Stock referred to in subpart (b) of the definition of
"Preferred Stock" or a default under any certificate of
designation for any series of preferred stock of the
Borrower that the Series F Convertible Preferred Stock
is exchanged for pursuant to the terms of the
Subordinated Limited Waiver;"
(q) Substitution of Exhibit H: Compliance Certificate
Exhibit H to the Credit Agreement is hereby amended by
deleting said Exhibit H in its entirety and substituting in place
thereof a new Exhibit H in the form of Exhibit A-1 to this
Amendment.
(r) Substitution of Exhibit R: Borrowing Base Certificate
Exhibit R to the Credit Agreement is hereby amended by
deleting said Exhibit R in its entirety and substituting in place
thereof a new Exhibit R in the form of Exhibit A-2 to this
Amendment.
Section 3. CONDITIONS TO EFFECTIVENESS
The effectiveness of this Amendment is subject to the
satisfaction of all of the following conditions precedent (the
date of such satisfaction being the "Seventh Amendment Effective
Date"):
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(a) On or before the date hereof, the Credit Parties shall
deliver to the Agent the following, each, unless otherwise noted,
dated the date hereof:
(i) A certificate of each Credit Party, executed on behalf of
such Credit Party by its secretary or any assistant secretary (or
equivalent), certifying as to (A) the absence of any amendments
or other modifications to the Organizational Documents and
Operating Documents of such Credit Party since the Closing Date,
(B) the Organizational Documents and Operating Documents of such
Credit Party being in full force and effect as of the date
hereof, (C) the due organization and good standing and valid
existence of such Credit Party as an entity organized under the
laws of the jurisdiction of its organization, and the absence of
any proceeding for the dissolution or liquidation of such Credit
Party, (D) the truth of the representations and warranties
contained in this Amendment as though made on and as of the date
hereof and (E) after giving effect to this Amendment, the absence
of any event occurring and continuing that constitutes a Default
or an Event of Default (other than the Designated Defaults);
(ii) A certificate of each Credit Party, executed on its behalf
by its secretary or an assistant secretary (or equivalent),
certifying the names and true signatures of the officers of such
Credit Party authorized to sign this Amendment and any other
documents, agreements, instruments or certificates to be
delivered in connection therewith;
(iii) Copies of the resolutions of the board of directors or
other appropriate governing body (or of the appropriate committee
thereof) of each Credit Party approving and authorizing the
execution, delivery and performance of this Amendment and any
other documents, agreements, instruments or certificates to be
delivered in connection therewith, certified as of the date
hereof by the secretary or an assistant secretary (or equivalent)
of such Credit Party as being in full force and effect without
modification or amendment;
(iv) Copies of this Amendment and each other document, agreement,
instrument and certificate to be delivered in connection
herewith, including, without limitation, Uniform Commercial Code
financing statements for filing in all jurisdictions as may be
necessary or, in the opinion of the Agent, desirable to perfect
or continue the perfection of the security interests granted
under the Security Instruments, in each case duly executed by
each Credit Party thereto and with respect to this Amendment, by
each of the Lenders and the Agent; and
(v) Allonges executed by the Borrower for each Note
substantially in the form of Exhibit C annexed hereto, with such
modifications as may be approved by Agent.
(b) On or before the date hereof, the Agent shall have received,
in form and substance satisfactory to it, a cash budget
substantially in the form of Exhibit B annexed hereto (as
amended, supplemented or otherwise modified from time to time
with the prior written consent of the Required Lenders, the
"Budget"), together with a duly executed
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certificate of the chief
financial officer of the Borrower, certifying to the Agent that
the Budget was prepared based upon good faith estimates and
assumptions that are reasonable as of the date hereof and that
such chief financial officer is not aware of any information
contained in the Budget which is false or misleading or of any
omission of information which causes the Budget to be false or
misleading.
(c) The Agent shall have received, in each case in form and
substance satisfactory to it and the Lenders an agreement duly
executed by the holders of the Subordinated Debt, the trustee for
the holders of the Subordinated Debt, and the Series F
Convertible Preferred Stock (the "Subordinated Limited Waiver"),
which agreement shall include: (i) a waiver of all "Defaults" or
"Events of Default" under, and as such terms are defined in, the
Indenture dated as of March 19, 1998 between State Street Bank
and Trust Company, as Trustee, and the Borrower (as amended to
the date hereof, the "Indenture"); (ii) an agreement by the
holders of the Subordinated Debt that until the Maturity Date
neither the Borrower nor any other Person shall be required to
pay in cash any amounts with respect to any principal, interest,
fees or other amounts payable under the Indenture; (iii) a
reaffirmation by the Borrower and the holders of the Subordinated
Debt of all of the terms of the Indenture, including, without
limitation, Sections 10.03 and 10.08, the Lenders' rights under
Section 10.02(a) of the Indenture to block any payments of any
kind or character with respect to any principal, interest, fee or
other amounts payable with respect to the Subordinated Debt which
may be exercised at any time or from time to time hereafter upon
the Borrower's default in payment, whether at maturity, upon any
redemption, by declaration or otherwise, of any principal of the
Loans, interest thereon, fees or other Obligations payable under
the Loan Documents and the Lenders' other rights, remedies and
privileges under Section 10 of the Indenture, notwithstanding any
action heretofore taken by the Lenders (including, without
limitation, the issuance of a blockage notice under the terms of
the Indenture) or any amendments or other modifications to the
Indenture heretofore or hereafter made, and all agreements,
instruments, certificates, opinions and other documents delivered
in connection with any of the foregoing; (iv) a waiver of all
"Series F Stock Events of Default" under, and as such term is
defined in, the Certificate of Designation setting forth the
terms of the Series F Convertible Preferred Stock; and (v) an
agreement by the holders of the Series F Convertible Preferred
Stock that until the Maturity Date neither the Borrower nor any
other Person shall be required to pay in cash any amounts with
respect to the Series F Convertible Preferred Stock, and all
agreements, instruments, certificates, opinions and other
documents delivered in connection with any of the foregoing.
(d) On or before the date hereof, the Agent shall have received,
for the ratable benefit of the Lenders, by wire transfer in
immediately available funds, a portion of the waiver and
amendment fee in the aggregate amount of $368,750.
(e) On or before the date hereof, the Agent and the Lenders
shall have received, by wire transfer in immediately available
funds, reimbursement of all of their costs, fees and expenses
(including, without limitation, the attorneys' fees of O'Melveny
& Myers LLP and the fees of FTI/Policano & Manzo).
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(f) On the date hereof, the Agent and the Lenders shall have
received reliance letters addressed to the Agent, and each of the
Lenders dated the Seventh Amendment Effective Date with respect
to all legal opinions delivered in connection with the
Subordinated Limited Waiver, which shall include opinions with
respect to the due organization of the Borrower, the due
authorization, execution and delivery by each Credit Party of
this Amendment, the enforceability of the Credit Agreement as
amended by this Amendment and as to such other matters as Agent
acting on behalf of the Lenders may reasonably request and which
legal opinions and reliance letters shall be in form and
substance reasonably satisfactory to the Agent.
Section 4. CREDIT PARTIES' REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this
Amendment, each Credit Party represents and warrants to the
Lenders that the following statements are true, correct and
complete:
(a) Power and Authority. Each Credit Party has all requisite
power and authority to enter into this Amendment and to carry out
the transactions contemplated by this Amendment.
(b) Authorization of Amendment. The execution and delivery of
this Amendment and the performance of the Credit Parties
hereunder has been duly authorized by all necessary action on the
part of each Credit Party.
(c) No Conflict. The execution and delivery of this Amendment
by each Credit Party and the performance by such Credit Party of
this Amendment and the consummation of the transactions
contemplated hereby do not and will not (i) violate any provision
of any law or any governmental rule or regulation applicable to
the Credit Parties or any of their respective Subsidiaries, the
Operating Documents and Organizational Documents of the Credit
Parties or any of their respective Subsidiaries or any order,
judgment or decree of any court or other agency of government
binding on any of the Credit Parties or any of their respective
Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default
under any material contract, indenture, agreement or other
instrument or document to which any Credit Party or any of its
Subsidiaries is a party or by which the properties or assets of
such Credit Party or its Subsidiaries are bound, (iii) result in
or require the creation or imposition of any Lien upon any of the
properties or assets of any Credit Party or any of its
Subsidiaries (other than Liens created under any of the Loan
Documents in favor of the Agent on behalf of the Lenders), or
(iv) require any approval of stockholders or any approval or
consent of any Person under any contract of any Credit Party or
any of its Subsidiaries.
(d) Governmental Consents. The execution and delivery of this
Amendment by each Credit Party and the performance by such Credit
Party of this Amendment does not and will not require any
registration with, consent or approval of, or notice to, or other
action to, with or by, any federal, state or other governmental
authority or regulatory body.
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(e) Binding Obligation. This Amendment is the legally valid and
binding obligation of each Credit Party enforceable against each
such Credit Party in accordance with its terms, subject to the
effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors generally and
general principles of equity.
(f) Incorporation of Representations and Warranties. The
representations and warranties contained in the Loan Documents
(including, without limitation, the schedules to the Security
Instruments and the other Loan Documents) are and will be true,
correct and complete in all material respects on and as of the
date hereof to the same extent as though made on and as of such
date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of
such earlier date.
(g) Absence of Default. After giving effect to this Amendment,
no Default or Event of Default exists.
(h) Accuracy of Recitals. The Recitals to this Amendment are
true and correct in all respects on and as of the date hereof,
and are incorporated hereby as if fully set forth herein.
(i) Deposit Accounts. Schedule 1 annexed hereto sets forth a
true, accurate and complete list of each Deposit Account or
securities account maintained by each Credit Party and its
Subsidiaries or in which such Credit Party and its Subsidiaries
has an interest (such accounts being the "Accounts"), together
with the account number, name and address of each depository
institution and contact person thereat and balance maintained or
otherwise credited to each such Account as of the date hereof.
In addition, Schedule 1 summarizes the cash management
arrangements to fund operating needs of the Credit Parties as in
existence as of the date hereof. For purposes hereof, "Deposit
Accounts" means any demand, time, savings, passbook or like
account with a bank, saving and loan association, credit union or
like organization, and the balance maintained in each such
account as of the date hereof and the name of each such
depository institution.
(j) Remaining Earnout Payments. The aggregate amount of the
earnout payments required to be made by the Borrower under that
certain Stock Purchase Agreement dated as of July 31, 1998 (the
"Carlyle Stock Purchase Agreement"), by and among the Borrower,
Mitchell D. Berman, Max DeZara, Ward P. Feste, Larry S. Loubet
Trust, Jon Schultz and Larry S. Loubet, prior to giving effect to
the Earnout Restructuring Agreement (as defined below) is
$2,400,000.
(k) Receipt of Amendments to Indenture and Preferred Stock.
Agent and each Lender has received executed copies of the
Subordinated Limited Waiver and all certificates, instruments,
opinions and other documents delivered by or to any Credit Party
in connection therewith and such agreements and all such
certificates, instruments, opinions and other documents have not
been amended or otherwise modified without the consent of
Required Lenders.
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(l) Capitalization. The authorized capital stock of the
Borrower consists of 20,000,000 shares of common stock, $0.0001
par value per share (the "Common Stock"), and 5,000,000 shares of
preferred stock, $0.0001 par value per share, of which 1,000
shares have been designated as Series F Convertible Preferred
Stock, $0.0001 par value per share (the "Preferred Stock"). The
outstanding capital stock of the Borrower consists solely of
10,914,627 shares of Common Stock and 1,000 shares of Preferred
Stock. Except for the Preferred Stock, options to purchase
1,892,731 shares of Common Stock issuable under the Company's
employee stock option plan and the warrants delivered from time
to time by the Borrower to the holders of the Subordinated Debt
and the Series F Convertible Preferred Stock in connection with
the limited waiver and amendment executed and delivered by such
holders and the Borrower on the Seventh Amendment Effective Date,
there are no options, warrants, phantom stock, stock appreciation
rights or other securities that are convertible into capital
stock of the Company. As of the date hereof, the book value per
share of the Common Stock is $3.04 per share.
Section 5. ACKNOWLEDGMENT AND CONSENT
(A) The Security Instruments and the Guaranties to which the
Borrower and the other Credit Parties are party are herein
referred to collectively as the "Credit Support Documents". Each
Credit Party hereby acknowledges that it has reviewed the terms
and provisions of the Loan Documents and this Amendment. Each
such Credit Party hereby confirms that each Credit Support
Document to which it is a party or otherwise bound and all
Collateral encumbered thereby will continue to guaranty or
secure, as the case may be, to the fullest extent possible the
payment and performance of all "Guarantors' Obligations" and
"Secured Obligations" and "Obligations" as the case may be (in
each case as such terms are defined in the applicable Credit
Support Document), including without limitation the payment and
performance of all such "Guarantors' Obligations" or "Secured
Obligations" or "Obligations", as the case may be, whether now or
hereafter existing under or in respect of the Loan Documents.
Each such Credit Party acknowledges and agrees that each of the
Credit Support Documents to which it is a party or otherwise
bound shall continue in full force and effect and that all of its
obligations thereunder shall be valid and enforceable and shall
not be impaired or limited by the execution or effectiveness of
this Amendment or the performance hereof.
(b) The Credit Parties hereby acknowledge and reaffirm that, as
of the date hereof and after giving effect to this Amendment and
the transactions contemplated hereby (including, without
limitation, the repayment of the Loans pursuant to Section 3(d)
hereof), the aggregate principal amount of the Obligations owed
to the Lenders is $72,000,000, plus accrued and accruing
interest, fees, costs and expenses due under the Loan Documents,
and the Letter of Credit Outstandings is $1,750,000. The Credit
Parties acknowledge and reaffirm that all Obligations under the
Loan Documents (including, without limitation, all Revolving
Credit Outstandings and all Reimbursement Obligations now or
hereafter existing and all other obligations of every nature of
each Credit Party from time to time owed to the Agent, the
Lenders or any of them under the Loan Documents, whether for
principal, interest, reimbursement of amounts drawn under Letters
of Credit, fees, expenses, indemnification or otherwise) are
payable by the
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Borrower in accordance with the Credit Agreement
and the other Loan Documents and are jointly and severally
payable by the Guarantors in accordance with the Guaranties and
the other Loan Documents, and each Credit Party unconditionally
and irrevocably waives any claim or defense in respect of the
Obligations, including, without limitation, any claim or defense
based on any right of setoff or counterclaim and hereby ratifies
and affirms each and every waiver of claims and defenses granted
under the Loan Documents from time to time.
(c) Notwithstanding anything in the Credit Agreement to the
contrary, the Credit Parties hereby acknowledge that on the
Seventh Amendment Effective Date the Revolving Credit Commitment
shall be terminated, the Lenders shall have no commitment to make
any Advances under the Credit Agreement, the Issuing Bank shall
have no obligation to issue any additional Letters of Credit
(including any amendment or renewal of any Letter of Credit that
has been issued on or prior to the Seventh Amendment Effective
Date) and that any and all amounts from time to time hereafter
repaid pursuant to the terms of the Credit Agreement may not be
reborrowed; provided, however, that notwithstanding the
foregoing, (i) each Lender shall continue to be required to
acquire and fund a Participation in the liability of the Issuing
Bank in respect of each Letter of Credit in accordance with
Section 3.2 of the Credit Agreement and (ii) the Borrower shall
continue to be required to pay all Letter of Credit fees set
forth in Section 3.3 of the Credit Agreement. Notwithstanding
the foregoing and anything in the Credit Agreement to the
contrary and without in any way limiting the Borrower's
obligation to fully cash collateralize, replace or otherwise
return cancelled and undrawn all Letters of Credit on the
Maturity Date, the expiry date of each Letter of Credit issued
and outstanding as of the Seventh Amendment Effective Date may be
extended or permitted to be extended by the Issuing Bank (as
directed by all Lenders) for a period not to exceed one year from
the date of expiry thereof if the failure to so extend could give
rise to a right of the beneficiary of such Letter of Credit to
make a drawing thereunder solely as a result of or in
anticipation of such expiration.
(d) Each Credit Party hereby reaffirms and acknowledges (i) that
pursuant to the Security Instruments, the Agent (for the benefit
of the Lenders) has an enforceable, valid and perfected first
priority Lien on and security interest in the Collateral, subject
only to valid, enforceable and duly perfected Liens permitted
under Section 9.3(b)-(h) of the Credit Agreement and (ii) the
continuing validity and effectiveness of the Agent's and the
Lenders' rights under the Loan Documents and applicable law,
including, without limitation, the right of the Agent to recover
any and all amounts owed to the Lenders, free of set-off or
counterclaim, by foreclosure on or redemption or other
disposition of the Collateral. Without limiting the generality
of the foregoing, the Credit Parties represent, warrant and
covenant that (i) all cash deposited in or otherwise credited to
the Accounts as of the date hereof and at all times hereafter are
and will be cash proceeds (as such term is defined in the Uniform
Commercial Code) resulting from the sale, lease, license,
collection, exchange or other disposition or distribution of the
Collateral and that the Agent (for the ratable benefit of the
Lenders) has an enforceable, valid and perfected first priority
Lien on and security interest in all such cash proceeds and (ii)
the cash proceeds referred to in the preceding clause (i) that
are from time to time deposited in or otherwise maintained in the
Accounts are not and shall not be commingled with any other
money,
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checks or other funds that are not proceeds of Collateral
or otherwise subject to the Agent's first priority Liens.
(e) Each Credit Party hereby ratifies and confirms that the
terms, provisions and conditions of the Credit Agreement and the
other Loan Documents (as amended hereby) remain in full force and
effect and the Credit Agreement and each other Loan Document is
enforceable in accordance with its terms.
(f) Each Guarantor acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this
Amendment, such Guarantor is not required by the terms of the
Credit Agreement or any other Loan Document to consent to the
terms of this Amendment and (ii) nothing in the Credit Agreement,
this Amendment or any other Loan Document shall be deemed to
require the consent of such Guarantor to any future amendments to
or modifications of or standstill agreements with respect to the
Credit Agreement.
Section 6. COVENANTS
In order to induce the Lenders to enter into this
Amendment, each Credit Party hereby covenants and agrees as
follows (TIME BEING OF THE ESSENCE):
(a) Without limiting the generality of Section 5(e) above, the
Credit Parties ratify and affirm their obligations in respect of
expense and indemnity payments under Section 12.5 and Section
12.9 of the Credit Agreement and confirm that any and all costs
and expenses of the Agent and each Lender (including, without
limitation, reasonable attorneys fees and expenses of O'Melveny &
Myers LLP and the fees and expenses of FTI/Policano & Manzo)
heretofore or hereafter incurred shall be deemed "Obligations"
under the Credit Agreement and shall be payable on demand by the
Credit Parties pursuant to Section 12.5(b) of the Credit
Agreement.
(b) In addition to the financial reporting requirements
contained in Section 8.1 of the Credit Agreement, the Credit
Parties shall provide the Agent and the Lenders
(i) as soon as available, and in any event not later than the
fifth Business Day of each week after the date hereof, such
financial information and projections and reports described on
Part I of Exhibit D annexed hereto, prepared in a manner and in a
form satisfactory to Agent, together with such other information
as may be reasonably requested from time to time by the Agent or
the Required Lenders (it being understood and agreed that the
delivery of any or all of such financial information and
projections shall not be deemed to be an amendment or other
modification of the Budget);
(ii) as soon as available, and in any event not later than the
fifth Business Day after the end of each month after the date
hereof, the financial reports described on Part II of Exhibit D
annexed hereto, prepared in a manner and in a form satisfactory
to Agent together with such other information as may be
reasonably requested from time to time by the Agent or the
Required Lenders (it being understood and agreed that the
delivery of any or all of such financial
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information and
projections shall not be deemed to be an amendment or other
modification of the Budget); and
(iii) as soon as practical and in any event within 30 days
after the end of each month in any Fiscal Quarter (i)
consolidated and consolidating balance sheets of the Borrower and
its Subsidiaries as at the end of such month, and the related
consolidated and consolidating statements of income and
stockholders' equity and related consolidated statement of cash
flows for such month in each case setting forth in comparative
form consolidated figures from the consolidated statements of
income and stockholders' equity for the corresponding month 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 month and the results
of their operations and the changes in their financial position
for such month, 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) of the Credit Agreement.
(c) Notwithstanding anything in the Credit Agreement or the
other Loan Documents to the contrary, the Credit Parties shall
not open or close any Account or open any other Deposit Account
or securities account other than as described on Schedule 1
annexed hereto, without the consent of Required Lenders.
(d) The Borrower has advised the Lenders and the Agent that it
desires to engage C.E. Unterberg, Towbin to assist in the
refinancing (through the issuance of high yield debt, bank
financing or otherwise) and simultaneous repayment in cash, in
full of the Obligations owed to the Lenders under the Loan
Documents (the "Refinancing") and/or the sale (directly or
indirectly, whether through a sale of assets, stock, mergers or
otherwise) of certain of the Borrower's or its Subsidiaries'
assets in one or more transactions (all such transactions,
collectively, the "Asset Sales") so as to generate sufficient
proceeds to repay in cash, in full the Obligations to the Lenders
under the Loan Documents.
In order to consummate the Refinancing and/or the Asset
Sales, the Borrower shall:
(i) as soon as practicable and in any event not later than
September 4, 2001, engage C.E. Unterberg, Towbin or such other
investment bank chosen by the Borrower and satisfactory to the
Required Lenders and the Agent (the "Investment Bank"), pursuant
in each case to terms and conditions satisfactory to the Required
Lenders and the Agent;
(ii) as soon as practicable and in any event not later than
October 1, 2001, cause the Investment Bank to identify
prospective buyers or investors or other financiers, in each case
who are not Affiliates of the Borrower, and distribute by such
date information memorandums regarding the proposed Asset Sales
and
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Refinancing (a copy of all such information memorandums to be
delivered by the Borrower to the Agent within one Business Day of
execution thereof);
(iii) use its best efforts to enter into bona fide
commercially reasonable letter(s) of intent (or similar
agreement(s)) by December 3, 2001, in form and substance
satisfactory to the Required Lenders, to consummate the Asset
Sales and/or Refinancing, in each case with parties who are not
Affiliates of the Borrower and in an amount sufficient to repay
in cash all Obligations under the Loan Documents (a copy of such
letter(s) of intent or similar agreement(s) to be delivered by
the Borrower to the Agent within one Business Day of execution
thereof);
(iv) use its best efforts to enter into a binding definitive
commercially reasonable agreement(s), in form and substance
satisfactory to the Required Lenders by February 4, 2002, to
consummate the Asset Sales and/or Refinancing, in each case with
parties who are not Affiliates of the Borrower and in an amount
sufficient to repay in cash all Obligations under the Loan
Documents.
The Borrower further covenants that it will provide to all
Lenders, promptly upon receipt, copies of all written
proposals and summaries of all oral proposals from time to
time received in connection with the Asset Sales and/or
Refinancing and that the Agent and the Lenders shall have
access to the personnel of the Investment Bank working for
or on behalf of the Borrower to discuss, among other things,
the status of the Asset Sales and/or Refinancing.
(e) Without limiting the generality of Section 4.7 of the Credit
Agreement, each Credit Party agrees that it shall, upon the
request of the Agent, immediately (and in no event later than
three Business Days after such request) execute and deliver all
further instruments and documents, and take all further action,
that may be necessary or desirable in the discretion of the
Agent, in order to perfect and protect any security interest
granted or purported to be granted by the Security Instruments or
to enable the Agent to exercise and enforce its rights
thereunder.
(f) Unless the Required Lenders shall otherwise give prior
written consent, the Credit Parties shall not permit Consolidated
EBITDA for each three consecutive month period ending on each
date set forth below to be less than the amount set forth
opposite each such date:
Three Month Period Ending On: Consolidated EBITDA
Must Not Be Less Than:
August 31, 2001 $1,692,000
September 28, 2001 $ 993,000
October 30, 2001 $1,413,000
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November 31, 2001 $1,735,000
December 31, 2001 $1,996,000
January 31, 2002 $2,192,000
February 28, 2002 $2,587,000
March 31, 2002 $4,146,000
Solely for purposes of this Section 6(f), (i) each reference
to "any Four-Quarter Period" set forth in the definition of
"Consolidated EBITDA" in the Credit Agreement shall mean and
be a reference to "any three consecutive month period"
ending on the applicable date set forth in the chart above
and (ii) in calculating Consolidated EBITDA, the amount of
the fees paid by the Borrower in any three consecutive month
period to (x) the Lenders and Agent in connection with this
Amendment and any other amendment or waiver to the Credit
Agreement after the Seventh Amendment Effective Date and (y)
FTI/Policano & Manzo, C.E. Unterberg, Towbin, LeBoeuf, Lamb,
Greene & MacRae L.L.P, Swidler Berlin Shereff Friedman,
LLP, Weil, Gotshal & Manges LLP and O'Melveny & Myers LLP
and any other professionals hired by time to time by the
Borrower, any Lender or the Agent in connection with the
restructuring of the Borrower and its Subsidiaries, shall be
added back into the calculation of Consolidated Net Income
to the extent any such fees were originally deducted in the
determination of Consolidated Net Income.
(g) Unless the Required Lenders shall otherwise give prior
written consent, the Credit Parties shall not, and shall not
permit their Subsidiaries to, make or incur consolidated Capital
Expenditures during any three consecutive month period ending on
each date set forth below to be in excess of the amount set forth
opposite each such date:
Three Month Period Ending On: Maximum Consolidated
Capital Expenditures:
August 31, 2001 $470,000
September 28, 2001 $485,000
October 30, 2001 $520,000
November 31, 2001 $520,000
December 31, 2001 $520,000
January 31, 2002 $530,000
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February 28, 2002 $540,000
March 31, 2002 $545,000
(h) As soon as possible and in any event at least 10 days prior
to the end of the last weekly period contained in the Budget
from time to time, the Borrower shall deliver to the Agent a
supplement to the Budget, which supplement shall be substantially
in the form of the Budget and otherwise in form and substance
satisfactory to the Agent and the Required Lenders, and the
Budget (as supplemented) shall be certified by the chief
financial officer of the Borrower as having been prepared based
upon good faith estimates and assumptions that are reasonable as
of the date of delivery of the supplement and that such chief
financial officer is not aware of any information contained in
the Budget (as supplemented) which is false or misleading or of
any omission of information which causes the Budget (as
supplemented) to be false or misleading.
(i) The Borrower shall deliver to the Agent on or before October
31, 2001 a fully executed agreement (the "Earnout Restructuring
Agreement") with respect to the Carlyle Stock Purchase Agreement
providing that (i) the aggregate amount of earnout payments
required to be made by the Borrower pursuant to the Carlyle Stock
Purchase Agreement is $2,400,000 and (ii) that such amount shall
be repaid commencing November 2001 with a payment of $250,000 and
in monthly payments thereafter not to exceed $50,000 per month,
which agreement shall be in form and substance satisfactory to
the Agent and the Required Lenders.
(j) If the Series F Preferred Stock of the Borrower is exchanged
for another series of preferred stock of the Borrower (the
"Replacement Preferred Stock") in accordance with the terms of
the Subordinated Limited Waiver, the Borrower shall on the date
of such exchange deliver to the Agent evidence reasonably
satisfactory in form and substance to the Agent that all shares
of the Series F Preferred Stock of the Borrower have been
exchanged for shares of the Replacement Preferred Stock and that
the Series F Preferred Stock of the Borrower has been cancelled.
(k) On or before April 18, 2002, the Borrower shall pay to the
Agent for the ratable benefit of the Lenders, by wire transfer in
immediately available funds, the remainder of the waiver and
amendment fee in the aggregate amount of $250,000; provided,
however, that such portion of the waiver and amendment fee shall
be deemed to have been fully earned as of the Seventh Amendment
Effective Date; provided, further, that such portion of the
waiver and amendment fee shall be waived if on or before April
18, 2002 the Obligations are repaid in full in cash and all
Letters of Credit are permanently terminated or cancelled or
fully cash collateralized or other credit support for the Letters
of Credit acceptable to the Agent, Issuing Bank and the Required
Lenders in their sole and absolute discretion is provided..
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Section 7. RELEASE
The Borrower and each other Credit Party, on behalf of
itself, and each of its Subsidiaries (collectively, the
"Releasors") hereby releases, remises, acquits and forever
discharges the Agent, each Lender and each Issuing Bank and each
of their respective employees, agents, representatives,
consultants, attorneys, fiduciaries, servants, officers,
directors, partners, predecessors, successors and assigns,
subsidiary corporations, parent corporations, related corporate
divisions, participants and assigns (all of the foregoing
hereinafter called the "Released Parties"), from any and all
actions and causes of action, judgments, executions, suits,
debts, claims, demands, liabilities, obligations, setoffs,
recoupments, counterclaims, defenses, damages and expenses of any
and every character, known or unknown, suspected or unsuspected,
direct and/or indirect, at law or in equity, of whatsoever kind
or nature, whether heretofore or hereafter arising, for or
because of any matter or things done, omitted or suffered to be
done by any of the Released Parties prior to and including the
date of execution hereof, and in any way directly or indirectly
arising out of or in any way connected to this Amendment, the
Credit Agreement, any of the other Loan Documents or the
administration or enforcement of any of such documents (all of
the foregoing hereinafter called the "Released Matters"). Each
Releasor acknowledges that the agreements in this Section 7 are
intended to be in full satisfaction of all or any alleged
injuries or damages suffered or incurred by such Releasor arising
in connection with the Released Matters and constitute a complete
waiver of any right of setoff or recoupment, counterclaim or
defense of any nature whatsoever which arose prior to the Seventh
Amendment Effective Date to payment or performance of the
Obligations. Each Releasor represents and warrants that it has
no knowledge of any claim by it against the Released Parties or
of any facts, or acts or omissions of the Released Parties which
on the date hereof would be the basis of a claim by the Releasors
against the Released Parties which is not released hereby. Each
Releasor represents and warrants that it has not purported to
transfer, assign, pledge or otherwise convey any of its right,
title or interest in any Released Matter to any other person or
entity and that the foregoing constitutes a full and complete
release of all Released Matters. Releasors have granted this
release freely, and voluntarily and without duress.
Section 8. AMENDMENT TO SUBORDINATION AGREEMENT
Agent, Required Lenders and each Credit Party hereby
acknowledge and agree that the each Subordination Agreement in
effect as of the date hereof is hereby amended by deleting the
definition of Standstill Period contained therein and
substituting therefor the following:
"Standstill Period" means the period of time from the
date hereof to and including the 91st day following the
Maturity Date."
Section 9. ACKNOWLEDGEMENT
The Lenders acknowledge that under Section 10.02(b) of the
Indenture the Lenders may not commence another "Blockage Period"
as a result of a "Senior Debt Other Default" (as such terms are
defined in Section 10.02(b) of the Indenture) within the 360
consecutive day period commencing on July 2, 2001; provided that
nothing herein or in any other agreement or document executed and
delivered by the Borrower from time to time shall affect the
Lenders' other rights, remedies and privileges under Section 10
of the Indenture, including, without
E-24
limitation, the Lenders'
rights under Section 10.02(a) of the Indenture which may be
exercised at any time or from time to time hereafter upon the
Borrower's default in payment, whether at maturity, upon any
redemption, by declaration or otherwise, of any principal of the
Loans, interest thereon, fees or other Obligations payable under
the Loan Documents.
Section 10. MISCELLANEOUS
(A) Effect on the Credit Agreement and the Other Loan Documents.
The Credit Agreement and the other Loan Documents shall remain in
full force and effect and are hereby ratified and confirmed.
Except as specifically set forth in Section 1(a), the execution,
delivery and performance of this Amendment shall not constitute a
waiver of any provision of, or operate as a waiver of any right,
power or remedy of the Agent or any Lender under, the Credit
Agreement or any of the other Loan Documents or a consent to any
action or transaction contemplated by any other agreement,
document or instrument executed by the Borrower in connection
herewith or from time to time hereafter that is prohibited by the
Credit Agreement. This Amendment shall be deemed to be a Loan
Document and if any Credit Party shall breach or otherwise be in
default of or in non-compliance with any covenant, agreement,
representation, warranty or other provision contained herein,
such breach, default or noncompliance shall be deemed an "Event
of Default" for purposes hereof and under the Credit Agreement.
(b) Severability. In case any provision in or obligation under
this Amendment shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the
remaining provisions or obligations, or of such provision or
obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
(c) Headings. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall
not constitute a part of this Amendment for any other purpose or
be given any substantive effect.
(d) Applicable Law. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
(e) Waiver of Jury Trial and Consequential and Special Damages.
(i) EACH OF THE PARTIES TO THIS AMENDMENT HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AMENDMENT OR ANY OF THE
OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AMENDMENT OR ANY OF THE OTHER LOAN
DOCUMENTS AND (ii) EACH OF THE CREDIT PARTIES WAIVES ANY CLAIM
AGAINST THE AGENTS OR THE LENDERS FOR CONSEQUENTIAL OR SPECIAL
DAMAGES RESPECTING THIS AMENDMENT
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OR ANY OF THE OTHER LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREUNDER OR
HEREUNDER. The scope of this waiver is intended to be all-
encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction,
including contract claims, tort claims, breach of duty claims and
all other common law and statutory claims. Each party hereto
acknowledges that this waiver is a material inducement to enter
into a business relationship, that each has already relied on
this waiver in entering into this Amendment, and that each will
continue to rely on this waiver in their related future dealings.
Each party hereto further warrants and represents that it has
reviewed this waiver with its legal counsel and that it knowingly
and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO
THIS SECTION 10(e)). In the event of litigation, this Amendment
may be filed as a written consent to a trial by the court.
(f) No Third Party Beneficiaries. No Person other than the
parties hereto and with respect to Section 7 hereof, the Released
Parties, shall be entitled to claim any right or benefit under
this Amendment, including, without limitation, the status of
third-party beneficiary of this Amendment and nothing in this
Amendment, express or implied, is intended to confer upon any
other Person any rights or remedies of any nature whatsoever
under or by reason of this Amendment.
(g) No Commitments for Additional Waivers; Legal Advice. Each
Credit Party acknowledges and affirms that, except as expressly
set forth in Section 1(a), the Agent and Lenders are not
committing or offering any waiver or any other accommodations of
any nature whatsoever and each Credit Party agrees to conduct its
affairs accordingly. Without limiting the generality of the
foregoing, the Credit Parties will not claim that any prior
action or course of conduct by the Agent or any Lender
constitutes an agreement or obligation to continue such action or
course of conduct in the future. Each Credit Party acknowledges
that the Agent and the Lenders have no commitment to grant any
other waiver or accommodation to any of the Credit Parties.
Each Credit Party represents to the Lenders that it has
entered into this Amendment freely and voluntarily, without
coercion, duress, distress or undue influence and that it has
received legal advice from counsel of its choice in
connection with the negotiation, drafting, meaning and legal
significance of this Amendment and that it is satisfied with
its legal counsel and the advice received from it. Should
any provision of this Amendment require judicial
interpretation, it is agreed that a court interpreting or
construing the same shall not apply a presumption that the
terms hereof or thereof shall be more strictly construed
against any party by reason of the rule of construction that
a document is to be construed more strictly against the party
who itself or through its agent prepared the same.
(h) Integration. This Amendment sets forth the entire
understanding and agreement of the parties hereto in relation to
the subject matter hereof and supersedes any prior negotiations
and agreements among the parties relative to such subject matter.
No
E-26
promise, condition, representation or warranty, express or
implied, not herein set forth shall bind any party hereto, and
not one of them has relied on any such promise, condition,
representation or warranty. Each of the parties hereto
acknowledges that, except as in this Amendment otherwise
expressly stated, no representations, warranties or commitments,
express or implied, have been made by any party to the other.
None of the terms or conditions of this Amendment may be changed,
modified, waived or canceled orally or otherwise, except as
provided in the Credit Agreement.
(i) Survival. Without limiting the generality of Section 12.4
of the Credit Agreement, all representations, warranties,
covenants, agreements, undertakings and waivers of the Credit
Parties contained herein shall survive and be applicable until
the payment in full in cash of all of the Obligations and all of
the issued and outstanding Letters of Credit shall have been
cancelled, fully cash collateralized or otherwise supported in a
manner satisfactory to the Lenders.
(j) Counterparts; Effectiveness; Facsimile Signature Pages.
This Amendment may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original,
but all such counterparts together shall constitute but one and
the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached
to the same document. Any executed signature page delivered by
any party hereto by facsimile shall constitute a valid and
binding original counterpart.
[Remainder of page intentionally left blank]
E-27
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed by their duly authorized officers, all as of
the day and year first above written.
HEADWAY CORPORATE RESOURCES, INC.
By: /s/ Barry S. Roseman
Title: President
WHITNEY PARTNERS, L.L.C.
HEADWAY CORPORATE STAFFING SERVICES, INC.
CERTIFIED TECHNICAL STAFFING, INC.
CORPORATE STAFF ADMINISTRATION, INC.
HEADWAY CORPORATE STAFFING SERVICES
OF NEW YORK, INC.
HEADWAY CORPORATE STAFFING SERVICES
OF NORTH CAROLINA, INC.
HEADWAY CORPORATE STAFFING SERVICES
OF CONNECTICUT, INC.
ASA PERSONNEL SERVICES, L.L.C.
HCSS WEST, INC.
HCSS HOLDINGS, INC.
HCSS EAST, INC.
CHENEY ASSOCIATES, L.L.C.
HEADWAY TECHNOLOGY RESOURCES
INTERNATIONAL, L.L.C.
HEADWAY CORPORATE STAFFING SERVICES
OF FLORIDA, L.L.C.
HEADWAY CORPORATE STAFFING SERVICES
OF NEW JERSEY, L.L.C.
CARLYLE GROUP, LTD.
HEADWAY TECHNOLOGY RESOURCES OF
TEXAS, L.L.C.
HEADWAY CORPORATE STAFFING SERVICES
OF CALIFORNIA ONE, L.L.C.
HEADWAY CORPORATE STAFFING SERVICES
OF CALIFORNIA TWO, L.L.C.
HEADWAY CORPORATE STAFFING SERVICES OF
CALIFORNIA THREE, L.L.C.
By: /s/ Barry S. Roseman
Title: President
E-28
BANK OF AMERICA, N.A.,
as Agent for the Lenders and as Lender
By: /s/ Michael R. Heredia
Title: Managing Director
FLEET NATIONAL BANK
By: /s/ G. Christopher Miller
Title: Vice President
TRANSAMERICA BUSINESS CAPITAL
CORPORATION
By: /s/ Rai Kaplan
Title: Vice President
CITIZENS BANK OF MASSACHUSETTS
By: /s/ Steven C. Petrarca
Title: Assistant Vice President
FIRST UNION NATIONAL BANK
By: /s/ Joel Thomas
Title: Vice President
E-29