Exhibit 4.3
Form 10-Q
Headway Corporate Resources, Inc.
File No. 1-16025
HEADWAY CORPORATE RESOURCES, INC.
LIMITED WAIVER AND AMENDMENT
This LIMITED WAIVER AND AMENDMENT (this "Agreement") is
dated as of August 24, 2001 and entered into by and among HEADWAY
CORPORATE RESOURCES, INC., a Delaware corporation (the
"Company"), State Street Bank and Trust Company, N.A., a national
banking association, as trustee (the "Trustee"), and the holders
listed on the signature pages hereof (collectively, the
"Holders"), and is made with reference to (i) that certain
Indenture dated as of March 19, 1998, as amended to the date
hereof (the "Indenture"), by and between the Company and the
Trustee, (ii) the Increasing Rate Senior Subordinated Notes Due
2006 of the Company issued pursuant to the Indenture (the
"Subordinated Notes"), (iii) the Company's Series F Convertible
Preferred Stock, $0.0001 par value per share (the "Preferred
Stock"), and (iv) the Certificate of Designations, Preferences
and Rights of the Preferred Stock, which amended the Company's
Certificate of Incorporation as of March 19, 1998 (the
"Certificate of Designations," and, together with the Indenture,
the Subordinated Notes, the Preferred Stock and the Certificate
of Indenture, the "Governing Documents"). The Holders are
sometimes referred to herein as the "Noteholders," in their
capacity as holders of the Subordinated Notes, and are sometimes
referred to herein as the "Stockholders," in their capacity as
holders of the Preferred Stock. Capitalized terms used herein
without definition shall have the same meanings herein as set
forth in the Indenture.
RECITALS
WHEREAS, the Holders own beneficially and of record,
all of the Subordinated Notes and the Preferred Stock;
WHEREAS, pursuant to the Indenture, the Trustee has
been appointed as the trustee for the Noteholders with respect to
the Subordinated Notes;
WHEREAS, the Company has notified the Stockholders by
letter dated June 29, 2001 that Series F Stock Events of Default
(as defined in the Certificate of Designations) have occurred as
a result of events of default under the Credit Agreement (the
"Credit Agreement Designated Defaults");
WHEREAS, the Trustee has notified the Noteholders by
letter dated July 23, 2001 that the Trustee received a letter
dated July 2, 2001 from the agent under the Credit Agreement that
events of default had occurred under the Credit Agreement and
that the agent had declared a Blockage Period under Section
10.02(b) of the Indenture;
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WHEREAS, the Company has failed to (i) pay the
installment of interest due on the Subordinated Notes on July 2,
2001 and (ii) comply with Sections 4.20 and 4.23 of the
Indenture; and such failures (collectively, the "Subordinated
Notes Designated Defaults") constitute Events of Default under
the Indenture;
WHEREAS, under the terms of the Certificate of
Designations, the Credit Agreement Designated Defaults and the
Subordinated Notes Designated Defaults have resulted in the
occurrence of Series F Stock Events of Defaults;
WHEREAS, the Company has requested that the Holders
waive compliance with the provisions set forth in Section 1(a)
hereof for the periods described therein, and the Noteholders
amend the Indenture as more particularly described herein, and
the Holders have agreed to do so, but only on the terms and
conditions set forth herein;
WHEREAS, the Company has requested that the
Stockholders exchange all of their shares of Preferred Stock for
a new series of preferred stock, $.0001 par value per share,
having terms identical to the terms of the Preferred Stock,
except for those changes reflected herein (the "New Preferred
Stock").
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
Agreement and in reliance on the representations, warranties and
covenants of the Company herein contained, from and after the
Amendment Effective Date (as defined in Section 3), the
Noteholders, as to clauses (i), (ii) and (iii) below, and the
Stockholders, as to clauses (iv) and (v) below, hereby waive:
(i) compliance with Section 4.20 of the Indenture (Net
Worth) for the period from April 1, 2001 through and
including the Bank Maturity Date (as defined below);
(ii) compliance with Section 4.23 of the Indenture (Certain
Consolidated Ratios) for the period from April 1, 2001 through
and including the Bank Maturity Date;
(iii) the payment in cash of any amounts with respect to
principal, interest (but not the accrual of interest), fees or
other amounts payable under the Indenture and the Subordinated
Notes through and including the Bank Maturity Date, subject,
however, to the provisions of Section 3(e) hereof;
(iv) the payment in cash of any amounts with respect to the
Preferred Stock, including dividends (but not the accrual of
dividends), fees or other amounts payable under the Certificate
of Designations (and, upon consummation of the Exchange, the New
Certificate of Designations) through and
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including the Bank
Maturity Date, subject, however, to the provisions of Section
3(e) hereof;
(v) all Series F Stock Events of Default existing on the
date hereof under Section 8(f) (v) and (vi) of the Certificate of
Designation (and, upon consummation of the Exchange, the New
Certificate of Designations) arising from the Credit Agreement
Designated Defaults or the Subordinated Notes Designated Defaults
(the "Series F Stock Designated Defaults"); and
(vi enforcement of the Stockholders' rights under Section
11(c)(i) of the Certificate of Designations (and, upon
consummation of the Exchange, the New Certificate of
Designations) (the "Board Election Right") through and including
the Bank Maturity Date, provided, that, notwithstanding anything
to the contrary contained in subsection (iv) hereof, any failure
to pay dividends with respect to the Preferred Stock at any time
prior to the Bank Maturity Date shall be included in the
calculation of a "Dividend Payment Default" for purposes of the
Board Election Right.
Notwithstanding the foregoing, upon the occurrence of any
other Event of Default or Series F Stock Event of Default
(including, without limitation, the failure of the Company
to comply with the provisions of Section 6 hereof) or at any
time the Trustee, the Noteholders or the Stockholders, as
applicable, may hereafter become aware of any other Event of
Default or Series F Stock Event of Default (whether
heretofore or hereafter arising), as applicable, the limited
waiver set forth in Section 1(a) above shall be deemed null
and void as of the date hereof (other than the provisions of
Section 1(a)(iii) and (iv) above) 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 the
Company or other Person, and the Trustee, the Noteholders
and the Stockholders may thereafter in their sole and
absolute discretion and notwithstanding any grace or cure
periods or other provisions to the contrary in the Indenture
or the Certificate of Designations, as applicable, take any
enforcement action and exercise any or all of their other
rights, remedies and privileges under the Indenture or the
Certificate of Designations, as applicable, any other
instrument or agreement referred to therein, under
applicable law or otherwise, with respect to any
Subordinated Note Designated Defaults, Series F Stock Event
of Defaults or any other Event of Default.
All references herein to the Preferred Stock, the
Certificate of Designations, any Series F Stock Event of
Default, and other defined terms relating to the Preferred
Stock shall be deemed also to include the New Preferred
Stock, the New Certificate of Designations, and events of
default under the New Certificate of Designations, with the
corresponding terms related hereto, and all defaults or
events of default that occurred under the Certificate of
Designations shall be deemed to have also occurred under the
New Certificate of Designations.
(b)Without limiting the generality of the provisions of
Article IX of the Indenture, the limited waiver set forth in
Section 1(a)(i), (ii) and (iii) above shall be limited precisely
as written and shall relate solely to the non-compliance by the
Company
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with the provisions of the Indenture and/or the
Subordinated Notes (as applicable) specifically set forth in
clauses (i), (ii) and (iii) of Section 1(a) hereof for the
periods specifically referenced therein and nothing in this
Agreement shall be deemed to:
(i) constitute a waiver by the Trustee or the Noteholders
with respect to the payment of interest on the Subordinated
Notes, and compliance with Section 4.20 and 4.23 of the
Indenture, in any other instance or any other term, provision or
condition of the Indenture or the Subordinated Notes; or
(ii) prejudice any right or remedy that the Trustee or any
Noteholder may now have or may have in the future under or in
connection with the Indenture, the Subordinated Notes, any other
instrument or agreement referred to therein or under applicable
law.
(c) The limited waiver set forth in Section 1(a)(iv)
and (v) above shall be limited precisely as written and
shall relate solely to the default by the Company under the
provisions of the Preferred Stock specifically set forth in
clauses (iv) and (v) of Section 1(a) hereof for the periods
specifically referenced therein and nothing in this
Agreement shall be deemed to:
(i) constitute a waiver by the Stockholders
with respect to the payment of dividends on the
Preferred Stock, or the occurrence of any other Series
F Stock Event of Default, in any other instance or any
other terms, provision or condition of the Preferred
Stock or the Certificate of Designations; or
(ii) prejudice any right or remedy that the
Stockholders may now have or may have in the future
under or in connection with the Preferred Stock, the
Certificate of Designations, any other instrument or
agreement referred to therein or under applicable law.
(d) The Noteholders reaffirm all of the terms of the
Indenture, including, without limitation, Sections 10.03 and
10.08, the Lenders' (as defined in the Seventh Amendment and
Limited Waiver) 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 Notes which
may be exercised at any time or from time to time hereafter
upon the Company's default in payment, whether at maturity,
upon any redemption, by declaration or otherwise, of any
principal of the Loans (as defined in the Seventh Amendment
and Limited Waiver), interest thereon, fees or other
Obligations (as defined in the Seventh Amendment and Limited
Waiver) payable under the Loan Documents (as defined in the
Seventh Amendment and Limited Waiver) 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), subject
however to the provisions of Section 9 of the Seventh
Amendment and Limited Waiver.
Section 2. AMENDMENTS TO GOVERNING DOCUMENTS
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(a) Indenture Amendments
The parties agree to promptly enter into a supplemental
indenture in the form attached as Annex A (the "Fourth
Supplemental Indenture") pursuant to which:
(i) Section 1.01 of the Indenture shall be amended
by adding thereto the following definitions, which
shall be inserted in proper alphabetical order:
"Amendment Effective Date" has the meaning set forth in
Section 3 of the Limited Waiver and Amendment.
"Bank Maturity Date" means the earliest of (a) April
18, 2002, (b) the date on which all indebtedness under
the Credit Agreement shall have been repaid or
refinanced and all issued and outstanding letters of
credit under the Credit Agreement shall have been
canceled, fully collateralized or otherwise supported
in a manner satisfactory to the lenders under the
Credit Agreement and (c) the acceleration of any
indebtedness under the Credit Agreement or the exercise
of any rights or remedies by any of the Lenders or the
Agent under the Credit Agreement.
"Budget" means the cash budget delivered by the Company
to the Holders pursuant to Section 3(b) of the
Amendment, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with
the Limited Waiver and Amendment.
"Limited Waiver and Amendment" means that certain Limited
Waiver and Amendment dated as of August 24, 2001 by and
among the Company, the Trustee and the Holders, as the
same may be amended, supplemented or otherwise modified
from time to time.
(ii) Section 4.08 of the Indenture shall be
amended by adding new Sections 4.08(c) and (d) as
follows:
"(c) the Company shall, at all times following the
Amendment Effective Date, provide to each Holder and
the Trustee promptly, and in any event within one
Business Day, copies of any reports and other
information provided to the Lenders and the Agent
pursuant to the Credit Agreement."
"(d) The Company shall, and shall cause its
Subsidiaries to, cooperate with and give full and
complete access and make available to the Trustee and
the Holders and representatives retained by any of them
from time to time, on a daily basis, the books and
records of the Company and its Subsidiaries and other
information relating to the business or financial
affairs of the Company and its Subsidiaries (including,
without limitation, agreements and documents pertaining
to any receivables or payables), and the operating
management of the Company and its Subsidiaries shall
meet, upon request, with the Trustee and the Holders to
discuss, among other things, the financial and
operating performance and business
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plans of the Company
and its Subsidiaries. The Company shall, and shall
cause its Subsidiaries to, give full and complete
access to such other information as the Trustee or the
Holders may reasonably request from time to time, and
shall cooperate and consult with, and provide to the
Trustee and the Holders all such information."
(b) Amendment to Subordinated Notes
Pursuant to the Fourth Supplemental Indenture, Section
1 of the Subordinated Notes shall be amended by adding a new
sentence after the first sentence of paragraph 1 (Interest
Rate) that reads as follows:
"If all interest on the Securities and dividends on the
Preferred Stock accrued on and prior to April 1, 2002
are not paid in full in cash by such date, then the
interest rate on the Securities shall be increased to
20% per annum commencing on July 1, 2001; provided,
however, that following such increase there shall be no
increase in the interest rate upon the occurrence and
during the continuance of any Event of Default."
(c) Exchange of Series F Preferred Stock
The Company shall, file with the Secretary of State of
the State of Delaware (the "Secretary of State") a new
certificate of designations establishing a new series of
preferred stock of the Company having terms identical to the
terms of the Series F Preferred Stock other than the changes
in the terms of the Preferred Stock described below (the
"New Certificate of Designations"):
(i) Notwithstanding anything else contained in the
Certificate of Designations, (a) if all interest on the
Subordinated Notes and dividends on the Preferred Stock
("Payments") accrued on and prior to January 2, 2002
have not been paid in full in cash by such date, then
the Dividend Rate (as defined in the Certificate of
Designations) shall increase to 9% at such time; and
(b) if all Payments accrued on and prior to April 1,
2002 have not been paid in full in cash by such date,
then the Dividend Rate shall further increase to 10% at
such time.
(ii) Notwithstanding anything else contained in
the Certificate of Designations, (a) if all Payments
accrued on and prior to January 2, 2002 have not been
paid in full in cash by such date, then the Conversion
Price (as defined in the Certificate of Designations)
shall be reduced to $2.75 per share at such time; and
(b) if all Payments accrued on and prior to April 1,
2002 have not been paid in full in cash by such date,
then the Conversion Price shall be further reduced at
such time to $1.00 per share.
provided, however, that the reductions in the conversion
price set forth in the foregoing clauses (a) and (b) shall
be subject to any required approval of stockholders under
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applicable law or regulation. The approval of the
stockholders referred to in the foregoing Section 2(c)(ii),
along with the approval of the stockholders of the Company
of an increased in the authorized number of shares of Common
Stock to at least Sixty Million (60,000,000), is referred to
herein as the "Common Stockholder Approval".
Section 3. CONDITIONS TO EFFECTIVENESS
The effectiveness of this Agreement is subject to the
satisfaction of all of the following conditions precedent by
August 31, 2001 (the date of such satisfaction being the
"Amendment Effective Date"):
(a)On or before the Amendment Effective Date, the Company
shall deliver to the Trustee and each Holder the following, each,
unless otherwise noted, dated the Amendment Effective Date:
(i)A certificate of the Company, executed on behalf of the
Company 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 of the
Company since March 19, 1998 (other than the New Certificate of
Designations), (B) the organizational documents of the Company
being in full force and effect as of the date hereof, (C) the due
organization and good standing and valid existence of the Company
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 the Company, (D) the truth of the
representations and warranties contained in this Agreement as
though made on and as of the date hereof and (E) after giving
effect to this Agreement, the absence of any event occurring and
continuing that constitutes a Default or an Event of Default
(other than one specifically waived herein);
(ii) A certificate of the Company, executed on its behalf by
its secretary or an assistant secretary (or equivalent),
certifying the names and true signatures of the officers of the
Company authorized to sign this Agreement and any other
documents, agreements, instruments or certificates to be
delivered in connection therewith;
(iii) Copies of the resolutions of the board of directors of
the Company approving (subject to Common Stockholder Approval, in
the case of that portion of the New Certificate of Designations
pertaining to the reduction of the conversion price of the
Preferred Stock described in Section 2(c)(ii) hereof (the
"Section 2(c)(ii) Conversion Provisions")), authorizing the
execution, delivery and performance of this Agreement and any
other documents, agreements, instruments or certificates to be
delivered in connection therewith and recommending that the
holders of the Common Stock vote in favor of the approval of the
Section 2(c)(ii) Conversion Provisions, certified as of the date
hereof by the secretary or an assistant secretary (or equivalent)
of the Company as being in full force and effect without
modification or amendment;
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(iv) Copies of this Agreement and each other document,
agreement, instrument and certificate to be delivered in
connection herewith, in each case duly executed by the Company
and with respect to this Agreement, by each of the Stockholders,
the Noteholders and the Trustee;
(v) Copies of the Fourth Supplemental Indenture, duly
executed by the Company, the Trustee and each of the Noteholders;
(vi) Warrants, in form and substance acceptable to the
Holders, as follows:
(1) Warrants (the "Initial Warrants") in the aggregate
exercisable for One Million (1,000,000) shares of the Company's
common stock, $0.0001 par value per share (the "Common Stock"),
at an exercise price equal to $1.10 per share;
(2) Warrants (the "First Additional Warrants") in the aggregate
exercisable for One Million, One Hundred and Fifty Thousand
(1,150,000) shares of Common Stock, at an exercise price equal to
$0.01 per share; and
(3) Warrants (the "Second Additional Warrants," and, together
with the First Additional Warrants, the "Additional Warrants") in
the aggregate exercisable for Eight Hundred and Fifty Thousand
(850,000) shares of Common Stock, at an exercise price equal to
$3.05 per share.
The Initial Warrants shall be exercisable
immediately. The Additional Warrants shall be
exercisable on January 2, 2002 if (A) all Payments
accrued on and prior to such date have not been paid in
full in cash by such date and (B) the Common
Stockholder Approval has not been obtained. The
Additional Warrants shall be canceled if the Common
Stockholder Approval is obtained at any time prior to
exercise. The Initial Warrants and the Additional
Warrants (collectively, the "Warrants") shall provide,
among other things, that: (x) such exercise price may
be paid in cash, in securities of the Company having
equivalent value (which, in the case of Preferred Stock
or Subordinated Notes shall be the liquidation
preference or principal amount, as the case may be) or
with cashless exercise procedures; (y) the expiration
date of the Warrants will be the later of (1) five
years from the Amendment Effective Date and (2) the
repayment in full of the Subordinated Notes and
redemption in full or the conversion of all of the
shares of the Preferred Stock; and (z) the Common Stock
underlying the Warrants shall deemed to be registrable
securities pursuant to that certain Registration Rights
Agreement between the Company and the investors named
therein dated March 19, 1998, and the holders of the
Warrants shall be included in the definition of
"Holders," as defined therein;
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(vii) Duly executed, irrevocable proxies (in form and
substance acceptable to the Holders) of Gary S. Goldstein, Barry
S. Roseman, G. Chris Andersen, Ehud D. Laska and Richard B.
Salomon directing that all shares of Common Stock beneficially
owned, directly or indirectly, by them be voted in favor of the
Common Stockholder Approval;
(viii) An opinion of counsel to the Company, in form and
substance acceptable to the Holders, as to the matters described
in Section 4(a)-(e) hereof and such other matters as may be
reasonably requested by the Holders; and
(ix) The New Certificate of Designations, certified as filed
with the Secretary of State.
(b) On or before the date hereof, each of the Stockholders
and the Noteholders shall have received, in form and substance
satisfactory to the Lenders, a cash budget substantially in the
form of Annex B attached hereto (as amended, supplemented or
otherwise modified from time to time with the prior written
consent of the Lenders, the "Budget"), together with a duly
executed certificate of the chief financial officer of the
Company, certifying to the Stockholders and the Noteholders 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 Stockholders and the Noteholders shall each have
received, in each case in form and substance satisfactory to
them, an agreement duly executed by Lenders and the agent
therefor, which agreement shall include (i) a waiver of all
"Defaults" or "Events of Default" under, and as such terms are
defined in, the Credit Agreement, including, without limitation,
non-compliance with Sections 9.1 (b), (c) and (d) of the Credit
Agreement, (ii) reaffirmation by the Lenders that no new Blockage
Period may be invoked for 360 days subsequent to July 2, 2001 and
(iii) an amendment to the definition of the term "Change of
Control," as defined in the Credit Agreement, such that the
proviso to such definition is amended and restated, in its
entirety, to read "provided, however, that in calculating the
percentage of Voting Stock held by any 'beneficial owner' under
clause (i) above, the conversion rights under the Series F
Convertible Preferred Stock referred to in the definition of
'Preferred Stock' (or any Preferred Stock issued to the holders
of the Series F Convertible Preferred Stock in exchange for the
Series F Convertible Preferred Stock pursuant to the terms of the
Limited Waiver referred to in Section 5(c) of the Seventh
Amendment and Limited Waiver) and the warrants delivered by the
Borrower to the holders of the Subordinated Debt and the Series F
Convertible Preferred Stock on the Seventh Amendment Effective
Date, shall not be included in such calculation until such
conversion rights or warrants are converted into or exchanged for
Voting Stock."
(d) The Company shall have received all necessary consents
required from governmental authorities, stock exchange and self
regulatory organizations for the
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transactions contemplated
hereby, including, without limitation, the issuance of the
Warrants and the shares of Common Stock issuable upon exercise
thereof.
(e) On or before the date hereof, the Trustee and the
Holders 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
Swidler Berlin Shereff Friedman, LLP, counsel to GarMark
Partners, L.P.) in connection herewith and with the transactions
and agreements contemplated hereby.
Section 4. REPRESENTATIONS AND WARRANTIES
In order to induce the Stockholders and the Noteholders
to enter into this Agreement, the Company represents and warrants
to each of the Holders that the following statements are true,
correct and complete:
(a) Power and Authority. The Company has all the requisite
power and authority to enter into this Agreement and to carry out
the transactions contemplated by this Agreement.
(b) Authorization of Agreement. The execution and delivery of
this Agreement and the performance of the Company hereunder has
been duly authorized by all necessary action on the part of the
Company.
(c) No Conflict. The execution and delivery of this Agreement
by the Company and the performance by the Company of this
Agreement and the consummation of the transactions contemplated
hereby do not and will not (i) violate any provision of any law
or any governmental (including any applicable stock exchange)
rule or regulation applicable to the Company or any of its
Subsidiaries, the organizational documents of the Company or any
of its Subsidiaries or any order, judgment or decree of any court
or other agency of government (including any applicable stock
exchange) binding on the Company or any of its 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 the Company or any of its Subsidiaries is a party or by
which the properties or assets of the Company 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 the Company
or any of its Subsidiaries or (iv) require any approval of
stockholders or any approval or consent of any Person under any
contract of the Company or any of its Subsidiaries.
(d) Governmental Consents. The execution and delivery of this
Agreement by the Company and the performance by the Company of
this Agreement does not and will not require any registration
with, consent or approval of, or notice to, with or by, any
federal, state or other governmental authority or regulatory body
(including any applicable stock exchange).
(e) Binding Obligation. This Agreement is the legally valid and
binding obligation of the Company enforceable against the Company
in accordance with its
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terms, subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors generally and general principles
of equity.
(f) Absence of Default. After giving effect to this Agreement,
no Default or Event of Default exists.
(g) Accuracy of Recitals. The Recitals to this Agreement are
true and correct in all respects on and as of the date hereof,
and are incorporated hereby as if fully set forth herein.
(h) Remaining Earnout Payments. The aggregate amount of the
earnout payments required to be made by the Company under that
certain Stock Purchase Agreement dated as of July 31, 1998 (the
"Carlyle Stock Purchase Agreement"), by and among the Company,
Mitchell D. Berman, Max DeZara, Ward P. Feshe, 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.
(i) Receipt of Amendments to Credit Agreement. The Trustee and
the Holders have received executed copies of the agreements
entered into by the Lenders in accordance with Section 3(c) of
this Agreement and all certificates, instruments, opinions and
other documents delivered by or to the Company in connection
therewith and such agreements and all such certificates,
instruments, opinions and other documents have not been amended
or otherwise modified.
(j) Capitalization. The authorized capital stock of the
Company consists of 20,000,000 shares of 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 the Preferred Stock
pursuant to the Certificate of Designations. The outstanding
capital stock of the Company 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 issued pursuant to Section 3 hereof, 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 Company hereby ratifies and confirms that the
terms, provisions and conditions of the Indenture and the
Subordinated Notes (as each is amended hereby) remain in full
force and effect and the Indenture and the Subordinated Notes are
enforceable in accordance with their respective terms.
(b) The Company hereby ratifies and confirms that the
terms, provisions and conditions of the Certificate of
Designations (as amended hereby) remain in full force and effect
and such Certificate of Designations is enforceable in accordance
with its terms.
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Section 6. COVENANTS
In order to induce the Holders to enter into this
Agreement, the Company hereby covenants and agrees as follows:
(a) Unless the Required Holders shall otherwise give prior
written consent, prior to the Bank Maturity Date, the Company
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:
Consolidated EBITDA
Three Month Period Ending On: Must Not Be Less Than:
August 31, 2001 $1,523,000
September 28, 2001 $894,000
October 30, 2001 $1,272,000
November 30, 2001 $1,562,000
December 31, 2001 $1,796,000
January 31, 2002 $1,973,000
February 28, 2002 $2,328,000
March 31, 2002 $3,732,000
Solely for purposes of this Section 7(f), (i) each
reference to "any Four-Quarter Period" set forth in the
definition of "Consolidated EBITDA" in the Indenture 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 (as
defined in the Credit Agreement) in connection with the
Seventh Amendment and Limited Waiver 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, LeBouef, Lamb, Greene & MacRae L.L.P.,
Weil, Gotshal & Manges LLP, Swidler Berlin Shereff Friedman,
LLP and O'Melveny & Myers LLP and any other professionals
hired by time to time by the Company, any Lender or the
Agent in connection with the restructuring of the Company
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.
Unless the Required Holders and the Stockholders shall
otherwise give prior written consent prior to the Bank
Maturity Date, the Company shall not, and shall not permit
its 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:
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Maximum Consolidated
Three Month Period Ending On: Capital Expenditures:
August 31, 2001 $517,000
September 28, 2001 $533,000
October 30, 2001 $572,000
November 30, 2001 $572,000
December 31, 2001 $572,000
January 31, 2002 $583,000
February 28, 2002 $594,000
March 31, 2002 $600,000
(b)As soon as possible and in any event within at least 20
days prior to the end of the last weekly period contained in the
Budget from time to time, the Company shall deliver to the
Holders 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 Required Holders and the
Stockholders, and the Budget (as supplemented) shall be certified
by the chief financial officer of the Company 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.
(c) The Company shall deliver to the Holders 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 Company 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 Required Holders and the
Stockholders.
(d) The Company has advised the Noteholders and the
Stockholders that it desires to engage C.E. Unterberg, Towbin to
assist in the refinancing (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 Noteholders under the Indenture, all amounts owing under
the Certificate of Designations and all obligations under the
Credit Agreement and related agreements (collectively, the
"Company Obligations") and/or the sale (directly or indirectly,
whether through a sale of assets, stock, mergers or otherwise) of
certain of the Company'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 Company Obligations.
In order to consummate the Refinancing and/or the Asset
Sales, the Company shall:
E-48
(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 Company and satisfactory to the
Required Holders and the Stockholders (the "Investment Bank"),
pursuant in each case to terms and conditions satisfactory to the
Required Holders and the Stockholders;
(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 Company, and distribute by such
date information memoranda regarding (as applicable) the proposed
Asset Sales and Refinancing (a copy of such information memoranda
to be delivered by the Company to the Noteholders and the
Stockholders within one Business Day of issuance thereof);
(iii) use its best efforts to enter into bona fide binding,
commercially reasonable letter(s) of intent (or similar
agreement(s)) by December 3, 2001 in form and substance
satisfactory to the Required Holders and the Stockholders, to
consummate the Asset Sales and/or Refinancing, in each case with
parties who are not Affiliates of the Company and in an amount
sufficient to repay in cash all Company Obligations (a copy of
such letter(s) of intent or similar agreement(s) to be delivered
by the Company to the Noteholders and the Stockholders within one
Business Day of execution thereof); and
(iv) use its best efforts to enter into a binding,
definitive, commercially reasonable agreement(s), in form and
substance satisfactory to the Required Holders and the
Stockholders by February 4, 2002, to consummate the Asset Sales
and/or Refinancing, in each case with parties who are not
Affiliates of the Company and in an amount sufficient to repay in
cash all Company Obligations.
The Company further covenants that it will provide to all
Stockholders and Noteholders, promptly upon receipt, copies
of all written proposals and summaries of all oral proposals
form time to time received in connection with the Asset
Sales and/or Refinancing and that the Stockholders and the
Noteholders shall have access to the personnel of the
Investment Bank working for or on behalf of the Company to
discuss, among other things, the status of the Asset Sales
and/or Refinancing.
(e)The Company shall take all actions reasonably necessary
to obtain the Common Stockholder Approval as promptly as
possible. In the event that, as of April 1, 2002, (i) all
Payments accrued on and prior to such date have not been paid in
full in cash by such date and (ii) the Common Stockholder
Approval has not been obtained, the Holders will receive
alternative consideration to be negotiated by the Holders and the
Company; provided, that, unless otherwise agreed by the Holders
and the Company, such compensation shall include a decrease of
the exercise price of all Warrants to $0.01 per share.
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Section 7. RELEASE
The Company, on behalf of itself, and each of its
Subsidiaries (collectively, the "Releasors") hereby releases,
remises, acquits and forever discharges the Trustee, each
Stockholder, Noteholder 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 to 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 Agreement, the
Indenture, the Preferred Stock or the administration or
enforcement of any of such documents (all of the foregoing
hereinafter called the "Released Matter"). 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 the Amendment
Effective Date. 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 rights, 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. MISCELLANEOUS
(a) Effect on the Indenture and Certificate of Designations of
the Preferred Stock. The Indenture and Certificate of
Designations 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
Agreement shall not constitute a waiver of any provision of, or
operate as a waiver of any right, power or remedy, or be
construed as a consent, approval or authorization of the Trustee
or any Noteholder under, the Indenture or any Stockholder under
the Certificate of Designations. If the Company 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
Indenture and the Certificate of Designations.
(b) Severability. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and
E-50
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 Agreement
are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose or
be given any substantive effect.
(d) Applicable Law. THIS AGREEMENT 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 WITHOUTH LIMITATIN
SECTION 5-1401 OF THE GENERAL OBLIGAITONS 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 AGREEMENT 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 AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMNT AND (ii) THE BOROWER WAIVES ANY
CLAIM AGAINST THE TRUSTEE OR THE HOLDERS FOR CONSEQUENTIAL OR
SPECIAL DAMAGES RESPECTING THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPATED 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 Agreement,
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 8(e)). In the event of
litigation, this Agreement 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 Agreement, including, without limitation, the status of
third party beneficiary of this Agreement and nothing in this
Agreement, 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 Agreement.
(g) No Commitments for Additional Waivers; Legal Advice. The
Company acknowledges and affirms that, except as expressly set
forth in Section 1(a), the Trustee
E-51
and the Holders are not
committing or offering any waiver or any other accommodations of
any nature whatsoever and the Company agrees to conduct its
affairs accordingly. Without limiting the generality of the
foregoing, the Company will not claim that any prior action or
course of conduct by the Trustee or any Holder constitutes an
agreement or obligation to continue such action or course of
conduct in the future. The Company acknowledges that the Trustee
and the Holders have no commitment to grant any other waiver or
accommodation to the Company.
The Company represents to the Holders that it has
entered into this Agreement 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 Agreement and that it is satisfied with
its legal counsel and the advice received from it. Should
any provision of this Agreement 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 Agreement sets forth the entire
understanding and agreement of the parties hereto in relation tot
he subject matter hereof and supersedes any prior negotiations
and agreements among the parties relative to such subject matter.
No 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 Agreement 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 Agreement may be changed,
modified, waived or canceled orally or otherwise, except as
provided in the Indenture.
(i) Survival. All representations, warranties, covenants,
agreements, undertakings and waivers of the Company contained
herein shall survive and be applicable until the payment in full
in cash of all of the Obligations.
(j) Counterparts; Effectiveness. This Agreement 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.
(k) Stockholders. Any reference herein to approval by the
Stockholders shall mean the approval of the Stockholders in the
manner contemplated by Section 11(a) of the Certificate of
Designations.
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IN WITNESS WHEREOF, the parties hereto have cause this
Amendment to be duly executed and delivered by their respective
officers thereunto duly authorized as of the date first written
above.
HEADWAY CORPORATE RESOURCES, INC.
By: /s/ Barry S. Roseman
Title: President
(Signature page to Headway Corporate Resources, Inc. Limited
Waiver and Amendment)
E-53
GARMARK PARTNERS, L.P. BANC OF AMERICA
SECURITIES LLC, successor in
interest to Nationsbanc
Montgomery Securities, LLC
By: /s/ E. Garrett Bewkes,III By: /s/ Jeffrey G. Berry
Title: Managing Principal Title: Managing Director
MOORE GLOBAL INVESTMENT, LTD. REMINGTON INVESTMENT
STRATEGIES, L.P.
By: /s/ Anthony Gallagher
Title: Director of By: /s/ Anthony Gallagher
Operations Title: Director of
Operations
STATE STREET BANK AND TRUST
COMPANY, N.A., as Trustee
By: /s/ Ward A. Spooner
Title: Vice President
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